Annual report 2008
Power made efﬁcient
GTE Annual report 2008 Who we are
Overview
Contents
Overview
01 Highlights of the year
02 Chairman’s statement
05 Our markets
Business review
06 Chief Executive Ofﬁcer’s review
14 Corporate and social responsibility
16 Financial review
Management and governance
18 Board of directors
20 Directors’ report
Financial statements and notes
26 Independent Auditors’ report to
the shareholders of Gas Turbine
Efﬁciency plc
27 Consolidated statement of income
28 Consolidated balance sheet
30 Consolidated statement of
cash ﬂows
31 Consolidated statement of
changes in equity
32 Accounting policies
40 Notes to the ﬁnancial statements
62 Parent Company balance sheet
63 Parent Company statement of
cash ﬂows
64 Parent Company statement of
changes in equity
65 Parent Company accounting polices
66 Notes to the Parent Company
ﬁnancial statements
Additional information
70 Consolidated four-year summary
71 Shareholder information
72 Ofﬁces
Who we are
Gas Turbine Efﬁciency plc designs, manufactures and supplies proprietary cleantech energy
saving and performance enhancing solutions 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 has an international footprint comprising six sales ofﬁces and three operational
centres which cover Europe, the Americas, Russia, Singapore and the Middle East.
GTE’s shares are traded on the London Stock Exchange’s AIM market (Ticker: GTE). 2008 was a very successful year for GTE, with revenues almost doubling and the total order
intake increasing by 166%. The launch of GTE’s Advanced Fuels and Combustion product lines
strengthened our product offering and diversiﬁed our customer channels. With the expansion
of our geographic footprint and the granting of eight new patents, GTE continued to lay strong
foundations for future growth and success.
Highlights of the year
Overview
Highlights of the year
Operational highlights
 The number of patents granted
increased from 8 to 16 with an
additional 17 patent applications
pending or provisionally ﬁled.
 Increased its global footprint with
its ﬁrst order in Kazakhstan and
approvals by Abu Dhabi NOC and
a Russian OEM.
 Expanded its manufacturing footprint
by 200% to meet unprecedented
customer demand.
 Orders won in aviation from Pratt
& Whitney, Singapore Airlines,
Southwest Airlines, United Airlines
as well as military organisations.
 Trading for the ﬁrst three months of
2009 has continued to be robust in
all product areas and is in line with
the Board’s expectations.
Financial highlights
 Group revenue increased by 97%
to US$35.1m.
 Order intake increased by 166%
to US$46.7m.
 Gross proﬁt margins before warranty
reserve provisions were maintained
at 42% (2007: 42%).
 Moved into proﬁt, delivering
EBITDAE of US$2.5m.
 Proﬁt before tax of US$0.9m.
 Earnings per share were US$0.007
(2007: loss US$0.037).
 Revenues and order backlog for the
2009 ﬁscal year as of 31 March 2009
was US$26.7m, up 53% at the same
point in 2008.
01 GTE ANNUAL REPORT 2008
08
35.1
07
17.8
06
4.7
05
5.3
Group revenue (US$m)
08
2.5
07
(1.3)
06
(2.4)
05
(2.1)
EBITDAE (US$m)
08
46.7
07
17.6
06
8.6
05
5.4
Order intake (US$m) The past year for GTE represented a new phase of growth and development. Since its foundation,
GTE’s world class leadership, operational and technology teams have successfully created a
global, scalable company, which is internationally respected for its technological expertise, proven
leadership and strong growth track record.
Chairman’s statement
Overview
Achieving our objectives
Over the past few years, GTE has
grown rapidly. Through the integration
of several acquisitions, the recruitment
of top technology experts, the granting
of patents and the expansion of global
operations, GTE has gained a strong
position in the energy space.
2008 was a record year for GTE: solid
organic revenue growth and a robust
order backlog were achieved, and the
Company moved into proﬁt for the
ﬁrst time. Throughout 2008, GTE
continued to enjoy strong demand
across all product categories, and ﬁrmly
established itself as a leading player in
the global aftermarket for gas turbines.
Strategic steps
GTE consistently takes major steps
to strengthen and increase long-term
growth prospects, and 2008 saw the
Company continue to make strategic
operational decisions.
During 2008, GTE realised that in order
to service its growing customer base
better and meet increased demand from
its existing customers, an expansion
of its facilities was required. Over the
course of the year, plans were put in
place for the opening of our new 50,000
sq ft premises in Greenville, South
Carolina. The new facilities reﬂect the
rapid growth of our combustion repair
platform. GTE further increased its
US footprint by expanding the Control
Center facility in Florida from 15,000
to 40,000 sq ft.
In addition, the process was begun for
the opening of a UK operating company
and the move to new larger premises
in Sweden. These steps reﬂect our
growing customer base in the EMEA
region, and will help support the
services and repairs function.
As well as this physical expansion,
GTE also increased its service and
product portfolio with the launch of the
Fuels and Combustion product line in
January 2008. This launch positions
GTE for the signiﬁcant industry
opportunities expected to be created
by higher fuel prices, tightening
emissions standards and the move
towards alternative fuels. With this
platform, GTE has diversiﬁed its
customer base and we expect to see
this business line grow rapidly.
During 2008 GTE also saw rapid growth
in the Aviation product line. This was in
part due to the clear signals given out
by key players in the aviation industry
that the Pratt & Whitney EcoPower
®
programme is of great beneﬁt. 2008
saw endorsement of this programme
by industry leaders such as Southwest
Airlines and Singapore Airlines.
This acceptance meant 2008 was a
breakthrough year for GTE’s aviation
business, and is a key indicator of
potential future growth in this area.
A macro view
The global downturn in 2008 provided
challenges, but overall it has allowed
GTE to strengthen its position. In a
recession, products and services that
can reduce operating costs, reduce fuel
use, increase output and that can be
ﬁnanced out of operating budgets –
such as those offered by GTE –
remain attractive.
02 GTE ANNUAL REPORT 2008
John Bryant, Non-Executive Chairman
“The global downturn in
2008 provided challenges,
but overall it has allowed GTE
to strengthen its position.
In a recession, products
and services that can reduce
operating costs, reduce fuel
use, increase output, and
that can be ﬁnanced out of
operating budgets – such
as those offered by GTE –
remain attractive.” With GTE’s portfolio and market sector,
we believe GTE is relatively insulated
against the macro trends affecting the
industry, which include:
 Rising fuel prices.
 Stricter environmental regulations.
 The increasing use of
alternative fuels.
Growing concern about climate change
has led to unprecedented pressure on
the industry to reduce carbon emissions.
In 2008, this debate remained at the top
of the global agenda and the consensus
is that carbon emissions must be
reduced by 50% by 2050.
In addition, the EU is expected to impose
pollution charges on airlines in 2012
under the European Trading Scheme to
help counteract the growing contribution
by the aviation industry to global
emissions. The new US administration
is also highly likely to introduce a federal
cap and trade carbon scheme within the
next two years.
If so, this will mean GTE’s products
and services – which improve efﬁciency
and reduce emissions – will be even
more in demand.
03 GTE ANNUAL REPORT 2008
GTE’s family of EcoValue™ solutions provides
a combination of tangible beneﬁts to end users
in the form of fuel efﬁciency, lower emissions
and lower life cycle operational costs.
Paybacks are based on the “fuel/operational” cost
savings that can be visibly taken to the bottom line –
and can be achieved in 3-6 months. Secondary
beneﬁts of emissions reduction, environmental
impact, improvement and savings from parts life
extensions make GTE’s products and solutions
even more compelling.
Each EcoValue™ solution is tailored to a given gas
turbine conﬁguration and is designed to “plug into”
existing maintenance, repair and upgrade routines
for GTE’s customers, thereby making it convenient
to implement.
GTE will continue to expand its portfolio of EcoValue™
solutions to cover additional types of gas turbine
conﬁgurations, subsystems and geographical areas.
During the course of 2008 GTE held conversations
with many turbine owners and operators who know
the reputation of GTE’s engineers and are interested
in exploring whether GTE can make the same retroﬁt
improvements to ﬂeets of turbines that GTE achieved
for initial customers in North America.
Fuel
Efﬁciency
Asset
Operational
Costs
Environmental Chairman’s statement
Overview
Fuel costs and other competitive
pressures on gas turbine operators
continue to build. In the industrial sector,
GTE is seeing negative growth in a
number of mature economies and
slower growth in emerging economies.
The rate of increase for the demand
for power is expected to decrease or
become static. The logical extension
of this is that the building of new power
plants will be delayed, meaning the
servicing of existing plants will be even
more important. This will mean GTE’s
services and products will be in
demand and increasingly attractive.
GTE is also relatively insulated against
the ﬂuctuating oil price, as volatility and
limited supplies are driving operators
to use a wider range of fuels and
alternative fuel sources. GTE’s specialist
products can help companies improve
the efﬁciency and reduce emissions
of their machines, in keeping with the
speciﬁcations of the fuel they choose.
All of these macro trends have provided
a strong impetus for operators to seek
innovative solutions such as those
provided by GTE.
Protecting IP
The true measure of value at GTE
is customer demand for the solutions.
With this in mind, GTE puts a great deal
of effort into obtaining patents for its
products and services.
In 2008, the number of patents
granted to GTE increased by 100%
taking the total number to 16 with
an additional 17 patent applications
pending or provisionally ﬁled. The Group
substantially strengthened its technology
by investing US$8.4m (2007: US$4.0m)
in developing new products.
The Group also successfully defended
its strong intellectual property portfolio by
resolving a patent lawsuit in April 2008.
This lawsuit resulted in exceptional costs
of US$0.4m.
Since the foundation of GTE, a great
deal of importance has been placed
on the need to recruit recognised and
proven industry leaders and technology
experts. GTE has assembled a world-
class team with extensive turbine sector
and business expertise. This team is
held in the highest esteem throughout
the industry.
GTE’s efforts take place across several
industries and their respective segments,
but wherever in the world we go, and
whatever activity we undertake, GTE
is driven by a continued commitment
to applied science and a passion for
excellent performance and a cleaner
environment.
The Company is fully committed to
communicating honestly and openly
with all stakeholders, and to upholding
the highest standards of Corporate
Governance best practice.
I would like to take this opportunity to
extend thanks to all of our customers
and suppliers, and my colleagues at
GTE, for their ongoing efforts and
support. 2008 was a year of tremendous
achievements, and I look forward to
GTE’s continued success.
John Bryant
Non-Executive Chairman
04 GTE ANNUAL REPORT 2008
GTE Focus: Efﬁciency and Emissions
World Primary Energy Demand
0
500
1000
1500
2000
GTE Focus
Coal
Oil
Gas
Nuclear
Hydro
Biomass
Other Renew Source: IEA, World Energy Outlook 2007
GTE focuses on improving the efﬁciency and
environmental compliance of the vast global
asset infrastructure associated with fossil fuels.
2005–2030 1980–2005 05 GTE ANNUAL REPORT 2008
Our markets
Overview
A gas turbine, also called a combustion turbine, is a rotary engine that extracts energy from
a ﬂow of gas or liquid fuels. It has an upstream compressor coupled to a downstream turbine,
and a combustion chamber in-between.
Gas turbine usage in energy services
and aviation
BELOW: GTE specialises in combustion
turbine efﬁciency, emissions reduction and
operations improvements
Turbine Combustion
chambers
A typical gas turbine engine
Air inlet
In an aircraft gas turbine, the output of
the turbine is used to provide thrust or
propulsion power. In non-aviation gas
turbines, part of turbine power is used
to drive the compressor, while the
remainder of the “useful power” is used
as output shaft power to turn an energy
conversion device such as an electrical
generator or a ship’s propeller.
Aero derivative gas turbines (derived
from an aircraft jet engine) that are
designed for non-aviation use are most
frequently used to drive compressors
for natural gas pipelines, power ships
and provide peaking and intermittent
power for electric utility applications.
Industrial or frame (heavier weight)
machines are designed for up to
275 megawatt output range and are
designed speciﬁcally for land use
base load electrical power generation.
Energy services
1. Oil & gas extraction
2. Gas distribution
3. Liquid natural gas transport
and marine propulsion
4. Liquid to gas conversion
5. Oil & gas processing reﬁneries
6. Power generation
Aviation
7. Jet engine propulsion 2008 was a very important year for GTE. Revenues nearly doubled to US$35.1m, order intake
was up 166% to US$46.7m and gross margin remained relatively constant at 41% (2007: 42%).
This success reﬂects our customers’ increasing interest in GTE’s products and solutions, as well
as the recession resilient nature of the multi-billion dollar gas turbine service and upgrade market.
Chief Executive Ofﬁcer’s review
Business review
Strategic growth prospects
Focus on customer value
At the core of GTE’s growth strategy
is an intense focus on gas turbine
solutions that provide compelling
economic and environmental value.
Customers turn to GTE to help them
handle several increasingly urgent
operational issues:
 Extreme pressure on customer
operating expenses. GTE’s
solutions offer greater fuel efﬁciency,
parts life extension and reduced
service and maintenance costs.
 Constrained capital markets and
limited budgets for new project
expenditure. GTE offers increased
power output solutions for existing
assets, thereby helping to reduce
the need for new plants.
 Tightening environmental
restrictions and evolution of
emissions cap and trade
mechanisms. GTE offers a portfolio
of solutions that reduce a plant’s
emissions signature.
But this is only half the story.
Gas turbines power the economic
infrastructure in the form of aircraft
engines, power generators, process
industries and pipeline compression.
Such turbines are technically complex,
relatively high cost (US$5-30m per unit),
and serve the critical role of providing
energy to a host of activities. They are
generally operated by sophisticated
users with deep technical competence
and an aversion to unwarranted risk.
Only suppliers that are known to be
at technical parity with Original
Equipment Manufacturers (OEMs)
are allowed to perform work on these
important assets.
GTE fully understands the complex
dynamics of the turbine market and
has built a world class team to service
it. GTE’s top 25 people have over
500 years’ experience at the highest
level of the industry and many are
viewed as “industry experts” in
their areas of technical expertise.
For customers, GTE’s engineering
depth and competence is one of its
most signiﬁcant differentiators.
For customers, GTE’s engineering depth and
competence is one of the most signiﬁcant
differentiators. The top 25 people have over
500 years’ experience and are viewed
as “industry experts”.
06 GTE ANNUAL REPORT 2008
Steven Zwolinski, Chief Executive Ofﬁcer
“Our strong 2008 performance
demonstrates the success
of the Group’s strategy of
offering innovative solutions,
which increase customers’
fuel and operating efﬁciency
while providing environmental
beneﬁts.” Key performance indicators
07 GTE ANNUAL REPORT 2008
Year of achievement
In 2008, GTE demonstrated that its
strategy of building high-value products
and solutions for the turbine aftermarket
can generate substantial revenue
growth and proﬁtability, even against a
challenging global economic backdrop.
After years of laying solid foundations
for success, 2008 saw GTE “come of
age”. There were several particular
developments in 2008 that reﬂect this:
 Launched the Fuels and Combustion
product lines, considered by many
to be at the top tier of the industry
technology ladder in terms of
complexity and barriers to entry.
It also moved us closer to the
“consumable parts and recurring
repair” stream of the gas turbine
aftermarket.
 Our exclusive channel partner,
Pratt & Whitney, announced growth
of ten times, a reﬂection of the
aviation industry’s recognition and
acceptance of technology beneﬁts.
 Industrial OEM revenue channel
grew at 125%, reﬂecting the
strengthening relationships and
value proposition with leading
companies in the sector.
 Third party and end user direct
revenue channel grew at 123%,
reﬂecting GTE’s rapidly growing
brand recognition and credibility
with the ultimate “buying decision
points” of the multi-billion dollar
gas turbine aftermarket.
 Positioned the business for future
growth and ﬂexibility by doubling
our operational facilities.
 Proved we have ﬁrm ﬁnancial
foundations both in the consolidated
statement of income, where we
scaled the business and largely
maintained our 42% gross margin,
and on the balance sheet where we
raised over US$10m of new capital.
 The number of patents granted to
GTE increased from 8 to 16 with
an additional 17 patent applications
pending or provisionally ﬁled.
08
35.1
07
17.8
06
4.7
05
5.3
Revenue (US$m)
08
46.7
07
17.6
06
8.6
05
5.4
Order intake (US$m)
08
42
07
42
06
44
05
45
Gross proﬁt margin (%)
35.1
17.8
08
8.4
07
4.1
06
1.6
05
0.5
R&D expenses (US$m)
08
1.7
07
(2.4)
06
(2.4)
05
(2.1)
EBITDA (US$m)
08
0.5
07
(2.0)
06
(2.3)
05
(1.4)
Net income (US$m) Chief Executive Ofﬁcer’s review
Business review
Industrial & Combustion
The Industrial & Combustion product
lines had a very good year with revenues
increasing by 124% to US$28.2m (2007:
US$12.6m). Revenue in the industrial
segment rose 99% to US$20.7m, while
combustion was up 241% to US$7.5m
(2007: US$2.2m).
Order intake for industrial and
combustion activities increased by
104% to US$32.6m in 2008.
Sales to leading OEMs increased
by 125% to US$14.4m, reﬂecting
continued strong demand and
expansion of product lines offered
through this channel.
End user sales increased by 123%
to US$13.8m reﬂecting sales to third
parties and direct to end users, such as
utilities, oil & gas companies and global
service providers.
