Gran Tierra Regulatory News (GTE)

16 Apr 2007 07:02

Gas Turbine Efficiency PLC16 April 2007 16 April 2007 Gas Turbine Efficiency plc Preliminary Results for the year to 31 December 2006 Gas Turbine Efficiency plc ("GTE" or "the Company"), a leading supplier ofadvanced cleaning, performance monitoring and fluid and control systems for gasturbines, announces its financial results for the year ended 31 December 2006. Financial Highlights •Revenues amounted to $4.7m (2005: $5.3m), reflecting the Company's business model to invest in long term relationships with global Original Equipment Manufacturers (OEMs) •Gross margin broadly unchanged at 44.1% (2005: 44.8%) •Total order intake in 2006 rose 58% to $8.6m, driven by an 158% increase in aviation sector orders •Net cash used by operating activities reduced by 66% to $0.75m (2005: $2.2m) •Basic and fully diluted loss per share were unchanged at 5 cents (2005: 5 cents) •Cash and cash equivalents amounted to $2.9m (2005: $4.7m) as at 31 December •On track for strong revenue growth in 2007 with total revenues up by 402% to $3.4m in Q1 2007 •Current order book for 2007 is in excess of $10m, much of which is expected to be turned into revenue in the first half Operating Highlights •Strong growth in aviation revenues, up by 29% to $2.7m •Industrial sector revenues declined 37% to $2m reflecting the Company's strategy to focus on long term supply agreements with global OEMs •Won $5m contract from Pratt & Whitney for a global roll out of commercial aviation hubs •Multi-year agreement signed with Siemens Industrial Turbines AB •Completed rigorous qualification process with four global OEMs in industrial sector •Expanded presence in Middle-East with an exclusive distribution agreement with Nama •Launched a Russian subsidiary to address large industrial turbines market •Acquired Control Center LLC, a top tier supplier to the industrial sector, in February 2007 to provide a strong platform for long term growth •Signed a five year agreement in March 2007 with Solar, a Caterpillar company, to design manufacture and supply cleaning systems for its entire range of existing and new industrial turbines. Steven Zwolinski, CEO of Gas Turbine Efficiency, said: "We made tremendousprogress in 2006 and fulfilled all our strategic initiatives to position thebusiness for long term profitable growth. We strengthened relationships with keyindustrial global OEMs by completing approximately 90% of their demandingqualification tollgates for GTE technology. We have followed this up by makingthe strategically important acquisition of Control Center in preparation for thecommercialisation and ramp of our industrial product lines."The positive impact of last year's achievements can already be seen in 2007.Revenues in the first quarter of 2007 increased sharply and our first half orderbook is almost double our revenues achieved in the whole of 2006. As a result wehave a solid platform for delivering strong growth for the year and beyond." Enquiries: Gas Turbine Efficiency plcSteven Zwolinski, CEO +44 20 7929 8989 on the day +46 8 546 10 528Libertas CapitalAamir Quraishi, Charles Goodfellow +44 20 7569 9650 Corfin CommunicationsNeil Thapar, Harry Chathli +44 20 7929 8989 Overview Gas Turbine Efficiency is pleased to announce a strong operational performancefor 2006, which positions the Company for sustained growth for the long term.The period covered the Company's first full 12 month trading as an AIM-listedcompany and was marked by its transformation into a much stronger business withbroader product lines, technical capabilities, global footprint, and customerrelationships. As a result of the solid foundations laid during 2006 and furthermajor milestones achieved early in 2007, GTE is a now a leading provider ofadvanced cleaning, performance monitoring, fluid and control systems for gasturbines primarily in the aviation, industrial, oil & gas and pharmaceuticalssectors. The Company's customers include global OEMs such as Pratt & Whitney(PW), Rolls-Royce, Saab, Siemens, Solar Turbines as well as gas turbineoperators such as Calpine, Norsk Hydro, SNAM, Statoil and TexasGenCo. Total revenues during the year declined by 11% to $4.7m (from $5.3m) reflectinga strong increase in demand for GTE's on wing advanced cleaning