TIDMETQ
Energy Technique Plc
("Energy Technique" or the "Company")
Half-Yearly Report
30 September 2009
3 December 2009
Headlines
· SIAS FM buildings maintenance business acquired to provide more recurring
income streams;
· A new range of air handling units, which are being installed into the One
Hyde Park development, opens up a much larger GBP100m UK market for Diffusion;
· Remained profitable despite the current weak market conditions for fan
coils and heating products;
· Sales GBP2.724m (2008: GBP4.209m) and profit before tax GBP50,000 (2008:
GBP215,000);
· Net cash in hand GBP706,000 (2008: GBP1.524m)
· Strong balance sheet net worth of GBP2.520m equal to 7.6 pence per share;
· Board's strategy is to build a support services group on the back of the
strong Diffusion brand name.
Chairman's statement
Introduction
Significant progress has been achieved in the half year to 30 September 2009 in
expanding the Company's product and service offerings.
In July 2009, the Company, through Diffusion, purchased certain assets of a
competitor falling into administration and was then awarded the contract to
supply air handling units to the prestigious One Hyde Park project in London,
thereby opening up access to a much larger UK market for air handling units,
estimated at over GBP100m.
In August 2009, the Company purchased the building maintenance division of SIAS
Building Services LLP (in administration), now re-named SIAS FM, where the aim
is to grow this business to become a nationwide provider of building maintenance
services to the commercial sector.
All of this has been achieved in much weaker market conditions for fan coils and
commercial heating products, caused by the unprecedented decline in commercial
property construction and development activity, which started in late 2008. The
current market place has been characterised not only by reduced demand but also
by delays in project start dates, which has made production planning at
Diffusion more difficult.
Group financial performance
Sales in the half year to 30 September 2009 were GBP2.724m (2008: GBP4.209m) and
group operating profit was GBP66,000 (2008: GBP207,000). Whilst these trading
results are below those of the corresponding half year in 2008 this level of
operating profit is in line with management's expectations and the results
should be set in the context of the weak market conditions already outlined.
After net interest costs of GBP16,000, the group profit before tax was GBP50,000
(2008: GBP215,000).
Diffusion
Diffusion's sales in the half year were GBP2.557m (2008: GBP4.209m) and operating
profit was GBP96,000 (2008: GBP331,000). This result was achieved through improved
contribution margins and a 22% reduction in overheads. The improved
contribution margins were attributable to both labour and material manufacturing
efficiencies, provided by the GBP300,000 investment in a state of the art laser
cutting machine made recently.
The largest project win for Diffusion was the supply of air handling units into
the One Hyde Park development in London. Diffusion now has the necessary
technical skills in house to exploit this much larger UK air handling market
estimated at over GBP100m, and it has just secured its first follow on order.
Major fan coil projects completed during the half year include City Inn
Westminster, BBC London, St Pancras Chambers, Queen Mary University, and
Ravensbourne College. Diffusion was delighted to receive sole national
specification for the supply of air curtains, fan convectors, and ceiling
ventilation units from Marks & Spencer and Aldi for projects in 2009/10.
SIAS FM
In August 2009, the Company purchased the building maintenance division of SIAS
Building Services LLP (in administration), now trading as SIAS FM, as a supplier
of heating and ventilation building maintenance services to hotels and
commercial buildings, with regional offices in Crewe, Keighley and Basingstoke.
This business will start to provide more recurring income streams from its
annual maintenance contracts, which provide both planned and reactive
maintenance, together with resulting contract works. There is very little
overlap of customers with Diffusion and the Board believes this presents many
cross selling opportunities. Work is underway for SIAS FM to be included in the
approved supply lists of major procurement organisations for building
maintenance services.
Sales from 21 August 2009 to 30 September 2009 were GBP167,000 and the Board is
pleased the business produced an operating profit of GBP7,000. The Company has
already started to invest into SIAS FM, including additional management, a new
Keighley office and replacing the vehicle fleet, together with engineer
development and training. During the second half of the 2010 financial year,
further investments will be made in the IT systems, so that SIAS FM has a strong
infrastructure to facilitate future growth. SIAS FM has a very experienced and
committed management team, who are eager to grow the SIAS FM brand.
Cash flow and net assets
Cash outflow during the half year amounted to GBP729,000, attributable to the
costs of acquiring SIAS FM and its subsequent working capital requirement,
together with increased working capital needs of Diffusion. Net cash in hand at
30 September 2009 was GBP706,000 (2008: GBP1.524m). The Company has a well-funded
balance sheet with share capital and reserves at 30 September 2009 of GBP2.520m,
equivalent to net assets per share of 7.6 pence. The Board expects the high
working capital needs of Diffusion experienced in the six months to 30 September
2009 to reverse during the second half of the 2010 financial year.
