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Gas Turbine Efficiency plc Interim Results for the Six Months to 30 June 2008

LONDON-(Business Wire)-September 24, 2008 - Gas Turbine Efficiency plc (“GTE†or “the Groupâ€)(LSE:GTE), 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

Operating Highlights

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.â€

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

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