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Turbotec Products (TRBO)

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Monday 06 December, 2010

Turbotec Products

Half Yearly Report

RNS Number : 3815X
Turbotec Products PLC
06 December 2010
 



 

              

Press Release

6 December 2010

 

Turbotec Products Plc

 

("Turbotec" or "the Company")

 

Half Yearly Report

 

 

Turbotec Products Plc (TRBO.L), the designer and manufacturer of high performance, high quality heat exchangers and Tru-Twist® heat transfer tubing, today announces its interim results for the six months ended 30 September 2010.

 

Summary

·

Revenue of $12.2 million (2009: $9.7 million)

·

Gross margin of 25.5% (2009: 29.1%)

·

Operating profit of $1.2 million, including net litigation proceeds of $0.3 million (2009: $0.9 million, including litigation expenses of $0.2 million)

·

Increase in net assets by 11.8% to $11.4 million (2009: $10.2 million)

·

Purchase of new Hickory manufacturing facility in North Carolina completed; relocation of operations underway

                                

Overview

First half sales of $12.2 million were above the $9.7 million achieved in the comparable period last year with shipments to major market segments at increased levels and unit volumes up by approximately 23% overall.  The Company generated profit before tax of $1.2 million for the first half, (FY2010: $0.9 million) which includes the interim payment on account of costs of approximately $0.5 million in relation to the Company's successful defence of the litigation brought against it by its major shareholder, Thermodynetics Inc. Associated legal costs of approximately $0.2 million were charged to operations during the period.

 

In the United States, the continuing sluggish economy coupled with tight credit markets has prolonged the weak housing market for both new construction and resale properties. Other markets served by the Company have been similarly impacted by the economy. In an attempt to counterbalance these factors, the federal government instituted a home buyer credit and a 30% tax credit incentive towards the installation of geothermal heat pump systems in calendar year 2009, helping to spur demand for water source heat pump products during the current period. The demand for swimming pool heat pump applications continues to be depressed and with no outside stimulus package foreseen, shipments to this market are expected to remain at reduced levels through the foreseeable future. The board has factored into its expectations for the balance of the fiscal year a moderation of shipments as Canadian tax incentives for geothermal heat pumps expire and fears of a double-dip recession emerge. The Company has also been experiencing increased competition in certain of its markets and while taking action to protect its position, recent inroads made by domestic and overseas manufacturers into the company's core business markets have become more frequent. 

 

In April 2010 the Company acquired a new facility in Hickory, North Carolina, and is currently upgrading the building to accommodate its manufacturing requirements. Operations at the nearby rental facility have been moved into the new building with production machinery and equipment from Connecticut to be transferred to Hickory over the coming months.  Additions to senior staff in selling and engineering during the current period increased overhead costs in the current period but are expected to significantly enhance the Company's technical expertise and ability to develop new product applications and expand the customer base in future years.

 

Commenting on the interim results, Sunil Raina, Managing Director of Turbotec Products, said: "Whilst the Company continues to trade in line with the board's expectations for the full year, we remain cautious regarding our prospects for the next 6 months given the ongoing economic uncertainty. The Company, through the relocation of operations to Hickory and expansion of its sales and engineering functions, remains focused on a long term strategy take advantage of those opportunities once the economy begins to recover. "

 

-Ends-

 



For further information please contact:

Turbotec Products Plc


Sunil Raina, Managing Director

SRaina@turbotecproducts.com

Robert Lieberman, Finance Director

RLieberman@turbotecproducts.com

Tel: +1 (860) 731 4205

 

Tel: +1 (860) 731 4206

www.turbotecproducts.com

 

Evolution Securities Limited


Joanne Lake / Casper Kaars

Joanne.lake@evosecurities.com

Tel: +44 (0) 113 243 1619

 

 

 

Media enquiries:

Abchurch Communications


Sarah Hollins / Nick Probert

nick.probert@abchurch-group.com

Tel: +44 (0)20 7398 7715

www.abchurch-group.com

 

Copies of this announcement are available for collection from Evolution Securities, offices at Kings House, 1 King Street, Leeds, LS1 2HH and electronic copies can be obtained from the Company's website www.turbotecproducts.com.



