Interim Results
Gas Turbine Efficiency PLC
29 September 2006
29 September 2006
Gas Turbine Efficiency plc
Interim Results for the six months to 30 June 2006
Gas Turbine Efficiency plc ('GTE' or 'the Company'), a leading supplier of
advanced high pressure gas turbine cleaning systems for the aviation and power
generation industries, announces its financial results for the six months to 30
June 2006.
Financial Highlights
• Total revenues were $2.1m (H1 2005: $2.3m)
• Aviation revenues were $1.3m (H1: 2005: $1.0m)
• Revenues from industrial sector $0.8M (H1 2005: $1.3m)
• Operating loss amounted to $1.1m (H1 2005: $1.0m )
• Basic and fully diluted loss per share of $0.02 (H1 2005: $0.04)
• Cash and cash equivalents totalled $3.5m as at 30 June 2006 (H1 2005:
$0.2m)
Operating Highlights
• Significant progress made on OEM qualification in the industrial sector
with global OEMs which is the cornerstone of GTE's long term strategy
• Pratt & Whitney expanded EcoPower(TM)service to Europe and Asia hubs
• Multi-year agreement signed with Siemens Industrial Turbines AB
• First Middle Eastern order received
• Second office opened in New York State for engineering support to
existing and potential partners
• Set up a Russian subsidiary to target its large installed base of
industrial turbines
Steven Zwolinski, CEO of GTE, said: 'We have made tremendous progress in the
first half to strengthen relationships with key industrial global OEMs by
focusing on completing the demanding but non-recurring process of GTE technology
qualification. We are just entering the last phase of our negotiations with
several global OEMs and hope to achieve necessary qualifications soon.
These steps have made a positive impact on our business, leading to a strong
pipeline of orders for the second half of 2006. As a result, the Company remains
confident of delivering significant revenue growth for the full year 2006 and
beyond.'
Enquiries:
Gas Turbine Efficiency plc
Steven Zwolinski, CEO +44 20 7929 8989 on the day
+46 8 546 10 528
Libertas Capital
Aamir Quraishi, Charles Goodfellow + 44 20 7569 9650
Corfin Communications
Neil Thapar, Harry Chathli +44 (0)20 7929 8989
Overview
GTE made considerable progress in the first half of 2006 to position itself for
sustained long term growth and the steps taken during the period have already
started making a positive impact on the business. The Company's systems enable
gas turbine operators to achieve substantial savings in their energy costs,
reduce emissions and cut maintenance downtime. Operating data from a number of
gas turbine operators suggests that they are achieving better-than-expected cost
efficiency in real-life working conditions - which validates the compelling
benefits of our advanced high pressure systems.
Our customers include global OEMs such as Pratt & Whitney, Rolls-Royce, Saab and
Siemens as well as gas turbine operators such as Calpine, Norsk Hydro, SNAM,
Statoil and TexasGenCo.
Turnover decreased by 8% to $2.1m (H1 2005: $2.3m) reflecting a lower
contribution from the industrial segment, partly offset by a sharp increase in
sales into the aviation market. The fall in revenues was in line with the
Company's expectations and its strategy, discussed below, to focus on
establishing long term partnerships with global original equipment manufactures
(OEMs).
Operating review
The Company achieved several notable milestones in the first half of 2006 as it
continued to target the global market for wash systems in power generation,
aviation, oil & gas and marine segments. The market opportunity available to GTE
is both large and growing. The global installed base for civilian and military
aircraft engines is estimated at approximately 120,000 units while the number of
industrial turbines currently in use is estimated at more than 40,000 units.
Aviation systems
Revenues from aviation systems, where GTE is the exclusive supplier of on-wing
wash systems to Pratt & Whitney's EcoPowerbusiness (PW), rose by 30% to $1m.
In February 2006, the Company won a $1.3m order from PW for two complete
cleaning systems for new commercial aviation hubs in Asia and Europe, taking the
total number of its service hubs to five. The order reflected a planned global
rollout by EcoPower(TM), which provides wash services to a wide range of
aircraft fleets powered by engines manufactured by PW as well as other major
OEMs. EcoPower(TM)'s first European hub at Schiphol airport commenced operations
in July with Martinair as its launch customer. In Asia, its first hub is located
in Singapore where it will serve a wide range of aircraft operators.
