3rd Apr 2006 07:02
Gas Turbine Efficiency PLC03 April 2006 3 April 2006 Gas Turbine Efficiency plc Preliminary Results for the year to 31 December 2005 Gas Turbine Efficiency plc ("GTE" or "the Company"), a leading supplier ofadvanced high pressure gas turbine cleaning systems, announces its financialresults for the year ended 31 December 2005 which have been prepared inaccordance with IFRS. Financial Highlights •Revenues increased 112% to $5.3m (2004: $2.5m) •Gross margin remained stable •Revenues from industrial sector up 185% to $3.7m (2004: $1.3m) •Increased aviation revenues by 45% to $1.6m (2004: $1.1m) •Reduced EBITDA deficit to $0.3m (2004: $1.1m) excluding the impact of IFRS and one-off costs •Basic and fully diluted loss per share of $0.05 •Cash and cash equivalents amounted to $4.7m as at 31 December •Raised $9.3m before expenses from admission to AIM in December 2005 Operating Highlights •Sales in EMEA region rose 83% to $4.4m (2004: $2.4m) •US non-aviation revenues increased 10-fold to $0.9m •Extended exclusive aviation contract with Pratt & Whitney's subsidiary EcoPower to 2014 with options through to 2019, guaranteeing yearly minimum royalties to GTE •Established three EcoPower aviation hubs in US and started shipments to aviation service markets in Asia and Europe •Strengthened management team with appointment of Steven Zwolinski as Chief Executive Officer and Thomas Wagner as Chief Technology Officer •New product range launched for power generation turbines exceeding 80MW •Delivered seven large-scale systems to US power generation segment •Completed first marine application to US Navy Commenting on the results Steven Zwolinski, CEO of Gas Turbine Efficiency, said:"We made great strides in 2005 to set the building blocks in place for long termsuccess. The combination of a world class technology capability, IPO capitalinjection, strong OEM partners, patent portfolio, and global leadership teamprovide a rock solid foundation for the future." Enquiries: Gas Turbine Efficiency plcSteven Zwolinski, CEO +44 (0)20 7929 8989 on the day +46 8 546 10 528Libertas CapitalAamir Quraishi, Charles Goodfellow +44 (0)20 7569 9650 Corfin CommunicationsNeil Thapar, Harry Chathli +44 (0)20 7929 8989 Overview Gas Turbine Efficiency announces its maiden results since admission to AIM witha strong operating performance that heralds an exciting period of growth for theCompany. Although the period under review includes only two weeks' trading sincethe flotation, GTE made great progress during 2005 to transition itself from aniche player to a global designer and supplier of advanced gas turbine cleaningsystems for the aviation, power generation, marine and oil & gas sectors. It hassupplied systems to global OEMs such as Pratt & Whitney, Rolls-Royce, Saab andSiemens as well as gas turbine operators such as Norsk Hydro, Dresser-Rand,Statoil and TexasGenCo. Revenues increased by 112% to $5.3m (2004: $2.5m) reflecting strong growth inthe industrial segment with the first sales of GTE's large-scale systems to allthree segments of US power generation market. GTE's continued success will be measured by its ability to deliver solidcustomer value in highly dynamic commercial, technological, and geographicalenvironments. The Company's systems enable gas turbine operators to achievesubstantial savings in their energy costs, reduce emissions and cut maintenancedowntime. The worldwide growth in aviation markets, especially with the growthof low-cost airlines, is focusing attention on operating efficiency. Increasingfuel costs, often reflected in specific surcharges, show why GTE's advancedwashing systems are so important. In power generation, gas turbines are replacing conventional coal technologywith both greater efficiency and a reduction in atmospheric discharges. Fuelcosts, often geared directly to the oil price, have all risen. This has impactedon power plant economics, making GTE's wash systems a compelling investmentproposition to boost efficiency and operators' bottom line. As a result, the Company has a long term opportunity to provide advancedsolutions into a large and growing market. The global installed base forcivilian and military aircraft engines is estimated at approximately 120,000units while the number of industrial turbines currently in use is estimated atmore than 40,000 units. Recognizing the opportunities, the Company took several decisive actions,discussed below, during 2005 to build a strong platform for growth. Inparticular, GTE's management was strengthened with the appointment of StevenZwolinski as Chief Executive Officer. As the former CEO of General ElectricCompany's Global Wind Energy business, he brings more than 20 years' experiencein the industry and is the driving force behind GTE's long term strategy. Operating review GTE successfully completed an IPO on the London Stock Exchange's AIM market inlate December, raising $9.3m (£5.4m) before expenses principally for a plannedglobal roll-out of