systems in theaviation sector. However this was offset by a planned reduction in sales intothe industrial sector where the Company is pursuing a global strategy, discussedbelow, to drive growth by focusing on long term partnership agreements withglobal OEMs and major turbine operators. Despite the lower revenues, gross margins were broadly unchanged at 44.1% (2005:44.8%) as the Company benefited from manufacturing efficiencies and tightcontrol on costs. The loss before tax increased to $2.9m (2005: $2.4m) partlydue to sharply higher spending on research and development to cementrelationships with existing and potential new customers. Operating review The market opportunity for GTE in the global gas turbines sector is large andgrowing. The global installed base for civilian and military aircraft engines isestimated at approximately 120,000 units while the number of industrial turbinescurrently in use is estimated at more than 40,000 units. The Company's corestrategy has remained consistent and simple: Combine three important businesselements: •High Value Environmental and Performance Solutions •Patented or Proprietary Position •Strong Commercial Channel (Long term agreement with OEMs) Aviation systems Revenues from aviation systems rose by 29% to $2.7m demonstrating the successfulestablishment of GTE's business model in this segment through an exclusivepartnership agreement with Pratt & Whitney. The combination of GTE's on-wingwash technology solution and Pratt & Whitney's global commercial and operationsnetwork yielded a 158% increase in order intake for GTE in 2006, including a $5morder signed in December. Further, it positioned the product line for long termopportunities in a number of new geographical and market segments. The bulk of the $5m order will be delivered in the first half of 2007 and ispart of PW's global roll-out of an aviation services' hub that deliverscompelling cost efficiency and environmental benefits to commercial and defenceaircraft operators. As previously announced, in January 2006, GTE's contract with PW was extended to2014. This contract provides a solid foundation for long term growth for theCompany. GTE generates revenues under this contract from the sale of GTEequipment as well as royalties based on the number of washes carried out by PW. Industrial Based on the success in the aviation sector we took on a huge challenge in 2006to extend the business model with not one, but four industrial OEMs in parallel.This strategy had an inherent timing risk - until approval by an OEM, industrialsales by GTE would be essentially zero to that customer. Revenues from the industrial segment (which includes power generation, oil & gasand marine industries) decreased to $2m - 37% lower than the correspondingperiod last year. The result was in line with the Company's expectations and itsstrategy to work directly with global OEMs, and the required, non-recurringprocess of GTE technology qualification. During the qualification period, GTEwas required to de-emphasise direct sales into a significant portion of itsend-customer base. Although the strategy impacted turnover in the short term, the Company stronglybelieves it will open up considerably larger market opportunities in the longterm by providing access to the global OEMs' large installed user base. To thisend, GTE is currently making excellent progress in achieving an extensiveprogramme of product qualifications at key global OEMs in the US and Europe.Approximately 95% of the technical and intellectual property issues with allfour OEMs have been addressed and GTE is now in the process of completing longterm commercial contract terms with several OEMs in parallel. Through the process, we have maintained ownership of our intellectual propertyand more importantly, created a channel structure for the introduction of futureproducts in a much shorter cycle. Also of note is that GTE's product performedas well or better than expected in the OEM technical evaluations. The progress made in the industrial segment in 2006 has already begun to make apositive impact. In March 2007 we announced a five year agreement with Solar, aCaterpillar company, to design manufacture and supply cleaning systems for itsentire range of existing and new industrial turbines. Control Center