Interim Results
Gas Turbine Efficiency PLC
24 September 2007
24 September 2007
Gas Turbine Efficiency plc
Interim Results for the six months to 30 June 2007
Gas Turbine Efficiency plc ('GTE' or 'the Group'), a leading designer and
manufacturer of advanced cleaning, performance monitoring and fluid and control
systems for gas turbines, announces its results for the six months to 30 June
2007.
Financial Highlights
• Total revenues increased by 342% to $9.3m (H1 2006: $2.1m)
• Industrial revenues up six-fold to $5.7m (H1 2006: $0.8m) reflecting
first time contributions from Control Center LLC and ARES Technology LLC
• Aviation revenues up by 184% to $3.7m (H1 2006: $1.3m) as Pratt &
Whitney continued roll-out of its aviation service centres worldwide
• Achieved operating profit excluding legal costs of $0.1m (H1 2006 loss: $1.1m)
• Basic and fully diluted loss per share of $0.013 (H1 2006: loss $0.020)
• Cash and cash equivalents totalled $8.4m as at 30 June 2006 (H1 2006: $3.5m)
• Strong order book underpins robust trading for second half of 2007
Operating Highlights
• Acquired Control Center LLC in February 2007 for $4m and ARES Technology
LLC for $0.3m in June 2007
• Signed 5-year deal with Solar Turbines Incorporated, a Caterpillar
company, to develop cleaning systems for mid-range industrial turbines
• Raised £4.25 million through an institutional share placing
• Expanded presence into Asia with new subsidiary in Singapore
• On 1 July signed three year extension of agreement with Rolls Royce
Steven Zwolinski, CEO of GTE, said: 'GTE has delivered excellent results in the
first half of 2007. Our sales are ramping up as manufacturers and operators come
under increasing pressure to optimise turbine performance to lower fuel costs,
equipment downtime and control greenhouse gas emissions. These trends will
continue to drive GTE's long term growth. Trading conditions remain robust and
are underpinned by a strong order backlog for the full year.'
Enquiries:
Gas Turbine Efficiency plc
Steven Zwolinski, CEO +44 (0)20 7977 0020 on the day
+46 (0)8 546 10 528
Libertas Capital
Aamir Quraishi, Charles Goodfellow + 44 (0)20 7569 9650
Corfin Communications
Neil Thapar, Harry Chathli +44 (0)20 7977 0020
About GTE
Gas Turbine Efficiency plc, whose shares are traded on London Stock Exchange's
AIM market (Ticker: GTE), designs, manufactures and markets advanced integrated
solutions for environmental, process and asset optimisation of gas turbines
primarily in the aerospace, industrial and oil & gas sectors. These solutions
include cleaning systems, performance monitoring, fluid and control sub-systems
that improve turbine performance and availability, fuel efficiency and parts
life, resulting in increased profits for our clients and a cleaner environment.
The Group sells its products to blue chip customers worldwide from operational
centres in Europe and the USA.
Overview
GTE made tremendous progress in the first half of 2007 as the Group took major
strategic steps to diversify its solutions portfolio, enabling it to move up the
value chain in the $10 billion global turbine after-market. Our integrated
products and services are aimed primarily at the power generation, aviation, oil
& gas and chemical processing industries and help to reduce their fuel costs,
cut greenhouse gas emissions and minimise equipment downtime.
These moves have already begun to pay-off with a strong ramp-up in sales during
the first half. Group turnover increased by 342% to $9.3m (H1 2006: $2.1m)
reflecting strong growth in both industrial and aviation, and accounting for
acquisitions. The results included a first time contribution from Control Center
LLP (Control Center), acquired in February for approximately $4m and ARES
Technology (ARES), acquired in June for approximately $0.3m.
The Group also delivered a strong improvement at the operating level. The first
half operating loss was halved to $0.6m from a $1.1m loss in the corresponding
period last year. Excluding the impact of a US lawsuit initiated by GTE, the
Group move into an operating profit of $0.1m compared with a $1.1m operating
deficit the same time last year.
Operating review
Industrial
Revenues from industrial systems (which includes power generation, oil & gas and
marine industries) rose by over 600% to $5.7m compared with revenues of $0.8m in
the corresponding period last year. This was in line with the Group's guidance
and validates GTE's bold strategy to extend its business model with the
acquisition of Control Center and ARES. Integration efforts have exceeded
management expectations with faster time-to-market development of new products
and a higher level of order intake than planned earlier in the year.
Control Center
The results include a first time contribution of $4.6m to Group turnover.