its current technology, secure qualification with leadingOEMs and fund expansion into further geographical markets. Longer term, the AIMlisting provides a currency for potential acquisitions, a means to rewardemployees through stock incentive schemes and enhances GTE's global profile. Industrial applications Revenues from industrial applications rose 185% to $3.7m (2004: $1.3m) partly asa result of significant sales into the US power generation market. GTE shippedits first seven US-designed and packaged systems for large industrial gasturbines. This was an important step in demonstrating our systems in the 80MWand larger turbine class. The US shipments were also significant because thesesales were made into all three of the major power generation customer segments -independent power producer (IPP), utility and municipal. The Company also completed its first sales to contractors for the US Navy - foruse on gas turbine propulsion systems. Aviation systems Revenues from aviation systems increased by 45% to $1.6m (2004: $1.1m),reflecting rising royalty and services fees as more and more aircraft operatorsuse GTE's advanced "on-wing" wash solutions to improve engine efficiency, cutfuel and maintenance costs. The key highlight in this area was the extension of GTE's contract with Pratt &Whitney's EcoPower business through 2014, with options through 2019. Exclusiveto both parties for aircraft wash equipment, this long term agreement includesguaranteed minimum royalty fees to GTE each year and provides a solidcornerstone for a sector that is expected to continue to represent 30-40% oftotal revenues. During 2005, three service hubs were established in the US andorders were received for equipment for expansion into EMEA regions. Management In January 2006 Thomas Wagner was appointed as GTE's Chief Technology Officer.He brings 30 years of industry experience with General Electric and in-depthknowledge of gas turbine systems and services. As part of the Company's overalltechnical and development strategy Per Alvestig, with more than 20 years' intechnology leadership roles with Saab, was recruited. In addition, GTE strengthened its senior management team in North America withabout half of its leadership team now based in the US. Financial Review Revenues increased by 112% to $5.3m (2004: $2.5m) reflecting strong growth inindustrial applications, with the first sales of GTE's large-scale systems intothe US power generation market, and an uplift in demand for aviation systems inkey territories. The EMEA region increased its contribution to overall revenues by 83% to $4.3m(2004: $2.4m) while revenues from North America rose 10-fold to $0.9m. Operating loss amounted to $2.2m (2004: $1.1m) reflecting costs associated withthe settlement of litigation in October 2005 and referred to in the admissiondocument. In addition, the Company incurred exceptional listing costs. In total,costs of $1.9m were incurred in connection with the Company's listing on AIM andthe associated fund raising. In accordance with IFRS 32, the costs incurred havebeen deducted from equity to the extent that they relate to the issue of newshares and the balance charged to the income statement. The impact of exceptional costs on EBITDA is set out below: Analysis of EBITDA ('000 US$) 2005 2004 ---------- ---------- Operating loss ($2,228) ($1,063) Depreciation and amortisation $167 $25 EBITDA before exceptional items ($2,061) ($1,038) Exceptional items - IPO costs $846 - Share-based payments $53 - Settlement of litigation and related costs $870 ---------- $1,769 Underlying EBITDA result ($292) ($1,038) The tax credit for the year of $0.9m (2004: $0.1m) reflects the recognition of adeferred tax asset in respect of trading losses as the directors are confidentof utilising these losses in the foreseeable future. Net loss amounted to $1.3m ($2004: $0.9m). Basic and fully diluted loss per share amounted to $0.05 (2004: $0.03). Cash and cash equivalents as at 31 December 2005 were $4.7m reflecting proceedsof $9.3m before expenses from the Company's IPO. Outlook The Company is continuing to build on its strong performance last year. Ourstrategic partnership with Pratt & Whitney, which guarantees a significant levelof royalty revenues, has extended our reach into new geographic territories inaviation. In industrial segments, good progress continues to be made to deepenrelationships with major OEMs. We made great strides in 2005 to set the building blocks in place for long termsuccess. The combination of a world class technology capability, IPO capitalinjection, strong OEM partners, patent portfolio, and global leadership teamprovide a rock solid foundation for the future. CONSOLIDATED STATEMENTS OF INCOMEIn thousands of US dollars, except share data December 31 December 31 Note 2005 2004 ------- --------- --------- Continuing operations Revenue 1 5,265 2,475 Own work capitalized 112 138 Other operating income 141 19 --------- --------- 5,518 2,632Operating expenses