Dividends
The Board does not recommend payment of an interim dividend, as it believes the
Company's best interests are served by reinvesting profits generated for future
growth and development.
Business strategy
The Board's strategy is to continue to expand the Company's product offering and
to grow into a broadly based support services group from the foundations of the
strong Diffusion brand name. Entering the UK air handling market and the
acquisition of SIAS FM were the initial steps in this strategy. The Board hopes
to complement the SIAS FM heating and ventilation maintenance business with
another acquisition offering related maintenance services.
Current trading and prospects
Order prospects and intakes at Diffusion are showing some signs of improvement
and with the acquisition of SIAS FM, the Board believes that trading conditions
for the enlarged group are likely to be more favourable during the second half
of the financial year.
James W Lugg
Chairman and CEO
Contacts:
Energy Technique Plc: 020 8783 0033
James Lugg, Chairman and CEO
Rob Unsworth, Company Secretary
Blomfield Corporate Finance Limited (Nominated Adviser): 020 7444 0800
Ben Jeynes
Derek Crowhurst
Consolidated income statement
For the six months ended 30 September 2009
6 months to 6 months to Year to
30 September 30 September 31 March
2009 2008 2009
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
CONTINUING OPERATIONS
Revenue 2,724 4,209 7,750
Cost of sales (1,826) (2,850) (5,604)
Gross profit 898 1,359 2,146
Distribution costs (583) (681) (1,480)
Administration expenses (249) (471) (423)
Operating
profit
Before exceptional items 66 207 305
Exceptional items - - (62)
66 207 243
Financial (expense)/income (net) (16) 8 12
Profit before taxation 50 215 255
Taxation - (47) (48)
Profit for the financial period
from Continuing Operations 50 168 207
DISCONTINUED OPERATIONS
Loss attributable to Discontinued Operations - - (36)
Profit for the year 50 168 171
Earnings per share:
Basic 0.15p 0.50p 0.51p
Diluted 0.15p 0.50p 0.51p
There are no other recognised gains or losses other than as recorded in the
consolidated income statement for the period.
Consolidated balance sheet
At 30 September 2009
30 September 30 September 31 March
2009 2008 2009
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
ASSETS
Non-current assets
Maintenance contracts 310 - -
Property, plant and equipment 428 126 414
Deferred tax asset 305 306 305
Total non-current assets 1,043 432 719
Current assets
Inventories 734 750 570
Trade and other receivables 1,713 1,467 1,003
Net cash and cash equivalents 706 1,524 1,435
Total current assets 3,153 3,741 3,008
Total assets 4,196 4,173 3,727
LIABILITIES
Current liabilities
Trade and other payables (1,187) (1,530) (1,115)
Tax liabilities (243) (161) (142)
Financial liabilities (88) - -
Total current liabilities (1,518) (1,691) (1,257)
Non-current liabilities
Financial liabilities (158) - -
Total non-current liabilities (158) - -
Total liabilities (1,676) (1,691) (1,257)
Net assets 2,520 2,482 2,470
EQUITY
Equity attributable to equity holders
Share capital 4,351 4,351 4,351
Share premium account 3,399 3,399 3,399
Other reserves 7,449 7,449 7,449
Retained earnings (12,679) (12,717) (12,729)
Total equity 2,520 2,482 2,470
Consolidated statement of changes in equity
hare premium Other Retained
Share capital account reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000
Half year ended 30 September
2009 - Unaudited
At 1 April 2009 4,351 3,399 7,449 (12,729) 2,470
Total recognised income - - - 50 50
At 30 September 2009 4,351 3,399 7,449 (12,679) 2,520
Half year ended 30 September 2
008 - Unaudited
At 1 April 2008 4,351 3,399 7,449 (12,885) 2,314
Total recognised income - - - 168 168
At 30 September 2008 4,351 3,399 7,449 (12,717) 2,482
Year ended 31 March 2009 - Audited
At 1 April 2008 4,351 3,399 7,449 (12,885) 2,314
Profit for year - - - 171 171
Treasury shares - - - (15) (15)
Total recognised income - - - 156 156
At 31 March 2009 4,351 3,399 7,449 (12,729) 2,470
Consolidated cash flow statement
For the six months ended 30 September 2009
6 months 6 months Year to
to to 31
30 30 March
Septembe September 2009
r 2008 Audited
2009 Unaudited GBP000
Unaudite GBP000
d
GBP000
Cash flows from operating
activities
Profit before taxation 50 215 219
Finance costs/(income) (net) 16 (8) (12)
Depreciation 46 32 59
Operating income before changes 112 239 266
in working capital
(Increase)/decrease in (164) 64 244
inventories
(Increase)/decrease in (712) (110) 354
receivables
Increase/(decrease) in payables 174 302 (407)
Cash (absorbed)/generated from (590) 495 457
operations
Finance costs (16) (14) (17)
