Appointment of Tom Nairn and Robert Lowe as Independent Non-Executive Directors

 

Wednesday, June 28th, 2006

Turbotec Products Plc (‘the Company’) was admitted to trading on AIM on 8^th May 2006. The Company owns 100% of the issued share capital of Turbotec Products Inc. (‘Turbotec’). The last accounts presented in the admission document for Turbotec were for a nine-month period ended 31^st December 2005.  As the Company’s year end is 31^st March and henceforth the intention is to report twice yearly, these figures serve to bring the Company into line with its reporting objectives. 

HIGHLIGHTS of the most recently completed fiscal year for Turbotec include:

 

• Record turnover of $18,750,000 achieved in fiscal 2006

• Increase in turnover of 20% over prior year

• Increase in total assets of $1,034,000 over prior year (increase of 13%)

• Increase in net assets of  7% from fiscal 2005

• ISO 9001 / 2000 registration achieved 

• Million dollar, multi-year, customer order for boiler tubing received in August 2005

• Debt repayment of $2,900,000 made subsequent to year end from proceeds of Share Placing.

• Initial order received from significant UK swimming pool heat pump OEM 

Sunil Raina, Managing Director, commented:

“The year under review has seen Turbotec continue to develop its product range

and customer base. The Company was pleased to announce on 9th June 2006 that Turbotec has won a new order for the supply of heat transfer tubing to a major existing US customer.

Turbotec estimates that the order will be fulfilled over the next 18 to 24 months with a total contract value of up to US$700,000.

“Furthermore, the Company appointed Rob Lowe and Tom Nairn as independent Non-Executive Directors on the 19th June 2006. Both are experienced AIM company directors bringing considerable senior level management experience to the Company.

“The Directors look forward to the future as an AIM quoted company and plan to leverage this position as the Company sets its sights on wider market horizons.

 “In seeking to expand into new market areas, the Company is mindful of the need to maintain and nurture existing long standing client relationships who rely upon Turbotec’s consistently high levels of design, workmanship and delivery.

 “We look forward to another year of growth in both turnover and profitability as the Company continues to explore new markets and applications for its products.”

28 June 2006

 

Enquiries:

Turbotec Products Plc	+1 860 683 2005
Sunil Raina, Managing Director
Dawnay Day Corporate Finance Ltd	+44 (0) 20 7509 4570
David Rae
Nexus Financial Ltd	+44 (0) 20 7451 7050
Nicholas Nelson	Nicholas.nelson@nexusgroup.co.uk

 

CHAIRMAN’S STATEMENT

 

We are pleased to announce that the Company was admitted to trading on AIM on 8 May 2006. The Company is the holding company of Turbotec a specialist engineering business based in Windsor, Connecticut, USA and leader in enhanced heat transfer technology. The financial information presented herein for the fiscal year ended 31 March 2006 relates only to Turbotec as the Company acquired Turbotec in April 2006, subsequent to the fiscal year end.

Turbotec’s enhanced surface tubing provides higher energy efficiencies for applications in the biomedical, aerospace, automotive, boiler, marine, ice machine, swimming pool and spa, food and beverage and residential/commercial heating and cooling industries. These tubing products support a wide array of component and heat transfer needs, including surface-enhanced tubing, single and double wall co-axial condenser and evaporator coils and heat recovery systems.

 

Trading Overview

 

Net sales for the year ended 31 March 2006 increased by $3,100,000, or 20% over the prior year. Current year sales totalled $18,750,000 compared to $15,651,000 recorded in 2005.  During fiscal year 2006 there was a slight degradation in gross profit due to the rapid escalation in the cost of primary materials, principally copper, nickel, titanium and stainless steel, with some metal pricing increasing almost threefold over the prior two years. Turbotec regularly adjusts customer pricing of products to incorporate various portions of these increases, depending on the sensitivity of the particular market to pricing changes.

 

Operating expenses increased over the prior year as personnel were added in sales, marketing, customer service and engineering to support the additional sales base, identify new markets and assist in the development of future products. Turbotec plans on further additions to its marketing and engineering staff in fiscal 2007 to continue and expand its engineering research and development programs and to provide support to new products and markets.

 

Turbotec is sole supplier to a large number of these major customers in providing a competitive advantage and core strength. Turbotec places much emphasis on customer care, working closely with some customers in developing their products, and assists in their inventory management.

 

Market Opportunities

 

Recent historic sales growth has been organic, driven by expansion in the swimming pool heat pumps, water source heat pumps, and boiler tubing markets. These markets are expected to continue to grow because of the need for housing and commercial buildings with an emphasis on energy efficiency. Turbotec is also planning to expand applications for the recently developed titanium co-axial heat exchanger product line, targeted to have a significant impact on sales within the financial year 2007. These coils are designed to meet industry demands for longer lasting products that are more durable and environmentally resistant.

 

In addition, both Europe and the USA are facing high energy prices thereby encouraging residential and commercial customers to convert conventional heating and cooling units, such as central air conditioning units and boilers, to water source heat pumps. These units are more energy efficient than traditional air conditioning and heating systems. Turbotec is already experiencing an increase in sales in this area.

