TIDMTRBO
RNS Number : 8433I
Turbotec Products PLC
31 July 2012
Press Release 31 July 2012
Turbotec Products Plc
("Turbotec", "the Company" or "the Group")
Final Results
Turbotec Products Plc (TRBO.L), the designer and manufacturer of
compact high performance heat exchangers and heat transfer tubing,
today announces its final results for the year ended 31 March
2012.
Highlights
* Sales turnover of $22.1 million (2011: $24.8 million)
* Earnings of $0.1 million before tax (2011: $1.4
million), despite significant development costs for
new facility
* Net assets increased to $11.6 million (2011: $11.4
million)
* Investments in new Hickory, North Carolina
manufacturing facility eclipse $8.4 million
* Transition to new Hickory manufacturing facility
continuing with completion expected during 2013
* Final settlement of litigation proceeds received in
July 2011 ($0.3 million)
Commenting on the Final Results, Sunil Raina, Managing Director
of Turbotec, said:
"Turbotec has continued to show measured progress in these
extremely difficult economic times with its dual strategy of
protecting market share while transitioning the business to its
North Carolina location. With now over 50% of the unit volume being
produced in North Carolina, the Company expects to continue to
build on this momentum and is forecasting over 75% of units to be
shipped from this new facility by the end of 2012 with full
completion in 2013. "
- Ends -
For further information please contact:
Turbotec Products Plc
Robert Lowe, Non Executive Chairman +44 (0) 7917 148930
RLowe@trbohx.com
Sunil Raina, Managing Director Tel: +1 (860) 731-4200
SRaina@trbohx.com www.turbotecproducts.com
Robert Lieberman, Finance Director
RLieberman@trbohx.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 / Oliver Hibberd Tel: +44 (0)20 7398
oliver.hibberd@abchurch-group.com 7714
www.abchurch-group.com
Chairman's Statement
In a world where change is often rapid it is disappointing to
report that the statement I wrote for the half year to September
30, 2011 would fit well as my report for the full year, virtually
unchanged. Economic indicators continue to disappoint in our main
market, the US, while the months of turmoil in the Eurozone have
only exacerbated the global economic situation.
The good news for consumers in the US market is that the
plentiful supply of natural gas has driven gas prices downwards to
lows not seen for many years. The bad news for our customers, the
Heat Pump Manufacturers, is that demand for energy efficient heat
pumps has softened as prices of natural gas fall. Yet again, the
housing market continues to be weak, with minimal recovery in the
marine and swimming pool markets.
Our move to our new manufacturing facility in Hickory, North
Carolina continues and the Board is confident that we will have
completed a significant portion of the move in calendar year 2012.
While the move has taken longer than was originally planned the
result will be a modern manufacturing facility capable of increased
production and reduced costs. The on-going added costs of operating
two manufacturing plants in the meantime have impacted negatively
on our profit line.
The Group generated net sales of $ 22.1 million in the period, a
reduction of $2.8 million (-11.2%), compared to the fiscal year
ended 31 March 2011. The Gross profit fell from $ 5.0 million in
F/Y 2011 to $3.1 million in the current year. Profit before tax
fell to $0.1 million as compared to $1.4 million in the last fiscal
year.
The Board would like to thank our employees for a year of hard
work under difficult circumstances.
I would like to thank the executive team, under Sunil Raina,
Managing Director, for continuing to focus on our goals of
servicing and supplying our customer base, while continuing the
move to Hickory, rebuilding our manufacturing infrastructure and
cutting costs related to the dual manufacturing facilities as
quickly as possible.
Robert Lowe Non-executive Chairman
Chief Executive's Review
Strategic Review
Turbotec Products is a market leader in tube-in-tube heat
exchangers used in the highest efficiency heating and cooling
devices, such as water source and geothermal heat pumps. Turbotec
also provides titanium twisted tubes in plastic outer casings that
are used as heat transfer devices in swimming pool heat pumps. Our
heat exchangers are also used in marine air conditioning, ice
machines and heat re-claimers.
Twisting metal tubes to create a highly enhanced surface
providing superior heat transfer is the heart of our heat
exchangers. The technology continues to evolve with improvements to
the characteristics of the twisted tube geometry to continuously
expand the heat transfer capability of the products. Enhanced
surface tubing is currently used in a limited number of other heat
transfer applications. The potential for serving additional heat
transfer markets with a variety of applications remains
substantial.
Markets
The Group saw an 8% decrease in the unit volume of its heat
exchangers compared to the previous year resulting in revenue of
$22.1 million, a decrease of 11% from the previous year. The
Company supplies products to original equipment manufacturers using
an inside sales force with 97% of sales generated in the US.