Acquisition In preparation for the commercialisation and ramp up of our industrial productlines, we made an important acquisition in February 2007 of Control Center, LLClocated in Orlando, Florida. This deal provides GTE with a proven Tier 1 OEMsupplier, US base of operations, 40 year industry track record, and world classquality control system. In addition, it gives GTE several importantcomplementary product lines in the Gas Turbine market segment: •Combustion System Monitoring •Fuel Systems & Measurement •Controls •Fluid Systems and Packaging •Parts Distribution Of significance is that many of the core capabilities and customer base ofControl Center, LLC span several industry segments including Oil & Gas, Energy,Pharmaceuticals and Aerospace. Their reputation as a capable, high qualitysolutions provider is well founded and respected in the industry. That said, the most important aspect of the acquisition is that when the ControlCenter expertise in several important Gas Turbine sub-systems is combined withGTE's core products and technology team, led by Tom Wagner, with over 30 yearsof General Electric experience - the resulting team is significantly strongerthan either team separately. GTE can now participate in larger, more complex systems solutions- a flexibilitythat will be very important as the Power Generation, Oil & Gas and other Processindustries take on increasingly difficult Environmental, Economic and Fuelchallenges. New geographic markets The Company has also entered the highly promising markets in the Middle East andRussia. Both regions are attracting major investment by the international oiland gas industry. The Middle East is also investing heavily in waterdesalination plants, which are large consumers of power. In Russia there isalready a large installed base of industrial turbines. During the year GTE appointed Nama as its distributor in Abu Dhabi to addressthe Middle East market and received its first order from that region. In Russia,GTE has set up a new subsidiary based in St Petersburg with a sales andmarketing director. Financial Review Revenues decreased to $4.7m from $5.3m as strong growth from the aviation sectorwas offset by a planned reduction in the industrial sector in line with theCompany's long-term strategy to focus on global OEM agreements. The Eastern region maintained its contribution to overall revenues at $4.2m(2005: $4.3m) while revenues from the Western region declined to $0.4m (2005:$0.9). Operating loss amounted to $2.7m (2005: $2.3m) partly reflecting a sharpincrease in research and development spending which more than doubled to $0.59m(2005: $0.24m). Loss before tax amounted to $2.9m (2005: $2.4m). Basic and fully diluted loss per share were unchanged at $0.05 (2005: $0.05). Cash and cash equivalents as at 31 December 2006 amounted to $2.9m (2005: $4.7m) Outlook During 2006 GTE focused on strengthening relationships with key global OEMs andon expanding into new regions. These steps have made a positive impact on ourbusiness, leading to a strong start to 2007. Revenues in the first quarter of 2007 have increased by 402% compared with sametime last year and the total order book for first half is at a record level at$9.7m. This provides the Company with a solid platform for delivering stronggrowth for the year and beyond. The Company is considering raising a further $5m through debt or equity sourcesin order to capitalise upon its current and future growth initiatives. CONSOLIDATED STATEMENTS OF INCOMEfor the year ended 31 December 2006 Restated Note 2006 2005 $'000 $'000Continuing operationsRevenue 1 4 662 5 265Cost of sales (2 608) (2 908) Gross profit 2 054 2 357 Distribution and selling costs (843) (908)Research and development expenses (585) (243)Administrative expenses (3 390) (3 628)Other operating income 50 140 Operating loss (2 714) (2 282) Finance costs (204) (87) Loss before tax (2 918) (2 369) Tax 2 629 963 LOSS FOR THE YEAR ATTRIBUTABLETO EQUITY HOLDERS OF THE PARENT (2 289) (1 406) Loss per share From continuing operationsBasic and diluted loss per share ($) (0.05) (0.05) CONSOLIDATED BALANCE SHEETSat 31 December 2006 Restated Note 2006 2005ASSETS $'000 $'000Non-current assetsIntangible assetsCapitalised expenditure for research and development 765 135Patents 376 183ERP-System 