 

Turbotec secured a million dollar purchase order in August 2005, coupled to the design and development of the next advances in a customer’s boiler product line. The Directors anticipate that the successful completion of the development programme could result in further orders from this customer. Turbotec is in discussions with several other original equipment manufacturers (“OEM”) to incorporate, develop and manufacture heat exchanger components for swimming pool heat pumps and to incorporate its surface enhanced tubing technology in various boiler and space conditioning applications.

 

In March 2006 Turbotec supplied an initial order for its titanium coaxial heat exchangers product to a European OEM that forms an early conduit into Europe, consistent with plans to expand outside the core US marketplace. In addition, the Company has a concentration of customers in the eastern half of the USA and intends to increase its marketing to other US manufacturing regions. More staff will be recruited in sales, marketing and engineering to enable Turbotec to enhance its product design capability and further improve its targeting of customers.

 

Outlook

 

The year under review has seen Turbotec continue to develop its product range and customer base.  The Company was pleased to announce on 9th June 2006 that Turbotec has won a new order for the supply of heat transfer tubing to a major existing US customer. TPI estimates that the order will be fulfilled over the next 18 to 24 months with a total contract value of up to US$700,000.

 

Furthermore, the Company appointed Rob Lowe and Tom Nairn as independent Non-Executive Directors on the 19th June 2006. Both are experienced AIM company directors bringing considerable senior level management experience to the Company.

 

The Directors look forward to the future as an AIM quoted company and plan to leverage this position as the Company sets its sights on wider market horizons.

 

In seeking to expand into new market areas, the Company is mindful of the need to maintain and nurture existing long standing client relationships who rely upon Turbotec’s consistently high levels of design, workmanship and delivery.

Summary financial performance for Turbotec for the year ended March 31, 2006:

 

	Year ended March 31 2006	Year ended March 31 2005
	(in 000’s, except per share data)
Net Turnover	$18,750	$16,651
Operating Income	$1,695	$1,763
Income Before Income Taxes	$1,557	$1,605
Net Income	$1,027	$1,098
Earnings Per Share- Basic and Diluted	$10,270	$10,980

 

We look forward to a year of growth in both turnover and profitability for the Company as Turbotec continues to explore new markets and applications for its products.

 

Thomas Nairn

Chairman

 

 

 

FINANCIAL STATEMENTS

 

UNAUDITED FINANCIAL INFORMATION ON TURBOTEC PRODUCTS INC

BALANCE SHEET AT 31 MARCH 2006

	31 March 2006	31 March 2005
	$’000	$’000
ASSETS
Current assets :
Cash		-
Accounts receivable – net of allowance for doubtful debts of $74,448 (2005: $85,052)	2,050	1,952
Inventories (Note 4)	3,002	2,357
Prepaid expenses and other current assets	53	28
Total current assets	5,105	4,337
Property, plant and equipment, net (Note 5)	3,657	3,537
Other assets (Note 6)	249	103
Total assets	9,011	7.977
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	2,610	2,166
Accounts payable	2,078	1,512
Accrued expenses and taxes	236	198
Current portion of long-term debt (Note 7)	276	328
Current portion of obligations under finance leases	10	30
Total current liabilities	5,210	4,234
Long-term liabilities:
Long-term debt, less current maturities above (Note7)	290	583
Obligations under capital leases, less current maturities above	-	9
Deferred income taxes (Note 10)	935	750
Total long-term liabilities	1,225	1,342
Stockholders' equity:
Common Stock, $100 per share par value; Authorized, Issued and outstanding shares – 100	10	10
Retained earnings	2,526	2,351
Other equity reserves	40	40
Total stockholders' equity	2,576	2,401
Total liabilities and stockholders' equity	9,011	7,977

Statement of Income 

For the year ended 31 march 2006

	31 March 2006	31 March 2005
	$’000	$’000
Net Sales	18,750	15,651
Cost of Sales	14,543	11,667
Gross profit	4,207	3,984
Selling, general and administration expenses	1,762	1,595
Management fees payable to parent	750	626
Income from operations	1,695	1,763
Other income/(expense)
Interest expense	(138)	(168)
Other income, net	-	10
Income before provision for income tax	1,557	1,605
Provision for income taxes (Note 9)	530	507
Net income	1,027	1,098
Net income per common share ($)	10,270	10,980
Weighted average number of shares - Basic and diluted	100	100

Statements of Cash Flows 

for the year ended 31 march 2006

	31 March 2006	31 March 2005
	$’000	$’000
Cash flows from operating activities:
Net income	1,027	1,098
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	233	178
Share based payments	-	16
Deferred taxes	185	60
Changes in operating assets and liabilities:
Increase in accounts receivable	(98)	(739)
Increase in inventories	(645)	(696)
(Decrease)/increase in prepaid expenses and other       current assets	(25)	10
Increase in accounts payable	566	543
Increase/(decrease) in accrued expenses and taxes	38	(33)
Increase in other assets	(146)	-
Total adjustments	108	(661)
Net cash (used)/received for operating activities	1,135	437
Cash flows from investing activities
Purchase of equipment	(353)	(395)
Net cash used in investing activities	(353)	(395)
Cash flows from financing activities
Proceeds from short-term borrowings	444	1,045
Principal payments on long-term debt	(345)	(274)
Principal payments on capital lease obligations	(29)	(27)
Net distributions to parent	(852)	(788)
Net cash used in financing activities	(782)	(44)
Net decrease in cash	-	(2)
Cash at beginning of year	-	2
Cash at end of year	-	-

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY