TIDMTRBO
RNS Number : 6504T
Turbotec Products PLC
09 December 2011
Press Release 9 December 2011
Turbotec Products Plc
("Turbotec" or "the Company")
Half Yearly Report
Turbotec Products Plc (TRBO.L), the designer and manufacturer of
high performance heat exchangers and Tru-Twist(R) heat transfer
tubing, today announces its interim results for the six months
ended 30 September 2011.
Highlights
-- Revenue of $11.7 million (2010: $12.2 million)
-- Profit before tax of $0.4 million (2010: $1.2 million),
including net proceeds from litigation of $0.3 million
(2010: $0.3 million)
-- Increase in net assets to $11.8 million (2010: $11.4
million)
-- Multi year contracts secured from major customers
-- Resolution of litigation with former parent company
-- Significant progress made in refurbishment of manufacturing
facility in North Carolina; relocation of operations
continue
Overview
First half sales of $11.7 million were below the $12.2 million
achieved in the comparable period last year, with shipments to
major market segments at decreased levels and unit volumes down by
approximately 5% overall. The Company generated profit before tax
of $0.4 million for the first half, (2011: $1.2 million) which
includes the final payment of costs of $336,000 (GBP210,000 ) in
relation to the Company's successful defence of the litigation
brought against it by its major shareholder, Thermodynetics Inc.
The aggregate cost recovery from this litigation totaled $837,000
(GBP560,000), which includes a payment on account in the prior
year.
While the Company had benefited in previous years from a robust
housing market and more flexible lending practices, current
operations are now negatively impacted by reverse trends. The
continuing weak economy, coupled with tight credit markets, has
prolonged the weak housing market for both new construction and
resale properties. Other markets served by the Company have been
similarly impacted by the economy. The residential geothermal heat
pump market trails previous year's shipments, despite the
continuing 30% tax credit incentive in the United States towards
the installation of such systems. The demand for swimming pool heat
pump applications continues to be depressed and with no outside
stimulus package anticipated, shipments to this market are expected
to remain at reduced levels through the foreseeable future. The
product mix has shifted to components used in commercial heating
and cooling applications which typically are of lower efficiency
when compared to the high efficiency residential applications;
these products are priced at points resulting in lower gross
margins.
The Company has also been experiencing increased competition in
certain of its markets and while taking action to protect its
position, recent inroads made by domestic and overseas
manufacturers into the Company's core business markets have become
more frequent. The Company has vigorously worked to recover lost
market share through some aggressive contract negotiations and has
recently secured long term agreements with some of its major
customers which are expected to positively impact the business
outlook for the long term.
In April 2010 the Company acquired a new facility in Hickory,
North Carolina, and has now completed the majority of the building
structural upgrades to accommodate its manufacturing requirements.
Operations at the nearby rental facility were moved into the new
building. Upgraded machinery and newly acquired production
equipment is being transferred from Connecticut to Hickory; this
process is expected to continue over the next 12 months. Although
the Company has extended its previously announced timetable for the
move to Hickory, certain actions were taken this past summer,
including personnel changes, to address the situation. These moves
have resulted in a positive effect on the transition process.
Competitive pressures in the marketplace have affected customer
pricing, which combined with increased operating costs reflecting
expenses related to the transition of operations to Hickory,
including delays created by the changes in senior staff, resulted
in a 9% decrease in gross margin as a percentage of sales compared
to the same period of the prior year.
The Company is now in a position to offer some of the same
products from both facilities; the testing and qualification
programs for the initial production runs from the new facility have
started and are expected to accelerate every month as we proceed
with the shift of product shipments from Windsor, Connecticut to
Hickory, North Carolina.
The additions of senior staff in sales and engineering are
starting to significantly enhance the Company's selling and
technical expertise and we are now able to respond to the
continuous higher efficiency product requirements from our existing
customer base while also preparing to target new product
applications which will expand our business prospects in future
years.