213 85Goodwill 3 1 255 1 084 2 609 1 487 Tangible assetsEquipment, tools, fixtures and fittings 572 405 Financial assetsInvestments 204 152 Deferred tax assets 4 1 743 1 128 Total non-current assets 5 128 3 172 Current assetsInventories 556 442 Current receivablesAccounts receivable-trade 1 910 1 843Income taxes recoverable 97 -Other receivables 467 2 080Prepaid expenses and accrued income 768 631 3 242 4 554Cash and cash equivalents 2 855 4 705Total current assets 6 653 9 701 TOTAL ASSETS 11 781 12 873 CONSOLIDATED BALANCE SHEETSat 31 December 2006 (continued) Restated Note 2006 2005 $'000 $'000EQUITY AND LIABILITIES EquityShare capital 156 156Share premium 8 225 8 225Capital reserve 2 636 2 636Share based payment reserve 355 184Revaluation reserve 59 30Translation reserves 1 621 602Retained earnings (4 663) (2 374) Total equity attributable to equity holders of the 8 389 9 459parent Non-current liabilitiesFinancial liabilities - borrowings 90 94Deferred tax liabilities 4 75 66 165 160 Current liabilitiesFinancial liabilities - borrowings 947 1 292Accounts payable - trade 1 125 904Income tax liability - 31Other liabilities 146 142Accrued expenses 1 009 885 3 227 3 254 Total liabilities 3 392 3 414 TOTAL EQUITY AND LIABILITIES 11 781 12 873 CONSOLIDATED STATEMENTS OF CASH FLOWSfor the year ended 31 December 2006 Restated Note 2006 2005 $'000 $'000Cash flow from operating activitiesLoss after financial items (2 918) (2 369)Adjustments to operating cash flows 723 329 Cash flow from operating activities before changes (2 195) (2 040)in working capital Cash flow from changes in working capital(Increase)/decrease in inventories (41) 201(Increase)/decrease in receivables 1 780 (1 342)Increase in liabilities 86 1 058 1 825 (2 123) Cash used by operationsIncome taxes received - 16Net interest paid (204) (88) (204) (72) Net cash used by operating activities (574) (2 195) Cash flows from investing activitiesPurchase of financial assets (27) -Purchase of intangible fixed assets (964) (231)Purchase of tangible fixed assets (226) (356) Net cash used by investing activities (1 217) (587) Cash flows from financing activitiesNew share issue (net of issue costs) - 5 371Loans taken/(repaid) (523) 1 945 Net cash (used in)/generated by financing activities (523) 7 316 Net change in cash and cash equivalents (2 314) 4 534Cash and cash equivalents at beginning of the year 4 705 137Effect of foreign exchange rate changes 464 34Cash and cash equivalents at end of the year 2 855 4 705 CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2006 Ordinary Share Capital Share shares premium reserves based reserve payment $'000 $'000 $'000 $'000Balance at 1January 2005 aspreviouslyreported 95 - 2 636 -Change in accounting policy for test - - - -equipment (net of income taxes) Balance at 1January 2005 asrestated 95 - 2 636 -New share issue,18,000,000 sharesat nominal £ 0.002 61 9 263 - -IPO costs - (1 038) - -Recognition ofshare-basedpayments - - - 184Financial investments valued through - - - -equityExchange differences arising on - - - -translation of foreign operationsNet loss for the year - - - - Balance at 31December 2005 asrestated 156 8 225 2 636 184Recognition ofshare-basedpayments - - - 171Financial investments valued through - - - -equityExchange differences arising on - - - -translation of foreign operationsNet loss for the year - - - -Balance at 31December 2006 156 8 225 2 636 355 continued...CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2006 Revaluation Translation Retained Restated Total reserve reserve earnings shareholders Equity $'000 $'000 $'000 $'000Balance at 1January 2005 - 1 039 (954) 2 816as previouslyreportedChange inaccountingpolicy for - - (14) (14)test equipment (netof income taxes)Balance at 1January 2005 - 1 039 (968) 2 802as restatedNew shareissue,18,000,000shares atnominal £0.002 - - - 9 324IPO costs - - - (1 038) Recognition ofshare-basedpayments - - - 184 Financialinvestmentsvalued throughequity 30 - - 30 - (437) - (437)Exchange differencesarising ontranslation offoreign operationsNet loss forthe year - - (1 406) (1 406) Balance at 31December 2005as restated 30 602 (2 374) 9 459 Recognition ofshare-basedpayments - - - 171 Financialinvestmentsvalued throughequity 29 - - 29 Exchangedifferencesarising ontranslation