As previously announced, in January 2006 GTE's contract with PW was extended to
2014. This contract provides a solid foundation for long term growth for the
Company. GTE generates revenues under this contract from the sale of GTE
equipment as well as royalties based on the number of washes carried by
EcoPower
While the civil aviation market is expected to gain momentum, the Company has
also targeted the military segment, where it already has a number of customers
including the Swedish Air Force. As a result, there has been significant
increase in inquiry levels from potential military customers in the first half
of the year.
Industrial
Revenues from the industrial segment (which includes power generation, oil & gas
and marine industries) decreased to $0.8m compared with revenues of $1.3m in the
corresponding period last year. However, the result was in line with the
Company's expectations and its strategy to work directly with global OEMs, and
the required, non-recurring process of GTE technology qualification. During the
qualification period, GTE was required to de-emphasise direct sales into a
significant portion of its end-customer base.
Although the strategy impacted turnover in the short term, the Company strongly
believes it will open up considerably larger market opportunities in the long
term by providing access to the global OEMs' large installed user base. To this
end, GTE is currently making excellent progress in achieving an extensive
programme of product qualifications at key global OEMs in the US and Europe,
which is expected to pave the way for long term partnership agreements.
In May 2006 GTE signed a multi-year agreement with Siemens Industrial Turbines
AB (SIT), part of Siemens AG, to supply its cleaning systems as a standard
feature of SIT's complete range of turbines. The deal strengthened an existing
arrangement under which GTE's cleaning systems have been incorporated as a
standard product in SIT's turbines since 1995. GTE will manufacture and supply
gas turbine cleaning systems to SIT in Sweden for inclusion in its entire range
of industrial turbines, as well as other future models, for shipments worldwide.
The turbines are designed to deliver an output of between 17 megawatts and 43
megawatts and aimed primarily at the mid-range power generation and the oil &
gas industries.
New geographic markets
The Company has also entered the highly promising markets in the Middle East and
Russia. Both regions are attracting major investment by the international oil
and gas industry. The Middle East is also investing heavily in water
desalination plants, which are large consumers of power. In Russia there is
already a large installed base of industrial turbines.
GTE is at an advanced stage of appointing a distributor in Abu Dhabi to address
the Middle East market and has just received its first order from that region.
In Russia, GTE has set up a new subsidiary based in St Petersburg with a sales
and marketing director.
Financial Review
Turnover decreased by 8% to $2.1m (H1 2005: $2.3m) reflecting a lower
contribution from the industrial segment, partly offset by a sharp increase in
sales into the aviation market. Turnover from the eastern hemisphere, which
covers Europe and the rest of world excluding the Americas, accounted for the
majority of the sales.
Operating loss amounted to $1.1m (H1 2005: $1.0m).
Pre-tax loss amounted to $1.19m compared with a $0.96m loss in the corresponding
period last year.
Basic and fully diluted loss per share was $0.02 (H1 2005: $0.04).
Cash and cash equivalents totaled $3.5m as at 30 June 2006 (H1 2005: $0.2m).
Outlook
During the first half of the year GTE focused on strengthening relationships
with key global OEMs and on expanding into new regions. These steps have made a
positive impact on our business, leading to a strong pipeline of orders for the
second half of 2006. As a result, the Company remains confident of delivering
significant revenue growth for the full 2006 and beyond.
