Interim Results

RNS Number : 1444E

Gas Turbine Efficiency PLC

24 September 2008

 



24 September 2008                                                    

Gas Turbine Efficiency plc

Interim Results for the six months to 30 June 2008

Gas Turbine Efficiency plc ('GTE' or 'the Group'), a leading provider of proprietary cleantech systems for enhancing the performance of aviation and industrial turbines, announces its unaudited results for the six months to 30 June 2008.

Financial Highlights

• Revenues increased 58% to $14.7m (H1 2007: $9.3m) driven by strong organic growth and a continued ramp-up in sales to Original Equipment Manufacturers (OEMs)

• Total order intake for the year to date increased 100% to $30m (2007: $15m)

• Gross margin improved to 44% (H1 2007: 42%)

• EBITDA, excluding exceptional legal costs, rose 220% to $0.77m (H1 2007: $0.24m)

• Pre-tax profits were $0.4m (H1 2007: loss $0.8m)

• Maiden net profits of $0.03m (H1 2007: loss $0.7m)

• Cash and cash equivalents totalled $7.9m as at 30 June 2007  

• On track to accelerate revenue growth in the second half, underpinned by a robust order backlog 

Operating Highlights

• Industrial revenues up 98% to $11.3m (H1 2007: $5.7m), including $1.6m first time contribution from Fuel & Combustion product lines, launched in January 2008

• Direct sales to leading industrial OEMs rose 156% to $7.1m 

• Significant progress on Oil & Gas product validation programs in Middle East and Russia

• First half aviation revenues off 6% to $3.4m (H1 2007: $3.6m) due to a backlog conversion timing

• Aviation revenues included orders from Pratt & Whitney as its GTE-enabled on-wing wash service signs major contracts including Singapore Airlines, Southwest and United Airlines  

• Total number of patents granted year to date increased to 11 from 8 

• Patent lawsuit initiated by GTE resolved successfully on 7 April 2008

• Appointed Charles Cameron as Non Executive Director in April

Steven Zwolinski, Chief Executive Officer of GTE, said: 'GTE achieved solid revenue growth in the first half of 2008 and also moved into profits for the first time. The results mark a tipping point in GTE's growth as it firmly establishes itself as a leading independent provider of proprietary cleantech solutions to the world's top turbine manufacturers and operators in the aviation, power generation, oil & gas and industrial sectors. With a robust order backlog providing excellent momentum for the second half, the Group remains on track to achieve another year of  strong growth.'

Enquiries:

Gas Turbine Efficiency plc
Steven Zwolinski, CEO	[phone] on the day
	[phone]
Libertas Capital
Aamir Quraishi, Anthony Rowland	+ 44 (0)20 7569 9650
Corfin Communications
Neil Thapar, Harry Chathli, Alexis Gore	[phone]

About GTE

Gas Turbine Efficiency plc designs, manufactures and supplies proprietary cleantech energy saving and performance enhancing systems to the power generation, oil & gas and aviation industries. GTE's extensive portfolio of patented cleantech solutions save fuel, reduce emissions, increase availability, and extend turbine and parts life. 

The Group also provides solutions for burning a wider variety and quality of fuels such as liquefied natural gas, clean coal, and alternative fuel blends. Specific product and services developed by our world-class technology team include compressor cleaning and power augmentation systems; fuels management systems; combustion design, repair, upgrade and monitoring; and fluid and control auxiliaries. The Group's systems and associated services are provided to turbine end users and OEMs including General Electric, Pratt & Whitney, Rolls Royce, Caterpillar-Solar and Siemens from operation centres in Europe and the USA. Gas Turbine Efficiency plc shares are traded on London Stock Exchange's AIM (Ticker: GTE). 

  Overview

GTE achieved strong revenue growth and maiden net profits in the first half of 2008 as the Group continued to experience a ramp-up in demand for its advanced cleantech solutions from OEMs and turbine operators worldwide. The Group's proprietary systems and services are increasingly sought after to save fuel, reduce carbon emissions as well as to maximise turbine use and flexibility in the aviation, power generation, oil & gas and industrial sectors.  

