Turbotec Products PLC-Trading Statement

 

 

Turbotec Products Plc (‘the Company’), Turbotec Products Plc (“Turbotec”), a leader in enhanced heat transfer technology, which was admitted to AIM last May announces its results for the 6 months to 30 September 2006.

 

Summary financials

(in $000’s, except per share data)	6 months ended 30 Sept 2006	6 months ended 30 Sept 2005	% Change Y-o-Y
Net Turnover	$ 11,545	$  9,065	27%
Operating Income	$   1,149	$  1,259	(9%)
Income Before Income Taxes	$      758	$     782	(3%)
Net Income	$      538	$     516	4%
EPS - Basic and Diluted	4.3 cents	5 cents	-
Net debt	$      486	$  3,464	(84%)

 

Operating HIGHLIGHTS

• Underlying sales growing at double digit rates

• Water Source Heat Pump market in US has shown overall growth in units

• Turbotec Tru-Twist™ titanium tubes well on the way to becoming industry standard in Swimming Pool Heat Pump Applications

Sunil Raina, Managing Director, commented:

 

“The maintenance of operating efficiencies remains high on our agenda and we are pleased that in respect of costs and customer fulfillment, we are ahead of target. Our business development activities having been strengthened during the period, are resulting in a greater level of customer enquiries.

“The unfortunate effect of high raw materials prices is being felt throughout the industry which, as we have announced, will impact the full year results. We have taken positive actions to address this situation and are encouraged by the continued growth in our core markets and expansion of our customer base.”

 

7 November 2006

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

CHAIRMAN’S STATEMENT

It is pleasing to report that this six-month period has seen a continuation in the growth of the Company with increasing order flow from existing customers and a widening of the customer base. Turbotec’s market leading product range has served to diversify the Company into new industrial areas.

 

The hardening of metals prices in the latter half of the period, whilst not fully impacting these results, will certainly affect our results for the full year.  Consequently on the 24^th October 2006 the Directors took the precaution of advising the market that results for the full year are expected to fall below market expectations.

 

Active steps have been taken to mitigate these higher raw materials prices, not least through an increase in end product prices, but also through a concerted drive to increase sales in higher margin areas. The Directors believe that the result of this action will be to preserve Turbotec’s competitive position and see an improvement in gross profits in future periods.

 

Trading Overview

The Company saw an increase in sales for the six months ended 30 September 2006, partly due to the raw material price increases, but also follows an expansion of the product range and augmented marketing drive which saw our production volumes reach record levels. Consequently, turnover increased to $11.5 million (H1 2005: $9.06 million) an increase of 27%, with net income of $0.54 million just ahead of the $0.52 million of last year. 

 

The appointment of a dedicated product manager in November will lead to widening interest from existing and new customers, for both traditional and recent Turbotec products.  The Company’s presence has been strengthened through regular attendance at trade shows and a range of exciting new products, such as the titanium co-axial heat exchangers, is attracting considerable interest within the trade.  In March the Company won an order for the titanium co-axial heat exchanger from a European equipment manufacturer, that has recently been repeated for larger quantities, which the directors believe will act as a springboard into Europe.

 

The Directors believe that Turbotec leads the field in enhanced tubing. It is this long standing ability, based upon proprietary tube twisting technology, which underpins the Company’s market position and provides the platform for an ever expanding range of heat transfer products.  Indeed, with the ability to form tubing out of advanced metals such as titanium, the Company’s recognition amongst high efficiency boiler manufacturers has grown and in June the Company announced that an existing customer had placed an order worth up to $0.7 million. 

 

Business Summary

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.

 

Outlook

The improvement of operating efficiencies remains high on our agenda, with the new extended six sigma training of our colleagues, and we are pleased that in respect of costs and customer fulfillment, we are ahead of target. Our business development activities, having been strengthened during the period, are resulting in a greater level of customer enquiries than at any time in Turbotec’s history.