------------------------ ----------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
For the period ended 30 June 2006
6 months 12 months 6 months
ended ended ended
30 June 31 December 30 June
2006 2005 2005
Note unaudited restated unaudited
----------------------------------------
Continuing operations $'000 $'000 $'000
Revenue 2 2 132 5 265 2 318
Cost of sales (1 206) (908) (1 348)
----------------------------------------
Gross profit 926 2 357 970
Distribution and selling costs (449) (908) (527)
Research and development expenses (144) (243) (71)
Administrative expenses (1 554) (3 628) (1 448)
Other operating income 73 140 120
----------------------------------------
Operating loss (1 148) (2 282) (956)
Finance costs (43) (87) (8)
----------------------------------------
Loss before taxation (1 191) (2 369) (964)
Tax 3 321 963 4
LOSS FOR THE PERIOD ATTRIBUTABLE
TO EQUITY HOLDERS OF THE PARENT (870) (1 406) (960)
Loss per share
From continuing operations
Basic and diluted loss per share ($) 4 (0.02) (0.05) (0.04)
---------------------------------------
---------------------------------------
--------------------------- ---------------------------------------
CONSOLIDATED BALANCE SHEETS
At 30 June 2006
6 months 12 months 6 months
ended ended ended
30 June 31 December 30 June
2006 2005 2005
unaudited restated unaudited
----------------------------------------
$'000 $'000 $'000
ASSETS
Non-current assets
Intangible assets
Capitalized expenditure for
research and development 459 135 187
Patents 322 183 114
ERP-System 82 85 90
Goodwill 1 163 084 1 103
----------------------------------------
2 026 1 487 1 494
Tangible assets
Equipment, tools, fixtures and fittings 460 405 383
----------------------------------------
460 405 383
Financial assets
Available for sale investments 169 152 142
Deferred tax assets 1 449 1 128 10
----------------------------------------
Total non-current assets 4 104 3 172 2 029
Current assets
Inventories 585 442 486
Current receivables
Accounts receivable-trade 459 1 843 764
Income taxes recoverable 51 - 21
Other receivables 2 344 2 080 51
Prepaid expenses and accrued income 655 631 297
----------------------------------------
3 509 4 554 1 133
Cash and cash equivalents 3 500 4 705 204
Total current assets 7 594 9 701 1 823
TOTAL ASSETS 11 698 12 873 3 852
----------------------------------------
----------------------------------------
--------------------------- ----------------------------------------
CONSOLIDATED BALANCE SHEETS (continued)
At 30 June 2006
6 months 12 months 6 months
ended ended ended
30 June 31 December 30 June
2006 2005 2005
unaudited restated unaudited
----------------------------------------
$'000 $'000 $'000
EQUITY AND LIABILITIES
Equity
Share capital 156 156 95
Share premium 8 225 8 225 -
Capital reserve 2 636 2 636 2 636
Share based payment reserve 269 184 -
Revaluation reserve 30 30 18
Translation reserve 1 251 602 586
Retained earnings (3 244) (2 374) (1 928)
----------------------------------------
Total equity attributable to equity 9 323 9 459 1 407
holders of the parent
Non-current liabilities
Financial liabilities 81 94 113
Deferred tax liabilities 75 66 67
----------------------------------------
156 160 180
Current liabilities
Financial liabilities 553 1 292 458
Accounts payable - trade 670 904 773
Income tax liability - 31 -
Other liabilities 28 142 527
Accrued expenses 968 885 507
----------------------------------------
2 219 3 254 2 265
----------------------------------------
Total liabilities 2 375 3 414 2 445
TOTAL EQUITY AND LIABILITIES 11 698 12 873 3 852
----------------------------------------
----------------------------------------
------------------------ ----------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period ended 30 June 2006
6 months 12 months 6 months
ended ended ended
30 June 31 December 30 June
2006 2005 2005
Note unaudited restated unaudited
----------------------------------------
$'000 $'000 $'000
Cash flow from operating activities
Loss before tax (1 191) (2 369) (964)
Adjustments to operating cash flows 5 227 329 149
----------------------------------------
Cash flow from operating activities
before changes in working capital (964) (2 040) (815)
Adjustments for changes in working
capital
(Decrease)/ increase in inventories (91) 201 125
(Decrease)/ increase in receivables 1 523 (1 342) 55
(Decrease)/ increase in liabilities (412) 1 058 934
----------------------------------------
56 (2 123) 299
Cash used by operations
Income taxes received - 16 125
Net interest paid (42) (88) (8)
----------------------------------------
Net cash generated/(used) by operating
activities 14 (2 195) 416
Cash flows from investing activities
Purchase of intangible fixed assets (449) (231) (176)
Purchase of tangible fixed assets (116) (356) (312)
----------------------------------------
Net cash used by investing activities (565) (587) (488)
Cash flows from financing activities
New share issue (net of issue costs) - 5 371 -
Loans taken - 1 945 157
Repayment of liabilities (877) - -
----------------------------------------
Net cash (used)/generated by financing
activities (877) 7 316 157