Global footprint
GTE’s global footprint expanded with its
ﬁrst order in Kazakhstan. In the Middle
East, distribution and technical support
activities increased substantially and
GTE’s patented compressor cleaning
solution was approved by Abu Dhabi
NOC. A major Russian OEM also
approved GTE’s compressor cleaning
solution for use on their turbine.
GTE expanded its product portfolio
to include fuel treatment and auxiliary
solutions, combustion repairs,
monitoring and diagnostics and control
upgrades. The new solutions are
expected to provide compelling value
to customers globally.
Aviation
The Aviation product line, where GTE is
the exclusive supplier of engine wash
systems to Pratt & Whitney, had an
excellent year, achieving revenue of
US$6.9m up 33% (2007: US$5.2m).
Order intake increased by 801% to
US$14.1m in 2008.
In the second half of 2008, GTE
received an US$8m order from Pratt &
Whitney EcoPower
®
for further global
infrastructure expansion. Contracts were
also secured with Singapore Airlines,
Southwest Airlines, United Airlines as
well as military organisations.
08 GTE ANNUAL REPORT 2008
Reducing operational costs and increasing the output of existing
power generation assets means savings for the power producers that
can be passed on to their customers. GTE has designed and validated
EcoValue™ control retroﬁt solutions that have given GE 7FA combustion
turbine operators the ability to gain additional electrical capacity while
operating in a safe mode for parts life and emissions compliance. A large
independent power producer in the US has installed six upgrades to date
and immediately gained beneﬁt.
CUSTOMER BENEFIT:
 More than 24Mw gain in output.
 Strong return on investment.
ENVIRONMENTAL BENEFIT:
 Operates within compliance for NOx, CO,
and CO
2
.
 Reduces need for additional power plants. Broader product range
A commitment to innovative new
technology runs throughout GTE, and
during 2008 we invested signiﬁcantly
in developing new products that bring
substantial economic and environmental
value to our customers.
As part of this commitment to developing
new products, our investment in
research and development topped 24%
of sales, up from 22% in 2007.
We also designed new combustion
offerings including replacement and
upgraded parts and controls and
automation solutions. These new
solutions were demonstrated on multiple
advanced gas turbines and delivered a
1% increase in output while maintaining
emissions compliance.
09 GTE ANNUAL REPORT 2008
During the year, we expanded the
engineering team by more than 60%.
This larger team is made up of highly-
skilled, proven innovators who bring with
them a wealth of expertise in mechanical
and electrical engineering, ﬂuid systems
and instrumentation and controls.
In 2008, our patent portfolio doubled
taking the total number to 16, with
an additional 17 in the pipeline.
This dedication to expanding and
protecting our IP portfolio forms a
fundamental part of GTE’s strategy.
The aviation product line was
completely redesigned and optimised
to reduce airlines’ operating costs and
provide greater ﬂexibility at airports.
ABOVE: Control retroﬁt solution found in
adjacent case study on page 8.
LEFT: Some of the largest independent power
producers in the US are working with GTE’s
technology team to improve operational efﬁciency .
“An independent power
generation operator in
the US has utilised
GTE’s advanced
combustion repair
services and reports
signiﬁcant improvements
in emissions compliance
activities and
associated costs.” Chief Executive Ofﬁcer’s review
Business review
10 GTE ANNUAL REPORT 2008
Testing by SouthWest Airlines shows
that the EcoPower
®
service delivers an
increase of up to 1.3% in fuel efﬁciency
and an extension of 18 months’ parts life
on aircraft engines.
In addition, three new Industrial product
lines were added for compressor
cleaning, emissions reduction and fuel
conditioning. In previous years, our
compressor cleaning solution has
demonstrated around 1% additional
output. In 2008, we saw applications
where 2.5% and 6% additional output
was achieved.
Our quality
As well as developing these innovative
products, we also ensure the highest
possible standard in terms of quality
and life-span. Our products and services
are rigorously tested in the laboratory
and in the ﬁeld, and our experts
consider the entire cycle of a product,
from design through to its disposal.
All systems are developed with
careful consideration given to safety,
the environment, construction,
operations and ease of maintenance.
ABOVE: Intellectual property continues to be an
emphasis for the Technology Team. During 2008
the number of unique granted patents increased
from 8 in 2007 to 16 by the end of 2008 and an
additional 17 applications are in process.
RIGHT: “We’ve seen amazing growth in our
EcoPower
®
business as the result of sharply
rising fuel costs, increasing environmental focus
and proven success of our patented engine wash
system,” GSP Senior VP and GM Jim Keenan said.
By Mark Fitzgerald
Airline Procurement, July ’08 Newsletter , p.1
Airlines select Pratt’s EcoPower
®
system, anticipate
fuel savings, emissions reductions (Publication)
This thorough approach to new product
development will continue into the future
with any new GTE development product
and solution.
GTE works closely with numerous
high-proﬁle, leading companies, and
we ensure we have very high standards
in line with their best practice. Our quality
control team ensures compliance with
our customers’ requirements. We can
provide certiﬁcates of conformance,
material test reports and manufacturing
veriﬁcation data sheets to meet our
customers rigorous compliance
documentation requirements in the areas
of performance testing, emissions
monitoring and environmental
compliance.
Global operational excellence
Throughout 2008, GTE focused on
building an operational infrastructure
that can support the needs of our
expected future growth. Quality and
on-time delivery at a competitive price
is essential to our customers and to our
commercial reputation. 11 GTE ANNUAL REPORT 2008
We are proud to have excelled in this
area during 2008 in several key ways:
 Achieved ISO-9001:2000 certiﬁcation
in our Orlando, Florida facility and
were recertiﬁed in our Sweden facility.
 Successfully completed nine OEM
quality and environmental audits.
 Successfully completed six
end-user and third-party audits.
 Implemented lean manufacturing
to minimise working capital and
increase quality.
In addition, GTE took key steps to align
our assembly infrastructure in North
America and Europe to better handle
the signiﬁcant sales volume increases
we are beginning to experience
in our Aviation, Industrial and
Combustion product lines.
In Sweden during the ﬁrst quarter of
2009, we signed an agreement to be the
cornerstone business in a new “Green
City Business Park” outside Stockholm.
This new facility will be three times
the size of our previous one and will
be capable of satisfying increased
aviation demand as well as assembling
some of our new industrial and
combustion products.
Our Orlando, Florida facility was
expanded from 15,000 sq ft to 40,000
sq ft to handle the increased industrial
workload and also to serve as the US
service base for aviation.
Improving aircraft engine fuel efﬁciency saves airlines’ fuel costs
and reduces CO2 emissions, helping reduce passengers’ carbon
footprints. GTE has granted leading engine manufacturer, Pratt &
Whitney, exclusive distribution rights to its water wash equipment for
aircraft engines, which Pratt & Whitney markets under the EcoPower
®
brand name. EcoPower
®
technology can service all OEM brands of
commercial and military jet engines. So far, more than 60 aircraft
operators and 4,000 aircraft engines have beneﬁted from the system.
CUSTOMER BENEFIT:
 In 2008 alone, the EcoPower
®
programme saved
76m kg of aeroplane fuel and 242,000 tonnes
of CO
2
emissions, equivalent to removing over
26,600 cars from the road for a year.
 A clean engine reduces fuel consumption by up
to 1.3% and CO
2
emissions by 3.1kg per 1kg of
fuel saved.
Source: Pratt & Whitney Chief Executive Ofﬁcer’s review
Business review
12 GTE ANNUAL REPORT 2008
We also relocated to a new US south
corridor facility that effectively increases
our combustion product capability by
ﬁve times and includes co-location
alongside several important suppliers.
These strategic geographic steps
represent a key part of GTE’s growth
strategy, and this expanded international
footprint will pave the way for further
growth and expansion.
Customer and channel diversiﬁcation
GTE is very proud of its strong
relationships with its customers, and
has established a diverse range of
channels to ensure a robust and
resilient order book. Our world-class
team can generally move faster than
larger OEM organisations, and can
focus on advanced ﬂeets, legacy ﬂeets
and niche portions of the market.
In addition, our cost structure enables us
to be relatively nimble and sell solutions
through a variety of channels.
Our high-value technical solutions are
leveraged across:
 Multiple sales channels including
OEM, third parties and direct to
end users.
 Multiple applications including power
generation, oil & gas, 50Hz and 60Hz,
and heavy and light fuel markets.
 Multiple customer types including
utilities, IPPs, and energy providers.
 Multiple geographies including North
America, Europe, the Middle East
and Russia and Asia.
An independent energy generator gained US$3.3m
of added revenue through GTE’s advanced and rapid
combustion repair capabilities. GTE returned to service
combustion hardware faster than competitive offerings
which allowed this operator to run an estimated 276 hours,
that they would have lost otherwise.
This quick response ensures stable energy costs
for this operator’s customers.
CUSTOMER BENEFIT:
 Avoided extended plant shutdown.
 Avoided loss of revenue. 13 GTE ANNUAL REPORT 2008
During 2008 we focused heavily
on growing our customer base.
The experience, credibility and network
of the leadership team proved very
valuable in achieving signiﬁcant growth
across all channels and segments.
In addition, GTE received its ﬁrst order
in Kazakhstan its ﬁrst customer ﬂeet
approval in the Middle East and its ﬁrst
approval from a Russian OEM.
Commitment to the environment
GTE takes its corporate and social
responsibilities very seriously, in fact
CSR is at the core of everything we do.
It is our belief that CSR drives growth
as much as any of our own strategic
steps in our market place as we pride
ourselves on creating solutions that
improve the environmental impact of
our customers’ infrastructure.
GTE’s technology helps a range of
companies in the energy and aviation
spheres minimise the damage they do
to the environment – at the same time
as providing signiﬁcant and proven
economic beneﬁts.
During 2008, we introduced the family
of EcoValue™ solutions that provide
economic payback on fuel efﬁciency
alone in as little as six months, at the
same time as providing signiﬁcant
environmental beneﬁts. This economic
proposition makes it easy for an end
user to choose a “green” solution that
is compelling from an economic and
environmental point of view.
In 2008, we also introduced our
programme of “Power Made Efﬁcient”
to highlight the beneﬁts our products
bring to customers around the world,
whether it enables school lighting to
be provided in Thai villages or improves
aeroplane fuel efﬁciency, saves CO
2
emissions and helps reduce
passengers’ carbon footprints.
When it comes to our employees,
GTE has an intense focus on safety and
wellbeing. We believe our people are
our greatest asset, and we strive
to ensure their workplace is as secure
as possible. We are proud of our safety
record, and have had no accidents
for over ﬁve years. In addition, our
on-site safety index is at 0.86 – one
of the lowest levels in the industry.
Positive outlook
Despite the challenging global
economic environment in 2008,
GTE continued to establish itself as
a leading player in the international
aftermarket for gas turbines.
By building on the various strengths
of the Company, we have now created
a strong growth engine with which
to propel GTE forward.
The multi-billion dollar gas turbine
aftermarket and aviation turbine
cleaning market has proved its
resilience in these very difﬁcult
economic conditions. The beneﬁts our
services offer to owners of the globally
installed base of gas turbines are even
more relevant in these challenging
times. Customers want lower operating
costs and more output from their
assets, while being good stewards
of the environment. GTE can provide
them with the solution. These factors,
coupled with our strong ﬁnancial
statements, underpin our conﬁdence
for 2009 and beyond.
There are, of course, several
challenges facing the Group, including
managing high rates of growth,
maintaining strong partnerships and
deploying complex value-driven
services. However, I am conﬁdent that
the leadership team we have in place,
and the strong foundations we have
created at GTE, will enable us to meet
any challenge we encounter.
Trading for the ﬁrst three months of
2009 has continued to be robust in all
product areas and is in line with the
Board’s expectations. Revenues and
order backlog for the 2009 ﬁscal year
as of 31 March 2009 was US$26.7m,
up 53% on the same point in 2008.
The Group’s aviation operations are
showing strong progress year-on-year
beneﬁting from the framework order
received from Pratt & Whitney in
December 2008, as it accelerates
the roll-out of its “EcoPower
®
” engine
wash service worldwide.
Although mindful of the current global
economic climate, the Board believes
the Group’s product offering remains
compelling, especially for aviation,
power generation and oil & gas
segments. Consequently, we are
conﬁdent that the Group will continue
to grow strongly in 2009.
Steven Zwolinski
Chief Executive Ofﬁcer
Oil & gas platforms utilise gas turbines to drive
compressors and for electricity generation for their
own use. Operators need increased availability and
are targets for stricter environmental regulations. Corporate and social responsibility
Business review
14 GTE ANNUAL REPORT 2008
GTE takes its role as a corporate citizen seriously, and we are very aware of the impact
our activities have on the world. A commitment to being a responsible company which
cares about the environment and the communities we come into contact with is at the
heart of everything we do.
Committed to global change
Spanning several continents, industries
and cultures, the GTE team brings a
unique perspective to improving the
energy infrastructure. Its leadership
team, with more than 500 years’
experience with leading OEMs has the
credibility to bring the environmental
solutions to the global energy
infrastructure. GTE’s commitment to
protecting the natural world and helping
create a cleaner atmosphere is one of
the most important foundational design
elements of our products and services.
Our products and services
GTE’s CleanTech energy saving and
performance enhancing systems
help our customers to be more
environmentally friendly. We enable
customers to save fuel, reduce
emissions and extend turbine and parts
life, meaning less maintenance and
replacement is required. In addition,
GTE’s products and services allow
our customers to burn a variety of
alternative fuels, including liqueﬁed
natural gas, clean coal and alternative
fuel blends.
For the aviation industry, our technology
provides signiﬁcant environmental
beneﬁts. Airlines report that GTE’s
technology can reduce fuel burn by
as much as 1% in cruise mode and
1.3% during take-off.
 Southwest Airlines estimates that by
implementing GTE’s technology the
airline will save ﬁve million gallons
of fuel per year and reduce CO
2
emissions by around 45,000 tonnes
per year.
 United Airlines plans to introduce
Pratt & Whitney’s EcoPower
®
system
throughout its entire ﬂeet, which it
estimates will create savings of three
million gallons of jet fuel per year and
a reduction of about 28,000 tonnes in
CO
2
emissions.
 Singapore Airlines announced in
February 2008 that it also planned
to introduce the system across its
entire ﬂeet, saving an estimated
US$15m per year in fuel costs and
reducing CO
2
emissions by more
than 57,000 tonnes per year.
We also regularly complete OEM quality
and environmental audits, as well as
end-user and third-party audits.
In addition, we have published our own
documented quality manuals, policies,
procedures, work instructions, safety
standards and speciﬁcations.
GTE is known in the industry for having
very high quality control standards – this
is an essential part of our commercial
reputation and something we are fully
committed to.
Our people
As well as this commitment to the
environment, we are also fully
We are proud to have been chosen as the
cornerstone company in the new Swedish
“Green City Business Park” – a clear indication
of our “green” credentials. This new facility
will be capable of satisfying increased aviation
demand as well as assembling new industrial
and combustion products.
The facility is expected to be completed
in September 2009. 15 GTE ANNUAL REPORT 2008
More efﬁcient GTE compressor cleaning systems extend
the geographic reach of a plant’s power generation without
the need for additional installations or equipment.
A major power station in Malaysia improved the performance
of their gas turbines by applying the GTE recommended
system. Additional systems were ordered due to the
programme’s success.
CUSTOMER BENEFIT:
 8-13.6% increase in power output.
 Effective Heat Rate Recovery of up to 1.5%.
 Payback period of two months.
 Reduced emissions.
committed to what lies at the heart of
our Company: our people. Since the
Company’s beginnings, a great deal
of emphasis has been placed on
attracting, valuing and retaining talented
employees, and we continually strive
to ensure their safety and wellbeing.
We have strict health and safety
policies in place, and are proud of our
impressive safety record. This record
is particularly important due to the
nature of the work we do, which often
involves work on customer sites.
For these locations, strict safety
documentation and training certiﬁcation
must be provided. This commitment to
safety is never an optional add-on for
GTE – it is deeply embedded into
everything we do.
Looking to a greener future
GTE is proud of its success, and now
has a strong international presence
across several different industries.
During 2008 we continued to develop
new products which bring ecological
beneﬁts to the world. It gives us great
pride that our innovative technology
is having a positive impact around the
globe and is helping to create a more
secure future for generations to come. 2008 was an important year in our development. After posting our maiden proﬁts at
the mid year the Group continued the trend and posted full year net proﬁt of US$0.5m
(2007: loss US$2.0m) entirely in line with our strategic plan.
Financial review
Business review
Financial review
Firm ﬁnancial structure
During 2008, GTE took signiﬁcant
steps to strengthen its ﬁnancial position
to better capitalise on the growth
opportunity we see in front of us:
 Raised US$10.7m of new capital
(net of expenses) from our existing
investor base and added several
new, strategically important
institutional funds.
 Gross proﬁt margins before warranty
reserve provisions were maintained
at 42% (2007: 42%).
 Created a warranty reserve of 1%
of sales to cover newly developed
products. This is despite the fact that
GTE has never yet suffered warranty
issues with its products. We will
monitor this area in the future and
adjust the reserve accordingly.
This reduced the reported gross
proﬁt margin to 41% (2007: 42%).
 Started to use the US tax asset
generated in previous years.