Raw materials and consumables (1,823) (888) Other external costs 2 (3,714) (1,454) Personnel costs (2,020) (1,317) Depreciation and write-downs of tangible and intangible assets (167) (25) Other operating expenses (22) (11) --------- --------- Operating loss (2,228) (1,063) Other gains and losses 31 99 Interest receivable 1 2 Interest payable (89) (5) --------- --------- Loss before tax (2,285) (967) Taxation 3 944 69 LOSS FOR THE YEAR ATTRIBUTABLE TO EQUITYHOLDERS OF THE PARENT (1,341) (898) ========= =========Loss per share From continuing operations Basic and diluted loss per share (USD) (0.05) (0.03) Weighted average number of ordinary 26 250 500 25 750 500 shares in issue Weighted average number of ordinary shares for 26 569 063 25 750 500 diluted loss per share CONSOLIDATED BALANCE SHEETSIn thousands of US dollars, except share data December 31 December 31 Note 2005 2004 ------ ---------- ----------ASSETS Intangible non-current assets Capitalized expenditure for research 135 152 and development Patents 183 59 ERP-System 85 128 Goodwill 4 1,084 1,304 ---------- ---------- 1,487 1,643Tangible non-current assets Equipment, tools, fixtures and fittings 178 132 ---------- ----------Financial non-current assets Investments 152 148 ---------- ----------Deferred tax assets 5 1,102 7 ---------- ----------Total non-current assets 2,919 1,930 Current assets Inventories 743 741 ---------- ----------Current receivables Accounts receivable-trade 1,843 1,284 Income taxes recoverable - 140 Other receivables 2,080 68 Prepaid expenses and accrued income 631 47 ---------- ---------- 4,554 1,539 Cash and cash equivalents 4,705 137 ---------- ----------Total current assets 10,002 2,417 TOTAL ASSETS 12,921 4,347 ========== ========== CONSOLIDATED BALANCE SHEETSIn thousands of US dollars, except share data December 31 December 31 Note 2005 2004 ------- ---------- ----------EQUITY AND LIABILITIES Equity Share capital 156 95 Share premium 8,356 - Capital reserve 2,636 2,636 Share based payment reserve 53 - Translation reserves 601 1,038 Retained earnings (2,295) (953) ---------- ----------Total equity attributable to equity holders of the parent 9,507 2,816 Non-current liabilities Financial liabilities 94 134 Deferred tax liabilities 5 66 76 ---------- ---------- 160 210Current liabilities Financial liabilities 1,292 236 Accounts payable - trade 904 787 Income tax liability 31 - Other liabilities 142 37 Accrued expenses 885 261 ---------- ---------- 3,254 1,321 TOTAL EQUITY AND LIABILITIES 12,921 4,347 ========== ========== CONSOLIDATED STATEMENT OF CASH FLOWSIn thousands of US dollars December 31 December 31 2005 2004 ----------- -----------Cash flow from operating activities Loss after financial items (2,285) (966) Adjustments to operating cash flows 157 (108) ----------- -----------Cash flow from operating activities before changes in working capital (2,128) (1,074) Cash flow from changes in working capital increase in inventories (99) (232) increase in receivables (1,342) (67) increase in liabilities 1,058 424 Income taxes received/(paid) 16 (126) ----------- ------------Net cash used by operating activities (2,495) (1,075) Cash flows from investing activities Sale of financial assets - 42 Purchase of intangible fixed assets (231) (155) Purchase of tangible fixed assets (55) (51) ----------- ------------Net cash used by investing activities (286) (164) Cash flows from financing activities New share issue 5,371 548 Loans taken 1,945 154 ----------- ------------Net cash generated by financing activities 7,316 702 Net change in cash and cash equivalents 4,535 (537)Cash and cash equivalents beginning of the year 137 677Effect of foreign exchange rate changes 33 (3) Cash and cash equivalents end of the year 4,705 137 =========== ============ CONSOLIDATED STATEMENT OF CHANGES IN EQUITYIn thousands of US dollars Consolidated statement of changes in equity for the year ended 31 December 2005 Share based Ordinary Share Capital payment Shares premium reserves reserve -------- ------- -------- --------Balance at January 1, 2004 95 - 2,038 - Issue of share capital - - 598 - Exchange differences - - - - arising on translation of foreign operations Net loss for the year - - - - -------- ------- -------- --------Balance at December 31, 2004 95 - 2,636 - New share issue, 18,000,000 61 9,263 - - shares at nominal £0.002 IPO costs - (1,038) - - Recognition of share-based - - - 53 payments Share premium - 131 - - Exchange differences - - - - arising on translation of foreign operations Net loss for the year - - - - ------- -------- -------- --------Balance at December 31, 2005 156 8,356 2,636 53 ======= ======== ======== ======== CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued)In thousands of US dollars Consolidated statement of changes in equity for the year ended 31 December 2005 Total Translation Retained shareholders reserve earnings Equity ----------- -------- ------------Balance at January 1, 2004 787 (56) 2,864 Issue