----------------------------------------
Net change in cash and cash equivalents (1 428) 4 534 85
Cash and cash equivalents at
beginning of the period 4 705 137 137
Effect of foreign exchange rate changes 223 34 (18)
Cash and cash equivalents ----------------------------------------
at end of the period 3 500 4 705 204
----------------------------------------
----------------------------------------
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY
Ordinary Share Capital Share based
Shares premium reserves payment reserve
$'000 $'000 $'000 $'000
--------------------------------------------------
Balance at 31 December 2004 95 - 2 636 -
Exchange differences
arising on translation of
foreign operations. - - - -
Financial investments
valued through equity - - - -
Net loss for the period - - - -
--------------------------------------------------
Balance at 30 June 2005 95 - 2 636 -
New share issue, 18 000
000 shares at nominal £
0.002 61 9 263 - -
IPO costs - (1 038) - -
Recognition of
share-based payments - - - 184
Financial investments
valued through equity
Exchange differences
arising on translation of
foreign operation - - - -
Net loss for the period - - - -
--------------------------------------------------
Balance at 31 December 156 8 225 2 636 184
2005
Recognition of
share-based payments - - - 85
Exchange differences
arising on translation of
foreign operations. - - - -
Net loss for the period - - - -
--------------------------------------------------
Balance at 30 June 2006 156 8 225 2 636 269
--------------------------------------------------
CCONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY
(continued) Total
Revaluation Translation Retained shareholders
reserve reserve earnings Equity
$'000 $'000 $'000 $'000
--------------------------------------------------
Balance at 31 December 2004 - 1 038 (968) 2 801
Exchange differences
arising on translation of
foreign operations. - (452) - (452)
Financial investments
valued through equity 18 - - 18
Net loss for the period - - (960) (960)
--------------------------------------------------
Balance at 30 June 2005 18 586 (1 928) 1 407
New share issue, 18 000
000 shares at nominal £
0.002 - - - 9 324
IPO costs - - - (1 038)
Recognition of
share-based payments - - - 184
Financial investments
valued through equity 12 - - 12
Exchange differences
arising on translation of
foreign operations. - 16 - 16
Net loss for the period - - (446) (446)
--------------------------------------------------
Balance at 31 December 30 602 (2 374) 9 459
2005
Recognition of
share-based payments - - - 85
Exchange differences
arising on translation of
foreign operations. - 649 - 649
Net loss for the period - - (870) (870)
--------------------------------------------------
Balance at 30 June 2006 30 1 251 (3 244) 9 323
--------------------------------------------------
--------------------------------------------------
Note 1: Accounting policies
The unaudited interim accounts for the 6 months ended 30 June 2006 have been
prepared using accounting policies that are consistent with the company's
statutory accounts for the year ended 31 December 2005 with the exception of the
following:
Test equipment
Equipment which is held by customers was previously treated as inventory and
held at cost until disposed of. The directors have determined that, as this
equipment is used by clients for extensive periods and the value thus decreases,
this equipment should be treated as a non-current tangible asset and depreciated
over its useful life, which is estimated to be 5 years.
As this is a change in accounting policy under IAS 8, comparatives have been
restated, resulting in an increase in non-current tangible assets as at 31
December 2005 of $227 005 and an increase in the retained loss for the year
ended 31 December 2005 of $34 526 due to depreciation on these assets.
Available for sale financial assets
Under the amendment to IAS 39, certain investments which had previously been
classified as 'financial assets at fair value through profit or loss' have been
reclassified in the current and prior period balance sheets as 'available for
sale financial assets'. The book value of these investments at 31 December 2005
was $152,000. The net loss for the year ended 31 December 2005 has been
increased by $30 255 reflecting gains now taken through equity.
Change of format of income statement
The classification of the income statement for the year ended 31 December 2005
has been changed from by nature to by function. In the director's view, this is
appropriate because it better describes the company and the development of the
company. Income statement by function is also the standard within the energy
sector.
Note 2 Segment information
For management purposes, the Group is currently organised into the
following two operating divisions: Eastern and Western hemisphere,
where Western hemisphere relates to US and the Americas and Eastern
relates to Europe and the rest of the world. These divisions are
the basis on which the Group reports its primary and only segment
information. Inter-segment sales are charged at prevailing market
rates.