 Were very pleased to report our
ﬁrst proﬁts at the half-year point and
to show a further proﬁt increase at
year end.
 Showed earnings per share of
US$0.007 (2007: loss US$0.037).
In addition, we honed our internal
processes to utilise our cash better
through the implementation of lean
manufacturing, structuring of in-process
work with suppliers and negotiation of
more favourable collection terms with
our customers.
As a result of these efforts, we saw
signiﬁcant growth and a strengthening of
our ﬁnancial position. This strengthening
reﬂects a continued growth in demand
for GTE’s range of innovative solutions.
Discussion on ﬁnances
Consolidated statement of income
Revenues increased 97% to US$35.1m
(2007: US$17.8m).
Aviation revenues are a combination of
licence income and product purchase by
Pratt & Whitney/EcoPower
®
. Framework
orders tend to be negotiated at intervals
during the year with shipments against
purchase orders. Industrial &
Combustion revenue is generated
from the sale of equipment to
multiple customers.
The Company recognised a total of
US$0.8m of exceptional costs during
the year (2007: US$1.2m) arising from
legal costs, US$0.4m of which related to
the successful resolution of a US lawsuit
initiated by GTE to protect its intellectual
property. The balance came from a
combination of registering trademarks
valid for ten years but non-capitalisable
under IFRS, and the design and
implementation of a new long-term
incentive plan for the retention of key
management and staff.
Costs for depreciation and amortisation
increased to US$0.9m (2007: US$0.5m)
reﬂecting the commercialisation of newly
developed products particularly in the
aviation and combustion areas as
well as from an expansion in GTE’s
US manufacturing infrastructure.
16 GTE ANNUAL REPORT 2008
“We were very pleased to
report our ﬁrst proﬁts at the
half-year point and to show
a further proﬁt increase
at year end.”
Magnus Nordgren, Chief Financial Ofﬁcer The amortisation charge is expected
to increase over time as new products
and product lines are brought to market
and begin to generate revenues and
cash ﬂows.
Balance sheet
Working capital
 Cash at 31 December was
US$5.4m (2007: US$2.3m).
 Receivables at 31 December
increased to US$8.7m (2007:
US$4.5m) reﬂecting strong fourth
quarter billings. Payables increased
to US$6.3m (2007: US$2.6m).
Reﬂecting increasing sales volumes,
inventories grew to US$3.4m (2007:
US$1.5m).
In line with management’s expectations,
goodwill from acquisitions was
maintained at US$6.2m (2007: US$6.3m)
with revenue from the 2007 acquisitions
of Control Center LLC and ARES
Technology LLC growing more than
120% to US$22.9m (2007: US$10.2m).
The variance in goodwill between
the two years relates to changes in
exchange rates for underlying assets.
Capitalised expenditure for research
and development increased to US$7.5m
(2007: US$2.9m) together with patent
assets of US$1.7m (2007: US$0.9m).
Capitalisation of development and
patents is carefully scrutinised by the
Board on a regular basis as well as our
Auditors under IFRS. Development
expenditure is directed mostly at
application development for products
and solutions which GTE has
conﬁrmed with customers that they
will subsequently purchase. If any
programme is terminated, the
development cost is written off and
the majority of our development
programmes are for products we
expect to ship within 12-18 months.
For example, some 22% of 2008
revenues were derived from products
developed by GTE within the previous
12-18 months.
Cash ﬂow
As the business is growing, more
working capital is used on an absolute
basis, but ratios are tightly monitored
and managed. Shipments to customers
are proportionately higher at the end
of the second and fourth quarters.
During the year the Company invested
US$7.0m in the development of new
products, methods, and patents (2007:
US$2.9m). A majority of the investment
was directed to the development of
Industrial & Combustion products.
US$1.2m was invested in new
manufacturing facilities, mainly in
the US (2007: US$0.7m).
Taxation
Deferred tax assets, relating mainly to
the US operations started to be utilised
in 2008. Although there is no cash ﬂow
effect, there is a tax charge to the
income statement as these are utilised.
The ﬁnal balance as at 31 December
was US$2.1m (2007: US$2.6m).
Swedish corporate tax rates are 26.3%
from 1 January 2009 (2008: 28%).
Share capital
The Company raised US$10.7m net of
expenses through institutional placings
in May and June (2007: US$10.6m).
The number of shares in issue at the
end of the year was 72.4m, an increase
of 15.7m (2007: 56.7m). The weighted
average number of ordinary shares in
issue was 67.2m (2007: 54.0m).
The Company is currently undertaking a
further placing as referred to in note 30.
Magnus Nordgren
Chief Financial Ofﬁcer
17 GTE ANNUAL REPORT 2008 From left: Charles Cameron, Steven Zwolinski, Magnus Nordgren, Otto Lagarhus and John Bryant.
Board of directors
Management and governance
18 GTE ANNUAL REPORT 2008 John Bryant
Non-Executive Chairman, aged 62.
Mr Bryant has been Non-Executive
Chairman of GTE since he joined the
Board in 2005.
He previously served as Vice President
of Cinergy Corp and President of
Cinergy Global Resources, the
US-based electricity and gas utility
provider, where he was responsible
for all international business and global
renewable power operations. Prior to
joining Cinergy, Mr Bryant’s professional
experience was gained in a number of
managerial roles at Midlands Electricity,
Generation, British Sugar, Drexel
Limited, British Oxygen Company
and Unilever.
Until December 2007, Mr Bryant was
also Chairman of KP Renewables,
which entered into a reverse takeover
transaction with Island Gas Resources
where he now serves as a
non-executive director. He is also a
non-executive director of Weatherly,
and a board member of Attiki Gas
Supply Company.
Mr Bryant is the Chairman of the
Remuneration Committee and a
member of the Audit Committee
and Nomination Committee.
Steven Zwolinski
Chief Executive Ofﬁcer, aged 48.
Mr Zwolinski joined GTE as Chief
Executive Ofﬁcer in 2005. He is also
President of GTE Inc.
Prior to joining GTE, Mr Zwolinski held
a number of senior management roles
at General Electric Company (GE),
including President and CEO of GE
Wind Power, President and CEO of
GE Hydropower, President and CEO
of GE Energy Service Aftermarket Parts
and General Manager of GE Energy
Global Service Center Network. He has
also held operational and technical
leadership positions with GE’s
Aerospace, Medical Systems, Industrial
Products and Corporate Research and
Development business units.
Since joining the business, Mr Zwolinski
has also served on an Industry Advisory
Board for Zouk Ventures Limited (which,
together with its afﬁliates, holds 7% of
the Company’s shares). He has an MBA
and a BS in Mechanical Engineering,
both from Rensselear Polytechnic
Institute, based in Troy, New York.
Magnus Nordgren
Chief Financial Ofﬁcer, aged 38.
Mr Nordgren joined GTE in 2004.
He previously specialised in building
and developing ﬁnance functions within
businesses with global operations in
a number of countries. Immediately
prior to joining GTE, Mr Nordgren was
Nordic Region Director of Finance for
ACNielsen, with direct responsibility
for operations in Sweden, Denmark,
Finland and Norway. He holds a BA
in Business Administration from
Stockholm University.
Otto Lagarhus
Non-Executive Director, aged 63.
Mr Lagarhus joined GTE in 2002.
Until May 2006 he was Director General
of the Norwegian Civil Aviation Authority,
and prior to joining GTE worked for
Scandinavian Airlines System (SAS) for
over 25 years, where he held several
senior management positions, and
served as a board member for a number
of companies in the SAS Group.
Additionally, Mr Lagarhus has held
positions in several international aviation
organisations, such as IATA, ICAO
and IFALPA.
Mr Lagarhus is currently Chairman of the
Board of three Norwegian companies –
Haslestad Bruk AS, Haslestad Holdings
AS and Luftfartsskolen AS (the
Norwegian Aviation Academy) – as well
as serving as the elected President of
the Norwegian Air Sports Federation.
Mr Lagarhus also operates his own
consulting business, Lagarhus Aviation
Consulting, advising the management
of major international airlines and other
organisations in the area of safety
and quality.
Mr Lagarhus is the Chairman of
the Nomination Committee and
a member of the Audit Committee
and Remuneration Committee.
Charles Cameron
Non-Executive Director, aged 47.
Mr Cameron joined GTE in 2008.
Having previously been a director at
Kleinwort Benson and Goldman Sachs,
Mr Cameron was most recently at
Jefferies International, where he was
responsible for providing capital
markets advice to technology-centric
and cleantech growth companies.
Mr Cameron also spent several years
as Chief Executive of InTechnology plc,
a UK-listed data storage and security
solutions business.
In addition to his role with GTE he is a
director of Achilles Group and a partner
in Encore Ventures, a business formed
with DFJ Esprit to acquire venture
stakes from banks, hedge funds and
venture capital providers. Mr Cameron
has a BA in History and is a Morehead
Scholar from the University of North
Carolina, Chapel Hill.
Mr Cameron is the Chairman
of the Audit Committee and a
member of the Nomination Committee
and Remuneration Committee.
19 GTE ANNUAL REPORT 2008 Directors’ report
for the year ended 31 December 2008
Management and governance
The directors present their report and the annual ﬁnancial statements for the year ended 31 December 2008.
Principal activities
Gas Turbine Efﬁciency plc designs, manufactures and supplies proprietary cleantech energy saving and performance enhancing
solutions 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 subsidiary undertakings principally affecting the proﬁts or net assets of the Group in the year are listed in note 15 of the
ﬁnancial statements.
Business review and future developments
A review of the business of the Group and future developments is set out in the Chief Executive Ofﬁcer’s review.
Key performance indicators
Key performance indicator (KPI) 2005 2006 2007 2008
Revenue
1
US$5.3m US$4.7m US$17.8m US$35.1m
Order intake
2
US$5.4m US$8.6m US$17.6m US$46.7m
Gross proﬁt margin
3
45% 44% 42% 41%
Research & development expenses
4
US$0.5m US$1.6m US$4.1m US$8.4m
EBITDA
5
(US$2.1m) (US$2.4m) (US$2.4m) US$1.7m
Net income
6
(US$1.4m) (US$2.3m) (US$2.0m) US$0.5m
Notes to KPIs
1 Revenue = The gross inﬂow of economic beneﬁts (cash, receivables, other assets) arising from the ordinary operating activities of an enterprise
(such as sales of goods, sales of services, interest, royalties, and dividends). Group revenue increased by 97% to US$35.1m (2007: US$17.8m).
2 Order intake = Customer orders received within the period measured in US$m. Total order intake in 2008 rose 166% to US$46.7m (2007: US$17.6m),
driven by sales to leading industrial OEMs and end user customers.
3 Gross proﬁt margin = Gross proﬁt as a percentage of revenue. Gross proﬁt margin show the relationship between sales and the direct cost of
products/services sold. It measures the ability of both control costs and to pass along price increases through sales to customers. Gross margins
were broadly unchanged at 41% (2007: 42%) reﬂecting a higher proportionate weight of industrial sales in the revenue mix in 2008.
4 Research & development expenses = Expenses and investments into tangible and intangible assets relating to non-customer order related research
& development activities including depreciation of research & development related assets. In 2008, research & development investments more than
doubled to US$8.4m (2007: US$4.1m) reﬂecting the efforts as outlined in the section “Research & development” of the directors’ report.
5 Earnings before interest, taxes, depreciation and amortisation.
6 Proﬁt or (loss) from ordinary activities and exceptional items after tax.
Principal risks and uncertainties facing the Company
 Timing with respect to development programmes and commercialisation.
 Increased competition and resulting price/margin pressures.
 Intellectual property defence as the portfolio of global patents grows each year.
 Lower fuel prices, easing of environmental restrictions.
 Lessening global demand for energy, resulting in deactivation of energy infrastructure.
Research and development
GTE’s product portfolio experienced signiﬁcant growth in 2008. In Aviation Water Wash, the next generation of washing
equipment was delivered to Pratt & Whitney EcoPower
®
. The Combustion business grew from an initial repair focus to a repair
and manufacturing business with a product line containing over 45 individual products. A complete new business, GTE
Monitoring, was created by combining new Combustion Optimisation Controls capability with the existing Combustion Dynamic
Monitoring product. In addition to the expansion of products in these segments, the Industrial product line also saw continued
growth and initiated expansion from a predominant US focus to an EU, MENA and Russia focus.
20 GTE ANNUAL REPORT 2008 The new product development continued to focus on OEM service in the Aviation Water Wash and Industrial segments.
Our other segments of Combustion Repair, Manufacturing and Monitoring developed interest from direct Operating Power
Generation Customers.
Validation and qualiﬁcation of the GTE product lines continues to be a key activity. Through this activity operational data deﬁning
the delivered client data is developed and shared with the industry. During 2008, ﬁve new validation sites were added to
increase the client value data base. Three of the validation sites have already started showing client value; the two other sites
are starting operation in 2009 and are similarly expected to demonstrate value.
One very satisfying experience in the Combustion Repair segment was the report by an independent quality consultant on
GTE’s Combustion Repairs. Based on the data collected for the report, the consultant published a recommendation to use
GTE for Combustion Repairs. This report has directly led to increased orders for GTE as well as enhancing its credibility.
Industrial business, driven by the Group’s Orlando site, increased with expanded skid business developed for Aero-derivative
applications. Additionally, the Orlando team initiated activity to transfer the Industrial Technology developed for the US market
to EU, MENA and Russian applications. The Team also expanded qualiﬁcations to include ISO-9001: 2000 certiﬁcation.
New product development and expansion of existing products to other markets is providing GTE with greater opportunity to
market to both OEM and operating plants. This increased opportunity has strengthened the need for manufacturing and service
support as GTE products are being applied to a larger group of customers and delivering promised value.
Given the increased amount of products and application of products, a new challenge of managing this product line is
developing. To meet this challenge, GTE has initiated further system level management projects. These projects will close
in 2009 to provide an improved structure to manage the product line.
The Group further expanded its intellectual property position through innovation. The total number of patents granted to the
Company increased to 16 from 8 in the previous year and another 17 patent applications have been ﬁled or are currently
in the process of being ﬁled (2007: 17). In addition, the Group substantially strengthened its technology edge by investing
US$8.4m in research and development during the ﬁnancial year.
The treatment of research and development costs in the ﬁnancial statements is detailed in note 9.
Financial risk management
The Group’s ﬁnancial risk management policies are disclosed in the accounting policies on page 38 within this document.
Dividends
The directors do not recommend a dividend for the year (2007: £Nil).
Directors
The following directors held ofﬁce during the ﬁnancial year ended 31 December 2008:
John Bryant
Frederic Telander (resigned 29 May 2008)
Steven Zwolinski
Magnus Nordgren
Jan Telander (resigned 29 May 2008)
Otto Lagarhus
Charles Cameron (appointed 15 April 2008)
21 GTE ANNUAL REPORT 2008 Directors’ report
for the year ended 31 December 2008
Management and governance
Directors’ interests in shares and options
The directors who held ofﬁce at 31 December 2008 had the following interests in the shares of the Company, including
family interests:
Shares Shares under option
1 January 31 December 1 January 31 December
2008 2008 2008 2008
number number number number
John Bryant 50,000 248,895 – 86,538
3
Steven Zwolinski 131,250 380,163 1,050,000 1,050,000
1
Magnus Nordgren – – 125,000 125,000
2
Otto Lagarhus – – – –
Charles Cameron – 87,780 – 57,692
3
1 The GTE Share Option Scheme.
2 The GTE Swedish Share Option Scheme.
3 Non-Executive directors’ Share Option Agreement.
Further details of the share option schemes are given in note 27 to the ﬁnancial statements. The options shown above were
granted in the period from incorporation to 31 December 2008. 144,230 options were granted in the year ended 31 December
2008. No options were exercised in either period.
Donations
Charitable and political donations made by the Group during the year amounted to £Nil (2007: £Nil).
Substantial shareholdings
At the close of business on 24 April 2009, the directors were aware of the following substantial shareholdings:
Number of
Number of % of ordinary
ordinary share shares under
shares capital warrants
Barclays Stockbrokers Ltd 6,513,016 9.0% –
AXA SA 5,589,380 7.7% –
Cleantech/Zouk 5,095,681 7.0% –
Oceanic Small Cap Fund 4,000,000 5.5% –
Gartmore Investment Management 3,194,203 4.4% –
Age Westbro As 2,999,210 4.1% –
EIG 2,883,796 4.0% 1,000,000
1
Markota Limited 2,631,578 3.6% –
1 EIG Venture Capital Limited has a warrant to purchase 1,000,000 ordinary shares. The warrants were originally exercisable at any time up to
30 months from the date of admission (21 December 2005), at an exercise price of £0.30. On 29 May 2008 the exercise period was extended by
a further 12 months and will now remain exercisable until 20 June 2009.
Creditor payment policy and practice
It is the Company’s policy that payments to suppliers are made in accordance with those terms and conditions agreed between
the Company and its suppliers, providing that all trading terms and conditions have been met. Trade creditors of the Company
at 31 December 2008 were equivalent to 32 days’ purchases (2007: 20 days).
Post balance sheet events
Extraordinary general meeting
An Extraordinary General Meeting was held on 12 March 2009 in order to seek approval for the implementation of the Gas
Turbine Efﬁciency plc 2009 Long Term Incentive Plan, the Gas Turbine Efﬁciency plc 2009 Restricted Share Plan, the Gas
Turbine Efﬁciency 2009 Share Option Plan (see “Grant of share awards” on page 23) and to amend the Company’s Articles of
Association to bring the articles in line with the Companies Act 2006, relating to notices for General Meetings. All resolutions
were duly passed.