These long term growth drivers, together with GTE's existing agreements with five of the world's major OEMs and a proven solutions portfolio, enabled the Group to make further inroads into the $10bn global turbine aftermarket during the first half. The Group's OEM customers are General Electric, Caterpillar-Solar, Pratt & Whitney, Rolls Royce and Siemens. End users of GTE solutions include US power producers such as Connectiv, Progress Energy and Calpine; oil companies such as BP and StatoilHydro; and airlines including SAS, Singapore Airlines and United Airlines.  

Group turnover increased by 58% to $14.7m (H1 2007: $9.3m) driven by strong organic growth in the industrial sector. The result included a first time revenue contribution of $1.6m from Advanced Fuel & Combustion, a new unit launched by GTE in January 2008 to provide a range of highly specialised products and services in the global energy services market. 

Earnings before interest, tax, depreciation and amortisation (EBITDA), excluding exceptional legal costs relating to a US lawsuit initiated by GTE to protect its intellectual property, rose by 220% to $0.77m (H1 2007: $0.24m). This action was successfully concluded in April 2008.

Operating review 

Industrial

Revenues from the industrial sector (which includes power generation and oil & gas industries) almost doubled to $11.3m compared with revenues of $5.7m in the corresponding period last year. Sales to leading OEMs increased 156% from $2.8m to $7.1m as GTE continued to leverage its relationships with leading manufacturers by providing highly specialised and innovative value solutions into their installed customer base. End user sales increased 34% from $2.9m to $4m.

GTE's solutions are deployed on industrial turbines for many different applications. For example, the Group's advanced turbine wash systems are used by power utilities and offshore oil platforms to clean turbines so they operate more efficiently for longer, burning less fuel and with fewer shutdowns for maintenance or repairs. This enables utilities to maximise revenues by supplying power into the electricity grid or oil rigs to maximise production from wells. 

GTE currently ships to all global markets, either directly to end users or through OEM or third party channels. Additional customer qualifications are progressing in the Middle East, Europe and Russia, and the US.   

 
Fuel & Combustion 

In January 2008, GTE broadened its products and services offering in the $10bn global turbine aftermarket by launching a suite of advanced Fuel & Combustion solutions. This unit has grown rapidly, with a first time revenue contribution of $1.6m which is included in the industrial segment. The unit's early success validates GTE's strategy to develop this business through the recruitment of a team of world-class industry experts and illustrates the great potential for growth in this area. 

It provides a range of highly specialised services including product design, root cause analysis, manufacturing, and repair. GTE is currently working in this capacity with leading industry players and is expected to increase its contribution to revenues in the second half of 2008 and 2009. Demand for advanced fuel and combustion solutions is expected to grow strongly over the long term as turbine operators turn to fuel-flexible combustors that will more efficiently operate on conventional fuels and on a wider variety of fuels such as liquefied natural gas, clean coal, and bio-fuel blends to reduce costs and carbon emissions. 

Aviation 

Revenues from aviation systems, where GTE is the exclusive supplier of on-wing wash systems to Pratt & Whitney, were off to $3.4m (H1 2007: $3.6m) due to timing of backlog conversion. During the period, GTE developed the 'next generation' product line, designed to significantly increase the operational flexibility at airport hubs.  

Underlying demand drivers in this segment remain strong as an increasing number of airlines as well as military aircraft operators aim to reduce their fuel costs, emissions and operational costs. GTE's on-wing wash systems form a crucial part of Pratt & Whitney's global EcoPower® aviation service business. Pratt & Whitney has deployed the services on more than 40 airlines and recent deals announced by Pratt & Whitney include wash services for United Airlines, Southwest Airlines and Singapore Airlines.

These systems can reduce fuel burn by as much as 1 percent and decrease exhaust gas temperature margin by as much as 15 degrees celsius. According to Pratt & Whitney, Singapore Airlines is expected to save close to $15m in fuel costs and reduce CO2 emissions by 128 million pounds per year by using Pratt & Whitney Global Services' EcoPower® wash services for its entire aircraft fleet.