 

The affect of high raw materials prices, is not confined to Turbotec alone but is being felt throughout the industry. We see an opportunity in turning this to our future advantage, as customers search for more energy efficient products, by playing to those strengths, which now position us as a market leader: unique manufacturing technology, reputation and diversity of customers.

 

Thomas Nairn

Chairman

 

FINANCIAL STATEMENTS

UNAUDITED FINANCIAL INFORMATION ON TURBOTEC PRODUCTS INC

BALANCE SHEET AT 30 SEPTEMBER 2006 AND 30 SEPTEMBER 2005

                                                                                                   		           UNAUDITED      UNAUDITED

                                                                                                                               			   PRO FORMA

	30 SEPTEMBER 2006	30 SEPTEMBER 2005
	$’000	$’000
ASSETS
Current assets:
Cash	2	2
Accounts receivable – net of allowance for doubtful debts of $120,000 (2005: $85,000)	2,501	2,112
Inventories (Note 5)	3,653	2,596
Prepaid expenses and other current assets	230	78
Total current assets	6,386	4,788
Property, plant and equipment, net (Note 6)	3,787	3,553
Other assets (Note 7)	306	103
Total assets	10,479	8,444
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	197	2,700
Accounts payable	2,244	1,675
Accrued expenses and taxes	259	116
Current portion of long-term debt (Note 9)	123	328
Current portion of obligations under finance leases	-	25
Total current liabilities	2,823	4,844
Long-term liabilities:
Long-term debt, less current maturities above (Note 9)	168	413
Obligations under capital leases, less current maturities	-	-
Deferred income taxes (Note 13)	982	839
Total long-term liabilities	1,150	1,252
Stockholders' equity:
Common Stock, $100 per share par value; Authorized, Issued and outstanding shares – 100	236	-
Share Premium      Merger Reserve	3,373 (108)	- 10
Retained earnings	3,005	2,338
Total stockholders' equity	6,506	2,348
Total liabilities and stockholders' equity	10,479	8,444

Statement of Income 

For the SIX MONTHS ENDED 30 SEPTEMBER 2006 AND 30 SEPTEMBER 2005

                                                                                                     UNAUDITED          UNAUDITED 

                                                                                                                                 PRO FORMA

	30 SEPTEMBER 2006	30 SEPTEMBER 2005
	$’000	$’000
Net Sales	11,545	9,065
Cost of Sales	(9,283)	(6,897)
Gross profit	2,262	2,168
Selling, general and administration expenses	(1,113)	(909)
Income from operations	1,149	1,259
Other income/(expense)
Interest expense	(55)	(115)
Other income, net	(48)	-
Income before administrative fees   Administrative fee expense (Note 16)	1,046   (288)	1,144   (362)
Income before provision for income tax	758	782
Provision for income taxes (Note 13)	(220)	(266)
Net income	538	516
Net income per common share ($)	0.04	0.05
Weighted average number of shares - Basic and diluted	11,858,347	10,009,590

Statements of Cash Flows 

for the six months ended 30 september 2006 and 30 september 2005 

                                                                                            UNAUDITED             UNAUDITED

                                                                                                                             PRO FORMA

	30 SEPTEMBER 2006	30 SEPTEMBER 2005
	$’000	$’000
Cash flows from operating activities:
Net income	538	516
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	126	117
Share based payments	-	-
Deferred taxes	47	89
Changes in operating assets and liabilities:
Increase in accounts receivable	(451)	(161)
Increase in inventories	(651)	(238)
(Decrease)/increase in prepaid expenses and other       current assets	(174)	(50)
Increase in accounts payable	166	163
Increase/(decrease) in accrued expenses and taxes	23	(82)
Increase in deferred assets	(60)	-
Total adjustments	(974)	(162)
Net cash (used)/received for operating activities	(436)	354
Cash flows from investing activities
Purchase of equipment	(256)	(133)