Chairman's Statement

Given the difficult conditions in our main markets, it is most encouraging to report a respectable set of interim results for the half-year ended 30 September 2010. Turnover is up by 25% to $12 million, due in part to the U.S. government fiscal stimulus programmes, and also due in part to stock replenishment, following the harsh cutbacks at some customers in the prior period.

 

Margins have been reduced by the volatile cost of raw materials, competitive pressures and the overlap costs of manufacturing sites, and I am pleased to report that the Company has generated a welcome net income of $856,000, despite these many challenges. Copper has once again surged to a record level, which has a fluctuating and transient effect on margins.

 

In September 2010, Thermodynetics Inc., the Company's major shareholder which had previously brought proceedings against the Company, was served with a formal bill of costs in relation to the litigation amounting to approximately £683,000, which included the interim payment on account of £350,000 ($501,000) already announced in May 2010. Thermodynetics Inc. paid the interim payment but has now served points disputing the bill of costs; a hearing on this matter will be scheduled by the Court.

 

The preparation of the new lower-cost Hickory facility for full manufacturing is progressing well, as is the recruitment of high caliber individuals in key positions to further strengthen the executive management team. The ongoing investment being made in Hickory reinforces the need to conserve cash in these current depressed market conditions.

 

After carefully considering all of these factors, and in line with previous statements, the Board has concluded that it should reserve any decision on payment of a dividend until after the payment of the final cost award in relation to the litigation.

 

In keeping with the wishes of our key customers the Company will retain some capabilities and extend its presence in Windsor, Connecticut for some period during 2011, enabling dual supply capability while the new Hickory manufacturing operation demonstrates supply capability that passes stringent testing and qualification parameters in meeting our long standing customers' expectations.

 

The challenges identified by your Board three years ago remain, as we positively re-equip the business on all fronts, to greatly improve its cost competitiveness for the long term in line with our business strategy. We are confident that the great efforts being made by a lot of our colleagues on the Hickory project will bear fruit in the coming years.

 

Tom Nairn

Chairman

2 December 2010   

   



 

TURBOTEC PRODUCTS PLC

UNAUDITED CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

 

Six Months

30 September

2010

Six Months

30 September

2009

Year Ended

31 March

2010

$'000

$'000

$'000

Revenue

12,162

9,734

19,823

Cost of sales

(9,063)

(6,903)

(14,372)

Gross profit

3,099

2,831

5,451

Distribution costs

(308)

(281)

(564)

Administrative expenses

(1,573)

(1,627)

(3,675)

Operating profit

1,218

923

1,212

Finance costs

(2)

(3)

(5)

Profit before tax

1,216

920

1,207

Income tax expense

(360)

(369)

(468)

Profit and total comprehensive income

    for the period

856

551

739

Earnings per share - basic

$ 0.07

$ 0.04

$ 0.06

Earnings per share - diluted

$ 0.07

$ 0.04

$ 0.06

 

There were no items of other comprehensive income for any period.

All of the profit and total comprehensive income is attributable to the owners of the parent.

 

 



 TURBOTEC PRODUCTS PLC

UNAUDITED CONSOLIDATED statement of changes in equity

 


 

 

 

Share capital

 

 

 

Share Premium

 

 

 

Retained earnings

 

 

 

Merger Reserve

 

 

 

 

Total


$'000

 

$'000

$'000

$'000

 







Balance at 31 March 2009

    228

3,441

6,089

(168)

9,590







Profit and total comprehensive income for the period

 

-

 

-

 

551

           

            -

 

551

Share based payment expense

Other

-

-

-

-

62

(38)

            -

-   

62

(38)







Balance at 30 September 2009

    228

3,441

6,664

(168)

10,165

 

Profit and total comprehensive income for the period

 