offoreignoperations - 1 019 - 1 019Net loss forthe year - - (2 289)Balance at 31December 2006 59 1 621 (4 663) 8 389 Notes to the financial statements Note 1 Segment informationFor management purposes, the Group is currently organised into the following twooperating divisions: Eastern and Western hemisphere, where Western hemisphererelates to US and the Americas and Eastern relates to Europe and the rest of theworld. These divisions are the basis on which the Group reports its primary andonly segment information. Inter-segment sales are charged at prevailing marketrates.31 December 2006 Continuing Western Eastern Eliminations Total foroperations group $'000 $'000 $'000 $'000Revenue from sale ofgoodsExternal sales 443 4 219 4 662Inter-segmentsales 364 733 (1 097) -Segment result- operatingloss (1 421) (1 283) (10) (2 714)Other gains andlossesOther interestincome andsimilarprofit/lossitems 155Interestexpense forgroupcompanies (359)Loss beforetax (2 918)Income taxcredit 629Loss for theyear (2 289) Other informationCapitaladditions 401 789 1 190Depreciation,amortisationand writedowns (62) (188) (250)Non-cashexpenses 171 - 171 Western Eastern Unallocated assets/ Total for liabilities group $'000 $'000 $'000 $'000Balance sheetAssets:Segmentassets: 2 723 4363 4 695 11 781Liabilities:Segmentliabilities: 484 1795 1 113 3 392 31 December 2005Continuing Western Eastern Eliminations Total foroperations group $'000 $'000 $'000 $'000Revenue from sale ofgoodsExternal sales 917 4 348 5 265Inter-segmentsales - 254 (254) -Segment result- operatingloss (1 765) (483) (34) (2 282)Other interestincome andsimilarprofit/lossitems 1Interestexpense forgroupcompanies (88)Loss beforetax (2 369)Income taxcredit 963Loss for theyear (1 406) Other informationCapitaladditions 244 344 588Depreciation,amortisationand writedowns (4) (163) (167)Impairmentlossesrecognised inloss (28) (28)Non-cashexpenses 84 100 184 Western Eastern Unallocated assets/ Total for liabilities group $'000 $'000 $'000 $'000Balance sheetAssets:Segmentassets: 2 283 4783 5 807 12 873Liabilities:Segmentliabilities: 647 1283 1 484 3 414 Note 2 Taxation 2006 2005 $'000 $'000 Current tax - Continuing operations - (156)Deferred tax assets (Note 4) 630 1 121Deferred tax liabilities (Note 4) (1) (2) 629 963 The total credit for the year can be reconciled to the accounting loss beforetax as follows: 2006 2005 $'000 $'000Loss before tax (2 918) (2 369)Tax at the domestic tax rate in the Group's main tradinglocation of Sweden of 28% (2005: 28%) 817 663Tax effect of expenses that are not deductible indetermining taxable profit (57) (31)Tax effect of income that is not taxable in determiningtaxable profit - 15Tax effect of utilisation of tax losses not previouslyrecognised - 309Tax effect of not recognised tax losses (258) (297)Deferred tax booked directly against equity - -Effect of different tax rates of subsidiaries operating inother jurisdictions 127 304Tax credit for the year 629 963 Note 3 Intangible assets - Goodwill 2006 2005Cost $'000 $'000 As at 1 January 1 084 1 304Exchange differences 171 (220)As at 31 December 1 255 1 084 ImpairmentAs at 1 January and 31 December - -Net book value as at 31 December 1 255 1 084Goodwill is allocated to the Group's cash-generating units (CGUs) identifiedaccording to country of operation. 2006 2005 $'000 $'000Western - -Eastern 1 255 1 084 1 255 1 084 The Group tests goodwill annually for impairment or more frequently if there areindications that goodwill might be impaired. The recoverable amounts of the CGUs are determined from value in usecalculations. The key assumptions for the value in use calculations are thoseregarding the discount rates, growth rates and expected changes to sellingprices and direct costs during the period. Management estimates discount ratesusing pre-tax rates that reflect current market assessments of the time value ofmoney and the risks specific to the CGUs. Changes in selling prices and directcosts are based on past practices and expectations of future changes in themarket. The Group prepares cash flow forecasts derived from the most recent financialforecasts approved by the Board of Directors. The view of the Board of Directorsis that the future discounted cash flows of the Company over the next 3 yearssignificantly exceed the