Commenting on the interim results, Sunil Raina, Managing
Director of Turbotec Products, said: "The Company is pleased to
continue its performance record of generating profits in each
reporting period since joining the AIM market. In these extremely
turbulent economic times; we continue to focus our efforts in
protecting our market share in an extremely competitive environment
for heating, ventilation and air conditioning components while at
the same time developing our new manufacturing facility which is
expected to help improve the Company's growth prospects. "
-Ends-
For further information please contact:
Turbotec Products Plc
Robert Lowe, Non Executive Chairman +44 (0) 79 1714 8930
RLowe@trbohx.com
Sunil Raina, Managing Director Tel: +1 (860) 731-4200
SRaina@trbohx.com www.turbotecproducts.com
Robert Lieberman, Finance Director Tel: +1 (860) 731-4200
RLieberman@trbohx.com www.turbotecproducts.com
Seymour Pierce Limited
Guy Peters, Corporate Finance Tel: +44 (0) 20 7107
Paul Jewell, Corporate Broking 8000
www.seymourpierce.com
Media enquiries:
Abchurch Communications
Sarah Hollins / Mark Dixon/Oliver Tel: +44 (0)20 7398
Hibberd 7714
oliver.hibberd@abchurch-group.com www.abchurch-group.com
Electronic copies of this announcement can be obtained from the
Company's website www.turbotecproducts.com.
Chairman's Statement
We continue to face a challenging business landscape driven by
weak global economic conditions and softness in our core markets.
The housing market in particular remains extremely weak and there
has been no recovery in the swimming pool and marine markets.
Fluctuating metal prices have continued to challenge us but we
are taking opportunities to purchase forward as prices allow,
keeping our costs as low and consistent as possible.
Competition, both domestic and foreign, continues in our market
segments and we have moved aggressively to combat this by entering
into longer term supply deals with our major customers. We are
continuing to maintain a dual manufacturing capability in Windsor
and Hickory and transfer operations to Hickory only when our
customers have fully tested the items produced there. This process
has taken longer than we had first estimated and consequently we
have extended our lease in Windsor to December 31 2012, at very
favourable rates.
Our turnover for the period dropped to $11.7 million from $ 12.2
million for the comparable period in 2010. Gross margins fell from
25% to 16% as a result of increased raw material costs and our
multi-plant transitional operating structure, resulting in an
operating profit of $0.4 million. (2010: $1.2million)
I am pleased to report that the long running legal matter with
our former parent company, Thermodynetics Inc. has finally been
settled with a final payment of GBP210,000 ($336,000) received
during July 2011. The Company has received a total of GBP560,000
($837,000) as a full and final settlement of our bill of costs,
which totaled GBP683,000.
I would like to thank Sunil Raina and his team for working
extremely hard to deliver these results in a very challenging
environment. Hard decisions were made that reduced profit margin in
the short term, but protected the Company and the customer base. We
should see the benefits in FY 2013 as production moves to our lower
cost manufacturing facility in Hickory.
The Board would also like to thank our many dedicated employees,
without whose effort all our goals and aspirations would not be
possible.
Rob Lowe
Chairman
9 December 2011
TURBOTEC PRODUCTS PLC
UNAUDITED CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE
INCOME
Six Months Six Months Year Ended
30 September 30 September 31 March
2011 2010 2011
$'000 $'000 $'000
Revenue 11,728 12,162 24,839
Cost of sales (9,872) (9,063) (19,886)
-------------- -------------- -----------
Gross profit 1,856 3,099 4,953
Distribution costs (341) (308) (614)
Administrative expenses (1,066) (1,573) (2,905)
-------------- -------------- -----------
Operating profit 449 1,218 1,434
Finance costs (20) (2) (10)
Profit before tax 429 1,216 1,424
Income tax expense (59) (360) (586)
Profit and total comprehensive
income for the period 370 856 838
============== ============== ===========
Earnings per share - basic $ 0.03 $ 0.07 $ 0.07
Earnings per share - diluted $ 0.03 $ 0.07 $ 0.06
There were no items of other comprehensive income for any period.
All of the profit and total comprehensive income is attributable
to the owners of the parent.