22 GTE ANNUAL REPORT 2008 Grant of share awards
On 13 February 2009 the Board of the Company announced that the Remuneration Committee had granted the following share
awards to the executive directors of the Company as ordinary shares in the Company, under the Gas Turbine Efﬁciency plc
2009 Long Term Incentive Plan (“LTIP”), the Gas Turbine Efﬁciency plc 2009 Restricted Share Plan (“RSP”) and the Gas
Turbine Efﬁciency 2009 Share Option Plan (“SOP”) (the LTIP, RSP and SOP together being the “Schemes”). The grant of these
share awards under the Schemes was approved by shareholders at an extraordinary general meeting on 12 March 2009.
Number of Number of Number of
ordinary shares ordinary shares ordinary shares
subject to subject to subject to
Director LTIP award RSP award SOP option
Steven Zwolinski 1,000,000 989,472 (A) 250,000
Magnus Nordgren 300,000 191,031 (A) Nil
100,000 (B)
LTIP
In accordance with the rules of the LTIP, LTIP awards were granted in the form of conditional share awards at 24.25p per
ordinary share (being the closing mid-market share price on 12 February 2009).
Shares subject to the LTIP awards will vest three years from the date of grant, subject to continued employment and to the
satisfaction of share price targets. Of the total number of ordinary shares subject to LTIP awards, 20% will vest if the Company’s
share price is equal to or more than 30p at the end of the three-year period, with vesting increasing on a sliding scale to 100%
if the Company’s share price is equal to or more than 80p at the end of the three-year period.
RSP
In accordance with the rules of the RSP, RSP awards were granted, in the form of conditional share awards, at 24.25p per
ordinary share (being the closing mid-market share price on 12 February 2009).
The RSP awards denoted (A) above relate to deferred annual bonus payments. The shares subject to the awards will vest three
years from the date of grant, subject to continued employment.
The RSP awards denoted (B) above will vest over a four-year period subject to continued employment.
SOP
In accordance with the rules of the SOP, the SOP option was granted with an exercise price of 24.25p per ordinary share
(being the closing mid-market share price on 12 February 2009).
The shares subject to the SOP option will vest over a four-year period, subject to continued employment.
The Company may issue up to 15% of its shares within a ten-year period to satisfy awards to participants in the Schemes
operated by the Company under which shares are issued.
Capacity expansion
On 11 March 2009 the Company announced it had expanded global capacity to meet increased demand:
 GTE signed an agreement to act as the cornerstone company in the planned “Green City Business Park” in Stockholm,
Sweden. The new facility, which will have three times the current capacity, will continue to provide aviation solutions for Pratt
& Whitney’s EcoPower
®
business. Additional capability for industrial, fuel and combustion solutions will be added to service
customers in Europe, Russia, the Middle East and Asia.
 GTE recently expanded its assembly operation in Florida (US) from 15,000 to 40,000 sq ft. This facility will continue to
service the growing demand for industrial products and have the ﬂexibility to meet aviation demand in the US.
 On 15 March 2009, GTE formally opened its new combustion and power plant solutions center in South Carolina (US)
which will give GTE a ﬁve-fold increase over its previous facility’s capacity to 50,000 sq ft.
23 GTE ANNUAL REPORT 2008 Directors’ report
for the year ended 31 December 2008
Management and governance
New legal entity
In order to extend the Company’s footprint in the EMEA region, the Company incorporated a new UK operating subsidiary
(Gas Turbine Efﬁciency UK Limited) on 9 February 2009. This presence will extend the Company’s footprint in the region and
will be further extended to support EMEA customers commercially.
Share capital
On 7 May 2009, the Company announced that it had conditionally raised approximately £7.0m (approximately US$10.5m)
before expenses by way of a placing of 29.2m new ordinary shares at 24p per share to institutional investors. The placing is
subject to, inter alia, the approval of shareholders at a general meeting of the Company which has been convened to be held on
26 May 2009.
Going concern
Having made appropriate enquires and examined the major areas which could affect the Group’s ﬁnancial position, the directors
are satisﬁed that the Group has adequate resources to continue in operation for the foreseeable future. For this reason, they
consider it appropriate to adopt the going concern basis in preparing the ﬁnancial statements.
Information to shareholders
The Company has its own website (www.gtefﬁciency.com) for the purposes of improving information ﬂow to shareholders as
well as potential investors.
Corporate Governance
The directors support high standards of Corporate Governance. As the Company is admitted to trading on AIM, it is not required
to comply with the provisions of the Combined Code on Corporate Governance issued in 2008 by the Financial Reporting
Council (the “Code”). The Company aims to support the principles set out in the Code and complies in the areas that it
considers it appropriate to do so, given both the size and resources available to the Company.
The Board meets on a monthly basis – physically at least six times per year. Prior to a Board meeting, the directors receive
a Board pack comprising reports from the executive directors together with any material deemed necessary for the Board to
discharge its duties. It is the Board’s responsibility to deal with matters such as formulating the business strategy, ensuring that
adequate resources are available to meet the strategy objectives, approving the proﬁt plan, borrowing levels and other ﬁnancial
commitments, annual assessment of signiﬁcant risks and internal controls and the delegation of authority to senior
management. The types of decision delegated to management are the approval of transactions and contracts in the ordinary
course of business, including employment contracts relating to employees other than senior management.
The Board has established an Audit Committee, chaired by Mr Charles Cameron; a Remuneration Committee, chaired by
Mr John Bryant; and a Nomination Committee, chaired by Mr Otto Lagarhus. The other committee members are referenced
to in the directors’ biographies section on page 19 of this Annual Report.
The number of scheduled Board meetings and committee meetings attended by each director during the year is as follows
(the ﬁgures in brackets indicate the total number of meetings that each director could have attended in the ﬁnancial year ended
31 December 2008):
Scheduled Audit Remuneration Nomination
Board Committee Committee Committee
meetings meetings meetings meetings
John Bryant (16) 16 (3) 3 (8) 8 (2) 2
Steven Zwolinski (16) 16 n/a n/a n/a
Magnus Nordgren (16) 15 n/a n/a n/a
Charles Cameron (11) 10 (2) 2 (6) 6 (2) 1
Otto Lagarhus (16) 13 (3) 3 (8) 8 (2) 1
John Bryant, Charles Cameron and Otto Lagarhus are regarded as independent Non-Executive directors as they each
do not have a signiﬁcant shareholding in the Company.
In 2008 a formal evaluation of the Chief Executive Ofﬁcer was undertaken by the Remuneration Committee by means
of a performance appraisal. The results were communicated to the Board and any speciﬁc feedback was communicated
to the Chief Executive Ofﬁcer. The Board will keep under review whether to implement a formal process of evaluation
24 GTE ANNUAL REPORT 2008 of the performance and effectiveness of the Board and its committees, based on the size of the Board and the committees
and the resources available to the Group.
At the forthcoming Annual General Meeting John Bryant and Steven Zwolinski will retire and, being eligible, will each offer
themselves for re-appointment.
Relations with shareholders
The Chief Executive Ofﬁcer is the Company’s principal spokesperson with investors, fund managers, the press and other
interested parties. At the Annual General Meeting, private investors are given the opportunity to question the Board.
Internal control
The Board acknowledges its responsibility for establishing and monitoring the Group’s systems of internal control. Although no
system of internal control can provide absolute assurance against material misstatement or loss, the Company’s systems are
designed to provide the directors with reasonable assurance that problems are identiﬁed on a timely basis and so can be dealt
with appropriately.
Statement of directors’ responsibilities
The directors are responsible for preparing the Annual Report and ﬁnancial statements in accordance with applicable law
and regulations.
Company law requires the directors to prepare ﬁnancial statements for each ﬁnancial period. Under that law the directors have
elected to prepare the ﬁnancial statements in accordance with International Financial Reporting Standards (IFRS) as adopted
by the European Union. The ﬁnancial statements are required by law to give a true and fair view of the state of affairs of the
Group and of the Company and of the proﬁt or loss of the Group for that period. In preparing those ﬁnancial statements, the
directors are required to:
 Select suitable accounting policies and then apply them consistently.
 Make judgements and estimates that are reasonable and prudent.
 State whether the ﬁnancial statements comply with IFRS as adopted by the European Union.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the
ﬁnancial position of the Group and enable them to ensure that the ﬁnancial statements comply with the Companies Act 1985,
as amended. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and ﬁnancial information on the Company’s
website. Legislation in the United Kingdom governing the preparation and dissemination of the ﬁnancial statements and other
information included in Annual Reports may differ from legislation in other jurisdictions.
Disclosure of information to auditors
The directors who held ofﬁce at the date of approval of this directors’ report each conﬁrm the following:
 So far as he is aware, there is no relevant audit information of which the Company’s Auditors are unaware.
 He has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit
information and to establish that the Company’s Auditors are aware of that information.
Auditors
RSM Bentley Jennison is the appointed Auditor of the Company and has indicated its willingness to continue in ofﬁce.
A resolution proposing RSM Bentley Jennison be re-appointed as Auditor of the Company and that the directors be authorised
to ﬁx its remuneration will be put to the next Annual General Meeting.
By order of the Board
London Registrars plc
Company Secretary
7 May 2009
25 GTE ANNUAL REPORT 2008 Independent Auditors’ report to the shareholders of Gas Turbine Efﬁciency plc
for the year ended 31 December 2008
Financial statements and notes
We have audited the Group and parent company ﬁnancial statements (the “Financial Statements”) of Gas Turbine Efﬁciency plc
for the year ended 31 December 2008 set out on pages 27 to 69. These Financial Statements have been prepared in
accordance with the accounting policies set out therein.
This report is made solely to the Group’s shareholders, as a body, in accordance with section 235 of the Companies Act 1985.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state
to them in an Auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Group and the Company and the Company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and Auditors
The directors’ responsibilities for preparing the Annual Report and the Group Financial Statements in accordance with
applicable law and International Financial Reporting Standards (IFRS) as adopted by the EU, and for preparing the parent
company ﬁnancial statements in accordance with applicable law and IFRS are set out in the statement of directors’
responsibilities on page 25. Our responsibility is to audit the Financial Statements in accordance with relevant legal and
regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the Financial Statements give a true and fair view and are properly prepared
in accordance with the Companies Act 1985 and, as regards the Group Financial Statements, Article 4 of the IAS Regulation.
We also report to you whether in our opinion the information given in the directors’ report is consistent with the Financial
Statements. In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have
not received all the information and explanations we require for our audit, or if information speciﬁed by law regarding directors’
remuneration and other transactions with the Group is not disclosed.
We read the director’s report and consider the implications for our report if we become aware of any apparent misstatements
within it.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures
in the Financial Statements. It also includes an assessment of the signiﬁcant estimates and judgements made by the directors
in the preparation of the Financial Statements, and of whether the accounting policies are appropriate to the Group’s and
the Company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in
order to provide us with sufﬁcient evidence to give reasonable assurance that the Financial Statements are free from material
misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the Financial Statements.
Opinion
In our opinion:
 The Group ﬁnancial statements give a true and fair view, in accordance with IFRS as adopted by the European Union,
of the state of affairs of the Group as at 31 December 2008 and of its proﬁt and cash ﬂows for the year then ended.
 The Group ﬁnancial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4
of the IAS Regulation.
 The parent company ﬁnancial statements give a true and fair view, in accordance with IFRS as adopted by the European
Union, of the state of affairs of the Company as at 31 December 2008 and of the its loss and cash ﬂows for the year then ended.
 The parent company ﬁnancial statements have been properly prepared in accordance with the Companies Act 1985.
 The information given in the directors’ report is consistent with the Financial Statements.
RSM Bentley Jennison
Chartered Accountants and Registered Auditors
Charterhouse, Legge Street, Birmingham, B4 7EU
7 May 2009
26 GTE ANNUAL REPORT 2008 Consolidated statement of income
for the year ended 31 December 2008
Financial statements and notes
2008 2007
Note US$’000 US$’000
Continuing operations
Revenue 1 35,119 17,830
Cost of sales (20,764) (10,358)
Gross proﬁt 14,355 7,472
Distribution and selling costs (3,598) (2,204)
Research and development expenses (1,347) (1,130)
Administrative expenses (8,850) (7,124)
Other operating income 2 320 78
Operating proﬁt/(loss) 3,4 880 (2,908)
Interest receivable 5 720 164
Finance costs 6 (669) (150)
Proﬁt/(loss) before tax 931 (2,894)
Tax 7 (440) 880
Proﬁt/(loss) for the year attributable to equity holders of the parent 491 (2,014)
Proﬁt/(loss) per share 8
From continuing operations
Basic proﬁt/(loss) per share (US$) 0.007 (0.037)
Basic and diluted proﬁt/(loss) per share (US$) 0.007 (0.037)
Earnings/(loss) before interest, taxes, depreciation and amortisation (EBITDA) 1,736 (2,425)
Earnings/(loss) before interest, taxes, amortisation and exceptional items (EBITAE) 2,045 (1,520)
Earnings/(loss) before interest, taxes, depreciation, amortisation and exceptional items (EBITDAE) 2,549 (1,266)
27 GTE ANNUAL REPORT 2008 Consolidated balance sheet
as at 31 December 2008
Financial statements and notes
2008 2007
Note US$’000 US$’000
Assets
Non-current assets
Intangible assets
Capitalised expenditure for research and development 9 7,491 2,904
Patents 10 1,703 928
Customer relations 11 318 421
ERP-system 12 684 506
Goodwill 13 6,186 6,306
16,382 11,065
Tangible assets
Equipment, tools, ﬁxtures and ﬁttings 14 1,943 1,282
Financial assets
Available-for-sale investments 16 27 187
Deferred tax assets 17 2,056 2,611
Total non-current assets 20,408 15,145
Current assets
Inventories 18 3,410 1,525
Current receivables
Accounts receivable-trade 19 8,695 4,525
Income taxes recoverable 104 201
Other receivables 20 1,173 633
Prepaid expenses and accrued income 531 469
10,503 5,828
Cash and cash equivalents 21 5,448 2,284
Total current assets 19,361 9,637
Total assets 39,769 24,782
28 GTE ANNUAL REPORT 2008 Consolidated balance sheet
as at 31 December 2008
2008 2007
Note US$’000 US$’000
Equity and liabilities
Equity
Share capital 22 269 207
Share premium 31,319 20,705
Capital reserve 2,636 2,636
Share-based payment reserve 781 540
Revaluation reserve (32) (8)
Translation reserves 7 1,966
Retained earnings (6,186) (6,677)
Total equity attributable to equity holders of the parent 28,794 19,369
Non-current liabilities
Financial liabilities – borrowings 23 73 90
Deferred tax liabilities 17 195 266
268 356
Current liabilities
Financial liabilities – borrowings 23 157 243
Accounts payable – trade 6,338 2,550
Other liabilities 794 307
Accrued expenses 3,418 1,957
10,707 5,057
Total liabilities 10,975 5,413
Total equity and liabilities 39,769 24,782
The ﬁnancial statements were approved by the Board of Directors and authorised for issue on 7 May 2009. They were signed
on its behalf by:
Magnus Nordgren
Director
29 GTE ANNUAL REPORT 2008 Consolidated statement of cash ﬂows
for the year ended 31 December 2008
Financial statements and notes
2008 2007
Note US$’000 US$’000
Cash ﬂow from operating activities
Proﬁt/(loss) after ﬁnancial items 931 (2,894)
Adjustments to operating cash ﬂows 24 1,338 668
Cash ﬂow from operating activities before changes in working capital 2,269 (2,226)
Cash ﬂow from changes in working capital
Increase in inventories (2,078) (327)
Increase in receivables (5,424) (1,580)
Increase in liabilities 6,246 937
Cash generated/(used) by operations 1,013 (3,196)
Interest received 143 151
Finance costs (384) (169)
Net cash generated by operating activities 772 (3,214)
Cash ﬂows from investing activities
Purchase of intangible non-current assets (7,010) (2,931)
Purchase of tangible non-current assets (1,228) (667)
Operations acquired – (2,524)
Sale of tangible non-current assets 121 –
Net cash used by investing activities (8,117) (6,122)
Cash ﬂows from ﬁnancing activities
New share issue (net of issue costs) 10,676 10,572
Loans taken 216 158
Loans repaid (319) (2,015)
Net cash generated/(used) by ﬁnancing activities 10,573 (8,715)
Net change in cash and cash equivalents 3,228 (621)
Cash and cash equivalents at beginning of the year 2,284 2,855
Effect of foreign exchange rate changes (64) 50
Cash and cash equivalents at end of the year 5,448 2,284
30 GTE ANNUAL REPORT 2008 Consolidated statement of changes in equity
for the year ended 31 December 2008
Share- Total
based share-
Share Share Capital payment Revaluation Translation Retained holders’
capital premium reserve reserve reserve reserve earnings equity
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Balance at 31 December 2006 156 8,225 2,636 355 59 1,621 (4,663) 8,389
New share issue, 5,144,954 shares
at nominal £0.002 20 4,480 – –– –– 4,500
New share issue, 250,000 shares
at nominal £0.002 1– – –– ––1
New share issue, 7,456,140 shares
at nominal £0.002 29 8,363 – –– –– 8,392
Placing costs – (423) – –– –– (423)
New share issue, 100,000 shares
at nominal £0.002 1 60 – –– –– 61
Credit to equity for equity-settled
share-based payments –– – 185 –– – 185
Decrease in fair value of
available-for-sale investments –– – – (67) –– (67)
Exchange differences arising on
translation of foreign operations –– – –– 345 – 345
Net loss for the year –– – –– – (2,014) (2,014)
Balance at 31 December 2007 207 20,705 2,636 540 (8) 1,966 (6,677) 19,369
New share issue, 2,231,000 shares
at nominal £0.002 9 1,388 – –– –– 1,397
New share issue, 8,989,000 shares
at nominal £0.002 35 6,683 – –– –– 6,718
New share issue, 4,000,000 shares
at nominal £0.002 16 2,987 – –– –– 3,003
New share issue, 476,000 shares
at nominal £0.002 2 297 – –– –– 299
Placing costs – (741) – –– –– (741)
Credit to equity for equity-settled
share-based payments –– – 241 –– – 241
Decrease in fair value of
available-for-sale investments –– – – (24) –– (24)
Exchange differences arising on
long-term intercompany loans –– – –– (1,029) – (1,029)
Exchange differences arising on
translation of foreign operations –– – –– (930) – (930)
Net proﬁt for the year –– – –– – 491 491
Balance at 31 December 2008 (note 22) 269 31,319 2,636 781 (32) 7 (6,186) 28,794
31 GTE ANNUAL REPORT 2008 Accounting policies
for the year ended 31 December 2008
Financial statements and notes
1 General information
Gas Turbine Efﬁciency plc, incorporated in the United Kingdom with registered number 5396081, develops, manufactures and
markets methods and systems for gas turbine gas path cleaning. The Group develops and manufactures all products in Järfälla,
Sweden and New York, Florida, and South Carolina, USA through its subsidiaries Gas Turbine Efﬁciency AB, Gas Turbine
Efﬁciency Sweden AB, Gas Turbine Efﬁciency Inc, Control Center LLC and ARES Technology LLC.
