24th Sep 2007 07:02
Gas Turbine Efficiency PLC24 September 2007 24 September 2007 Gas Turbine Efficiency plc Interim Results for the six months to 30 June 2007 Gas Turbine Efficiency plc ("GTE" or "the Group"), a leading designer andmanufacturer of advanced cleaning, performance monitoring and fluid and controlsystems for gas turbines, announces its results for the six months to 30 June2007. Financial Highlights • Total revenues increased by 342% to $9.3m (H1 2006: $2.1m)• Industrial revenues up six-fold to $5.7m (H1 2006: $0.8m) reflecting first time contributions from Control Center LLC and ARES Technology LLC• Aviation revenues up by 184% to $3.7m (H1 2006: $1.3m) as Pratt & Whitney continued roll-out of its aviation service centres worldwide• Achieved operating profit excluding legal costs of $0.1m (H1 2006 loss: $1.1m)• Basic and fully diluted loss per share of $0.013 (H1 2006: loss $0.020)• Cash and cash equivalents totalled $8.4m as at 30 June 2006 (H1 2006: $3.5m)• Strong order book underpins robust trading for second half of 2007 Operating Highlights • Acquired Control Center LLC in February 2007 for $4m and ARES Technology LLC for $0.3m in June 2007• Signed 5-year deal with Solar Turbines Incorporated, a Caterpillar company, to develop cleaning systems for mid-range industrial turbines• Raised £4.25 million through an institutional share placing• Expanded presence into Asia with new subsidiary in Singapore• On 1 July signed three year extension of agreement with Rolls Royce Steven Zwolinski, CEO of GTE, said: "GTE has delivered excellent results in thefirst half of 2007. Our sales are ramping up as manufacturers and operators comeunder increasing pressure to optimise turbine performance to lower fuel costs,equipment downtime and control greenhouse gas emissions. These trends willcontinue to drive GTE's long term growth. Trading conditions remain robust andare underpinned by a strong order backlog for the full year." Enquiries: Gas Turbine Efficiency plcSteven Zwolinski, CEO +44 (0)20 7977 0020 on the day +46 (0)8 546 10 528Libertas CapitalAamir Quraishi, Charles Goodfellow + 44 (0)20 7569 9650 Corfin CommunicationsNeil Thapar, Harry Chathli +44 (0)20 7977 0020 About GTE Gas Turbine Efficiency plc, whose shares are traded on London Stock Exchange'sAIM market (Ticker: GTE), designs, manufactures and markets advanced integratedsolutions for environmental, process and asset optimisation of gas turbinesprimarily in the aerospace, industrial and oil & gas sectors. These solutionsinclude cleaning systems, performance monitoring, fluid and control sub-systemsthat improve turbine performance and availability, fuel efficiency and partslife, resulting in increased profits for our clients and a cleaner environment.The Group sells its products to blue chip customers worldwide from operationalcentres in Europe and the USA. Overview GTE made tremendous progress in the first half of 2007 as the Group took majorstrategic steps to diversify its solutions portfolio, enabling it to move up thevalue chain in the $10 billion global turbine after-market. Our integratedproducts and services are aimed primarily at the power generation, aviation, oil& gas and chemical processing industries and help to reduce their fuel costs,cut greenhouse gas emissions and minimise equipment downtime. These moves have already begun to pay-off with a strong ramp-up in sales duringthe first half. Group turnover increased by 342% to $9.3m (H1 2006: $2.1m)reflecting strong growth in both industrial and aviation, and accounting foracquisitions. The results included a first time contribution from Control CenterLLP (Control Center), acquired in February for approximately $4m and ARESTechnology (ARES), acquired in June for approximately $0.3m. The Group also delivered a strong improvement at the operating level. The firsthalf operating loss was halved to $0.6m from a $1.1m loss in the correspondingperiod last year. Excluding the