In previous years, the Company has benefited from a robust
housing market and more flexible lending practices as well as
increasing energy costs. The current economic climate with single
family home construction hovering around a fifty-year low, record
low natural gas prices and continued weak job growth has created a
less than favourable environment for our customers' products.
Significant financial incentives in the form of a 30% US federal
tax credit along with state tax credits are available for
residential installations of geothermal heat pump systems, which
continue to present a strong case for the application of this
technology. US factory shipments of water source and geothermal
heat pumps have stabilised with a modest increase of 2% over the
past year after a decline of 5% for the previous year while still
down 15% after peaking in calendar year 2008.
Florida, traditionally the largest market for swimming pool heat
pumps, continues to see reduced demand and with no outside stimulus
anticipated, shipments are expected to remain at reduced levels for
the foreseeable future.
The Group supplies vented double wall heat exchangers that are
used for making potable hot water from waste heat that is integral
to water source heat pumps manufactured by many of our customers.
The Group also supplies packages integrating these heat exchangers
with pumps and controls that are then field installed on existing
air conditioning and refrigeration systems. Although this market
has suffered in the US with the current record low prices of
natural gas, we remain optimistic of the potential especially in
geographical regions with expensive and/or limited local energy
sources.
The Company has seen increased competition in certain of its
markets by domestic and overseas manufacturers. The Company has
vigorously worked to defend market share through some aggressive
contract negotiations and has secured multi-year agreements with
some of its major customers.
Commodities
The Group uses both ferrous and non-ferrous metals in the
manufacture of its products. Commencing 2009 copper prices steadily
rose and peaked at around $4.60/lb in January 2011, dropped to
around $3.15/lb in September 2011 and became more stable in the
beginning of 2012 hovering in the $3.50-$3.80/lb range. Similarly,
nickel prices have increased and are now in the $7.50-$9.50 range.
To manage these cost changes, some fixed price purchasing of copper
is done by the Group working with its tubing suppliers, In order to
protect its pricing of products to customers from significant
fluctuations.
The Group has pricing arrangements with its customers whereby a
trailing rolling average of copper and nickel price is used to
calculate raw material price adjustments that are passed through to
customers. While the customers have accepted the metal price
increases, expectations have now shifted to the need for reduction
in base prices thereby limiting the total increase, which coupled
with increasing business costs has negatively impacted the Group's
gross margins and profitability.
Business Transformation Strategy - Relocation to Hickory, North
Carolina
During this year, work continued at the new Hickory
manufacturing site to transition manufacturing from Windsor. The
Group has made substantial investments in modernising the equipment
installed in this facility. While some machinery and tooling has
been designed and built by outside vendors, a substantial portion
is designed and constructed in house.
Due to the critical nature of the application for our products
and its impact on system efficiency, customers are requiring that
the products to be manufactured at this new facility go through an
intensive testing and qualification program. This will require the
continued use of the current Windsor facility for the foreseeable
future at diminishing capacity. To prevent the loss of intellectual
property and to continue access to the proprietary experience
developed over the years, the Group plans to maintain a small
operation in Connecticut for product and technology development and
other support functions.
People
Any business is only as good as its people and we continue to be
highly rated for our service levels to customers. The Group
implemented a retention bonus program to keep essential staff and
production workers during our move to Hickory. The Company also
continues to recruit and train new employees in Hickory. We
currently have the strongest management team in our history to
guide us through this transition. We are confident that the "new
and improved" Turbotec will be better than ever.
Future
Turbotec is focused on serving our markets with quality products
and strong relationships with our customers. We continue to be on
the lookout for synergistic products and applications for our
technology to expand our revenue stream. This along with the
development of the Hickory operation will position us for long-term
growth as the markets for our products recover.
In closing I would like to thank our customers for their
continued confidence in our ability to service their needs, our
suppliers for supporting us during the continued fluctuating
commodity costs and demand shifts, and our employees for their
continued dedication and commitment to help us achieve our
goals.
I would also like to thank Rob Lowe (Non-Executive Chairman) and
Joe DeSena (Non-Executive Director) who have helped guide the Group
this past year. With the 2012 financial year behind us, we are
confident that Turbotec is poised for long-term growth and will be
an integral part of global energy efficient heating and cooling
markets in the years ahead.
Sunil Raina
Managing Director
CONSOLIDATED STATEMENT of comprehensive income
For the YEAR ended 31 MARCH 2012
2012 2011
$'000 $'000
------------- ----------------
Revenue 22,062 24,839
Cost of sales (18,952) (19,886)
Gross profit 3,110 4,953
Distribution expenses (632) (614)
Administrative expenses (2,294) (2,905)
------------- ----------------
Profit from operations 184 1,434
Finance expenses (58) (10)
------------- ----------------
Profit before tax 126 1,424
Tax benefit (expense) 15 (586)
Profit and total comprehensive
income 141 838
============= ================
Earnings per share - basic 1.1c 6.5c
============= ================
Earnings per share - diluted 1.0c 5.9c
============= ================
The profit for the year is all attributable to the equity
holders of the parent Company.