2 Adoption of new and revised International Financial Reporting Standards
In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the International
Accounting Standards Board (the IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the
IASB that are relevant to its operations and effective for accounting periods beginning on 1 January 2008. The adoption of the
following IFRS has not impacted these ﬁnancial statements.
 IFRIC 7 Applying the Restatement Approach under IAS 29.
 IFRIC 8 Scope of IFRS 2.
 IFRIC 9 Reassessment of Embedded Derivatives.
 IFRIC 10 Interim Financial Reporting and Impairment.
Adopted IFRS not yet applied
The following Adopted IFRS and interpretations were available for early application but have not been applied by the Group
in these ﬁnancial statements:
 IFRS 8 Operating Segments.
 Revised IAS 23 Borrowing Costs.
 IFRIC 11 IFRS 2: Group and Treasury Share Transactions.
 IFRIC 12 Service Concession Arrangement.
The revised IAS 23 “Borrowing Costs” requires that borrowing costs that are directly attributable to the acquisition or
construction of a qualifying asset are capitalised as part of the cost of that asset. The standard must be applied for accounting
periods on or after 1 January 2009. The Group’s current accounting policy is to recognise borrowing costs in the income
statement as incurred. Application of the standard is expected to increase the cost of qualifying assets and the future
depreciation and amortisation charges and to reduce ﬁnance costs where the Group has funded the asset through borrowing.
The other Standards and Interpretations are not expected to have any signiﬁcant impact on the Group’s ﬁnancial statement,
in their periods of initial application, except for the additional disclosures on operating segments when the relevant standard
comes into effect for periods commencing on or after 1 January 2009.
3 Signiﬁcant accounting policies
The ﬁnancial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the
European Union. The ﬁnancial statements have been prepared on the historical cost basis, except for the revaluation of certain
ﬁnancial instruments. The principal accounting policies adopted are set out below.
Changes in accounting policy
The consolidated ﬁnancial statements for the 12 months ended 31 December 2008 have been prepared using accounting
policies that are consistent with the Company’s statutory accounts for the year end 31 December 2007.
Basis of consolidation
The consolidated ﬁnancial statements incorporate the ﬁnancial statements of the Company and entities controlled by the
Company (its subsidiaries). Control is achieved where the Company has the power to govern the ﬁnancial and operating
policies of an entity so as to obtain beneﬁts from its activities.
32 GTE ANNUAL REPORT 2008 3 Signiﬁcant accounting policies continued
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the ﬁnancial statements of subsidiaries to bring their accounting policies into line
with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated
on consolidation.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the
aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination.
The acquiree’s identiﬁable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3
are recognised at their fair values at the acquisition date.
Goodwill
Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over the Group’s interest
in the net fair value of the identiﬁable assets, liabilities and contingent liabilities of the subsidiary recognised at the date of
acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated
impairment losses. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units
expected to beneﬁt from the synergies of the combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable
amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated ﬁrst to reduce
the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the
carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination
of the proﬁt or loss on disposal.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods
and services provided in the normal course of business, net of discounts and sales related taxes.
Sales of goods are recognised when goods are delivered and title has passed.
Royalty income is recognised on an accrual basis in accordance with the substance of the relevant agreements.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the ﬁnancial asset to that
asset’s net carrying amount.
Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.
Operating proﬁt/loss
Operating proﬁt/loss is stated before interest receivable and ﬁnance costs.
Borrowing costs
Borrowing costs are recognised in proﬁt or loss in the period in which they are incurred.
33 GTE ANNUAL REPORT 2008 Accounting policies
for the year ended 31 December 2008
Financial statements and notes
3 Signiﬁcant accounting policies continued
Leasing
Leases are classiﬁed as ﬁnance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classiﬁed as operating leases.
Assets held under ﬁnance leases are recognised as assets of the Group at their fair value at the inception of the lease or,
if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance
sheet as a ﬁnance lease obligation. Lease payments are apportioned between ﬁnance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged
to the income statement.
Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the
relevant lease.
Foreign currencies
a) Functional and presentation currency
Items included in the ﬁnancial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (“the functional currency”). The consolidated ﬁnancial statements are
presented in US dollars, which is the Group’s presentation currency because it is the currency which mainly inﬂuences sales
prices for the Group’s products.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised
in the income statement.
c) Group companies
The results and ﬁnancial position of all the Group entities that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not
a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income
and expenses are translated at the dates of the transactions); and
iii) all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign entities, are taken to
shareholders’ equity. When a foreign operation is sold, such exchange differences are recognised in the income statement
as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Retirement beneﬁt costs
Payments to deﬁned contribution retirement beneﬁt plans are charged as an expense as they fall due.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable proﬁt for the year. Taxable proﬁt differs from proﬁt as reported in the income
statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
34 GTE ANNUAL REPORT 2008 3 Signiﬁcant accounting policies continued
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the ﬁnancial statements
and the corresponding tax bases used in the computation of taxable proﬁt, and is accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable proﬁts will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable
proﬁt nor the accounting proﬁt.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the
Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse
in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufﬁcient taxable proﬁts will be available to allow all or part of the asset to be recovered. Deferred tax is calculated
at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged
or credited to proﬁt or loss. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
Equipment, tools, ﬁxtures and ﬁttings
Equipment, tools, ﬁxtures and ﬁttings are accounted for at acquisition cost less depreciation. Depreciation is based on the
expected economic life of the asset. Equipment, tools, ﬁxtures and ﬁttings are amortised on a straight-line basis from the time
at which they are taken into use.
Assets held under ﬁnance leases are depreciated over their expected useful lives on the same basis as owned assets or,
where shorter, the term of the relevant lease.
Depreciation is calculated as follows:
Equipment, test equipment, tools, ﬁxtures and ﬁttings – three to ﬁve years
Intangible assets
Internally-generated intangible assets – research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated
intangible asset arising from the Group’s product development is recognised only if all of the following conditions are met:
 An asset is created that can be identiﬁed (such as software and new processes).
 It is probable that the asset created will generate future economic beneﬁts.
 The development cost of the asset can be measured reliably.
Internally-generated intangible assets are amortised on a straight-line basis over their estimated useful lives of three to ﬁve
years. Where no internally-generated intangible asset can be recognised, development expenditure is charged to proﬁt or loss
in the period in which it is incurred.
Patents
Patents and trademarks are measured initially at purchase cost and are amortised on a straight-line basis over their estimated
useful lives of ten to 20 years. Amortisation starts when the patent is approved by the authorities.
35 GTE ANNUAL REPORT 2008 Accounting policies
for the year ended 31 December 2008
Financial statements and notes
3 Signiﬁcant accounting policies continued
Computer software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the speciﬁc
software. These costs are amortised over their estimated useful lives (ﬁve years).
Costs that are directly associated with the production of identiﬁable and unique software products controlled by the Group,
and that will probably generate economic beneﬁts exceeding costs beyond one year, are recognised as intangible assets.
Direct costs include the software development employee costs. Computer software development costs recognised as assets
are amortised over their estimated useful lives (three years).
Amortisation of intangible assets is included within “Administrative expenses” in the income statement.
Impairment of tangible and intangible assets
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount
of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the
recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the
asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash ﬂows are discounted to their present value using a pre-tax discount rate that reﬂects current market assessments of the
time value of money and the risks speciﬁc to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately
in proﬁt or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to
the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years.
A reversal of an impairment loss is recognised immediately in proﬁt or loss, unless the relevant asset is carried at a revalued
amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable,
direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and
condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price
less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Financial instruments
Financial assets and ﬁnancial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Trade receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the
effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in proﬁt or loss when
there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the
asset’s carrying amount and the present value of estimated future cash ﬂows discounted at the effective interest rate computed
at initial recognition.
36 GTE ANNUAL REPORT 2008 3 Signiﬁcant accounting policies continued
Available-for-sale investments
The Group’s securities held for trading purposes are valued to fair value with gains and losses arising from changes in fair value
taken to equity.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments with
a maturity of 90 days or less that are readily convertible to a known amount of cash and are subject to an insigniﬁcant risk of
changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Company are classiﬁed according to the substance of the contractual
arrangements entered into and the deﬁnitions of a ﬁnancial liability and an equity instrument. An equity instrument is any
contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. The accounting
policies adopted for speciﬁc ﬁnancial liabilities and equity instruments are set out below.
Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective
interest rate method.
Derivative ﬁnancial instruments
Derivatives embedded in other ﬁnancial instruments or other non-ﬁnancial host contracts are treated as separate derivatives
when their risks and characteristics are not closely related to those of the host contract and the host contract is not carried
at fair value with unrealised gains or losses reported in proﬁt or loss.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges
are accounted for on an accruals basis in proﬁt or loss.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group
will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to
settle the obligation at the balance sheet date, and are discounted to present value where the effect is material. Provision is
made for the expected costs of warranty arising from the sales of newly developed products.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Share-based payments
The Group has issued equity-settled share-based payments to certain employees. Equity-settled share-based payments
are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based
payments is expensed over the vesting period, based on the Group’s estimate of the shares that will eventually vest.
Fair value is measured using the Black-Scholes pricing model.
37 GTE ANNUAL REPORT 2008 Accounting policies
for the year ended 31 December 2008
Financial statements and notes
4 Critical accounting judgements and key sources of estimation uncertainty
Critical judgements in applying the entity’s accounting policies
In the process of applying the entity’s accounting policies, which are described above, management has made the following
judgements that have the most signiﬁcant effect on the amounts recognised in the ﬁnancial statements.
Income taxes
The Group is subject to income taxes in the United Kingdom, Sweden, Norway, Russia, Singapore and the US. Judgement
is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate
tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due. Where the ﬁnal tax outcome of these matters is different
from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the
period in which such determination is made.
The recoverable amounts of the Group’s deferred tax assets have been determined based on the Board’s estimates of future
taxable proﬁts and income and tax rates.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that
have a signiﬁcant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next ﬁnancial
year, are discussed below.
Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy. The
recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations
require the use of estimates.
Recoverability of internally-generated intangible asset
During the year, management reconsidered the recoverability of its internally-generated intangible assets arising from the
Group’s product development, which are included in its balance sheet at 31 December 2008 at US$7,491,000. The projects
continue to progress in a very satisfactory manner, and customer reaction has reconﬁrmed management’s previous estimates
of anticipated revenues from the projects.
Recoverability of patents
During the year, management reconsidered the recoverability of its patents arising from the Group’s patents applications,
which are included in its balance sheet at 31 December 2008 at US$1,703,000. Management have not identiﬁed any indications
of impairment to this asset value.
5 Financial risk management
The Group’s activities expose it to a variety of ﬁnancial risks: market risk (including currency risk, fair value interest risk and
price risk), credit risk, liquidity risk and cash ﬂow interest-rate risk. The Group’s overall risk management programme focuses
on the unpredictability of ﬁnancial markets and seeks to minimise potential adverse effects on the Group’s ﬁnancial
performance. Risk management is carried out by group ﬁnance under policies approved by the Board of Directors. Group
ﬁnance identiﬁes, evaluates and mitigates ﬁnancial risks in close co-operation with the Group’s operating units. The Board
provides written principles for overall risk management, as well as written policies covering speciﬁc areas, such as foreign
exchange risk, interest-rate risk, credit risk, use of derivative ﬁnancial instruments and non-derivative ﬁnancial instruments,
and investing excess liquidity.
a) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily
with respect to the US dollar, the Swedish krona, the British pound and the Euro. Foreign exchange risk arises from future
commercial transactions, recognised assets and liabilities and net investments in foreign operations.
38 GTE ANNUAL REPORT 2008 5 Financial risk management continued
Foreign exchange risk arises when future commercial transactions, recognised assets and liabilities are denominated in a
currency that is not the entity’s functional currency. Group Treasury is responsible for managing the net position in each foreign
currency by using external forward currency contracts.
The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.
b) Credit risk
The Group has no signiﬁcant concentrations of credit risk. It has policies in place to ensure sales of products are made
to customers with an appropriate credit history.
c) Liquidity risk
Prudent liquidity risk management implies maintaining sufﬁcient cash and marketable securities, the availability of funding through
an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the
underlying businesses, the Company aims to maintain ﬂexibility in funding by keeping committed credit lines available.
d) Interest rate risk
Interest rate risk is the risk that the Group’s net income will be affected by changes in market interest rates. The Group’s
interest-bearing assets are mainly liquid assets. The Company does not expect that the market interest rate, will decrease to a
signiﬁcant extent and hence reduce cash ﬂow from interest bearing assets. The Group’s interest-rate risk arises from long-term
borrowings. Borrowings issued at variable rates expose the Group to cash ﬂow interest-rate risk. The Group has loans in the
Swedish krona, the British pound and US dollar with both ﬁxed and ﬂoating interest rates. The details of long-term borrowings
are disclosed in notes 23 and 26. Since income is tied to the customer contracts with an annual price review and this impact
usually follows economic development and inﬂation rate, interest rate risks are deemed to be minimised through short interest
rate periods. The Company’s strong liquidity reduces the Group’s dependency on external ﬁnancing and thereby also minimises
interest rate risk.
39 GTE ANNUAL REPORT 2008 Notes to the ﬁnancial statements
for the year ended 31 December 2008
Financial statements and notes
1 Segment information
For management purposes, the Group is currently organised into the following two operating divisions: Eastern (EMEA) and
Western (Americas) hemisphere, where Western hemisphere relates to the US and the Americas and Eastern relates to Europe
and the rest of the world. These divisions are the basis on which the Group reports its primary and only segment information.
Inter-segment sales are charged at prevailing market rates.
31 December 2008
Total for
Western Eastern Eliminations Group
Continuing operations US$’000 US$’000 US$’000 US$’000
Revenue from sales
External sale of goods 25,112 10,007 – 35,119
Inter-segment sale of goods and services 8 54 (62) –
Segment result – operating proﬁt 666 214 – 880
Other interest income and similar proﬁt items 720
Interest expense for Group companies (669)
Proﬁt before tax 931
Tax charge (440)
Proﬁt for the year 491
Other information
Capital additions 1,396 6,842 – 8,238
Depreciation, amortisation and write downs (468) (387) – (856)
Unallocated
assets/ Total for
Western Eastern liabilities Group
Balance sheet US$’000 US$’000 US$’000 US$’000
Assets:
Segment assets: 17,155 15,022 7,592 39,769
Liabilities:
Segment liabilities: 6,171 4,395 409 10,975
31 December 2007
Total for
Western Eastern Eliminations Group
Continuing operations US$’000 US$’000 US$’000 US$’000
Revenue from sales
External sale of goods 10,203 7,627 – 17,830
Inter-segment sale of goods and services 2,150 320 (2,470) –
Segment result – operating loss (2,205) (523) (180) (2,908)
Other interest income and similar proﬁt/(loss) items 164
Interest expense for Group companies (150)
Loss before tax (2,894)
Tax credit 880
Loss for the year (2,014)
Other information
Capital additions 594 3,004 – 3,598
Depreciation, amortisation and write downs (233) (250) – (483)
40 GTE ANNUAL REPORT 2008 1 Segment information continued
Unallocated
assets/ Total for
Western Eastern liabilities Group
Balance sheet US$’000 US$’000 US$’000 US$’000
Assets:
Segment assets: 10,106 9,580 5,096 24,782
Liabilities:
Segment liabilities: 2,803 2,011 599 5,413
2 Other operating income
2008 2007
US$’000 US$’000
Exchange differences – operating transactions 320 69
Other income – 9
320 78
3 Operating proﬁt/(loss)
Operating proﬁt/(loss) has been stated after charging the following:
2008 2007
US$’000 US$’000
Exchange differences – operating transactions (370) (318)
Exceptional legal costs (351) (1,159)
Exceptional trade mark costs (325) –
Exceptional administrative costs (137) –
Write down on inventories (15) (63)
Loss on disposal of ﬁxed assets – (14)
Depreciation of equipment, tools, ﬁxtures and ﬁttings (504) (254)
Amortisation of intangible assets (352) (210)
Impairment loss on tangible assets – (19)
Auditors’ remuneration
2008 2007
US$’000 US$’000
Fees payable to the Group’s auditor for the audit of the ﬁnancial statements (147) (103)
Fees payable to the Group’s auditor and its associates
For other services:
Audit of the ﬁnancial statement of the Company’s subsidiaries pursuant to legislation (20) (20)
(167) (123)
41 GTE ANNUAL REPORT 2008 Notes to the ﬁnancial statements
for the year ended 31 December 2008
Financial statements and notes
4 Personnel costs
2008 2007
No. No.