currently booked goodwill asset of $1,084,000. Thecompany has not prepared discounted cash flow forecasts beyond these 3 years. The rate used to discount the forecast cash flows from the business related toSweden is 12 per cent. Note 4 Deferred tax The following are the major deferred tax liabilities and assets recognised bythe Group, and the movements thereon, during the current and prior reportingperiods.Deferred tax assets Inventory Tax Loss Carry-forward Total $'000 $'000 $'000 At 1 January 2005 7 - 7Credited to the income statement 15 1 106 1 121At 31 December 2005 22 1 106 1 128Credited to the income statement 4 626 630Exchange differences - (15) (15)At 31 December 2006 26 1 717 1 743 Intangible UntaxedDeferred tax liabilities assets reserves Total $'000 $'000 $'000 At 1 January 2005 (17) (59) (76)Charged to the income statement (2) - (2)Exchange differences 2 10 12At 31 December 2005 (17) (49) (66)Charged to the income statement (1) - (1)Exchange differences - (8) (8)At 31 December 2006 (18) (57) (75) At the balance sheet date 31 December 2006, the Group has unused tax losses of $4,588,000 (2005: $2,770,000) available for offset against future profits. Thesetax loss carry-forwards expire as follows. Year Amount $'000 2018 1 102 2019 1 668 2020 1 152 Later 666 4 588 On 31 December 2006, the total tax loss carry-forwards generated deferred taxassets of $1,717,000 (2005: $1,106,000). The tax loss carry-forwards can beutilised to reduce future taxable income. Their future utilisation does not meana lower tax charge for the Group. A deferred tax asset in respect of the total amount of these losses has beenrecognised as management's forecasts for the next three years indicate thatthese losses will be utilised by offset against available profits over theforecast period. Note 5 Significant accounting policies The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards. The financial statements have been prepared onthe historical cost basis, except for the revaluation of certain financialinstruments. The unaudited accounts for the 12 months ended 31 December 2006have been prepared using accounting policies that are consistent with thestatutory accounts for the year ended 31 December 2005 with the exception of thefollowing. Test equipment Equipment which is held by customers was previously treated as inventory andheld at cost until disposed of. The directors have determined that, as thisequipment is used by clients for extensive periods and the value thus decreases,this equipment should be treated as a non-current tangible asset and depreciatedover its useful life, which is estimated to be 5 years. As this is a change in accounting policy under IAS 8, comparatives have beenrestated, resulting in an increase in non-current tangible assets as at 31December 2005 of $227,005 and an increase in the retained loss for the yearended 31 December 2005 of $34,526 (2004: $14,000) due to depreciation on theseassets. Available for sale financial assets Under the amendment to IAS 39, certain investments which had previously beenclassified as "financial assets at fair value through profit or loss" have beenreclassified in the current and prior period balance sheets as "available forsale financial assets". The book value of these investments at 31 December 2005was $152,000. The net loss for the year ended 31 December 2005 has beenincreased 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 2005has been changed from by nature to by function. In the directors' view, this isappropriate because it better describes the Company and the development of theCompany. Income statement by function is also the standard within the energysector. Note 6 Basis of preparation The financial information set out in this announcement does not constitute theCompany's statutory accounts for the year ended 31 December 2006 and theseaccounts have not yet been approved, audited or filed Copies of the 2006 Annual Report, which will be posted to shareholders in June2007, may be obtained from the date of posting from the registered office of theCompany at 89 Fleet Street, London EC4Y 1DH. This statement, which has beenagreed with the auditors, was approved by the Board on 13 April 2007. This information is provided by RNS The company news service from the London Stock Exchange