TURBOTEC PRODUCTS PLC
UNAUDITED CONSOLIDATED statement of changes in equity
Share Share Retained Merger Total
capital Premium earnings Reserve
$'000 $'000 $'000 $'000 $'000
Balance at 31 March
2010 228 3,441 6,952 (168) 10,453
Profit and total comprehensive
income for the period - - 856 - 856
Share based payment
expense - - 53 - 53
Balance at 30 September
2010 228 3,441 7,861 (168) 11,362
Profit and total comprehensive
income for the period - - -6 - -6
Share based payment
expense - - 70 - 70
Balance at 31 March
2011 228 3,441 7,925 (168) 11,426
Profit and total comprehensive
income for the period - - 370 - 370
Share based payment
expense - - 41 - 41
Balance at 30 September
2011 228 3,441 8,336 (168) 11,837
============ ========= ========== ========= =======
TURBOTEC PRODUCTS PLC
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 SEPT 30 SEPT 31 MARCH
2011 2010 2011
$'000 $'000 $'000
---------- ---------- ----------
Assets
Non-current assets:
Property, plant and equipment 12,919 10,156 11,778
Intangible assets 229 313 271
Other 37 11 9
---------- ---------- ----------
13,185 10,480 12,058
----------
Current assets:
Inventories 4,385 4,865 4,365
Trade and other receivables 2,083 2,153 1,969
Cash and cash equivalents 4 288 5
---------- ---------- ----------
6,472 7,306 6,339
---------- ---------- ----------
Total Assets 19,657 17,786 18,397
========== ========== ==========
Liabilities
Non-current liabilities:
Loans and borrowings 3,320 2,393 764
Deferred tax liability 894 900 894
---------- ---------- ----------
4,214 3,293 1,658
---------- ---------- ----------
Current liabilities:
Trade and other payables 2,203 2,909 2,488
Loans and borrowings 1,389 173 2,827
Current tax liabilities 14 49 (2)
---------- ---------- ----------
3,606 3,131 5,313
---------- ---------- ----------
Total Liabilities 7,820 6,424 6,971
---------- ---------- ----------
Net Assets 11,837 11,362 11,426
========== ========== ==========
Shareholders' equity:
Share capital 228 228 228
Share premium account 3,441 3,441 3,441
Merger reserve (168) (168) (168)
Retained earnings 8,336 7,861 7,925
Total equity 11,837 11,362 11,426
========== ========== ==========
TURBOTEC PRODUCTS PLC
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
SIX
MONTHS SIX MONTHS YEAR ENDED
30 SEPT 30 SEPT 31 MARCH
2011 2010 2011
--------- ----------- -----------
$'000 $'000 $'000
Cash flows from operating activities
Profit before tax 429 1,216 1,424
Adjustments to reconcile net income
to net
cash provided by operating activities:
Depreciation and amortization 259 239 476
Finance expense 20 2 10
Charge recognized in respect of share
based payment 41 65 135
Cash flows from operating activities
before changes in working capital 749 1,522 2,045
(Increase) in trade and other receivables (141) (616) (430)
(Increase) in inventory (20) (1,115) (615)
(Decrease) / increase in trade and
other payables (285) 1,772 1,293
Cash generated from operations 303 1,563 2,293
Taxes paid (43) (307) (520)
Net cash provided by operating activities 260 1,256 1,773
--------- ----------- -----------
Cash flows from investing activities
Additions to property, plant and equipment (1,358) (4,829) (6,646)
-----------
Net cash used in investing activities (1,358) (4,829) (6,646)
--------- ----------- -----------
Cash flows from financing activities
Proceeds from revolving debt and long
term borrowings 1,270 2,479 3,645
Principal payments on long term debt (153) (80) (221)
Finance expense (20) (2) (10)
--------- ----------- -----------
Net cash provided by financing activities 1,097 2,397 3,414
--------- ----------- -----------
Net change in cash and cash equivalents (1) (1,176) (1,459)
Cash and cash equivalents, beginning
of period 5 1,464 1,464
--------- ----------- -----------
Cash and cash equivalents, end of
period 4 288 5
========= =========== ===========
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The AIM Rules for Companies require that the annual consolidated
financial statements of the company for the 52 week period ending
31 March 2012 be prepared in accordance with International
Financial Reporting Standards adopted for use in the EU ("IFRS").