The average monthly number of employees (including executive directors) was 84 56
The split of employees by function within the Group is as follows:
No. No.
Manufacturing/supply chain 22 12
Engineering/IT 29 18
Sales and marketing 10 12
General and administrative/ﬁnance 16 10
Executive directors/management 7 4
Total 84 56
Their aggregate remuneration comprised:
2008 2007
US$’000 US$’000
Wages and salaries (8,719) (5,290)
Social security costs (1,320) (1,007)
Pension costs (310) (156)
Share-based payment expense (241) (185)
Other personnel costs (106) (45)
(10,696) (6,683)
Pursuant to a resolution of the Remuneration Committee on 18 February 2008, an aggregate of 476,000 ordinary shares were
issued effective 3 April 2008 in lieu of bonuses at a rate of 31.5p per share to Steven Zwolinski – 183,288, Thomas Wagner –
146,356 and Michael Thomas – 146,356, notice of which was given in an announcement to the market on 3 April 2008.
Directors’ emoluments
2008 2007
US$’000 US$’000
Aggregate directors’ emoluments (1,071) (787)
Company pension contributions to money purchase schemes (19) (16)
Sums paid to third parties for directors’ services (40) (87)
(1,130) (890)
Number of directors accruing beneﬁts under money purchase schemes 1 1
Aggregate emoluments of highest paid director 566 374
5 Interest receivable
2008 2007
US$’000 US$’000
Interest on bank deposits 37 151
Exchange differences on non-operating transactions 683 13
720 164
42 GTE ANNUAL REPORT 2008 6 Finance costs
2008 2007
US$’000 US$’000
Interest on bank overdrafts and loans (66) (125)
Interest on obligations under ﬁnance leases (23) (13)
Total borrowing costs (89) (138)
Total borrowing costs (89) (138)
Exchange differences on non-operating transactions (561) –
Other interest expense (19) (12)
Total interest expense (669) (150)
7 Taxation
2008 2007
US$’000 US$’000
Current tax – continuing operations 18 –
Deferred tax assets (note 17) 501 (840)
Deferred tax liabilities (note 17) (79) (40)
440 (880)
The total charge/(credit) for the year can be reconciled to the accounting proﬁt/(loss) before tax as follows:
2008 2007
US$’000 US$’000
Proﬁt/(loss) before tax 931 (2,894)
Tax at the domestic tax rate in the Group’s trading location of Sweden of 28% (2007: 28%) 261 (810)
Tax effect of expenses that are not deductible in determining taxable proﬁt 230 65
Tax effect of income that is not taxable in determining taxable proﬁt (259) (15)
Tax effect of utilisation of tax losses not previously recognised (85) (34)
Tax effect of not recognised tax losses 158 131
Effect of different tax rates of subsidiaries operating in other jurisdictions 135 (217)
Tax charge/(credit) for the year 440 (880)
8 Proﬁt/(loss) per share
Basic proﬁt/(loss) per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year.
2008 2007
Proﬁt/(loss) attributable to equity holders of the Company (US$’000) 491 (2,014)
Weighted average number of ordinary shares in issue (’000) 67,181 53,960
Basic proﬁt/(loss) per share (US$ per share) – continuing operations 0.007 (0.037)
There are dilutive potential ordinary shares up to an amount of 2,845,500
Diluted proﬁt/(loss) per share (US$ per share) 0.007 (0.037)
43 GTE ANNUAL REPORT 2008 Notes to the ﬁnancial statements
for the year ended 31 December 2008
Financial statements and notes
9 Intangible assets – capitalised expenditure for research and development
2008 2007
US$’000 US$’000
Cost
As at 1 January 3,155 932
Operations acquired – 48
Purchases 5,621 2,085
Disposals – (19)
Exchange differences (969) 109
As at 31 December 7,807 3,155
Amortisation
As at 1 January (251) (167)
Provided for the year (143) (70)
Exchange differences 78 (14)
As at 31 December (316) (251)
Net book value
As at 31 December 7,491 2,904
The Group continuously seeks to develop new techniques and methods to enhance the performance of its current product range
at the same time as new products are developed.
Where a project is deemed to have a commercially qualifying product – with future positive cash ﬂows – the costs of development
are capitalised and amortised over the product’s estimated economic life.
10 Intangible assets – patents
2008 2007
US$’000 US$’000
Cost
As at 1 January 938 382
Purchases 1,021 531
Exchange differences (243) 25
As at 31 December 1,716 938
Amortisation
As at 1 January (10) (6)
Provided for the year (4) (3)
Exchange differences 1 (1)
As at 31 December (13) (10)
Net book value
As at 31 December 1,703 928
Patents are amortised over their estimated useful lives, which is on average ten years.
The Group’s granted and pending patents protect the design and speciﬁcation of its gas turbine washing products in countries
in Europe, Asia and the Americas.
44 GTE ANNUAL REPORT 2008 11 Intangible assets – customer relations
2008 2007
US$’000 US$’000
Cost
As at 1 January 514 –
Operations acquired – 514
As at 31 December 514 514
Amortisation
As at 1 January (93) –
Provided for the year (103) (93)
As at 31 December (196) (93)
Net book value
As at 31 December 318 421
12 Intangible assets – Enterprise Resource Planning (ERP) system
2008 2007
US$’000 US$’000
Cost
As at 1 January 604 263
Purchases 368 315
Exchange differences (73) 26
As at 31 December 899 604
Amortisation
As at 1 January (98) (50)
Provided for the year (102) (44)
Exchange differences (15) (4)
As at 31 December (215) (98)
Net book value
As at 31 December 684 506
An ERP system, has been installed to assure controllership, speed, and absolute seamlessness of global operations.
This system will enable scaling of the core business without the traditional addition of administrative costs.
The ERP system is amortised over its estimated useful life, which is ﬁve years.
45 GTE ANNUAL REPORT 2008 Notes to the ﬁnancial statements
for the year ended 31 December 2008
Financial statements and notes
13 Intangible assets – goodwill
2008 2007
US$’000 US$’000
Cost
As at 1 January 6,306 1,255
Operations acquired – 5,074
Exchange differences (120) (23)
As at 31 December 6,186 6,306
Impairment
As at 1 January and 31 December – –
Net book value as at 31 December 6,186 6,306
Goodwill is allocated to the Group’s cash-generating units (CGUs) identiﬁed according to country of operation.
2008 2007
US$’000 US$’000
Western 5,074 5,074
Eastern 1,112 1,232
6,186 6,306
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use
calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during
the period. Management estimates discount rates using pre-tax rates that reﬂect current market assessments of the time value
of money and the risks speciﬁc to the CGUs. Changes in selling prices and direct costs are based on past practices and
expectations of future changes in the market.
Developments of Western hemisphere acquisitions are in line with managements expectations. Combined revenues for 2008
grew to US$22,867,000 (2007: US$10,203,000).
The Group prepares cash ﬂow forecasts derived from the most recent ﬁnancial forecasts approved by the Board of Directors.
The view of the Board of Directors is that the future discounted cash ﬂows of the Company over the next three years
signiﬁcantly exceed the currently booked goodwill asset of US$6,186,000 (2007: US$6,306,000). The Company has not
prepared discounted cash ﬂow forecasts beyond these three years.
The rate used to discount the forecast cash ﬂows from the business related to the Eastern and Western CGU is 12%.
46 GTE ANNUAL REPORT 2008 14 Equipment, tools, ﬁxtures and ﬁttings
Held Held
under under
Owned leasing Total Owned leasing Total
2008 2008 2008 2007 2007 2007
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Cost
As at 1 January 2,153 614 2,767 690 207 897
Operations acquired –– – 874 364 1 238
Purchases 1,224 4 1,228 638 29 667
Disposals (176) – (176) (72) – (72)
Exchange differences (79) (38) (117) 23 14 37
As at 31 December 3,122 580 3,702 2,153 614 2,767
Amortisation
As at 1 January (1,085) (400) (1,485) (277) (48) (325)
Operations acquired –– – (670) (274) (944)
Provided for the year (461) (43) (504) (184) (70) (254)
Disposals 174 – 174 58 – 58
Exchange differences 35 21 56 (12) (8) (20)
As at 31 December (1,337) (422) (1,759) (1,085) (400) (1,485)
Net book value
As at 31 December 1,785 158 1,943 1,068 214 1,282
47 GTE ANNUAL REPORT 2008 Notes to the ﬁnancial statements
for the year ended 31 December 2008
Financial statements and notes
15 Subsidiaries
Details of the Company’s subsidiaries at 31 December 2008 are as follows:
Proportion of
Place of ownership
Corporate incorporation interest and
identiﬁcation (or registration) of voting
Name of subsidiary number and operation power held Principal activity
Gas Turbine Efﬁciency AB 556317-2823 Sweden 100% Sales ofﬁce
Gas Turbine Efﬁciency Sweden AB 556701-9509 Sweden 100% Development centre,
assembly, manufacturing,
sales, Group management
Gas Turbine Efﬁciency Sweden AB 1013234 Sweden 100% Onshore and Offshore
– ABU DHABI Foreign Gas Installations and Fields
Company Services – Natural Gas
Branch and Oil Well Equipment
and Maintenance
Gas Turbine Efﬁciency Russia LLC 50678473047733 Russia 100% Sales ofﬁce
Gas Turbine Efﬁciency Norway AS 989 952 463 Norway 100% Sales ofﬁce
Gas Turbine Efﬁciency Inc 1455755 USA 100% Development, sales,
Group management
Control Center LLC 59-3597018 USA 100% Development, assembly,
marketing, sales
ARES Technology LLC 76-0755027 USA 100% Development, assembly,
marketing, sales
Gas Turbine Efﬁciency Singapore Pte Ltd 200709401Z Singapore 100% Sales ofﬁce
48 GTE ANNUAL REPORT 2008 16 Available-for-sale investments
2008 2007
US$’000 US$’000
Endowment insurance – 121
Shares in listed companies – Sweden 27 66
27 187
These investments have been designated as “available-for-sale ﬁnancial assets” in accordance with IAS 39 and are held at
fair value.
The directors consider that the carrying amount of available-for-sale investments approximates their fair value.
17 Deferred tax
The following are the deferred tax liabilities and assets recognised by the Group, and the movements thereon, during the
current and prior reporting periods.
Deferred tax assets
Research & Tax loss
Inventory development carry-forward Total
US$’000 US$’000 US$’000 US$’000
At 1 January 2007 26 – 1,717 1,743
Credited to the income statement (3) 53 790 840
Exchange differences (1) – 29 28
At 31 December 2007 22 53 2,536 2,611
Debited to the income statement 2 74 (577) (501)
Exchange differences – (6) (48) (54)
At 31 December 2008 24 121 1,911 2,056
Deferred tax liabilities
Intangible Untaxed
assets reserves Total
US$’000 US$’000 US$’000
At 1 January 2007 (18) (57) (75)
Operations acquired (225) – (225)
Charged to the income statement 40 – 40
Exchange differences (3) (3) (6)
At 31 December 2007 (206) (60) (266)
Operations acquired –– –
Charged to the income statement 45 34 79
Exchange differences – (8) (8)
At 31 December 2008 (161) (34) (195)
49 GTE ANNUAL REPORT 2008 Notes to the ﬁnancial statements
for the year ended 31 December 2008
Financial statements and notes
17 Deferred tax continued
At 31 December 2008, the Group has unused tax losses of US$4,929,000 (2007: US$6,761,000) available for offset against
future proﬁts. These tax losses carried forwards expire as follows.
Amount
Year US$’000
2016 74
2017 93
2018 999
2019 882
2020 938
2021 1,737
2022 206
Later –
4,929
At 31 December 2008, the total tax losses carried forwards generated deferred tax assets of US$1,911,000 (2007: US$2,536,000).
The tax losses carried forwards can be utilised to reduce future taxable income. Their future utilisation does not mean a lower
tax charge for the Group. A deferred tax asset has not been recognised in respect of tax losses of US$1,838,000
(2007: US$1,884,000) due to the unpredictability of future income streams.
A deferred tax asset in respect of the total amount of these losses has been recognised as management’s forecasts
for the next three years indicate that these losses will be utilised by offset against available proﬁts over the forecast period.
18 Inventories
2008 2007
US$’000 US$’000
Raw materials 3,362 1,030
Finished goods and goods held for resale 48 495
3,410 1,525
During the period the Group consumed US$16,615,000 (2007: US$9,720,000) of inventories and recognised write downs
of US$14,720 (2007: US$63,000).
19 Accounts receivable – trade
2008 2007
US$’000 US$’000
Accounts receivable before deduction of provisions for impairment of receivables 8,714 4,571
Provisions for bad debt losses
1
(19) (46)
8,695 4,525
1) The bad debt losses for the year amounted to US$53,000 (2007: US$1,000).
The directors consider that the carrying amount of accounts receivable approximates their fair value.
50 GTE ANNUAL REPORT 2008 20 Other receivables
2008 2007
US$’000 US$’000
VAT receivable 898 248
Customer deposits 19 109
Other 256 276
1,173 633
The directors consider that the carrying amount of other receivables approximates their fair value.
21 Cash and cash equivalents
2008 2007
US$’000 US$’000
Cash at bank and in hand 5,448 2,284
22 Share capital
2008 2007
US$’000 US$’000
Authorised
150,000,000 ordinary shares of £0.002 each 494 399
(2007: 100,000,000 ordinary shares of £0.002 each)
Issued and fully paid
72,397,594 ordinary shares of £0.002 each 269 207
(2007: 56,701,594 ordinary shares of £0.002 each)
269 207
The Company has one class of ordinary shares which carry no rights to ﬁxed income.
For information about the Company’s option programme, see note 27.
51 GTE ANNUAL REPORT 2008 Notes to the ﬁnancial statements
for the year ended 31 December 2008
Financial statements and notes
23 Financial liabilities
The borrowings are repayable as follows:
2008 2007
US$’000 US$’000
Current
Invoice credit facility – 6
Bank loans 104 152
Total bank loans and overdrafts (secured) 104 159
Finance lease obligations (secured) 53 84
Other interest bearing liabilities (unsecured) – –
Total other liabilities 53 84
Total on demand or within one year 157 243
Non-current
Bank loans – –
Total – –
Finance lease obligations 73 90
The carrying amounts of the Group’s borrowings are denominated in the following currencies:
31 December 2008 USD SEK GBP
US$’000 US$’000 US$’000
Bank loans –– 104
Finance lease obligations 45 81 –
45 81 104
31 December 2007 USD SEK GBP
US$’000 US$’000 US$’000
Invoice credit facility 6– –
Bank loans –– 152
Finance lease obligations 45 129 –
51 129 152
At 31 December 2008, the Group had available US$1,500,000 (2007: US$2,306,000) of undrawn committed borrowing facilities
in respect of which all conditions precedent had been met.
2008 2007
Securities Security US$’000 US$’000
Loan Chattel mortgage 258 309
Bank loans Accounts receivable 1,279 3,690
Invoice credit facility Inventory 350 303
Total 1,887 4,302
The average interest rates, excluding obligations under ﬁnance lease which are presented under note 26, were as follows:
2008 2007
Loans other than ﬁnance leasing 7% –
52 GTE ANNUAL REPORT 2008 24 Adjustments to operating cash ﬂows
2008 2007
US$’000 US$’000
Depreciation of tangible and intangible assets 856 464
Loss on disposal of ﬁxed assets – 14
Impairment loss on intangible assets – 19
Share-based payments 241 185
Finance costs 384 150
Interest received (143) (164)
1,338 668
25 Operating lease arrangements
Minimum lease payments under non-cancellable operating leases recognised as an expense in the year.
2008 2007
US$’000 US$’000
Minimum lease payments 612 378
At the balance sheet date, the Group has outstanding commitments under non-cancellable operating property leases, which fall
due as follows:
2008 2007
US$’000 US$’000
Within one year 761 440
In the second to ﬁfth years inclusive 2,162 1,256
2,923 1,696
Operating lease payments represent rentals payable by the Group for its premises, leases are negotiated for an average term
of four years and rentals are ﬁxed for an average of four years.