impact of a US lawsuit initiated by GTE, theGroup move into an operating profit of $0.1m compared with a $1.1m operatingdeficit the same time last year. Operating review Industrial Revenues from industrial systems (which includes power generation, oil & gas andmarine industries) rose by over 600% to $5.7m compared with revenues of $0.8m inthe corresponding period last year. This was in line with the Group's guidanceand validates GTE's bold strategy to extend its business model with theacquisition of Control Center and ARES. Integration efforts have exceededmanagement expectations with faster time-to-market development of new productsand a higher level of order intake than planned earlier in the year. Control Center The results include a first time contribution of $4.6m to Group turnover. Control Center, based in Orlando, designs and manufactures a wide range of flowmeasurement, combustion dynamics monitoring and control systems solutions aimedat industrial gas turbines primarily in the power generation, oil & gas,aerospace and pharmaceuticals sectors. Established in 1963, Control Centersupplies products and services to many blue chip Original EquipmentManufacturers (OEMs), industrial customers and end users. The acquisition has already significantly strengthened GTE's long term prospectsand provides long term operational and synergy benefits to GTE. These include: •Addition of a proven, Tier 1 supplier to OEMs and end users in key growth segments of power generation, oil & gas, pharmaceutical and aerospace •Broadening of GTE's technology portfolio with complementary product lines in fuel systems, combustion monitoring systems and controls •Creation of a cost effective, scalable operations base in North America with demonstrated ability to drive productivity and quality initiatives •Expansion of commercial channels and customer relationships with an experienced sales team •Integration of application engineering and prototyping capability to accelerate time to market for new products ARES On 20 June 2007, GTE announced the acquisition of ARES, a specialist gas turbineservices and repair business, for a cash consideration of $300,000. ARESbroadens the Group's technical capability in a highly specialised niche of theindustrial gas turbine market and will accelerate our growth as operators comeunder increasing pressure to minimise downtime, lower fuel costs and reduceemission levels. In March 2007, GTE signed a five-year agreement with Solar, a Caterpillarcompany, for the design and supply of advanced cleaning systems for Solar's lowto mid-range industrial turbines. This was followed by the extension of GTE'scontract with Rolls Royce. The deals take GTE's total number of global partnersto four. Discussions with other major OEMs to sign long term commercialcontracts continue and in some cases have been expanded to include several newproduct lines. Aviation systems Revenues from aviation systems, where GTE is the exclusive supplier of on-wingwash systems to Pratt & Whitney, increased 184% to $3.7m (H1 2006: $1.3m). Excellent progress has been made on next generation product design and inexecuting the $5m order received in December 2006 from its exclusive aviationindustry partner, Pratt & Whitney, in support of its global service network. New geographic markets GTE continued to expand its global footprint and opened a subsidiary inSingapore to target the fast growing Asian markets. Financial Review Turnover more than tripled to $9.3m (H1 2006: $2.1m) due to significant revenueincreases in both the aviation and industrial sectors. Operating loss amounted to $0.6m (H1 2006: $1.1m). The Group incurred legal feesof $0.7m relating to a US lawsuit initiated by GTE against a former employee toprotect its intellectual property. Pre-tax loss amounted to $0.8m compared with a $1.2m loss in the correspondingperiod last year. Basic and fully diluted loss per share was $0.013 (H1 2006: $0.020). Cash and cash