Net cash (absorbed)/generated (606) 481 440
from operating activities
Cash flows from investing
activities
Purchase of property, plant and (29) (16) (340)
equipment
Capital expenditure financed with - - 275
hire purchase
Acquisition of SIAS FM (340) - -
(369) (16) (65)
Disposal of plant and equipment - - 9
Interest received - 22 29
Net cash (used in)/generated from (369) 6 (27)
investing activities
Cash flows from financing
activities
Treasury shares - - (15)
New hire purchase agreements 275 - -
Hire purchase repayments (29) - -
Net cash generated/(absorbed) by 246 - (15)
financing activities
(729) 487 398
Net (reduction)/increase in cash
and cash equivalents
Cash and cash equivalents at 1,435 1,037 1,037
beginning of period
706 1,524
Cash and cash equivalents at end 1,435
of period
Consolidated segmental analysis
For the six months ended 30 September 2009
6 months to 6 months to Year to
30 September 30 September 31 March
2009 2008 2009
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
REVENUE
Diffusion United
Kingdom 2,520 4,137 7,379
Rest of Europe 37 72 371
2,557 4,209 7,750
SIAS FM
United Kingdom 167 - -
2,724 4,209 7,750
OPERATING PROFIT
Continuing Operations
Diffusion before exceptional items 96 331 475
Exceptional costs - - (62)
Diffusion after exceptional costs 96 331 413
SIAS FM 7 - -
Central and plc costs (37) (124) (170)
Operating profit 66 207 243
Interest (net) (16) 8 12
Profit before tax 50 215 255
Deferred tax charge - (47) (48)
Profit for the period Continuing Operations 50 168 207
Discontinued
Operations
Operating loss before and after taxation - - (36)
Consolidated profit for the period 50 168 171
Notes
1. GENERAL INFORMATION
Energy Technique Plc ("the Company") is a public limited company incorporated
in the United Kingdom under the Companies Act 1985 (registration number
13273). The Company is domiciled in the United Kingdom and its registered
office address is 47 Central Avenue, West Molesey, Surrey KT8 2QZ. The
Company's Ordinary Shares are traded on the AIM market of the London Stock
Exchange.
2. BASIS OF PREPARATION
Energy Technique Plc has adopted International Financial Reporting Standards
("IFRS") as adopted by the European Union with effect from 1 April 2006. The
financial statements are presented in sterling and all values are rounded to
the nearest thousand pounds (GBP000) except when otherwise indicated. The
accounting policies and methods of computation used in the preparation and
presentation of this half-yearly report are in a form consistent with that
which will be adopted in the Company's annual accounts.
3. REPORTING UNDER INTERNATIONAL REPORTING STANDARDS
As permitted, the Company has chosen not to adopt IAS 34 "Interim Financial
Statements" in preparing these half-yearly financial statements and therefore
the half-yearly financial information is not in full compliance with IFRS.
4. EARNINGS PER SHARE
The earnings per share calculations have 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
to to
30 30 31 March
Septembe Septembe
r r
2009 2008 2009
Unaudite Unaudite Audited
d d
Basic and diluted earnings per Pence Pence Pence
share
Continuing Operations 0.15 0.50 0.62
Discontinued Operations - - (0.11)
0.15 0.50 0.51
GBP000 GBP000 GBP000
Profit for the financial period
after taxation
Continuing Operations 50 168 207
Discontinued Operations - - (36)
50 168 171
No. No. No.
Weighted average number of 33,305,160 33,305,160 33,305,160
shares in issue
Weighted average number of 33,120,160 33,305,160 33,281,122
shares on a diluted basis
5. OTHER INFORMATION
The half-yearly financial statements do not constitute statutory accounts as
defined by Section 434 of the Companies Act 2006. It does not therefore
include all the information and disclosures required in the annual financial
statements. The financial information for the year ended 31 March 2009 has
been extracted from the statutory financial statements for the Company for
that period. These published financial statements prepared in a form
consistent with International Financial Reporting Standards, as adopted by
the European Union, were reported on by the auditors without qualification or
an emphasis of matter reference and did not include a statement under Section
237(2) or (3) of the Companies Act 1985 and have been delivered to the
Registrar of Companies.
6. POSTING TO SHAREHOLDERS
In an effort to further reduce costs and in accordance with the AIM Rules for
Companies, this half-yearly report will be announced on a Regulatory
Information Service and published on the Company's website, www.diffusion-
group.co.uk, but it will not be posted to shareholders.
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