CONSOLIDATED statement of changes in equity
For the YEAR ended 31 MARCH 2012
Share Share Retained Merger
capital Premium earnings Reserve Total
------------- ------------- -------------- ------------- -----------
$'000 $'000 $'000 $'000 $'000
Balance at 31 March
2010 228 3,441 6,952 (168) 10,453
Profit and total recognized
income and expenses
for the period - - 838 - 838
Share based payment
expense - - 135 - 135
Balance at 31 March
2011 228 3,441 7,925 (168) 11,426
Profit and total recognized
income expenses for
the period - - 141 - 141
Share based payment
expense - - 48 - 48
Balance at 31 March
2012 228 3,441 8,114 (168) 11,615
-------- ---------- ---------- ---------- -----------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 MARCH
2012
2012 2011
$'000 $'000
----------- -----------
Assets
Non-current assets :
Property, plant and equipment 13,336 11,778
Intangible assets 187 271
Other 36 9
----------- -----------
13,559 12,058
Current Assets:
Inventories 4,151 4,365
Trade and other receivables 2,619 1,971
Cash and cash equivalents 22 5
----------- -----------
6,792 6,341
----------- -----------
Total Assets 20,351 18,399
=========== ===========
Liabilities
Non-current liabilities
Long-term borrowings 2,965 764
Deferred tax liability 1,146 894
----------- -----------
4,111 1,658
----------- -----------
Current Liabilities
Trade and other payables 1,633 2,488
Loans and borrowings 2,992 2,827
4,625 5,315
----------- -----------
Total Liabilities 8,736 6,973
=========== ===========
Net assets 11,615 11,426
=========== ===========
Shareholders' equity:
Share capital 228 228
Share premium account 3,441 3,441
Merger reserve (168) (168)
Retained earnings 8,114 7,925
Total equity 11,615 11,426
=========== ===========
cONSOLIDATED Statement of Cash Flows
for the YEAR ENDED 31 MARCH 2012
2012 2011
$'000 $'000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 126 1,424
Adjustments to reconcile net income
to net
cash provided by operating activities:
Depreciation expense 374 392
Amortisation expense 84 84
Finance expense 58 10
Charge recognised in respect of share
based payment 48 135
Cash flows from operating activities
before changes in 690 2,045
working capital and provisions
Decrease (increase) in inventory 214 (615)
(Increase) in trade and other receivables (392) (430)
(Decrease) increase in trade and other
payables (803) 1,293
CASH (USED IN )GENERATED FROM OPERATIONS (291) 2,293
Taxes paid (67) (520)
Net cash (used in) generated
from operations (358) 1,773
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (1,932) (6,646)
Net cash used in investing
activities (1,932) (6,646)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank borrowings 2,668 3,645
Principal payments on long term debt (303) (221)
Finance expense (58) (10)
Net cash used in financing
activities 2,307 3,414
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 17 (1,459)
CASH AND CASH EQUIVALENTS, beginning
of period 5 1,464
------------ ------------
CASH AND CASH EQUIVALENTS, end of period 22 5
============ ============
1. BASIS OF PREPARATION
The financial statements of the group have been prepared in
conformity with International Financial Reporting Standards ("IFRS"
and IFRIC interpretations) issued by the International Accounting
Standards Board as adopted for use in the European Union and with
those parts of the Companies Act of 2006 applied to companies
preparing their accounts under IFRS. The Company has elected to
prepare its parent company financial statements in accordance with
UK GAAP.
The financial information set out above/ below does not
constitute the company's statutory accounts for 2012 or 2011.
Statutory accounts for the years ended 31 March 2012 and 31 March
2011 have been reported on by the Independent Auditors. The
Independent Auditors' Report on the Annual Report and Financial
Statements for 2012 and 2011 were unqualified, did not draw
attention to any matters by way of emphasis, and did not contain a
statement under 498(2) or 498(3) of the Companies Act 2006.
Statutory accounts for the year ended 31 March 2011 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 March 2012 will be delivered to the Registrar in
due course.