equivalents totaled $8.4m as at 30 June 2006 (H1 2006: $3.5m). Outlook The strong momentum of growth seen in the first half has continued into thesecond half as the Group's integrated solutions gain increasing acceptance fromindustrial turbine operators and original equipment manufacturers worldwide.Trading conditions remain robust and the Group's order backlog continues tostrengthen. As a result the Board looks forward to the full year results withconfidence. CONSOLIDATED STATEMENTS OF INCOMEfor the period ended 30 June 2007 Note 6 months ended 12 months ended 6 months ended 30 June 2007 31 December 2006 30 June 2006 unaudited audited unaudited $'000 $'000 $'000Continuing operationsRevenue 2 9 319 4 662 2 132Cost of sales (5 360) (2 608) (1 206) Gross profit 3 959 2 054 926 Distribution andselling costs (1 055) (843) (449)Research anddevelopmentexpenses (271) (585) (144)Administrativeexpenses (3 285) (3 390) (1 554)Other operatingincome 34 50 73 Operating loss (618) (2 609) (1 148) Interest receivable 198 155 45Finance costs (425) (359) (88) Loss before tax (845) (2 918) (1 191) Tax 3 193 629 321 LOSS FOR THE PERIODATTRIBUTABLE TOEQUITY HOLDERS OFTHE PARENT (652) (2 289) (870) Loss per share 4 From continuing operationsBasic and dilutedloss per share ($) (0.013) (0.052) (0.020) CONSOLIDATED BALANCE SHEETSat 30 June 2007 Note 6 months ended 12 months ended 6 months ended 30 June 2007 31 December 2006 30 June 2006 unaudited audited unaudited $'000 $'000 $'000ASSETS Non-current assets Intangible assetsCapitalisedexpenditure forresearch anddevelopment 1 448 765 459Patents 522 376 322ERP-System 283 213 82Customerrelationships 473 - -Goodwill 6 368 1 255 1 163 9 094 2 609 2 026 Tangible assetsEquipment, tools,fixtures andfittings 1 086 572 460 Financial assetsAvailable for-saleinvestments 211 204 169 Deferred tax assets 1 900 1 743 1 449 Total non-currentassets 12 290 5 128 4 104 Current assetsInventories 1 187 556 585 Current receivablesAccountsreceivable-trade 4 301 1 910 459Income taxesrecoverable 228 97 51Other receivables 636 467 2 344Prepaid expensesand accrued income 933 768 655 6 100 3 242 3 509 Cash and cashequivalents 8 369 2 855 3 500Total currentassets 15 656 6 653 7 594 TOTAL ASSETS 27 947 11 781 11 698 CONSOLIDATED BALANCE SHEETSat 30 June 2007 (continued) Note 6 months ended 12 months ended 6 months ended 30 June 2007 31 December 2006 30 June 2006 unaudited audited unaudited $'000 $'000 $'000EQUITY AND LIABILITIES EquityShare capital 207 156 156Share premium 20 705 8 225 8 225Capital reserve 2 636 2 636 2 636Share based payment reserve 396 355 269Revaluation reserve 66 59 30Translationreserves 1 779 1 621 1 251Retained earnings (5 315) (4 663) (3 244)Total equityattributable toequity holders ofthe parent 20 474 8 389 9 323 Non-current liabilitiesFinancialliabilities -borrowings 155 90 81Deferred taxliabilities 276 75 75 431 165 156 Current liabilitiesFinancialliabilities -borrowings 1 848 947 553Accounts payable -trade 3 709 1 125 670Other liabilities 250 146 28Accrued expenses 1 235 1 009 968 7 042 3 227 2 219Total liabilities 7 473 3 392 2 375 TOTAL EQUITY ANDLIABILITIES 27 947 11 781 11 698 CONSOLIDATED STATEMENTS OF CASH FLOWSfor the period ended 30 June 2007 Note 6 months ended 12 months ended 6 months ended 30 June 2007 31 December 2006 30 June 2006 unaudited audited unaudited $'000 $'000 $'000 Cash flow from operatingactivities Loss afterfinancial items (845) (2 918) (1 191)Adjustments tooperating cashflows 5 436 576 227 Cash flow fromoperatingactivities beforechanges in workingcapital (409) (2 342) (964) Cash flow from changes in working capital(Increase)/decreasein inventories (107) (41) (91)(Decrease)/increasein receivables (2 032) 1 780 1 523Increase/(decrease) inliabilities 1 419 85 (412) (1 129) 56 Cash used by operationsIncome taxes receieved - - -Interest received 198 155 45Finance costs (237) (189) (87) Net cash used byoperatingactivities (1 168) (552) 14 Cash