Research & Development

The Group further expanded its intellectual property position through innovation. Total number of patents granted to GTE increased to 11 from 8 with another 26 patent applications filed or currently in the process of being filed. In addition, the Group also substantially strengthened its technology edge by investing at a run rate of over $3m in R&D. Development efforts were focused on previously mentioned aviation 'next generation' as well as emerging needs of the industrial gas turbine market, particularly in the areas of fuels, combustion and optimisation.

As previously announced, in keeping with the strategy of building a strong intellectual property portfolio and protecting customer relationships, the Group launched a patent defense lawsuit against a former employee during the first half of 2007. This lawsuit was resolved on 7 April 2008 to GTE's satisfaction and reinforces GTE's strong patent position. 

Financial Review

Turnover increased by 58% to $14.7m (H1 2007: $9.3m) due to significant revenue increases in both the industrial sector and a first time contribution from the Advanced Fuel & Combustion business.

Gross margins improved to 44% from 42%, reflecting first half product mix. Balance of the year gross margins are expected to be approximately 42%.

Operating profit amounted to $0.1m (H1 2007: loss $0.6m). The Group incurred legal fees of $0.3m relating to a US lawsuit initiated by GTE against a former employee to protect its intellectual property. 

Basic and fully diluted profit per share was $0.000 (H1 2007: loss $0.013). 

Cash and cash equivalents totaled $7.9m as at 30 June 2008 (H1 2007: $8.4m). 

Outlook

GTE continues to experience robust demand for its systems as the Group benefits from increasing market penetration, strong relationships with leading OEMs and long term industry factors. The Group entered the second half with a solid momentum of new orders which is expected to contribute to stronger revenue growth for the full year, compared with the first half of 2008.

With a robust order backlog providing excellent visibility, the Group remains on track to achieve another year of strong growth and the Board looks forward to the future with confidence.

CONSOLIDATED STATEMENTS OF INCOME
for the period ended 30 June 2008
						6 months ended		12 months ended		6 months ended
						30 June 2008		31 December 2007		30 June 2007
				Note		unaudited		audited		unaudited
						$'000		$'000		$'000
	Continuing operations
		Revenue		2		14 731		17 830		9 319
		Cost of sales				(8 311)		(10 358)		(5 360)
	Gross Profit					6 420		7 472		3 959
		Distribution and selling costs				(1 433)		(2 204)		(1 055)
		Research and development expenses				(503)		(1 130)		(271)
		Administrative expenses				(4 408)		(7 124)		(3 285)
		Other operating income				0		78		34
	Operating profit/loss					76		(2 908)		(618)
		Interest receivable				619		164		198
		Finance costs				(328)		(150)		(425)
	Profit/loss before tax					367		(2 894)		(845)
		Tax		3		(338)		880		193
	PROFIT/LOSS FOR THE PERIOD ATTRIBUTABLE
	TO EQUITY HOLDERS OF THE PARENT					29		(2 014)		(652)
	Profit/loss per share			4
		From continuing operations
		Basic and diluted profit / (loss) per share ($)				0.000		(0.037)		(0.013)
		Earnings before interest, taxes, depreciation and amortisations (EBITDA)				474		(2 425)		(407)
		Earnings before interest, taxes, amortisations and exceptional items (EBITAE)				368		(1 749)		33
		Earnings before interest, taxes, depreciation, amortisations and exceptional items (EBITDAE)				766		(1 266)		244