2. TAXATION
Analysis of charge in period:
2012 2011
($000's) ($000's)
Current tax (benefit) expense computed
at US tax rates (267) 567
Deferred tax expense computed at US tax
rates 252 19
Total income tax (benefit) expense (15) 586
============= =============
Tax reconciliation:
The tax for the period is different than the standard rate of
corporate tax in the UK (26% in 2012 and 28% in 2011). The
differences on a combined basis after consideration of both UK and
US tax authorities are attributable to the following:
2012 2011
($000's) ($000's)
------------- -------------
Profit before tax 126 1,424
Profit before tax multiplied by rate
of
corporate tax in the UK of 26% (2011:28%) 33 399
Effect of:
Higher rate of tax on overseas earnings (62) 176
Differences between taxable and book
income 50 123
Utilisation of tax losses (34) (161)
Other (2) 49
Total (benefit) taxation (15) 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 year.
2012 2011
------------------------------------ ------------------------------------
Income Shares Income Shares
(Numerator) (Denominator) (Numerator) (Denominator)
$'000 Number $'000 number
Net income 141 838
---------------- ----------------
Basic EPS
Income available
to common
shareholders 141 12,806,773 838 12,806,773
Effect of Dilutive
Securities
Stock options 1,756,450 1,360,000
---------------- ------------------ ---------------- ------------------
Diluted EPS
Income available
to common shareholders
including assumed
conversions 141 14,563,223 838 14,166,773
================ ================== ================ ==================
4. OPERATING PROFIT
Administrative expenses from operations decreased significantly
during the year as during 2011 the Group instituted a relocation /
retention bonus plan for its Connecticut employees and incurred a
significant amount of other non-capitalised expenses relating to
the development of the new Hickory facility. In addition,
administrative costs for the parent company were reduced in 2012 as
two former non-executive directors who left the company in the
prior year received fees during 2011. The non-executive director
who joined the company in 2011 has elected to serve without
compensation.
5. LONG TERM BOROWINGS
2012 2011
($000's) ($000's)
Current financial liabilities
Bank loans- secured 466 2,437
Revolving line of credit 2,526 390
------------- -------------
Current loans and borrowings 2,992 2,827
============= =============
Non-current financial liabilities
Bank loans- secured 2,965 764
============= =============
The bank loans are secured by a fixed charge over the assets of
the Group. In addition, the Group must comply with certain
financial and non-financial covenants, noncompliance 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 facility.
The mortgage, in the amount of $2,215,000, has a maturity date of
April 2015. Under the terms of the note, principal is amortised
using a 25 year amortisation schedule. Interest for the first three
years has been fixed at a rate of 5.4% with a floating rate
thereafter.
The interest rate on floating rate financial liabilities is
linked to the bank's prime rate. The interest rates charged at the
balance sheet for floating rate debt are as follows:
31 March 2012 31 March, 2011
Bank overdrafts and secured loans 3.25% 3.25%
The Group has a revolving line of credit with its primary bank,
originally dated October 31, 1994, that is subject to annual
renewal. The agreement provides for a borrowing base equal to the
sum of 80% of qualified receivables, plus the lesser of $1,500,000
or 50% of the lower of cost or market value of eligible inventory
(as defined), less undrawn letters of credit and acceptances issued
by the bank, to a maximum of $3,250,000. Interest is charged at the
bank's prime rate. At 31 March, 2012 there was approximately
$724,000 available to be drawn against the revolving line of
credit.
In April 2012, concurrent with the issuance of a new $500,000
line of credit for future capital expenditures, the availability
under the revolving line of credit was reduced to $2,500,000.
Interest is charged at the bank's prime rate.
6. CALLED UP SHARE CAPITAL
Issued and Fully
Paid
Ordinary shares
of 1p each
2011 2010
---------------------------- ----------------------------
Number
Number of of
Shares $000's Shares $000's
At beginning
of year 12,806,773 228 12,806,773 228
Changes during
year - - - -
--------------- ----------- --------------- -----------
At end of year 12,806,773 228 12,806,773 228
7. LITIGATION WITH FORMER PARENT COMPANY
On 10 May 2010 the Company was notified that it was successful
in its defence of the claim brought by Thermodynetics, Inc., its
former parent company, in relation to the payment of administration
fees under the Relationship Agreement entered into at the time of
its admission to AIM. The Company was awarded substantial costs,
including an order of payment on account of 350,000 pounds sterling
($501,000) by Thermodynetics, Inc. with an additional amount to be
paid as determined by the court. The initial payment was received
by the Company in May 2010 and included in administrative costs in
the fiscal year 2011 accounts. The balance of the judgment was
satisfied by a payment of 210,000 pounds sterling ($336,000) in
July 2011 pursuant to a negotiated settlement between the parties
and is included in administrative costs for the year ended 31 March
2012
8. ANNUAL REPORT
Copies of the Report and Accounts will be available shortly from
the Company's website www.turbotecproducts.com and the Company's
Registered Office:
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
9. ANNUAL GENERAL MEETING
The Annual General meeting of the Company is to be held on 17
September, 2012.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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