-

 

-

 

226

           

            -

 

226

Share based payment expense

 

-

 

-

 

62

 

            -

 

62

 







Balance at 31 March 2010

    228

3,441

6,952

(168)

10,453

 

Profit and total comprehensive income for the period

 

-

 

-

 

856

           

            -

 

856

Share based payment expense

Other

-

-

-

-

65

(12)

            -

-

65

(12)







Balance at 30 September 2010

    228

3,441

7,861

(168)

11,362

 

 

 

 

 

 

 



TURBOTEC PRODUCTS PLC

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

30 SEPT

2010

30 SEPT

2009

31 MARCH

2010

$'000

$'000

$'000

Assets

Non-current assets:

Property, plant and equipment

10,156

5,174

5,424

Intangible assets

Other

313

11

396

7

355

109

10,480

5,577

5,888

Current Assets:

Inventories

Trade and other receivables

Cash and cash equivalents

4,865

2,153

288

3,725

1,689

1,984

3,750

1,539

1,464

7,306

7,398

6,753

Current Liabilities

Current portion of long-term borrowings

Trade and other payables

Current tax liabilities

173

2,909

49

142

1,609

34

85

1,125

21

3,131

1,785

1,231

Net current assets

4,175

5,613

5,522

Non-current liabilities

Long-term borrowings

Deferred tax

2,393

900

125

900

82

875

3,293

1,025

957

Net assets

11,362

10,165

10,453

Shareholders' equity:

Share capital

228

228

228

Share premium account

3,441

3,441

3,441

Merger reserve

(168)

(168)

(168)

Retained earnings

7,861

6,664

6,952

Total equity

11,362

10,165

10,453

 

 



TURBOTEC PRODUCTS PLC

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

 

 


SIX

MONTHS

30 SEPT

2010

SIX MONTHS

30 SEPT

2009

YEAR ENDED

31 MARCH 2010



$'000

$'000

$'000






Cash flows from operating activities





Profit before tax


1,216

920

1,207

Adjustments to reconcile net income to net





  cash provided by operating activities:





Depreciation and amortization


239

199

426

Finance expense


2

3

5

Charge recognized in respect of share based payment


65

62

124






Cash flows from operating activities before changes in working capital


1,522

1,184

1,762











(Increase) / (decrease) in trade and other receivables


(616)

(34)

113

(Increase) in inventory


(1,115)

(153)

(178)

Increase / (decrease) in trade and other payables


1,772

445

(201)






Cash generated from operations


1,563

1,442

1,496

Taxes paid


(307)

(574)

(510)






Net cash provided by operating activities


1,256

868

986






Cash flows from investing activities





Purchases of property, plant and equipment


(4,829)

(312)

(848)

Net cash used in investing activities


(4,829)

(312)

(848)






Cash flows from financing activities





Proceeds from long term borrowings


2,479

10

-

Principal payments on long term debt


(80)

(88)

(178)

Finance expense


(2)

(3)

(5)

Net cash provided by (used in) financing activities


2,397

(81)

(183)






Net change in cash and cash equivalents


(1,176)

475

(45)






Cash and cash equivalents,  beginning of period


1,464

1,509

1,509






Cash and cash equivalents,  end of period


288

1,984

1,464

 

NOTES TO THE FINANCIAL STATEMENTS

 

1.      BASIS OF PREPARATION

The AIM Rules for Companies require that the annual consolidated financial statements of the company for the 52 week period ending 31 March 2011 be prepared in accordance with International Financial Reporting Standards adopted for use in the EU ("IFRS"). Other than the adoption of IAS1 (revised), this half year financial statement has been prepared on a consistent basis in accordance with the accounting policies adopted in the accounts for the year ended 31 March 2010 and on the basis of the recognition and measurement requirements of IFRS in issue that are either endorsed by the EU and effective (or available for early adoption) at 2 December 2010 and hence on the basis of IFRS that are expected to apply in preparation of the accounts for the year ending 31 March 2011. The preparation of the interim financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.  Actual results may differ from these estimates.  These interim financial statements have neither been audited nor reviewed pursuant to guidelines issued by the Auditing Practices Board. 