CONSOLIDATED BALANCE SHEETS
at 30 June 2008
						6 months ended		12 months ended		6 months ended
						30 June 2008		31 December 2007		30 June 2007
						unaudited		audited		unaudited
				Note
	ASSETS
	Non-current assets
	Intangible assets
		Capitalised expenditure for R&D				4 904		2 904		1 448
		Patents				1 397		928		522
		Customer relationships				370		421		473
		ERP system				535		506		283
		Goodwill				6 516		6 306		6 368
						13 722		11 065		9 094
	Tangible assets
		Equipment, tools, fixtures and fittings				1 748		1 282		1 086
	Financial assets
		Available for sale investments				189		187		211
	Deferred tax assets					2 239		2 611		1 900
	Total non-current assets					17 898		15 145		12 290
	Current assets
		Inventories		5		2 886		1 525		1 187
	Current receivables
		Accounts receivable - trade				5 375		4 525		4 301
		Income taxes recoverable				336		201		228
		Other receivables				1 011		633		636
		Prepaid expenses and accrued income				1 607		469		933
						8 329		5 828		6 100
	Cash and cash equivalents					7 864		2 284		8 369
	Total current asets					19 079		9 637		15 656
	TOTAL ASSETS					36 977		24 782		27 947

CONSOLIDATED BALANCE SHEETS
at 30 June 2008 (continued)
						6 months ended		12 months ended		6 months ended
						30 June 2008		31 December 2007		30 June 2007
						unaudited		audited		unaudited
	EQUITY AND LIABILITIES
	Equity
		Share capital				267		207		207
		Share premium				31 043		20 705		20 705
		Capital reserve				2 636		2 636		2 636
		Share based payment reserve				655		540		396
		Revaluation reserve				(41)		(8)		66
		Translation reserves				2 256		1 966		1 779
		Retained earnings				(6 648)		(6 677)		(5 315)
	Total equity attributable to equity holders of the parent					30 168		19 369		20 474
	Current liabilities
		Financial liabilities - borrowings				620		243		1 848
		Accounts payable - trade				2 676		2 550		3 709
		Other liabilities				367		307		250
		Accrued expenses				2 829		1 957		1 235
						6 492		5 057		7 042
	Non-current liabilities
		Financial liabilities - borrowings				88		90		155
		Deferred tax liabilities				229		266		276
						317		356		431
	Total liabilities					6 809		5 413		7 473
	TOTAL EQUITY AND LIABILITIES					36 977		24 782		27 947

CONSOLIDATED STATEMENTS OF CASH FLOW
for the period ended 30 June 2008
						6 months ended		12 months ended		6 months ended
						30 June 2008		31 December 2007		30 June 2007
						unaudited		audited		unaudited
				Note
	Cash flow from operating activities
		Profit / (loss) after financial items				367		(2 894)		(845)
		Adjustments to operating cash flows		6		223		668		436
	Cash flow from operating activates before changes
	in working capital					590		(2 226)		(409)
	Cash flow from changes in working capital
		(Increase)/decrease in inventories				(1 347)		(327)		(107)
		(Increase)/decrease in receivables				(2 448)		(1 580)		(2 032)
		Increase/(decrease) in liabilities				1 692		937		1 419
						(1 513)		(3 196)		(1 129)
		Cash used by operations
		Income taxes recovered				-		-		-
		Interest received				619		151		198
		Finance costs				(329)		(169)		(237)
	Net cash used by operating activities					(1 223)		(3 214)		(1 168)
	Cash flow from investing activities
		Purchase of financial assets				(40)		-		-
		Purchase of intangible non current assets				(2 679)		(2 931)		(878)
		Purchase of tangible non current assets				(728)		(667)		(340)
		Operations acquired				-		(2 524)		(2 502)
		Sale of tangible non current assets				-		-		-
	Net cash used by investing activities					(3 447)		(6 122)		(3 720)
	Cash flows from financing activities
		New share issue (net of issue costs)				10 398		10 572		10 572
		Loans taken				26		158		159
		Loans repaid				(183)		(2 015)		(296)
	Net cash generated by/(used in) financing activities					10 241		8 715		10 435
	Net change in cash and cash equivalents					5 571		(621)		5 547
	Cash and cash equivalents at beginning of the period					2 284		2 855		2 855
	Effect of foreign exchange rate changes					9		50		(33)
	Cash and cash equivalents at the end of the period					7 864		2 284		8 369

