Energy Technique Plc
Interim Report
30 September 2005
Chairmans statement
The results for the half year ended 30 September 2005 are the first results to
be announced since my appointment as a director and Chairman on 4 November 2005.
Since my appointment, I have initiated a thorough review of all of the Groups
activities with the aim of concentrating on higher added value products only and
to seek ways of further reducing the Groups cost base. Certain of the actions
currently in hand are very necessary and will result in yet further termination
and reorganisation costs being incurred, but I believe they will turn out to be
in the long term interests of shareholders.
Results
The Group continued to experience extremely difficult trading conditions in the
first half year, although the results represent a considerable improvement on
the comparable period for the previous year. Sales fell 11% to �5.460 million
(2004: �6.115 million), but importantly the loss after taxation reduced to
�667,000 (2004: �924,000).
The combination of the losses for the first half year, in addition to the �2.471
million of losses incurred in the year ended 31 March 2005, necessitated a �1.5
million share placing, before issue expenses, completed after 30 September 2005,
which was approved by shareholders at an extraordinary general meeting held on
26 October 2005. These interim accounts include a pro-forma balance sheet at 30
September 2005 as if the �1.5 million share placing proceeds had been received
on that date.
Diffusion Heating and Cooling (Diffusion HC)
Sales of Diffusion HC in the first half year fell by 13% to �3.403 million
(2004: �3.896), but the operating loss reduced significantly to �152,000 (2004:
�348,000) as a result of a reduction in its operating cost base. All of the
losses in the current half year were incurred between April and July 2005, with
average monthly sales for August and September 11% ahead of the first four
months average. The impact of certain cost reductions already achieved,
particularly for management, will not be fully felt until after December 2005,
when notice periods have been worked out.
The core fan coil market remains intensely price competitive, but Diffusion HC
continues to differentiate itself by offering highly engineered bespoke
solutions. Sales of the higher added value commercial heating products grew by
19% to �845,000, following new product launches and successful marketing to
banks, and out of town and high street retail chains. We are currently
examining ways of improving both fan coil and commercial heating product
profitability by incorporating low cost high quality Chinese manufactured
products into the overall supply chain, whilst still retaining existing high
quality levels of engineering expertise and performance capability. Sales of
the premium priced Kampmann trench heating product range will substantially
cease from January 2006 onwards, following a period of continual sales and
margin erosion.
Diffusion DX Air Conditioning (Diffusion DX)
Sales of Diffusion DX, which distributed Panasonic, LG Electronics and Fujitsu
packaged air conditioning equipment, fell in the first half year by 5% to �2.003
million (2004: �2.111 million) incurring a small loss of �26,000 (2004: profit
of �23,000).
I have commented below on Diffusion DXs current trading since 30 September 2005
and our decision to effectively close Diffusion DX in its present form. Our aim
is to seek a distribution agreement with a suitable partner for higher margin
Heating Ventilation and Air Conditioning products, using the highly respected
and strong Diffusion brand name with its established routes to market.
Diffusion Air Treatment (Diffusion AT)
Sales of Diffusion AT in the first half year by fell 50% to �54,000 (2004:
�108,000) incurring a much reduced loss of �164,000 (2004: �369,000) due to
reduced operating costs. Sales comprised the Lifebreath range of domestic fresh
air ventilation products only. We were pleased to secure the first phase of a
major contract to supply Lifebreath units into a leading UK house builder, but
sales have been hindered by continued site delays out of our control.
Current trading
Since 30 September 2005 sales have been significantly below budget,
substantially due to the poor performance of Diffusion DX, where sales have been
approximately 40% of budget for the three months ending 31 December 2005. This
position has been compounded by the resignation, early in December, of the
remaining Diffusion DX sales team. Inevitably, this has impacted adversely on
profitability and cash flow has also been significantly impaired due to the
lower level of invoice discounting available to the Group.
The Board has decided effectively to close the Diffusion DX business in its
present form, which will stem the losses previously incurred in that division.