of share capital - - 598 Exchange differences arising on translation of foreign operations 251 - 251 Net loss for the year - (897) (897) ----------- --------- ------------Balance at December 31, 2004 1,038 (953) 2,816 New share issue, 18,000,000 shares at nominal £0.002 - - 9,324 IPO costs - - (1,038) Recognition of share-based - - 53 payments Share premium - - 131 Exchange differences (437) - (437) arising on translation of foreign operations Net loss for the year - (1,342) (1,342) ------- ------- ----------Balance at December 31, 2005 601 (2,295) 9,507 ======= ======= ========== Note 1 Segment information For management purposes, the Group is currently organised into the following twooperating divisions: Eastern and Western hemisphere. These divisions are the basis on which the Groupreports its primary and only segment information. December 31, 2005 Total Western Eastern Eliminations for group --------- --------- ------------ ----------Revenue External sales 917 4,347 - 5,265 Inter-segment sales - 254 (254) - Segment result (1,711) (483) (33) (2,228) --------- --------- ------------- ---------- Other gains and losses 31 Other interest income 1 and similar profit/loss items Interest expense for (89) group companies ---------- Loss before tax (2,285) Income tax credit 944 ----------Loss for the year (1,341) ==========Other information Capital additions 19 267 - 286 Depreciation, (4) (163) - (167) amortisation and write downs Impairment losses (28) - - (28) recognised in loss Impairment losses and 57 100 - 157 non-cash expenses Balance sheetAssets: Segment assets: 3,709 9,213 - 12,921Consolidated total assets 12,921 Liabilities: Segment liabilities: 2,809 605 (160) 3,254Consolidated total Liabilities 3,254 Note 1 Segment information/Continued December 31, 2004 Total for Western Eastern Eliminations group --------- --------- ------------ --------Revenue External sales 84 2,391 - 2,475 Inter-segment sales - 237 (237) - Segment result (807) (233) (23) (1,063) --------- --------- ------------ -------- Other gains and losses 99 Other interest income 2 and similar profit/ loss items Interest expense for (5) group companies -------- Loss before tax (967) Income tax credit 7 62 - 69 --------Loss for the year (898) ========Other information Capital additions - 369 - 369 Depreciation and - (25) - (25) amortisation Impairment losses and (107) - - (107) non-cash expenses Balance sheetAssets: Segment assets: 361 3,986 - 4,347 Unallocated assetsConsolidated total assets 4,347 Liabilities: Segment liabilities: 315 1,217 (211) 1,321Consolidated total Liabilities 1,321 Note 2 Other external costs December 31 2005 December 31, 2004 ------------------ ------------------- Legal Claim (500) -Legal Costs (370) -IPO & admission Costs (846) -Other external costs (1,998) (1,454) (3,714) (1,454) ================== =================== Legal proceedings surrounding GTE Inc's termination of its agency agreementwith Antoni International Inc, one of GTE's US sale agents, were settled on 26 October 2005 by means of a formal settlement agreement involving the paymentof 500 TUSD. In addition legal costs of 370 TUSD in respect of this case havebeen incurred. In total, costs of $1.9m were incurred in connection with the Company'slisting on AIM and the associated fund raising. In accordance with IFRS 32,the costs incurred have been deducted from equity to the extent that theyrelate to the issue of new shares and the balance charged to the incomestatement. Note 3 Taxation December 31 2005 December 31 2004 ------------------ ------------------Current tax (149) (0)Deferred tax (Note 5) Assets 1,096 69Deferred tax (Note 5) Liabili (3) - ------------------ ------------------ Tax credit for the year 944 69 ================== ================== The total credit for the year can be reconciled to the accounting profit as follows: December 31 2005 December 31 2004 ------------------ ------------------Loss before tax (2,285) (966) Tax at the domestic tax rate in Sweden of 28% 640 271 Tax effect of expenses that are not taxable/deductible in determining taxable profit (31) (30) Tax effect of income that is not taxable/deductible in determining taxable profit 15 29 Tax effect of utilisation of tax losses not previously recognised 309 - Tax effect of not recognised tax losses (297) (272) Deferred tax booked directly against balance sheet. (Taxable untaxed reserves not included in P/L) - 71 Effect of different tax rates of subsidiaries operating in other jurisdictions 308 - ----------- ----------Tax credit and effective tax rate for the year 944 69 =========== ========== Note 4 Intangible assets - Goodwill December 31, 2005 December 31, 2004 ----------------- -----------------Cost As at 1 January 1,304 1,185Purchases - -Disposals - -Exchange differences (220) 119As at 31 December 1,084 1,304 ImpairmentAs at 1 January - -Impairment loss recognized - -As at 31 December 1,084 1,304 ============ ============ Goodwill is allocated to the Group's cash-generating