 

The comparatives for the full year ended 31 March 2010 are not the Company's full statutory accounts for that year.  A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The auditors' report on those accounts was unqualified and did not contain a statement under Chapter 3 of the Companies Act 2006.

 

2.     TAXATION

Analysis of charge in period:


Six months ended 30 Sept

2010

Six months ended 30 Sept

2009

Year ended

31 March

2010


($000's)

 

($000's)

($000's)

Current

335

369

493

Deferred

25

-

(25)

Total Taxation

360

369

468

 

 

 

Tax reconciliation:

The effective tax rates for the periods are different than the standard rate of corporate tax in the UK (28% for all periods presented). The differences are attributable to the following:

 


Six months ended 30 Sept

2010

Six months ended 30 Sept

2009

Year ended

31 March

2010


($000's)

 

($000's)

($000's)

Profit before tax

1,266

920

1,207





Profit before tax multiplied by rate of corporate tax in the UK of 28%

355

258

338





Effect of:




Differences between book and taxable income

(10)

(10)

(52)

Higher rate of tax on overseas earnings

101

110

135

Unrelieved losses carried forward

-

-

134

Utilisation of tax loss carry forward

(84)

-

-

Over accrual from prior year

0

-

(72)

Tax credits used to reduce taxes paid

(5)

(5)

-

Other

3

16

(15)

Total Taxation

360

369

468

 

3.      BASIC EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE

The calculations of basic and diluted earnings per ordinary share are based on the profit for the financial year and the weighted average number of equity voting shares in issue and dilutive shares during the period.

 


Six Months 30 Sept 2010

Six Months 30 Sept 2009

Year Ended 31 March 2010


(Numerator)

(Denominator)

(Numerator)

(Denominator)

(Numerator)

(Denominator)


($000's)

Weighted

($000's)

Weighted

($000's)

Weighted



Average Shares


Average Shares


Average Shares








Basic EPS














Profit for the period

856

-

551

-

739

-

Weighted average shares

-

12,806,773

-

12,806,773

-

12,806,773

 

 

Diluted EPS-







Effect of Dilutive Securities

 







Stock options

-

922,778

-

-

-

707,781















Diluted EPS

856

13,729,551

551

12,806,773

739

13,514,554

 

Employee options have been excluded from the calculation of diluted earnings per share in 2009 as their exercise price was greater than the weighted average price share during the year. Therefore it was not to be advantageous for the holders to exercise those options.

 

4.         INTANGIBLE ASSETS



Capitalized




Development



Goodwill

Costs

Total


($000's)

($000's)

($000's)

Period Ended 30 Sept 2010




Cost and net book value




Balance at 1 April, 2010

94

261

355

Additions

Amortization

-

-

-

(42)

-

(42)

Balance at 30 Sept, 2010

94

219

313









Period Ended 30 Sept 2009




Cost and net book value




Balance at 1 April, 2009

94

345

439

Additions

Amortization

-

-

-

(43)

-

(43)

Balance at 30 Sept, 2009

94

302

396

 

          

            Period Ended 31 March 2010




Cost and net book value




Balance at 1 April, 2009

94

345

439

Additions

Amortization

-

-

-

(84)

-

(84)

Balance at 31 March, 2010

94

261

355





 

Goodwill relates to the acquisition of a technology company acquired by the US parent company in 1985.  The operations of that company were subsequently integrated into the company's primary manufacturing facility.  The technology acquired continues to be used by the group as an integral part of the engineering and manufacturing of its current product line. 

 

In accordance with IAS 36, the Group regularly monitors the carrying value of intangible assets. A review was undertaken at 31 March 2010 to assess whether the carrying value of assets was supported by the net present value of cash flows derived from those assets using future cash flow projections.   Further to the review, there have been no impairments to the carrying amount of goodwill in any period.  The deferred development costs will be amortized over the expected lives of the related products once sales of these products commence on a commercial level. 