This half year financial statement has been prepared on a
consistent basis in accordance with the accounting policies adopted
in the accounts for the year ended 31 March 2011 and on the basis
of the recognition and measurement requirements of IFRS in issue
that are either endorsed by the EU and effective (or available for
early adoption) at 9 December 2011 and hence on the basis of IFRS
that are expected to apply in preparation of the accounts for the
year ending 31 March 2012. The preparation of the interim financial
statements requires management to make judgments, estimates and
assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. Actual
results may differ from these estimates. These interim financial
statements have neither been audited nor reviewed pursuant to
guidelines issued by the Auditing Practices Board.
The comparatives for the full year ended 31 March 2011 are not
the Company's full statutory accounts for that year. A copy of the
statutory accounts for that year has been delivered to the
Registrar of Companies. The auditors' report on those accounts was
unqualified and did not contain a statement under 498(2) or 498 (3)
of the Companies Act 2006.
2. TAXATION
Analysis of charge in period:
Six months Six months Year ended
ended 30 ended 30 31 March
Sept Sept 2011
2011 2010
$'000 $'000 $'000
Current 59 335 567
Deferred - 25 19
----------- ----------- -----------
Total Taxation 59 360 586
=========== =========== ===========
Tax reconciliation:
The effective tax rates for the periods are different than the
standard rate of corporate tax in the UK (28% for all periods
presented). The differences are attributable to the following:
Six months Six months Year ended
ended ended 31 March
30 Sept 30 Sept 2011
2011 2010
$'000 $'000 $'000
Profit before tax 429 1,266 1,424
Profit before tax multiplied
by rate of corporate tax in the
UK of 28% 120 355 399
Effect of:
Differences between book and
taxable income 10 (10) 123
Higher rate of tax on overseas
earnings 34 101 176
Utilisation of tax loss carry
forward (94) (84) (161)
Tax credits used to reduce taxes
paid (5) (5) -
Other (6) 3 49
----------- ----------- -----------
Total Taxation 59 360 586
=========== =========== ===========
3. BASIC EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE
The calculations of basic and diluted earnings per ordinary
share are based on the profit for the financial year and the
weighted average number of equity voting shares in issue and
dilutive shares during the period.
Six Months 30 Sept Six Months 30 Sept Year Ended 31 March
2011 2010 2011
$'000 Weighted $'000 Weighted $'000 Weighted
Average Average
Shares Shares Average Shares
Basic EPS
Profit for
the period 370 - 856 - 838 -
Weighted average
shares - 12,806,773 - 12,806,773 - 12,806,773
Diluted EPS-Effect
of Dilutive
Securities
Stock options - 1,623,470 - 922,778 - 1,360,000
Diluted EPS 370 14,430,243 856 13,729,551 838 14,166,773
============== =========== ======= ============ ============= ===============
4. INTANGIBLE ASSETS
Capitalized
Development
Goodwill Costs Total
$'000 $'000 $'000
--------- ------------ ------
Period Ended 30 Sept 2011
Cost and net book value
Balance at 1 April, 2011 94 177 271
Additions - - -
Amortization - (42) (42)
--------- ------------ ------
Balance at 30 Sept, 2011 94 135 229
--------- ------------ ------
Period Ended 30 Sept 2010
Cost and net book value
Balance at 1 April, 2010 94 261 355
Additions - - -
Amortization - (42) (42)
--------- ------------ ------
Balance at 30 Sept, 2010 94 219 313
--------- ------------ ------
Period Ended 31 March 2011
Cost and net book value
Balance at 1 April, 2010 94 261 355
Additions - - -
Amortization - (84) (84)
--- ------ ------
Balance at 31 March, 2011 94 177 271
--- ------ ------
Goodwill relates to the acquisition of a technology company
acquired by the US parent company in 1985. The operations of that
company were subsequently integrated into the company's primary
manufacturing facility. The technology acquired continues to be
used by the group as an integral part of the engineering and
manufacturing of its current product line.