Control Center, based in Orlando, designs and manufactures a wide range of flow
measurement, combustion dynamics monitoring and control systems solutions aimed
at industrial gas turbines primarily in the power generation, oil & gas,
aerospace and pharmaceuticals sectors. Established in 1963, Control Center
supplies products and services to many blue chip Original Equipment
Manufacturers (OEMs), industrial customers and end users.
The acquisition has already significantly strengthened GTE's long term prospects
and provides long term operational and synergy benefits to GTE. These include:
•Addition of a proven, Tier 1 supplier to OEMs and end users in key growth
segments of power generation, oil & gas, pharmaceutical and aerospace
•Broadening of GTE's technology portfolio with complementary product lines
in fuel systems, combustion monitoring systems and controls
•Creation of a cost effective, scalable operations base in North America
with demonstrated ability to drive productivity and quality initiatives
•Expansion of commercial channels and customer relationships with an
experienced sales team
•Integration of application engineering and prototyping capability to
accelerate time to market for new products
ARES
On 20 June 2007, GTE announced the acquisition of ARES, a specialist gas turbine
services and repair business, for a cash consideration of $300,000. ARES
broadens the Group's technical capability in a highly specialised niche of the
industrial gas turbine market and will accelerate our growth as operators come
under increasing pressure to minimise downtime, lower fuel costs and reduce
emission levels.
In March 2007, GTE signed a five-year agreement with Solar, a Caterpillar
company, for the design and supply of advanced cleaning systems for Solar's low
to mid-range industrial turbines. This was followed by the extension of GTE's
contract with Rolls Royce. The deals take GTE's total number of global partners
to four. Discussions with other major OEMs to sign long term commercial
contracts continue and in some cases have been expanded to include several new
product lines.
Aviation systems
Revenues from aviation systems, where GTE is the exclusive supplier of on-wing
wash systems to Pratt & Whitney, increased 184% to $3.7m (H1 2006: $1.3m).
Excellent progress has been made on next generation product design and in
executing the $5m order received in December 2006 from its exclusive aviation
industry partner, Pratt & Whitney, in support of its global service network.
New geographic markets
GTE continued to expand its global footprint and opened a subsidiary in
Singapore to target the fast growing Asian markets.
Financial Review
Turnover more than tripled to $9.3m (H1 2006: $2.1m) due to significant revenue
increases in both the aviation and industrial sectors.
Operating loss amounted to $0.6m (H1 2006: $1.1m). The Group incurred legal fees
of $0.7m relating to a US lawsuit initiated by GTE against a former employee to
protect its intellectual property.
Pre-tax loss amounted to $0.8m compared with a $1.2m loss in the corresponding
period last year.
Basic and fully diluted loss per share was $0.013 (H1 2006: $0.020).
Cash and cash equivalents totaled $8.4m as at 30 June 2006 (H1 2006: $3.5m).
Outlook
The strong momentum of growth seen in the first half has continued into the
second half as the Group's integrated solutions gain increasing acceptance from
industrial turbine operators and original equipment manufacturers worldwide.
Trading conditions remain robust and the Group's order backlog continues to
strengthen. As a result the Board looks forward to the full year results with
confidence.
CONSOLIDATED STATEMENTS OF INCOME
for the period ended 30 June 2007
Note 6 months ended 12 months ended 6 months ended
30 June 2007 31 December 2006 30 June 2006
unaudited audited unaudited
$'000 $'000 $'000
Continuing operations
Revenue 2 9 319 4 662 2 132
Cost of sales (5 360) (2 608) (1 206)
Gross profit 3 959 2 054 926
Distribution and
selling costs (1 055) (843) (449)
Research and
development
expenses (271) (585) (144)
Administrative
expenses (3 285) (3 390) (1 554)
Other operating
income 34 50 73
Operating loss (618) (2 609) (1 148)
Interest receivable 198 155 45
Finance costs (425) (359) (88)
Loss before tax (845) (2 918) (1 191)
Tax 3 193 629 321
LOSS FOR THE PERIOD
ATTRIBUTABLE TO
EQUITY HOLDERS OF
THE PARENT (652) (2 289) (870)
Loss per share 4
From continuing operations
Basic and diluted
loss per share ($) (0.013) (0.052) (0.020)