units (CGUs) identifiedaccording to country of operation. Western - -Eastern 1,084 1,304 1,084 1,304 ============ ============ The Group tests goodwill annually for impairment or more frequently if thereare indications that goodwill might be impaired. The recoverable amounts of the CGUs are determined from value in usecalculations. The key assumptions for the value in use calculations are thoseregarding the discount rates, growth rates and expected changes to sellingprices and direct costs during the period. Management estimates discount ratesusing pre-tax rates that reflect current market assessments of the time value ofmoney and the risks specific to the CGUs. Changes in selling prices and directcosts are based on past practices and expectations of future changes in themarket. The Group prepares cash flow forecasts derived from the most recent financialforecasts approved by the Board of Directors. The view of the Board of Directorsis that the future growth of the Company significantly exceeds the currentlybooked goodwill asset of TUSD 1,084. The rate used to discount the forecast cash flows from the business related toSweden is 12 per cent. Note 5 Deferred tax The following are the major deferred tax liabilities and assets recognised by the Group, and the movements thereon, during the current and prior reporting periods. Deferred tax assets------------------- Tax Loss Inventory Carry-forward Total --------- ------------- ---------At January 1, 2004 - - -Charged/(credited) to the income statement 7 - -At 31 December 2004 7 - 7Charged/(credited) to the income statement 15 1,080 1,096At 31 December 2005 22 1,080 1,102 ========= Intangible Untaxed Deferred tax liabilities assets reserves Total------------------------ ---------- ------------ ---------At January 1 2004 (7) (126) (133)Charged/(credited) to the income statement (9) 71 62Exchange differences (1) (5) (5)At 31 December 2004 (17) (59) (76)Charged/(credited) to the income statement 3 3Exchange differences (2) 10 8At 31 December 2005 (16) (49) (66) At the balance sheet date December 31 2005, the Group has unused tax losses of2,770 TUSD (2004: estimated at 1,102 TUSD) available for offset against future profits. These tax loss carryforwards expire as follows. Year Amount----- ------2018 1,1022019 1,168 On December 31, 2005, the total tax loss carryforwards generated deferred tax assets of TUSD 1,080 (Nil). The tax loss carryforwards can be utilised to reduce future taxable income. Their future utilisation does not mean a lower tax chargefor the Group. 6. Significant accounting policies The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards. The financial statements have been prepared onthe historical cost basis, except for the revaluation of certain financialinstruments. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company (its subsidiaries). Controlis achieved where the Company has the power to govern the financial andoperating policies of an entity so as to obtain benefits from its activities. In preparation for the admission of the Company, which was incorporated on 17 March 2005, onto the AIM market of the London Stock Exchange, restructuringof the ownership of the companies, which now comprise the Group headed by theCompany was completed on 18 May 2005 when shares in the Company were issued tothe shareholders of GTE Holding Corporation Inc. in exchange for the entireshare capital in GTE Holding Corporation Inc. As ultimate ownership of theCompany acquired did not change as a consequence of this reconstruction, thetransaction does not constitute a business combination as defined by IFRS 3(Business Combinations) and, accordingly, will not be accounted for at that dateusing acquisition accounting principles. Goodwill does not arise on thistransaction and book values are not adjusted to fair value at the date of thereconstruction. For the period ending 31 December 2005, the Group has applied"pooling of interests" accounting principles in the preparation of its financialstatements. These financial statements include the Group's results from 1 January 2005 to 31 December 2005. The other significant accounting policies adopted by the Group in preparation ofthe accounts are consistent with the accounting policies disclosed in the AIMAdmission Document dated 15 December 2005. Basis of Preparation The financial information set out in this announcement does not constitute theCompany's statutory accounts for the year ended 31 December 2005 and theseaccounts have not yet been approved, audited or filed. Copies of the 2005 AnnualReport, which will be posted to shareholders in April 2006, may be obtained fromthe date of posting from the registered office of the Company at 5th Floor,Alder Castle, 10 Noble Street, London EC2V 7 QJ. This statement, which has beenagreed with the auditors, was approved by the Board on 31 March 2006. - ENDS - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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