 

5. ANALYSIS OF CASH AND CASH EQUIVALENTS AT:

 



30 Sept

30 Sept

31 March



2010

2009

2010



($000's)

($000's)

($000's)






Cash available on demand


288

1,984

1,464

Bank overdrafts


-

-

-



288

1,984

1,464

 

The Company has an overdraft facility in place. The entire balance was available for all periods presented.

 

 

6. LONG TERM BORROWINGS

 



30 Sept

30 Sept

31 March



2010

2009

2010



($000's)

($000's)

($000's)

 

Current financial liabilities










Bank loans - secured


173

142

85






Non-current financial liabilities

 





Bank loans - secured


2,393

125

82

 

 

The bank loans and overdraft are secured by a fixed charge over the assets of the Group.  In addition, the Group must comply with certain non-financial covenants, non-compliance with which would be considered an event of default and provide the bank with the right to demand repayment prior to the loan's maturity date. 

 

In April 2010 the Company acquired a building in Hickory, NC that will become its new primary manufacturing facility after the completion of certain improvements (see Note 8). The purchase of the building and an adjacent land parcel were financed in part by a mortgage with the face amount of $2,215,000.  The mortgage has a twenty five year amortization schedule with equal monthly payments of principal with a five year term and bears interest at a floating rate linked to the bank's prime rate.

 

Also in April 2010 the Company received funding of approximately $264,000 for manufacturing equipment purchases under a line of credit arrangement with its bank that provides for a total of $600,000 to be advanced for qualified purchases. Under the terms of the agreement, interest only is payable at a floating rate on advances made through 29 November 2010, with the aggregate principal amount repayable in fifty-four successive equal monthly installments. An additional $331,000 was advanced against the line in November 2010.

 

 

The interest rate on floating rate financial liabilities is linked to the bank's prime rate.  The interest rates charged at the balance sheet date are as follows:

 

 


30 Sept 2010

30 Sept 2009

31 March 2010

Bank overdrafts and secured loans

3.25%

3.25%

3.25%

 

 

Maturities of borrowings over the next five years are as follows (including interest payments at current rates):

 


30 Sept

30 Sept

31 March


2010

2009

2010


($000's)

($000's)

 ($000's)

 

In less than 1 year

292

145

88

In 1-2 years

254

88

83

In 3-4 years

211

51

-

In 4-5 years

205

-

-

In 5-6 years

182

-

-


1,144

284

171

 

      7. LITIGATION JUDGMENT

 

On 10 May 2010 the Company was notified that it was successful in its defence of the claim brought by Thermodynetics Inc. in relation to the payment of administration fees under the Relationship Agreement. The company was awarded substantial costs, including an order of interim payment on account of 350,000 pounds sterling ($501,000) by Thermodynetics Inc. with an additional amount to be determined by the Court.  The interim payment was received by the Company in May 2010.

 

On 13 September 2010 Thermodynetics was served with a formal bill of costs amounting to approximately 683,000 pounds sterling, including the interim payment on account. Thermodynetics Inc. has served points disputing the bill of costs claimed and a Court hearing will be listed in due course.  The Company has limited the recognition of the judgment to the amount of cash proceeds received to date.

 

8. PURCHASE OF NEW FACILITY

 

In April 2010, the Company completed the purchase of an approximately 100,000 square foot facility and an adjacent 5.46 acre parcel of undeveloped land in Hickory, North Carolina for $2,769,000K. The purchase was financed in part with a mortgage from the Company's existing bank in the amount of $2,215,000. The mortgage has a twenty five year amortization schedule with equal monthly payments of principal with a five year term and bears interest at a floating rate linked to the bank's prime rate.

 

9. APPROVAL

 

This interim report was approved by the Directors of the Company on 2 December 2010.  Copies may be obtained on the Company's website, www.turbotecproducts.com, or from the Company Secretary.


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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