flows from investingactivitiesPurchase offinancial assets - (27) -Purchase ofintangible noncurrent assets (878) (988) (449)Purchase oftangible noncurrent assets (340) (302) (116)Operations acquired (2 502) - -Sale of tangiblenon current assets - 73 - Net cash used byinvestingactivities (3 720) (1 244) (565) Cash flows from financingactivitiesNew share issue(net of issuecosts) 10 572 - -Loans taken 159 61 -Loans repaid (296) (584) (877) Net cash generatedby/(used in)financingactivities 10 435 (523) (877) Net change in cashand cashequivalents 5 547 (2 314) (1 428)Cash and cashequivalents at thebeginning of theperiod 2 855 4 705 4 705Effect of foreignexchange ratechanges (33) 464 223 Cash and cashequivalents at endof the period 8 369 2 855 3 500 CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the period ended 30 June 2007 Share Share Capital Share based capital premium reserve payment reserve $'000 $'000 $'000 $'000 Balance at 31December 2005 156 8 225 2 636 184Credit to equity for equity-settledshare-based payments - - - 85 Exchange differences arising on - - - -translation of foreign operations Net loss for the year - - - -Balance at 30June 2006 156 8 225 2 636 269Credit to equity for equity-settledshare-based payments - - - 86 Increase in fair value of - - - -available-for-sale investments Exchange differences arising on - - - -translation of foreign operations Net loss for the year - - - -Balance at 31December 2006 156 8 225 2 636 355New share issue, 5144954 shares at nominal £0.002 20 4 480 - - New share issue, 250 000shares at nominal £0.002 1 - - - New share issue, 7456140 shares at nominal £0.002 29 8 363 - - Placing costs - (423) - - New share issue, 100 000shares at nominal £0.002 1 60 - - Credit to equity for equity-settledshare-based payments - - - 41 Increase in fair value of available- - - - -for-sale investments Exchange differences arising on - - - -translation of foreign operations Net loss for the year - - - -Balance at 30 June 2007 207 20 705 2 636 396 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period ended 30 June 2007 (continued) Revaluation Translation Retained Total share- reserve reserve earnings holders equity $'000 $'000 $'000 $'000 Balance at 31December 2005 30 602 (2 374) 9 459Credit toequity forequity-settledshare-basedpayments - - - 85 Exchangedifferencesarising ontranslation offoreignoperations - 649 - 649 Net loss forthe year - - (870) (870)Balance at 30June 2006 30 1 251 (3 244) 9 323Credit toequity forequity-settledshare-basedpayments - - - 86 Increase infair value ofavailable-for-saleinvestments 29 - - 29 Exchangedifferencesarising ontranslation offoreignoperations - 370 - 370 Net loss forthe year - - (1 419) (1 419)Balance at 31December 2006 59 1 621 (4 663) 8 389New shareissue, 5144954 shares atnominal £0.002 - - - 4 500 New shareissue, 250 000shares atnominal £0.002 - - - 1 New shareissue, 7456140 shares atnominal £0.002 - - - 8 392 Placing costs - - - (423) New shareissue, 100 000shares atnominal £0.002 - - - 61 Credit toequity forequity-settledshare-basedpayments - - - 41 Increase infair value ofavailable-for-saleinvestments 7 - - 7 Exchangedifferencesarising ontranslation offoreignoperations - 158 - 158 Net loss forthe year - - (652) (652)Balance at 30June 2007 66 1 779 (5 315) 20 474 Notes to the financial statements Note 1 Accounting policies The unaudited interim accounts for the 6 months ended 30 June 2007 have beenprepared using accounting policies that are consistent with the company'sstatutory accounts for the year ended 31 December 2006. The adoption of the following IFRSs has not impacted the unaudited interimaccounts. • IFRS 7 Financial Instruments: Disclosure and the related amendment to IAS 1 on capital disclosures• IFRIC 7 Applying the Reassesment Approach under IAS• IFRIC 8 Scope of IFRS2• IFRIC 9 Reassessment of embedded derivatives• IFRIC 10 Interim Financial Reporting and Impairment Note 2 Segment information For management purposes, the Group is currently organised into the following twooperating divisions: Eastern and Western hemisphere, where Western hemisphererelates to US and the Americas and Eastern relates to Europe and the rest of theworld. These divisions are the basis on which the Group reports its primary andonly segment information. Inter-segment sales are charged at prevailing marketrates. 