26 Obligations under ﬁnance leases
Present value of
Minimum lease minimum lease
payments payments
2008 2007 2008 2007
US$’000 US$’000 US$’000 US$’000
Amounts payable under ﬁnance leases:
Within one year 56 91 50 84
In the second to ﬁfth years inclusive 28 96 24 90
84 187 74 174
Less: future ﬁnance charges (10) (13) N/A N/A
Present value of lease obligations 74 174 74 174
Less: Amount due for settlement within 12 months (shown under current liabilities) (50) (84)
Amount due for settlement after 12 months 24 90
It is the Group’s policy to lease certain of its cars under ﬁnance leases. The average lease term is three years. For the period
ended 31 December 2008, the average effective borrowing rate was 8% (2007: 5%). All leases are on a ﬁxed repayment basis
and no arrangements have been entered into for contingent rental payments.
53 GTE ANNUAL REPORT 2008 Notes to the ﬁnancial statements
for the year ended 31 December 2008
Financial statements and notes
26 Obligations under ﬁnance leases continued
The carrying amounts of the Group’s lease obligations are denominated in the following currencies:
31 December 2008
USD SEK
US$’000 US$’000
Within one year 31 50
In the second to ﬁfth years inclusive 14 24
45 74
The fair value of the Group’s lease obligations approximates their carrying amount.
The Group’s obligations under ﬁnance leases are secured by the lessors’ title to the leased assets.
27 Share-based payments
Introduction
The Company has established two option schemes, one designed to provide tax efﬁcient beneﬁts to Swedish resident
participants and one for non-Swedish resident participants. Summaries of the principal features of these schemes are set out
below. As at 31 December 2008, options under these schemes over a total of 2,403,422 ordinary shares had been granted
for non-Swedish resident participants and 848,500 ordinary shares had been made available for Swedish resident participants.
a) The GTE Share Option Scheme (the “Option Scheme”)
General
The Option Scheme was adopted by the Board of the Company on 15 November 2005. Beneﬁts under the Option Scheme
are not pensionable.
Eligibility
All executive directors and employees of the Company and any subsidiary of the Company are eligible to be granted options
under the Option Scheme. Participation is at the discretion of the directors. This scheme is principally intended to provide
options to eligible employees and executive directors who are not resident in Sweden.
Exercise price
Options have been granted at exercise prices of 26, 30, 45, 50, 53.5, 56, 58 and 100p – the market value of the ordinary shares
at the time of grant.
Individual limits
The aggregate market value of shares (valued at the relevant date of grant) granted to an individual under this scheme or any
other discretionary share option scheme in any year (excluding any options granted prior to admission) cannot normally exceed
400%, of the relevant individual’s annual basic salary. In exceptional circumstances options may be granted in excess of this limit.
Exercise of options
Options will normally vest over a four-year period. If the option holder ceases employment with the Group as a result of death,
injury, disability, redundancy, retirement or where the option holder’s employing company or business is transferred out of the
Group, normally options may be exercised to the extent vested for a period of 12 months in the case of death and three months
in all other cases. Where employment ends for other reasons options will lapse unless the Board permits otherwise.
The Board may grant options subject to alternative vesting and leaver arrangements.
Change of control, reorganisation and winding-up
Options may be exercised in full in the event of a change of control, reconstruction or winding-up of the Company. In the event
of another company acquiring the Company, option holders may in certain circumstances exchange their options for options
over shares in the acquiring company.
54 GTE ANNUAL REPORT 2008 27 Share-based payments continued
b) The GTE Swedish Share Option Scheme (the “Swedish Scheme”)
General
The Swedish Scheme was adopted by the Board of the Company on 15 November 2005. Beneﬁts under the Swedish Scheme
are not pensionable.
Eligibility
All executive directors and employees of the Company and any subsidiary of the Company are eligible to be granted options
under the Swedish Scheme. Participation is at the discretion of the directors. This scheme is principally intended to provide
options to eligible employees and executive directors who are resident in Sweden.
Grant of options
Participants have been required to purchase their options for consideration equal to the fair value of those options. Such value
is payable immediately or in arrears at the discretion of the directors.
Exercise price
Options have been granted at an exercise price of 30p – the market value of the ordinary shares on the time of grant. Options
will normally become exercisable over a four-year period, 25% annually. Options under the Swedish scheme will normally lapse
on the fourth anniversary of the date of grant.
Individual limits
The aggregate market value of shares (valued at the relevant date of grant) granted to an individual under this scheme or
any other executive share option scheme in any year (excluding any options granted prior to admission) cannot exceed 400%,
of the relevant individual’s annual basic salary. In exceptional circumstances options may be granted in excess of this limit.
Exercise and repurchase of options
If the option holder ceases employment with the Group, for any reason, or where the option holder’s employing company or
business is transferred out of the Group, the Company or its nominee will have a right to repurchase options for the fair value
of the options at the time the option holder’s employment with the Group ceases.
Options are transferable. However, if an option holder intends to sell or in any other way transfer the options he must ﬁrst offer
the Company or its nominee the opportunity to repurchase the options for the fair value of those options at the time of repurchase.
Change of control, reorganisation and winding-up
Options may be exercised in full in the event of a change of control, reconstruction or winding-up of the Company. In the event
of another company acquiring the Company, option holders may in certain circumstances exchange their options for options
over shares in the acquiring company.
c) Features common to the Option Scheme and the Swedish Scheme
Scheme limits
The rules of the Option Scheme and the Swedish Scheme limit the grant of options so that the number of ordinary shares
issued or remaining issuable by virtue of options granted under those schemes following admission and any other employee
share scheme established by the Company in the ten years following admission, cannot exceed 15%, of the Company’s issued
share capital on the relevant date of grant.
Termination of schemes
No options may be granted under the Option Scheme or the Swedish Scheme after the tenth anniversary of the adoption
by the Board of those schemes. Termination will normally be without prejudice to subsisting rights.
Adjustments
Options may be adjusted following a capitalisation, rights issue, sub-division, consolidation or reduction in the capital of the
Company or any other variation of ordinary share capital.
55 GTE ANNUAL REPORT 2008 Notes to the ﬁnancial statements
for the year ended 31 December 2008
Financial statements and notes
27 Share-based payments continued
Amendments
After admission the prior approval of the Company in general meeting is required for amendments which are to the advantage
of participants and relate to eligibility, the extent of participation, the exercise price of options, scheme limits, adjustment of
options or a variation of share capital and certain other provisions unless such amendments are minor amendments to beneﬁt
the administration of the Option Scheme or the Swedish Scheme, to take into account a change in legislation or to obtain or
maintain favourable tax treatment for participants, the Company or any participating Group company. Schemes similar to the
Option Scheme or the Swedish Scheme may be established but modiﬁed to take into account local tax, securities laws and
other local requirements.
Details of the share options outstanding during the year are as follows:
Number of Weighted average
share options exercise price
2008 2007 2008 2007
At 1 January and 31 December 3,251,922 2,962,500 £0.37 £0.36
of which:
Exercisable at the end of the year 1,845,500 1,134,250 £0.35 £0.30
The options outstanding at the end of the year have a weighted average remaining contractual life of 3.7 years. 346,922 new
options were granted during the year (2007: 754,000). 57,500 options lapsed during the year (2007: 240,000).
The fair values were calculated using the Black-Scholes option pricing model. The inputs into the model were as follows:
Option grant year
2008 2007 2005
Weighted average share price £0.31 £0.55 £0.30
Weighted average exercise price £0.31 £0.55 £0.30
Expected volatility 46.5% 46.5% 29.5%
Expected life 7yr 7yr 4yr/7yr
Risk free rate 5.08% 5.08% 4.14%
Expected dividend yield £Nil £Nil £Nil
Fair value £0.1729 £0.3024 £0.0892
Expected volatility was determined by calculating the historical volatility of three companies listed on the London Exchange.
These companies have been chosen on the basis that they are all within the engineering business and all have customers
with interest in motors and gas turbines.
The expected life is differentiated between the Option Scheme (seven years) and the Swedish Scheme (four years).
The Group recognised total expenses of US$241,000 (2007: US$185,000) related to equity-settled share-based payment
transactions during the year. The Swedish employees have paid fair value for their options of US$Nil (2007: US$Nil),
which has been booked against equity.
56 GTE ANNUAL REPORT 2008 28 Related party transactions
Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated
on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are
disclosed below.
EIG Venture Capital Ltd
EIG Venture Capital Ltd acquired GTE from its founder in 2001, and provided management depth and a coherent strategy, with
the aim of accelerating the potential growth of the business. Since 2001, EIG has diluted its shareholding with direct ownership
of 4% as per 24 April 2009 (2007: 25%).
As payment for loans given to the Company pre-ﬂotation, EIG further has the rights to purchase warrants over 1,000,000
ordinary shares to subscribe for ordinary shares. The purchase price of the warrants is the fair market value on the day
of admission (21 December 2005). The warrants were originally exercisable at any time up to 30 months from the date of
admission, at an exercise price of £0.30, but were extended in 2008 and are now exercisable at any time prior to 20 June 2009.
Compensation of key management personnel
The remuneration of directors and other members of key management during the year was as follows:
2008 2007
US$’000 US$’000
Short-term beneﬁts 3,318 2,224
Post-employment beneﬁts 66 43
Share-based payments 106 175
3,490 2,442
29 Financial instruments
The Group has one contract where the price is dependent on the relationship between USD/SEK exchange rates (cap and
ﬂoor). However, the economic risks and characteristics of this embedded derivative are closely related to the host contract,
and so the derivative does not need to be separated from the host contract and accounted for as a derivative per IAS 39.
The main market risks to which the Group is exposed are interest rates and foreign exchange. There is also exposure to credit
risk and liquidity risk. The Group monitors these risks and will take appropriate action to minimise any exposure through the use
of natural hedges as far as possible.
The carrying amount of ﬁnancial assets and liabilities recorded by IAS 39 category are summarised as follows:
2008 2007
US$’000 US$’000
Financial assets
Cash and cash equivalents 5,448 2,284
Loans and receivables: trade and other receivables 10,503 5,828
15,951 8,112
2008 2007
US$’000 US$’000
Financial liabilities
At fair value through the income statement
Measured at amortised costs:
Borrowings 230 333
Trade and other payables 10,745 5,080
10,975 5,413
57 GTE ANNUAL REPORT 2008 Notes to the ﬁnancial statements
for the year ended 31 December 2008
Financial statements and notes
29 Financial instruments continued
Credit risk
The Group’s overseas operations are partly ﬁnanced by local currency loans and the equity element is largely hedged by
long-term foreign currency borrowings. In addition, forward currency contracts are used as cash ﬂow hedges of exposures
on certain net foreign currency sales exposures.
The Group controls its exposure to credit risk by setting limits on its exposure to individual customers and these are disseminated
to operating companies and compliance is monitored by the internal audit department. As part of the process of setting customer
credit limits, different external credit reference agencies are used, according to the country of the customer. There are no
signiﬁcant concentrations of credit risk.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising
the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists
of debt, which includes borrowing disclosed in note 23, cash and cash equivalents and equity attributable to equity holders
of the parent, comprising issued capital, reserves and retained earnings.
Gearing ratio
The gearing ratio at the year end is as follows:
2008 2007
US$’000 US$’000
Debt (230) (333)
Cash and cash equivalents 5,448 2,284
Net funds 5,218 1,951
Equity 28,794 19,369
Debt is deﬁned as long- and short-term borrowings.
Equity includes all capital and reserves of the Group attributable to equity holders of the parent.
The ﬁnancial assets which are past-due but not impaired:
2008 2007
US$’000 US$’000
Financial assets
Less than 30 days 13,116 4,658
31–60 days 2,130 2,346
61–90 days 283 102
91–180 days 247 607
Over 180 days 175 399
15,951 8,112
Available-for-sale investments: all of them represent equity shares and therefore there is no maturity.
58 GTE ANNUAL REPORT 2008 29 Financial instruments continued
Liquidity risk
Financial liabilities maturity analysis
The Group manages liquidity risk on the basis of expected maturity dates. The following table analyses ﬁnancial liabilities
at 31 December 2008 by remaining contractual maturity (contractual and undiscounted cash ﬂows):
Trade
and other
Borrowings payables Total
US$’000 US$’000 US$’000
Less than one year 157 10,599 10,793
One to two years 55 79 97
Two to ﬁve years 18 67 85
Over ﬁve years –– –
230 10,745 10,975
At present the Group does expect to pay all liabilities at their contractual maturity. In order to meet such cash commitments the
Group expects the operating activity to generate sufﬁcient cash inﬂows. In addition, the Group holds ﬁnancial assets for which
there is a liquid market and that are readily available to meet liquidity needs.
At the balance sheet date there were undrawn borrowing facilities of US$1,500,000 (2007: US$2,306,000) available for
operating activities and to settle capital commitments. The Group maintains substantial borrowing facilities to ensure that it can
manage to fund its budgeted operations and take advantage of expansion opportunities as they arise. The ﬁnance director
provides the Board with a monthly schedule showing the maturity of ﬁnancial liabilities and unused borrowing facilities to assist
the Board in monitoring liquidity risk.
Market risks
Interest rate risk
The Group’s exposure to interest rate risk mainly concerns ﬁnancial liabilities. Liabilities are both ﬁxed rate and ﬂoating rate.
At present the Group does not hold loans and receivables that are short-term in nature. The following table analyses the
breakdown of liabilities by type of interest rate:
2008 2007
US$’000 US$’000
Financial liabilities
Fixed rate 126 174
Floating rate 104 159
Non-interest bearing 10,745 5,080
10,975 5,413
When considered appropriate, in order to manage the interest rate risk the Group enters into interest rate swaps to mitigate
the fair value risk relating to ﬁxed-interest assets or liabilities and the cash ﬂow risk related to variable-interest rate assets
and liabilities.
59 GTE ANNUAL REPORT 2008 Notes to the ﬁnancial statements
for the year ended 31 December 2008
Financial statements and notes
29 Financial instruments continued
Sensitivity analysis
A hypothetical increase in interest rates by 50 basis points on a parallel yield curve would cut proﬁts after tax by US$292
(2007: US$3,110).
A hypothetical increase in interest rates by 100 basis points on a parallel yield curve would cut proﬁt after tax by US$583
(2007: US$6,220).
A hypothetical increase in interest rates by 150 basis points on a parallel yield curve would cut proﬁts after tax by US$875
(2007: US$9,330).
A hypothetical increase in interest rates by 200 basis points on a parallel yield curve would cut proﬁts after tax by US$1,166
(2007: US$12,440).
The analysis has been performed separately for ﬁxed interest rate ﬁnancial assets/liabilities and ﬂoating interest rate ﬁnancial
assets/liabilities. The impact of a change in interest rates on ﬁxed interest rate ﬁnancial instruments has been assessed in terms
of changing of their fair value. The impact of a change in interest rates on ﬂoating interest rate ﬁnancial instruments has been
assessed in terms of changing of their cash ﬂows and therefore in terms of the impact on net expenses.
30 Post balance sheet events
Extraordinary General Meeting
An Extraordinary General Meeting was held on 12 March 2009 for the purposes of seeking approval to the implementation
of the Gas Turbine Efﬁciency plc 2009 Long Term Incentive Plan, the Gas Turbine Efﬁciency plc 2009 Restricted Share Plan,
the Gas Turbine Efﬁciency 2009 Share Option Plan (see “Grant of share awards”) and also to make an amendment to the
Company’s Articles of Association to bring the articles in line with the Companies Act 2006 relating to notices for General Meetings.
All resolutions were duly passed.
Grant of share awards
On 13 February 2009, the Board of the Company announced that the Remuneration Committee had granted the following share
awards to the Executive Directors of the Company over ordinary shares in the Company under the Gas Turbine Efﬁciency plc
2009 Long Term Incentive Plan (“LTIP”), the Gas Turbine Efﬁciency plc 2009 Restricted Share Plan (“RSP”) and the Gas
Turbine Efﬁciency 2009 Share Option Plan (“SOP”) (the LTIP, RSP and SOP together being the “Schemes”). The grant of the
share awards under the Schemes was approved by shareholders of each of the Schemes at an Extraordinary General Meeting
which was held on 12 March 2009.
Number of Number of Number of
ordinary shares ordinary shares ordinary shares
subject to subject to subject to
Director LTIP Award RSP Award SOP Option
Steven Zwolinski 1,000,000 989,472 (A) 250,000
Magnus Nordgren 300,000 191,031 (A) Nil
100,000 (B)
LTIP
In accordance with the rules of the LTIP, the LTIP awards were granted, in the form of conditional share awards, at a price
of 24.25p per ordinary share (being the closing mid-market share price on 12 February 2009).
The shares subject to the LTIP awards will vest three years from the date of grant subject to continued employment and subject
to the satisfaction of share price targets. 20% of the ordinary shares subject to LTIP awards will vest if the Company’s share
price is 30p at the end of the three-year period with vesting increasing on a sliding scale to 100% if the Company’s share price
is 80p at the end of the three-year period.
60 GTE ANNUAL REPORT 2008 30 Post balance sheet events continued
RSP
In accordance with the rules of the RSP, RSP awards were granted, in the form of conditional share awards, at a price of 24.25p
per ordinary share (being the closing mid-market share price on 12 February 2009).