CONSOLIDATED BALANCE SHEETS
at 30 June 2007
Note 6 months ended 12 months ended 6 months ended
30 June 2007 31 December 2006 30 June 2006
unaudited audited unaudited
$'000 $'000 $'000
ASSETS
Non-current assets
Intangible assets
Capitalised
expenditure for
research and
development 1 448 765 459
Patents 522 376 322
ERP-System 283 213 82
Customer
relationships 473 - -
Goodwill 6 368 1 255 1 163
9 094 2 609 2 026
Tangible assets
Equipment, tools,
fixtures and
fittings 1 086 572 460
Financial assets
Available for-sale
investments 211 204 169
Deferred tax assets 1 900 1 743 1 449
Total non-current
assets 12 290 5 128 4 104
Current assets
Inventories 1 187 556 585
Current receivables
Accounts
receivable-trade 4 301 1 910 459
Income taxes
recoverable 228 97 51
Other receivables 636 467 2 344
Prepaid expenses
and accrued income 933 768 655
6 100 3 242 3 509
Cash and cash
equivalents 8 369 2 855 3 500
Total current
assets 15 656 6 653 7 594
TOTAL ASSETS 27 947 11 781 11 698
CONSOLIDATED BALANCE SHEETS
at 30 June 2007 (continued)
Note 6 months ended 12 months ended 6 months ended
30 June 2007 31 December 2006 30 June 2006
unaudited audited unaudited
$'000 $'000 $'000
EQUITY AND LIABILITIES
Equity
Share capital 207 156 156
Share premium 20 705 8 225 8 225
Capital reserve 2 636 2 636 2 636
Share based payment
reserve 396 355 269
Revaluation reserve 66 59 30
Translation
reserves 1 779 1 621 1 251
Retained earnings (5 315) (4 663) (3 244)
Total equity
attributable to
equity holders of
the parent 20 474 8 389 9 323
Non-current liabilities
Financial
liabilities -
borrowings 155 90 81
Deferred tax
liabilities 276 75 75
431 165 156
Current liabilities
Financial
liabilities -
borrowings 1 848 947 553
Accounts payable -
trade 3 709 1 125 670
Other liabilities 250 146 28
Accrued expenses 1 235 1 009 968
7 042 3 227 2 219
Total liabilities 7 473 3 392 2 375
TOTAL EQUITY AND
LIABILITIES 27 947 11 781 11 698
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the period ended 30 June 2007
Note 6 months ended 12 months ended 6 months ended
30 June 2007 31 December 2006 30 June 2006
unaudited audited unaudited
$'000 $'000 $'000
Cash flow from operating
activities
Loss after
financial items (845) (2 918) (1 191)
Adjustments to
operating cash
flows 5 436 576 227
Cash flow from
operating
activities before
changes in working
capital (409) (2 342) (964)
Cash flow from changes in
working capital
(Increase)/decrease
in inventories (107) (41) (91)
(Decrease)/increase
in receivables (2 032) 1 780 1 523
Increase/
(decrease) in
liabilities 1 419 85 (412)
(1 129) 56
Cash used by operations
Income taxes receieved - - -
Interest received 198 155 45
Finance costs (237) (189) (87)
Net cash used by
operating
activities (1 168) (552) 14
Cash flows from investing
activities
Purchase of
financial assets - (27) -
Purchase of
intangible non
current assets (878) (988) (449)
Purchase of
tangible non
current assets (340) (302) (116)
Operations acquired (2 502) - -
Sale of tangible
non current assets - 73 -
Net cash used by
investing
activities (3 720) (1 244) (565)
Cash flows from financing
activities
New share issue
(net of issue
costs) 10 572 - -
Loans taken 159 61 -
Loans repaid (296) (584) (877)
Net cash generated
by/(used in)
financing
activities 10 435 (523) (877)
Net change in cash
and cash
equivalents 5 547 (2 314) (1 428)
Cash and cash
equivalents at the
beginning of the
period 2 855 4 705 4 705
Effect of foreign
exchange rate
changes (33) 464 223
Cash and cash
equivalents at end
of the period 8 369 2 855 3 500
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 30 June 2007
Share Share Capital Share based
capital premium reserve payment reserve
$'000 $'000 $'000 $'000
Balance at 31
December 2005 156 8 225 2 636 184
Credit to equity for equity-settled
share-based payments - - - 85
Exchange differences arising on - - - -
translation of foreign operations
Net loss for the year - - - -
Balance at 30
June 2006 156 8 225 2 636 269
Credit to equity for equity-settled
share-based payments - - - 86
Increase in fair value of - - - -
available-for-sale investments
Exchange differences arising on - - - -
translation of foreign operations
Net loss for the year - - - -
Balance at 31
December 2006 156 8 225 2 636 355
New share issue, 5144
954 shares at nominal £0.002 20 4 480 - -
New share issue, 250 000
shares at nominal £0.002 1 - - -
New share issue, 7456
140 shares at nominal £0.002 29 8 363 - -
Placing costs - (423) - -
New share issue, 100 000