6 months ended 30 June 2007 Continuing operations Western Eastern Eliminations Total for group $'000 $'000 $'000 $'000Revenue from salesExternal sale of goods 4 629 4 690 - 9 319Inter-segment sale ofgoods & services 773 28 (801) - Segment result - operating loss (676) 58 - (618) Other interest income andsimilar profit/loss items 198Interest expense forgroup companies (425) Loss before tax (845) Tax credit 193Loss for the period (652) Other information Capital additions 537 681 1 218Depreciation,amortisation and write downs (102) (109) (211) Unallocated assetsBalance sheet Western Eastern /liabilities Total for group $'000 $'000 $'000 $'000 Assets:Segment assets: 9 532 8 460 9 955 27 947 Liabilities:Segment liabilities: 2 650 2 555 2 279 7 473 12 months ended 31 December 2006 Continuing operations Western Eastern Eliminations Total for group $'000 $'000 $'000 $'000Revenue from salesExternal sale of goods 443 4 219 - 4 662Inter-segment sale ofgoods and services 364 733 (1 097) - Segment result -operating loss (1 421) (1 283) (10) (2 714) Other interest income andsimilar profit/loss items 155Interest expense forgroup companies (359) Loss before tax (2 918) Tax credit 629Loss for the year (2 289) Other information Capital additions 480 874 1 374Depreciation, amortisationand write downs (62) (211) (273) Unallocated assetsBalance sheet Western Eastern /liabilities Total for group $'000 $'000 $'000 $'000Assets:Segment assets: 2 723 4 363 4 695 11 781 Liabilities:Segment liabilities: 484 1 795 1 113 3 392 6 months ended 30 June 2006 Continuing operations Western Eastern Eliminations Total for group $'000 $'000 $'000 $'000Revenue from salesExternal sale of goods 128 2 004 - 2 132Inter-segment sale ofgoods and services - 108 (108) - Segment result - operating loss (841) (448) (141) (1 148) Other interest income andsimilar profit/loss items 45Interest expense forgroup companies (88) Loss before tax (1 191) Tax credit 321Loss for the period (870) Other information Capital additions 345 221 - 566Depreciation, amortisationand write downs (27) (68) - (95) Unallocated assetsBalance sheet Western Eastern /liabilities Total for group $'000 $'000 $'000 $'000Assets:Segment assets: 2 132 4 596 4 970 11 698 Liabilities:Segment liabilities: 514 1 152 709 2 375 Note 3 Taxation 6 months ended 12 months ended 6 months ended 30 June 2007 31 December 2006 30 June 2006 unaudited audited unaudited $'000 $'000 $'000 Current tax - Continuing - - -operationsDeferred tax assets 176 630 322Deferred tax liabilities 17 (1) (1) 193 629 321 Deferred taxation for the period has been credited at 19%, representing the bestestimate of the weighted average deferred tax rate expected for the full yearand is based upon the tax losses that the company will recover. Note 4 Loss per share Basic loss per share is calculated by dividing the loss attributable to equityholders of the Company by the weighted average number of ordinary shares inissue during the year. 6 months ended 12 months ended 6 months ended 30 June 2007 31 December 2006 30 June 2006 unaudited audited unaudited $'000 $'000 $'000 Loss attributable toequity holders of theCompany ($'000) (757 226) (2 288 994) (870 015) Weighted average number ofordinary shares in issue 51 209 176 43 750 500 43 750 500 Basic and diluted loss pershare ($ per share) -Continuing operations (0.015) (0.052) (0.020) There are no dilutive potential ordinary shares. Note 5 Adjustments to operating cash flows 6 months ended 12 months ended 6 months ended 30 June 2007 31 December 2006 30 June 2006 unaudited audited unaudited $'000 $'000 $'000 Depreciation of tangibleand intangible assets 211 273 95Unrealised exchange ratedifference - - 4Share based payments 41 171 85Finance costs 425 359 88Interest received (198) (155) (45)Financial leasing charges (43) (72) - 436 576 227 Note 6: Business Combinations On February 6, 2007, Gas Turbine Efficiency plc, announced its acquisition ofControl Center LLC ("Control Center") for $4 million, payable in cash and newordinary GTE shares. The results of the Control Center LLC operations have beenincluded in the consolidated financial statements as of February 6, 2007. On June 13, 2007, Gas Turbine Efficiency plc announced the acquisition of ARESTechnology LLC, a specialist gas turbine services and repair business, for acash consideration of $300,000. The results of the ARES Technology operationshave been included in the consolidated financial statements as of June 13, 2007. Financial effects The acquired businesses impacted consolidated revenue and net income, includingthe effects of fair value adjustments as follows. Revenue Net Income $'000 $'000 Control Center LLC 4 628 271ARES Technology LLC 1 (62) 4 629 209 The following table shows Gas Turbine Efficiency Plc pro forma revenue, netincome and earnings per share, including the effects of fair value adjustments,had the acquisitions taken place at January 1 2006. Gas Turbine Control ARES Gas Turbine Efficiency Efficiency Group Center LLC Technology LLC Group pro forma $'000 $'000 $'000 $'000 Pro formarevenue 9 319 888 316 10 523 Pro formanet income (652) (155) (12) (819) Pro formabasic anddiluted earnings per share($per share) (0.013) (0.016) Cost of combination, goodwill, acquired intangible assets and cash-flow effects Details of the cost of combination goodwill and acquired intangible assets is Control Center LLC ARES Technology LLC $'000 $'000Cash purchase consideration 2 000 300Share issue consideration 2 000 -Transaction related direct expenses 355 39Total cost of combination 4 355 339Less fair value of net liabilitiesacquired (724) (55)Goodwill and acquired intangibleassets 5 079 394 Control Center LLC ARES Technology LLC $'000 $'000Allocation:Goodwill - US based entities 4 771 356Acquired intangible assets - Customer relations 514 - - R&D Intangible assets - 48Deferred tax liability (206) (19) The total cost of combination and fair values have been determined provisionallyas they are based on preliminary appraisals and subject to confirmation ofcertain facts. Thus, the purchase price accounting is subject to refinement. The cash flow effects were as follows Control Center LLC ARES Technology LLC $'000 $'000 Total cost of combination paid incash 2 355 339Less Acquired cash and cashequivalents (174) (18)Net cash outflow from thecombination 2 181 321 Assets acquired and liabilities assumed Carrying value equals fair value. Control Center LLC ARES Technology LLC $'000 $'000 Financial assets 14 -Property and equipment 127 167Receivables and other currentassets 1 284 43Cash and cash equivalents 174 18Total assets 1 599 228 Non-current Financial liabilities -borrowings (75) (100)Current Financial liabilities (942) -Other non-interest bearingliabilities (1 306) (183)Total liabilities (2 323) (283) Total value of net liabilitiesacquired (724) (55) There were no collateral pledged or contingent liabilities arising from theacquisition. Note 6: Basis of preparation This interim report was approved by the Board on 21 September 2007. It is notthe company's statutory accounts. The figures for the year ended 31 December 2006 were derived from the statutoryaccounts for that year. These accounts have been delivered to the Registrar ofCompanies and received an audit report which was unqualified and did not containstatements under s237(2) or s237(3) of the Companies Act 1985. The six monthsresults for both periods are unaudited. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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