The RSP awards denoted (A) above relate to deferred annual bonus payments and the shares subject to the awards will vest
three years from the date of grant subject to continued employment.
The RSP awards denoted (B) above will vest over a four-year period subject to continued employment.
SOP
In accordance with the rules of the SOP, the SOP option was granted with an exercise price of 24.25p per ordinary share
(being the closing mid market share price on 12 February 2009).
The shares subject to the SOP option will vest over a four-year period subject to continued employment.
The Company may issue up to 15% of its shares within a ten-year period to satisfy awards to participants in the Schemes
operated by the Company under which shares are issued.
Capacity expansion
On 11 March 2009 the Company announced that it had expanded global capacity to meet increased demand:
 GTE had signed an agreement to be the cornerstone company in the planned “Green City Business Park” in Stockholm,
Sweden. The new facility, which will have three times the current capacity, will continue to provide aviation solutions for
Pratt & Whitney’s EcoPower
®
business. Additional capability for industrial, fuel and combustion solutions will be added to
service customers in Europe, Russia, Middle East, and Asia.
 GTE recently expanded its assembly operation in Florida (US) from 15,000 to 40,000 sq ft. This facility will continue
to service the growing demand for industrial products and have the ﬂexibility to meet aviation demand in the US.
 On 15 March 2009, GTE also formally opened its new combustion and power plant solutions centre in South Carolina (US)
which will give GTE a ﬁve-fold increase over its previous facility’s capacity to 50,000 sq ft.
Share capital
On 7 May 2009, the Company announced that it had conditionally raised approximately £7.0m (approximately US$10.5m)
before expenses by way of a placing of 29.2m new ordinary shares at 24p per share to institutional investors. The placing is
subject to, inter alia, the approval of shareholders at a general meeting of the Company which has been convened to be held
on 26 May 2009.
New legal entity
In order to extend the Company’s footprint in the EMEA region, the Company incorporated a new UK operating subsidiary
(Gas Turbine Efﬁciency UK Limited) on 9 February 2009. This presence will extend the Company’s footprint
in the region and will be further extended to commercially support EMEA customers.
61 GTE ANNUAL REPORT 2008 Financial statements and notes
62 GTE ANNUAL REPORT 2008
Gas Turbine Efﬁciency plc (Parent Company) balance sheet
as at 31 December 2008
Financial statements and notes
2008 2007
Note US$’000 US$’000
Assets
Non-current assets
Intangible assets
License VII 40 –
Financial non-current assets
Investments in subsidiaries III 3,766 588
3,806 588
Current assets
Current receivables
Receivables due from Group companies 23,619 18,719
Other receivables IV 229 218
Prepaid expenses and accrued income 185 206
24,033 19,143
Cash and cash equivalents V 2,440 834
Total current assets 26,473 19,977
Total assets 30,279 20,565
Equity and liabilities
Equity
Share capital VI 269 207
Share premium 31,319 20,705
Share-based payment reserve 360 355
Translation reserve 1,506 1,506
Retained earnings (3,805) (2,678)
Total equity 29,649 20,095
Liabilities
Financial liabilities – borrowings VIII 104 153
Accounts payable – trade 249 160
Accrued expenses 277 157
Total liabilities 630 470
Total equity and liabilities 30,279 20,565
The ﬁnancial statements were approved by the Board of Directors and authorised for issue on 7 May 2009. They were signed
on its behalf by:
Magnus Nordgren
Director 63 GTE ANNUAL REPORT 2008
Gas Turbine Efﬁciency plc (Parent Company) statement of cash ﬂows
for the year ended 31 December 2008
2008 2007
Note US$’000 US$’000
Cash ﬂow from operating activities
Loss before tax (1,132) (621)
Adjustments to operating cash ﬂows IX 5 –
Cash ﬂow from operating activities before changes in working capital (1,127) (621)
Cash ﬂow from changes in working capital
(Increase)/decrease in receivables (4,890) (12,004)
Increase/(decrease) in liabilities 209 18
Net cash used by operating activities (5,808) (12,607)
Cash ﬂows from investing activities
Purchase of intangible assets (40) –
Purchase of non-current assets (3,173) –
Net cash used from investing activities (3,213) –
Cash ﬂows from ﬁnancing activities
New share issue 10,676 10,571
Loans taken 216 157
Loans repaid (265) (106)
Net cash generated by ﬁnancing activities 10,627 10,622
Net change in cash and cash equivalents 1,606 (1,985)
Cash and cash equivalents at beginning of the year 834 2,686
Effect of foreign exchange rate changes – 133
Cash and cash equivalents end of the year 2,440 834 Share- Total
based share-
Share Share payment Translation Retained holders’
capital premium reserve reserve earnings equity
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Balance at 31 December 2006 156 8,225 355 1,070 (2,057) 7,749
New share issue, 5,144,954 shares at nominal £0.002 20 4,480 –– – 4,500
New share issue, 250,000 shares at nominal £0.002 1– ––– 1
New share issue, 7,456,140 shares at nominal £0.002 29 8,363 –– – 8,392
Placing costs – (423) –– – (423)
New share issue, 100,000 shares at nominal £0.002 1 60 –– – 61
Exchange differences arising on translation to presentation currency–– – 436 – 436
Net loss for the year –– –– (621) (621)
Balance at 31 December 2007 207 20,705 355 1,506 (2,678) 20,095
New share issue, 2,231,000 shares at nominal £0.002 9 1,388 –– – 1,397
New share issue, 8,989,000 shares at nominal £0.002 35 6,683 –– – 6,718
New share issue, 4,000,000 shares at nominal £0.002 16 2,987 –– – 3,003
Placing costs – (741) –– – (741)
New share issue, 476,000 shares at nominal £0.002 2 297 –– – 299
Share-based payments –– 5–– 5
Net loss for the year – – – – (1,127) (1,127)
Balance at 31 December 2008 269 31,319 360 1,506 (3,805) 29,649
64 GTE ANNUAL REPORT 2008
Gas Turbine Efﬁciency plc (Parent Company) statement of changes in equity
for the year ended 31 December 2008
Financial statements and notes Gas Turbine Efﬁciency plc (Parent Company) accounting policies
for the year ended 31 December 2008
65 GTE ANNUAL REPORT 2008
The separate ﬁnancial statements of the Company are presented as required by the Companies Act 1985. As permitted
by that Act, the separate ﬁnancial statements have been in accordance with International Financial Reporting Standards.
The ﬁnancial statements have been prepared on the historical cost basis. The principal accounting policies are the same
as those set out in the Accounting policies in the consolidated ﬁnancial statements except as noted below.
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
The Company has taken advantage of section 230 of the Companies Act 1985 and has not included an income statement in
these ﬁnancial statements. The loss attributable to members of the parent company for the period ended 31 December 2008
was US$1,127,000 (period ended 31 December 2007: US$621,000).
The Company’s ﬁnancial risk management policies are disclosed in the consolidated ﬁnancial statements. 66 GTE ANNUAL REPORT 2008
I Other external costs
Auditors’ remuneration
2008 2007
US$’000 US$’000
Fees payable to the Company’s Auditor for the audit of the ﬁnancial statements 71 60
The Company has no employees other than the directors and the related directors’ emolument disclosures can be found in note 4
to the consolidated ﬁnancial statements.
II Taxation
2008 2007
US$’000 US$’000
Tax for the year/period – –
The tax charge for the period can be reconciled to the accounting loss before tax as follows:
2008 2007
US$’000 US$’000
Loss before tax (1,127) (621)
Tax at 28% (2007: 30%) (316) (186)
Tax effect of losses not recognised (316) (186)
Tax charge for the year/period ––
Notes to the Parent Company ﬁnancial statements
for the year ended 31 December 2008
Financial statements and notes 67 GTE ANNUAL REPORT 2008
III Subsidiaries
Details of the Company’s subsidiaries at 31 December 2008 are as follows:
Proportion of
Place of ownership
Corporate incorporation interest and
identiﬁcation (or registration) of voting
Name of subsidiary number and operation power held Principal activity
Gas Turbine Efﬁciency AB 556317-2823 Sweden 100% Sales ofﬁce
Gas Turbine Efﬁciency Sweden AB 556701-9509 Sweden 100% Development centre,
assembly, manufacturing,
sales, Group management
Gas Turbine Efﬁciency Sweden AB 1013234 Sweden 100% Onshore and Offshore
– ABU DHABI Foreign Gas Installations and Fields
Company Services – Natural Gas
Branch Ofﬁce and Oil Well Equipment
and Maintenance
Gas Turbine Efﬁciency Russia LLC 50678473047733 Russia 100% Sales ofﬁce
Gas Turbine Efﬁciency Norway AS 989 952 463 Norway 100% Sales ofﬁce
Gas Turbine Efﬁciency Singapore Pte Ltd 200709401Z Singapore 100% Sales ofﬁce
Gas Turbine Efﬁciency Inc 1455755 USA 100% Development, sales,
Group management
Control Center LLC 59-3597018 USA 100% Development, assembly,
marketing, sales
ARES Technology LLC 76-0755027 USA 100% Development, assembly,
marketing, sales Financial statements and notes
III Subsidiaries continued
Net book value
2008 2007
US$’000 US$’000
Shares in subsidiary undertakings
Costs
As at 1 January 233 117
Additions 3,173 114
Exchange differences – 2
At 31 December 3,406 233
Other investment in subsidiary undertakings
At 1 January 355 355
Movement in the year 5 –
At 31 December 360 355
Total investments in subsidiary undertakings 3,766 588
During the year ended 31 December 2008 the Company registered a branch ofﬁce to Gas Turbine Efﬁciency Sweden AB
in Abu Dhabi, United Arab Emirates. The Company has during the year issued a shareholder contribution to Gas Turbine
Efﬁciency Sweden AB of US$3,173,000.
IV Other receivables
2008 2007
US$’000 US$’000
VAT receivable 39 42
Other 190 176
Total other receivables 229 218
V Cash and cash equivalents
2008 2007
US$’000 US$’000
Cash at bank and in hand 2,440 834
VI Share capital
2008 2007
US$’000 US$’000
Authorised
150,000,000 ordinary shares of £0.002 each 494 399
(2007: 100,000,000 ordinary shares of £0.002 each)
Issued and fully paid 269 207
72,397,594 ordinary shares of £0.002 each
(2007: 56,701,594 ordinary shares of £0.002 each)
269 207
68 GTE ANNUAL REPORT 2008
Notes to the Parent Company ﬁnancial statements
for the year ended 31 December 2008 VII Intangible assets, license
2008 2007
US$’000 US$’000
Cost
As at 1 January – –
Purchases 40 –
As at 31 December 40 –
VIII Financial liabilities
The borrowings are repayable as follows:
2008 2007
US$’000 US$’000
On demand or within one year
Bank loans 104 –
Bank overdrafts – 153
104 153
The carrying amounts of the parent Company’s borrowings are denominated in British pounds.
IX Adjustments to operating cash ﬂows
2008 2007
US$’000 US$’000
Share-based payments 5 –
Non-cash transactions
2008 2007
US$’000 US$’000
Share issue consideration for acquired operations – 2,000
X Share-based payments
Details of the Company’s share option schemes are disclosed in note 27 to the consolidated ﬁnancial statements.
XI Related party transactions
Details of the Company’s related party transactions are disclosed in note 28 to the consolidated ﬁnancial statements.
XII Post balance sheet events
Details of the Company’s post balance sheet events are disclosed in note 30 to the consolidated ﬁnancial statements.
69 GTE ANNUAL REPORT 2008 Additional information
70 GTE ANNUAL REPORT 2008
Consolidated four-year summary
IFRS IFRS IFRS IFRS
12 months 12 months 12 months 12 months
to 31 Dec to 31 Dec to 31 Dec to 31 Dec
2005 2006 2007 2008
US$’000 US$’000 US$’000 US$’000
Revenue 5,265 4,662 17,830 35,119
EBITDA (2,090) (2,441) (2,425) 1,736
EBIT (2,282) (2,714) (2,908) 880
EBITAE (476) (2,714) (1,520) 2,045
EBITDAE (374) (2,441) (1,266) 2,549
Proﬁt/(loss) before tax (2,369) (2,918) (2,894) 931
Proﬁt/(loss) after tax (1,406) (2,289) (2,014) 491
Base cost excluding depreciation, amortisation and exceptionals (2,731) (4,495) (8,738) (11,806)
Research and development expenses (474) (1,573) (4,061) (8,357)
Purchase of intangible non-current assets (231) (988) (2,931) (7,010)
Intangible assets
Capitalised expenditure for research and development 135 765 2,904 7,491
Patents 183 376 928 1,703
Goodwill 1,084 1,255 6,306 6,186
Net assets 9,459 8,389 19,369 28,794
US$m US$m US$m US$m
Revenue by geography
Americas/Western 0.9 0.4 10.2 25.1
EMEA/Eastern 4.3 4.2 7.6 10.0
5.3 4.7 17.8 35.1
Revenue by sector
Aviation 2.1 2.7 5.2 6.9
Industrial 3.2 2.0 10.4 20.7
Combustion –– 2.2 7.5
5.3 4.7 17.8 35.1
% of revenue ratios
Gross proﬁt 45% 44% 42% 41%
EBITDA –– – 5%
EBIT –– – 3%
EBITAE –– – 6%
EBITDAE –– – 7%
Net proﬁt –– – 1%
Base cost excluding depreciation, amortisation and exceptionals (51%) (96%) (49%) (34%)
Research and development (9%) (34%) (23%) (24%)
US$ US$ US$ US$
Earnings/(loss) per ordinary share
Basic (0.054) (0.052) (0.037) 0.007
Diluted (0.054) (0.052) (0.037) 0.007 Legal advisers to the Company
Orrick, Herrington & Sutcliffe
Tower 42
Level 35
25 Old Broad Street
London EC2N 1HQ
Auditors
RSM Bentley Jennison
Charterhouse
Legge Street
Birmingham B4 7EU
Public relations
FD
Holborn Gate
26 Southampton Buildings
London WC2A 1PB
Registrars
Share Registrars Limited
Suite E
9 Lion & Lamb Yard
Farnham
Surrey GU9 7LL
Principal places of business
Datavägen 9A 300 Sunport Lane
175 27 Järfälla Orlando, Florida, 32809
Sweden USA
Financial calendar
AGM 9 June 2009
Interim results September 2009
Year end 31 December
Board of directors
John Bryant
(Non-Executive Chairman)
Steven Edward Zwolinski
(Chief Executive Ofﬁcer)
Magnus Fredrik Nordgren
(Chief Financial Ofﬁcer)
Otto Lagarhus
(Non-Executive director)
Charles Robert MacMartin Cameron
(Non-Executive director)
Company secretary
London Registrars plc
Third Floor
89 Fleet Street
London EC4Y 1DH
Nominated adviser
Collins Stewart Europe Limited
9th Floor
88 Wood Street
London EC2V 7QR
Registered address
Third Floor
89 Fleet Street
London EC4Y 1DH
Registered number
GTE plc’s registered number is 5396081
Nomad and Joint Broker
Collins Stewart Europe Limited
9th Floor
88 Wood Street
London EC2V 7QR
Joint Broker
Mirabaud Securities LLP
21 St James’s Square
London SW1Y 4JP
Shareholder information
Additional information
71 GTE ANNUAL REPORT 2008 Ofﬁces
Additional information
European ofﬁces
Registered address
Gas Turbine Efﬁciency plc
89 Fleet Street
London EC4Y 1DH
United Kingdom
Tel: +44 870 766 8407
Gas Turbine Efﬁciency Sweden AB
Box 633
175 27 Järfälla
Sweden
Tel: +46 8 546 10 500
Fax: +46 8 546 10 501
Visiting/delivery address:
Datavägen 9A, 175 27 Järfälla
Russian ofﬁce
Gas Turbine Efﬁciency Russia LLC
6, Bolshoy Smolensky prospekt
Ofﬁce 422
St Petersburg 192029
Russian Federation
Tel: +7 812 325 65 89
Fax: +7 812 365 41 43
For additional sales ofﬁces in
Singapore and Dubai, contact
the Sweden ofﬁce.
72 GTE ANNUAL REPORT 2008
United States ofﬁces
Western Hemisphere
Headquarters and Manufacturing
Gas Turbine Efﬁciency
Industrial Business Unit
300 Sunport Lane
Orlando, FL 32809
USA
Tel: +1 407 304 5200
Fax: +1 407 304 5201
GTE Fuels and Combustion Facility
Gas Turbine Efﬁciency
Combustion Business Unit
240 Parkway East Suite 100
Duncan, SC 29334
USA
Tel: +1 864 249 2000
Fax: +1 864 249 2023
Worldwide Technology and
Research Center
Gas Turbine Efﬁciency
120 Defreest Drive
Troy, NY 12180
USA
Tel: +1 518 286 4000
Fax: +1 518 286 4003
Central (US) Region Sales Ofﬁce
Gas Turbine Efﬁciency
901 South Mopec Expressway
Barton Oaks Plaza One, Suite 300
Austin, TX 78746
USA
Tel: +1 512 329 1919
Fax: +1 407 304 5201
Western (US) Region Sales Ofﬁce
Gas Turbine Efﬁciency
32440 Saddle Mountain Drive
Westlake Village, CA 91361
USA
Tel: +1 818 597 4633
Fax: +1 407 304 5201
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