In accordance with IAS 36, the Group regularly monitors the
carrying value of intangible assets. A review was undertaken at 31
March 2011 to assess whether the carrying value of assets was
supported by the net present value of cash flows derived from those
assets using future cash flow projections. Further to the review,
there have been no impairments to the carrying amount of goodwill
in any period. The deferred development costs will be amortized
over the expected lives of the related products once sales of these
products commence on a commercial level.
5. CASH AND CASH EQUIVALENTS
30 Sept 30 Sept 31 March
2011 2010 2011
$'000 $'000 $'000
Cash available on demand 4 288 5
Bank overdrafts (1,128) - (390)
-------- -------- ---------
(1,124) 288 (385)
======== ======== =========
The Company has an overdraft facility in place. Approximately
$2,122,000, $3,250,000 and $2,860,000 was available for borrowing
against the Company's revolving line of credit at 30 September
2011, 30 September 2010, and 30 March 2011, respectively.
6. LONG TERM BORROWINGS
30 Sept 30 Sept 31 March
2011 2010 2011
$'000 $'000 $'000
Current financial liabilities
Bank loans - secured 261 173 2,437
Non-current financial
liabilities
Bank loans - secured 3,320 2,393 764
The bank loans and overdraft are secured by a fixed charge over
the assets of the Group. In addition, the Group must comply with
certain non-financial covenants, non-compliance with which would be
considered an event of default and provide the bank with the right
to demand repayment prior to the loan's maturity date.
In April 2010 the Group entered into a mortgage agreement with
its bank as the primary source of funding for the Hickory, North
Carolina facility. The mortgage was in the amount of $2,215,000,
repayable under a 25 year amortization schedule with a maturity
date of April 2015. Interest for the first three years has been
fixed at a rate of 5.4% with a floating rate thereafter. In June
2011 the Group's bank waived non-compliance with a covenant that
existed at 31 March 2011. Therefore, although the entire balance of
the mortgage is shown above as a current liability at 31 March
2011, the loan remains repayable under its original terms, as
reflected in the debt maturity table below.
During the current year the Company received funding of
approximately $532,000 for manufacturing equipment purchases under
a line of credit arrangement with its bank that provided for a
total of $1,000,000 to be advanced for qualified purchases. Under
the terms of the agreement, interest only is payable at a floating
rate on advances made through April 2012, with the aggregate
principal amount repayable in 48 successive equal monthly
installments.
The interest rate on floating rate financial liabilities is
linked to the bank's prime rate. The interest rates charged at the
balance sheet date are as follows:
30 Sept 2011 30 Sept 2010 31 March 2011
Bank overdrafts and secured
loans 3.25% 3.25% 3.25%
Maturities of long term borrowings over the next five years are
as follows (including interest payments at current rates):
30 Sept 30 Sept 31 March
2011 2010 2011
$'000 $'000 $'000
In less than 1 year 501 292 866
In 1-2 years 569 254 464
In 2-3 years 553 211 451
In 3-4 years 482 205 449
In 4-5 years 1,919 182 1,951
-------- -------- ---------
4,024 1,144 4,181
======== ======== =========
At 30 September 2010 the balloon maturity of the mortgage was
not included in the above table as the payment date was beyond five
years.
7. LITIGATION JUDGMENT
In May 2010 the Company was notified that it was successful in
its defence of the claim brought by Thermodynetics Inc. in relation
to the payment of administration fees under the Relationship
Agreement. The company was awarded substantial costs, including an
order of interim payment on account of 350,000 pounds sterling
($501,000) that was received by the Company in fiscal year 2011. In
July 2011 an additional 210,000 pounds sterling ($336,000) was paid
by Thermodynetics, representing the balance of the cost award.
8. APPROVAL
This interim report was approved by the Directors of the Company
on 9 December 2011. Copies may be obtained on the Company's
website, www.turbotecproducts.com, or from the Company
Secretary.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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