6 months ended 30 June 2006
Western Eastern Eliminations Total for group
Continuing operations $'000 $'000 $'000 $'000
--------------------------------------------------
Revenue from sale of goods
External sales 128 2 004 - 2 132
Inter-segment sales - 108 (108) -
--------------------------------------------------
Segment result (841) (448) 141 (1 148)
Financial items (43)
-------
Loss before tax (1 191)
Income tax credit 321
-------
Loss for the period (870)
-------
Other information
Capital additions 345 221 - 566
Depreciation, amortisation
and write downs (27) (68) - (95)
Balance sheet assets:
Segment assets: 4 078 7 620 - 11 698
-------
Liabilities:
Segment liabilities: 514 1 861 - 2 375
-------
6 months ended 30 June 2005
Western Eastern Eliminations Total for group
Continuing operations $'000 $'000 $'000 $'000
--------------------------------------------------
Revenue from sale of goods
External sales 107 2 211 - 2 318
Inter-segment sales - 125 (125) -
--------------------------------------------------
Segment result (1 156) 200 - (956)
Financial items (8)
-------
Loss before tax (964)
Income tax credit 4
-------
Loss for the period (960)
-------
Other information
Capital additions 208 254 - 462
Depreciation, amortisation
and write downs (21) (58) - (79)
Balance sheet assets:
Segment assets: 1 450 2 402 - 3 852
-------
Liabilities:
Segment liabilities: 954 1 491 - 2 445
-------
--------------------- --- -----------------------------------
Note 3 Taxation
6 months 12 months 6 months
ended ended ended
30 June 31 December 30 June
2006 2005 2005
unaudited restated unaudited
----------------------------------------
$'000 $'000 $'000
Current tax - Continuing operations - (149) (9)
Deferred tax assets 321 1 115 13
Deferred tax liabilities (1) (3) -
----------------------------------------
Tax credit for the year 321 963 4
----------------------------------------
----------------------------------------
Deffered taxation for the period has been credited at 27%, representing the best
estimate of the weighted average deferred tax rate expected for the full year.
Note 4 Loss per share
Basic loss per share is calculated by dividing the loss attributable to equity
holders of the Company by the weighted average number of ordinary shares in
issue during the year.
------------------------ ----------------------------------------
6 months 12 months 6 months
ended ended ended
30 June 31 December 30 June
2006 2005 2005
unaudited restated unaudited
----------------------------------------
Loss attributable to equity holders of the (870) (1 406) (960)
Company
Weighted average number of ordinary shares
in issue 43 750 500 26 103 780 25 750 500
Basic and diluted loss per share ($ per
share) - Continuing operations (0.02) (0.05) (0.04)
There are no dilutive potential ordinary
shares.
----------------------- -------
Note 5 Adjustments to operating cash flows
6 months 12 months 6 months
ended ended ended
30 June 31 December 30 June
2006 2005 2005
unaudited restated unaudited
----------------------------------------
$'000 $'000 $'000
Depreciation of tangible and intangible assets 95 195 79
Unrealized exchange rate difference 4 (33) -
Fair value adjustments of intangible assets - 26 -
Impairment losses recognised in loss - - 62
Share based payments 85 53 -
Net interest expense 43 88 8
----------------------------------------
Total 227 329 149
----------------------------------------
----------------------------------------
Non Cash flow transactions 6 months 12 months 6 months
ended ended ended
30 June 31 December 30 June
2006 2005 2005
unaudited restated unaudited
----------------------------------------
Conversion of debt to shares. - 1 009 -
Note 6: Basis of preparation
This interim report was approved by the Board on 29 September 2006. It is not
the company's statutory accounts.
The figures for the year to 31 December 2005 were derived from the statutory
accounts for that year as restated for the changes referred to in note 1. The
statutory accounts for the year ended 31 December 2005 have been delivered to
the Registrar of Companies and received an audit report which was unqualified
and did not contain statements under s237(2) or s237(3) of the Companies Act
1985. The restatement for the year ended 31 December 2005 is unaudited. The six
months results for both years are unaudited.
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