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 30 June 2008
			Share		Share		Capital		Share based		Revaluation		Translation		Retained		Total share-
			Capital		premium		reserve		payment reserve		reserve		reserve		earnings		holders equity
			$'000		$'000		$'000		$'000		$'000		$'000		$'000		$'000
Balance at 31 December 2006			156		8 225		2 636		355		59		1 621		(4 663)		8 389
New share issue,  5 144 954 shares at nominal  £ 0.002			20		4 480		-		-		-		-		-		4 500
New share issue,  250 000
shares at nominal  £ 0.002			1		-		-		-		-		-		-		1
New share issue,  7 456 140 shares at nominal  £ 0.002			29		8 363		-		-		-		-		-		8 392
Placing costs			-		(423)		-		-		-		-		-		(423)
New share issue,  100 000
shares at nominal  £ 0.002			1		60		-		-		-		-		-		61
Credit to equity for equity-settled share-based payments			-		-		-		41		-		-		-		41
Increase in fair value of available-for-sale investments			-		-		-		-		7		-		-		7
Exchange differences arising on
translation of foreign operations			-		-		-		-		-		158		-		158
Net loss for the year			-		-		-		-		-		-		(652)		(652)
Balance at 30 June 2007			207		20 705		2 636		396		66		1 779		(5 315)		20 474
Credit to equity for equity-settled share-based payments			-		-		-		144		-		-		-		144
Decrease in fair value of available- for-sale investments			-		-		-		-		(74)		-		-		(74)
Exchange differences arising on
translation of foreign operations			-		-		-		-		-		187		-		187
Net loss for the year			-		-		-		-		-		-		(1 362)		(1 362)
Balance at 31 December 2007			207		20 705		2 636		540		(8)		1 966		(6 677)		19 369

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
for the period ended 30 June 2008
			Share		Share		Capital		Share based		Revaluation		Translation		Retained		Total share-
			Capital		premium		reserve		payment reserve		reserve		reserve		earnings		holders equity
			$'000		$'000		$'000		$'000		$'000		$'000		$'000		$'000
Balance at 31 December 2007			207		20 705		2 636		540		(8)		1 966		(6 677)		19 369
New share issue,  2 231 000 shares at nominal  £ 0.002			9		1 388		-		-		-		-		-		1 397
New share issue,  8 989 000 shares at nominal  £ 0.002			35		6 682		-		-		-		-		-		6 717
New share issue,  4 000 000 shares at nominal  £ 0.002			16		2 987		-		-		-		-		-		3 003
Placing costs			-		(719)		-		-		-		-		-		(719)
Credit to equity for equity-settled share-based payments			-		-		-		115		-		-		-		115
Decrease in fair value of available-for-sale investments			-		-		-		-		(33)		-		-		(33)
Exchange differences arising on
translation of foreign operations			-		-		-		-		-		290		-		290
Net profit for the period			-		-		-		-		-		-		29		29
Balance at 30 June 2008			267		31 043		2 636		655		(41)		2 256		(6 648)		30 168

Notes to the financial statements

Note 1  Accounting policies 

The unaudited interim accounts for the 6 months ended 30 June 2008 have been prepared using accounting policies that are consistent with the company's statutory accounts for the year ended 31 December 2007. 

The adoption of the following IFRSs has not impacted the unaudited interim accounts.

• IFRS 7 Financial Instruments: Disclosure and the related amendment to IAS 1 on capital disclosures 