shares at nominal £0.002 1 60 - -
Credit to equity for equity-settled
share-based payments - - - 41
Increase in fair value of available- - - - -
for-sale investments
Exchange differences arising on - - - -
translation of foreign operations
Net loss for the year - - - -
Balance at 30 June 2007 207 20 705 2 636 396
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 30 June 2007 (continued)
Revaluation Translation Retained Total share-
reserve reserve earnings holders equity
$'000 $'000 $'000 $'000
Balance at 31
December 2005 30 602 (2 374) 9 459
Credit to
equity for
equity-settled
share-based
payments - - - 85
Exchange
differences
arising on
translation of
foreign
operations - 649 - 649
Net loss for
the year - - (870) (870)
Balance at 30
June 2006 30 1 251 (3 244) 9 323
Credit to
equity for
equity-settled
share-based
payments - - - 86
Increase in
fair value of
available-for-
sale
investments 29 - - 29
Exchange
differences
arising on
translation of
foreign
operations - 370 - 370
Net loss for
the year - - (1 419) (1 419)
Balance at 31
December 2006 59 1 621 (4 663) 8 389
New share
issue, 5144
954 shares at
nominal £0.002 - - - 4 500
New share
issue, 250 000
shares at
nominal £0.002 - - - 1
New share
issue, 7456
140 shares at
nominal £0.002 - - - 8 392
Placing costs - - - (423)
New share
issue, 100 000
shares at
nominal £0.002 - - - 61
Credit to
equity for
equity-settled
share-based
payments - - - 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 66 1 779 (5 315) 20 474
Notes to the financial statements
Note 1 Accounting policies
The unaudited interim accounts for the 6 months ended 30 June 2007 have been
prepared using accounting policies that are consistent with the company's
statutory accounts for the year ended 31 December 2006.
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 Reassesment Approach under IAS
• IFRIC 8 Scope of IFRS2
• IFRIC 9 Reassessment of embedded derivatives
• IFRIC 10 Interim Financial Reporting and Impairment
Note 2 Segment information
For management purposes, the Group is currently organised into the following 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 2007
Continuing operations Western Eastern Eliminations 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
Balance sheet Western Eastern /liabilities Total for group
$'000 $'000 $'000 $'000
Assets:
Segment assets: 9 532 8 460 9 955 27 947
Liabilities:
Segment liabilities: 2 650 2 555 2 279 7 473
12 months ended 31 December 2006
Continuing operations Western Eastern Eliminations Total for group
$'000 $'000 $'000 $'000
Revenue from sales
External sale of goods 443 4 219 - 4 662
Inter-segment sale of
goods and services 364 733 (1 097) -
Segment result -
operating loss (1 421) (1 283) (10) (2 714)
Other interest income and
similar profit/loss items 155
Interest expense for
group companies (359)
Loss before tax (2 918)
Tax credit 629
Loss for the year (2 289)
Other information
Capital additions 480 874 1 374
Depreciation, amortisation
and write downs (62) (211) (273)
Unallocated
assets
Balance sheet Western Eastern /liabilities Total for group
$'000 $'000 $'000 $'000
Assets:
Segment assets: 2 723 4 363 4 695 11 781
Liabilities:
Segment liabilities: 484 1 795 1 113 3 392
6 months ended 30 June 2006
Continuing operations Western Eastern Eliminations Total for group
$'000 $'000 $'000 $'000
Revenue from sales
External sale of goods 128 2 004 - 2 132
Inter-segment sale of
goods and services - 108 (108) -
Segment result -
operating loss (841) (448) (141) (1 148)
Other interest income and
similar profit/loss items 45
Interest expense for
group companies (88)
Loss before tax (1 191)
Tax credit 321
Loss for the period (870)
Other information
Capital additions 345 221 - 566
Depreciation, amortisation
and write downs (27) (68) - (95)
Unallocated
assets
Balance sheet Western Eastern /liabilities Total for group
$'000 $'000 $'000 $'000
Assets:
Segment assets: 2 132 4 596 4 970 11 698
Liabilities:
Segment liabilities: 514 1 152 709 2 375
Note 3 Taxation
6 months ended 12 months ended 6 months ended
30 June 2007 31 December 2006 30 June 2006
unaudited audited unaudited
$'000 $'000 $'000
Current tax - Continuing - - -
operations
Deferred tax assets 176 630 322
Deferred tax liabilities 17 (1) (1)
193 629 321
Deferred taxation for the period has been credited at 19%, representing the best
estimate of the weighted average deferred tax rate expected for the full year
and is based upon the tax losses that the company will recover.