Encouragingly, the Groups core business, Diffusion HC, has continued with its
recovery, and although sales are marginally below budget, the order prospects
for Diffusion HC in 2006 appear to be good.
The Board is urgently addressing ways of improving the present difficult cash
flow position, including, inter alia, the realisation of Diffusion DXs residual
stocks, the possibility of converting debt due to a former supplier into equity,
and the possibility of seeking further additional external financing.
A Caplin
Chairman
Group profit and loss account
For the six months ended 30 September 2005
6 months to 6 months to Year to
30 September 30 September 31 March
2005 2004 2005
Unaudited Unaudited Audited
�000 �000 �000
Turnover 5,460 6,115 10,677
Cost of sales (4,441) (4,941) (8,845)
Gross profit 1,019 1,174 1,832
Distribution costs (1,093) (1,567) (3,233)
Administrative expenses (560) (477) (953)
Operating loss
Before exceptional items (621) (836) (2,298)
Redundancies (included in cost of sales) (13) (34) (56)
Loss before interest (634) (870) (2,354)
Interest payable (66) (54) (117)
Loss on ordinary activities
before taxation (700) (924) (2,471)
Tax on loss on ordinary activities 33 - -
Loss on ordinary activities
after taxation (667) (924) (2,471)
Dividends on equity shares - - -
Transfer from reserves (667) (924) (2,471)
Loss per share:
Basic (0.44)p (0.67)p (1.70)p
Diluted (0.44)p (0.67)p (1.70)p
Before exceptional items (0.43)p (0.64)p (1.66)p
Both the turnover and operating results shown above are entirely in respect of
continuing operations.
There are no other recognised gains or losses other than as recorded in the
profit and loss account for the period.
Group balance sheet at 30 September 2005
30 September 30 September 31 March
2005 2004 2005
Unaudited Unaudited Audited
�000 �000 �000
Fixed assets
Intangible assets 17 17 17
Tangible assets 296 300 329
313 317 346
Current assets
Stocks 1,504 1,726 1,580
Debtors 2,944 2,825 2,308
4,448 4,551 3,888
Creditors
amounts falling due within one year (5,345) (3,248) (4,151)
Net current (liabilities)/assets (897) 1,303 (263)
Total assets
less current liabilities (584) 1,620 83
Capital and reserves
Called up share capital 1,526 1,526 1,526
Share premium account 3,572 3,562 3,572
Other reserves 7,449 7,449 7,449
Profit and loss account (13,131) (10,917) (12,464)
Equity shareholders funds (584) 1,620 83
Important note: a pro-forma balance sheet at 30 September 2005 is shown on page
8 on the basis the �1.5 million share placing proceeds completed after 30
September 2005 had been received on that date.
Reconciliation of movements in shareholders funds
For the six months ended 30 September 2005
6 months 6 months Year
to 30 to 30 to 31
September September March
2005 2004 2005
Unaudited Unaudited Audited
�000 �000 �000
Loss for the financial period (667) (924) (2,471)
Issue of ordinary shares - 780 780
Increase in share premium account - 1,975 1,985
Movements in shareholders funds (667) 1,831 294
Shareholders funds at
beginning of period 83 (211) (211)
Shareholders funds at end of period (584) 1,620 83
Group cash flow statement
For the six months ended 30 September 2005
6 months 6 months Year
to 30 to 30 to 31
September September March
2005 2004 2005
Unaudited Unaudited Audited
�000 �000 �000
Cash outflow from operating activities (377) (1,759) (2,077)
Returns on investment and
servicing of finance (66) (54) (117)
Capital expenditure and
financial investment (20) (34) (119)
Corporation tax receipt 33 - -
Cash outflow before financing (430) (1,847) (2,313)
Financing:
Issue of share capital - 2,755 2,765
Increase/(reduction) in debt 430 (908) (452)
Reduction in cash during period - - -
Reconciliation of net cash flow to movement in net debt
�000 �000 �000
Reduction in cash in period - - -
(Increase)/reduction in debt (430) 908 452