• IFRIC 7 Applying the Reassessment 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 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 2008
	Continuing operations			Western		Eastern		Elimination		Total for group
				$'000		$'000		$'000		$'000
	Revenue from sales
		External sale of goods		10 236		4 495		-		14 731
		Inter-segment sale of goods & services		4		509		(513)		-
	Segment result - operating profit			131		(40)		(15)		76
		Other interest income and similar profit/loss items								619
		Interest expense for group companies								(328)
	Profit before tax									367
		Tax								(338)
	Profit for the period									29
	Other information
		Capital additions		2 593		854				3 447
		Depreciation, amortisation and write downs		(182)		(216)				(398)
								Unallocated
								assets/
				Western		Eastern		liabilities		Total for group
	Balance sheet			$'000		$'000		$'000		$'000
	Assets:
		Segment assets:		14 070		12 469		10 438		36 977
	Liabilities
		Segment liabilities:		3 613		2 259		937		6 809
Note 2 Segment information (continued)
	12 months ended 31 December 2007
	Continuing operations			Western		Eastern		Elimination		Total for group
				$'000		$'000		$'000		$'000
	Revenue from sales
		External sale of goods		10 203		7 627		-		17 830
		Inter-segment sale of goods & services		2 150		320		(2 470)		-
	Segment result - operating loss			(2 205)		(523)		(180)		(2 908)
		Other interest income and similar profit/loss items								164
		Interest expense for group companies								(150)
	Loss before tax									(2 894)
		Tax credit								880
	Loss for the period									(2 014)
	Other information
		Capital additions		594		3 004				3 598
		Depreciation, amortisation and write downs		(233)		(250)				(483)
								Unallocated
								assets/
				Western		Eastern		liabilities		Total for group
	Balance sheet			$'000		$'000		$'000		$'000
	Assets:
		Segment assets:		10 106		9 580		5 096		24 782
	Liabilities
		Segment liabilities:		2 803		2 011		599		5 413

Note 2 Segment information (continued)
	6 months ended 30 June 2007
	Continuing operations			Western		Eastern		Elimination		Total for group
				$'000		$'000		$'000		$'000
	Revenue from sales
		External sale of goods		4 629		4 690		-		9 319
		Inter-segment sale of goods & services		773		28		(801)		-
	Segment result - operating loss			(676)		58		-		(618)
		Other interest income and similar profit/loss items								198
		Interest expense for group companies								(425)
	Loss before tax									(845)
		Tax credit								193
	Loss for the period									(652)
	Other information
		Capital additions		537		681				1 218
		Depreciation, amortisation and write downs		(102)		(109)				(211)
								Unallocated
								assets/
				Western		Eastern		liabilities		Total for group
	Balance sheet			$'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

Note 3 Taxation
						6 months ended		12 months ended		6 months ended
						30 June 2008		31 December 2007		30 June 2007
						unaudited		audited		unaudited
						$'000		$'000		$'000
		Current tax - Continuing operations				(26)		-		-
		Deferred tax assets				(351)		840		176
		Deferred tax liabilities				39		40		17
						(338)		880		193

Note 4 Profit / loss per share

Basic profit or 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 ended		12 months ended		6 months ended
						30 June 2008		31 December 2007		30 June 2007
						unaudited		audited		unaudited
Profit / (loss) attributable to equity holders of the Company						29 000		(2 014 000)		(651 940)
Weighted average number of ordinary shares in issue						61 891 292		53 960 288		51 209 176
Basic and diluted profit / (loss) per share - $ per share - Continuing operations						0.000		(0.037)		(0.013)
There are no dilutive potential ordinary shares.

Note 5 Inventories per segment
				6 months ended		12 months ended		6 months ended
				30 June 2008		31 December 2007		30 June 2007
				unaudited		audited		unaudited
				$'000		$'000		$'000
Western				1 762		745		622
Eastern				1 124		780		565
				2 886		1 525		1 187

Note 6 Adjustments to operating cash flow
				6 months ended		12 months ended		6 months ended
				30 June 2008		31 December 2007		30 June 2007
				unaudited		audited		unaudited
				$'000		$'000		$'000
Depreciation of tangible and intangible assets				398		464		211
Loss on disposal of fixed assets				-		14
Impairment loss on intangible assets				-		19
Share based payments				115		185		41
Finance costs				328		150		425
Interest received				(619)		(164)		(198)
Financial leasing charges				1		-		(43)
				223		668		436

Note 6: Basis of preparation

This interim report was approved by the Board on 23 September 2008. It is not the company's statutory accounts.

 

END

 

 

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