Note 4 Loss per share
Basic loss per share is calculated by dividing the loss attributable to 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 2007 31 December 2006 30 June 2006
unaudited audited unaudited
$'000 $'000 $'000
Loss attributable to
equity holders of the
Company ($'000) (757 226) (2 288 994) (870 015)
Weighted average number of
ordinary shares in issue 51 209 176 43 750 500 43 750 500
Basic and diluted loss per
share ($ per share) -
Continuing operations (0.015) (0.052) (0.020)
There are no dilutive potential ordinary shares.
Note 5 Adjustments to operating cash flows
6 months ended 12 months ended 6 months ended
30 June 2007 31 December 2006 30 June 2006
unaudited audited unaudited
$'000 $'000 $'000
Depreciation of tangible
and intangible assets 211 273 95
Unrealised exchange rate
difference - - 4
Share based payments 41 171 85
Finance costs 425 359 88
Interest received (198) (155) (45)
Financial leasing charges (43) (72) -
436 576 227
Note 6: Business Combinations
On February 6, 2007, Gas Turbine Efficiency plc, announced its acquisition of
Control Center LLC ('Control Center') for $4 million, payable in cash and new
ordinary GTE shares. The results of the Control Center LLC operations have been
included in the consolidated financial statements as of February 6, 2007.
On June 13, 2007, Gas Turbine Efficiency plc announced the acquisition of ARES
Technology LLC, a specialist gas turbine services and repair business, for a
cash consideration of $300,000. The results of the ARES Technology operations
have been included in the consolidated financial statements as of June 13, 2007.
Financial effects
The acquired businesses impacted consolidated revenue and net income, including
the effects of fair value adjustments as follows.
Revenue Net Income
$'000 $'000
Control Center LLC 4 628 271
ARES Technology LLC 1 (62)
4 629 209
The following table shows Gas Turbine Efficiency Plc pro forma revenue, net
income and earnings per share, including the effects of fair value adjustments,
had the acquisitions taken place at January 1 2006.
Gas Turbine Control ARES Gas Turbine Efficiency
Efficiency Group Center LLC Technology LLC Group pro forma
$'000 $'000 $'000 $'000
Pro forma
revenue 9 319 888 316 10 523
Pro forma
net income (652) (155) (12) (819)
Pro forma
basic and
diluted
earnings
per share
($per
share) (0.013) (0.016)
Cost of combination, goodwill, acquired intangible assets and cash-flow effects
Details of the cost of combination goodwill and acquired intangible assets is
Control Center LLC ARES Technology LLC
$'000 $'000
Cash purchase consideration 2 000 300
Share issue consideration 2 000 -
Transaction related direct expenses 355 39
Total cost of combination 4 355 339
Less fair value of net liabilities
acquired (724) (55)
Goodwill and acquired intangible
assets 5 079 394
Control Center LLC ARES Technology LLC
$'000 $'000
Allocation:
Goodwill
- US based entities 4 771 356
Acquired intangible assets
- Customer relations 514 -
- R&D Intangible assets - 48
Deferred tax liability (206) (19)
The total cost of combination and fair values have been determined provisionally
as they are based on preliminary appraisals and subject to confirmation of
certain facts. Thus, the purchase price accounting is subject to refinement.
The cash flow effects were as follows
Control Center LLC ARES Technology LLC
$'000 $'000
Total cost of combination paid in
cash 2 355 339
Less Acquired cash and cash
equivalents (174) (18)
Net cash outflow from the
combination 2 181 321
Assets acquired and liabilities assumed
Carrying value equals fair value.
Control Center LLC ARES Technology LLC
$'000 $'000
Financial assets 14 -
Property and equipment 127 167
Receivables and other current
assets 1 284 43
Cash and cash equivalents 174 18
Total assets 1 599 228
Non-current Financial liabilities -
borrowings (75) (100)
Current Financial liabilities (942) -
Other non-interest bearing
liabilities (1 306) (183)
Total liabilities (2 323) (283)
Total value of net liabilities
acquired (724) (55)
There were no collateral pledged or contingent liabilities arising from the
acquisition.
Note 6: Basis of preparation
This interim report was approved by the Board on 21 September 2007. It is not
the company's statutory accounts.
The figures for the year ended 31 December 2006 were derived from the statutory
accounts for that year. These accounts 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 six months
results for both periods are unaudited.
This information is provided by RNS
The company news service from the London Stock Exchange
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