Change in net debt resulting
from cash flows (430) 908 452
New finance leases - - -
(Increase)/reduction in net debt (430) 908 452
Net debt at start of period (1,319) 1,771) (1,771)
Net debt at end of period (1,749) (863) (1,319)
Reconciliation of operating loss to operating cash flows
�000 �000 �000
Operating loss before
exceptional items (621) (836) (2,298)
Redundancy costs (13) (34) (56)
Operating loss after
exceptional items (634) (870) (2,354)
Depreciation and amortisation 53 51 107
Stocks 76 (403) (257)
Debtors (635) (171) 346
Creditors 763 (366) 81
Operating cash flows (377) (1,759) (2,077)
Segmental analysis
For the six months ended 30 September 2005
6 months 6 months Year
to 30 to 30 to 31
September September March
2005 2004 2005
Unaudited Unaudited Audited
�000 �000 �000
Turnover
Diffusion HC 3,403 3,896 7,052
Diffusion DX 2,003 2,111 3,444
Diffusion AT 54 108 181
5,460 6,115 10,677
Operating (loss)/profit
Diffusion HC
Before exceptional items (139) (314) (837)
Exceptional items (13) (34) (56)
After exceptional items (152) (348) (893)
Diffusion DX (26) 23 (257)
Diffusion AT (164) (369) (833)
Before central and plc costs (342) (694) (1,983)
Central and plc costs (292) (176) (371)
(634) (870) (2,354)
Pro-forma group balance sheet
At 30 September 2005
30 Adjustment
September for 30
September
2005 Share 2005
Unaudited Placing Pro-forma
�000 �000 �000
Fixed assets
Intangible assets 17 - 17
Tangible assets 296 - 296
313 - 313
Current assets
Stocks 1,504 - 1,504
Debtors 2,944 - 2,944
4,448 - 4,448
Creditors amounts falling
due within one year (5,345) 1,400 (3,945)
Net current (liabilities)/assets (897) 1,400 503
Total assets less current liabilities
(584) 1,400 816
Capital and reserves
Called up share capital 1,526 1,500 3,026
Share premium account 3,572 (100) 3,472
Other reserves 7,449 - 7,449
Profit and loss account (13,131) - (13,131)
Equity shareholders funds (584) 1,400 816
The pro-forma group balance shown above has been extracted from the unaudited
balance sheet at 30 September 2005, adjusted only for the impact of the �1.5
million share placing completed after 30 September 2005 and the costs of
�100,000 relating to this placing. No adjustments have been made for trading
since 30 September 2005 or for any other adjustments.
Notes to the accounts
For the six months ended 30 September 2005
1. Financial information
The financial information provided for the six months ended 30 September 2005
has been prepared using consistent accounting policies as used in the
preparation and filing of the statutory accounts for the year ended 31 March
2005. The financial information set out here does not constitute statutory
accounts as defined by section 240 of the Companies Act 1985.
2. Audit review
These interim results have not been subject to a review by our company
auditors, which is in accordance with our usual interim procedures.
3. Loss per share
The loss per share calculations has been arrived at by reference to the
following earnings and weighted average number of shares in issue during the
period.
6 months 6 months Year
to 30 to 30 to 31
September September March
2005 2004 2005
Unaudited Unaudited Audited
�000 �000 �000
Basic
Loss after tax (667) (924) (2,471)
Before exceptional items
Operating loss (621) (836) (2,298)
Interest payable (66) (54) (117)
Tax recoverable 33 - -
Loss after tax (654) (890) (2,415)
No No No
Weighted average number of shares in issue
30 September 2005 - 152,628,016
30 September 2004 - 138,197,809
31 March 2005 - 145,334,603
Weighted average number of
shares on a diluted basis
30 September 2005 - 160,596,695
30 September 2004 - 160,732,003
31 March 2005 - 153,303,282
4. Posting to shareholders
This interim report will be posted to shareholders early in January 2006.
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