TIDMETQ
RNS Number : 3289F
Energy Technique PLC
14 June 2012
Energy Technique Plc
("Energy Technique", "ETQ" or the "Company" or the "Group")
Preliminary Announcement of 2012 results
Chairman's statement
Headlines
-- Return to profitability arising from Diffusion's sales 23 per
cent ahead of last year at GBP7.09 million;
-- Diffusion generated an operating profit of GBP343,000,
representing a turnaround in performance from the losses of
GBP137,000 incurred in the previous year;
-- Group profit before tax of GBP173,000, representing a
significant turnaround from the losses of GBP396,000 incurred in
the previous year;
-- Strong balance sheet net assets of GBP1.41 million with net
cash and cash equivalents of GBP237,000;
-- Diffusion's premium branded fan coils and commercial heating
products were supplied into many landmark and prestigious
commercial developments;
-- Enquiry levels and order intakes are at encouraging levels
and the Board looks forward to a successful year ahead, despite the
continuing challenges facing the UK construction industry.
Introduction
I am pleased to report the Company's return to profitability in
the year ended 31 March 2012 on Diffusion's sales 23 per cent ahead
of the previous year at GBP7.09 million. The combination of
increased sales and tight cost control produced a Group profit on
Continuing Operations before tax of GBP173,000, after charging
Central costs, representing a turnaround from the losses of
GBP396,000 incurred in the previous year. This was a pleasing
trading performance achieved in challenging trading conditions.
Diffusion's markets did not show any signs of growth during the
year and selling price pressure remained a market feature. The
Company produced its profit turnaround through maintaining
Diffusion's premium branding and pursuing quality jobs likely to
return target selling margins, combined with focused business
development activities.
Trading performance of Continuing Operations
Sales in the year ended 31 March 2012 rose by 23 per cent to
GBP7.09 million (2011: GBP5.79 million). Increased sales were
achieved for both fan coils and commercial heating products.
Following the previous year's disappointment with the collapse of
the Company's long established distributor in the Republic of
Ireland, terms were negotiated with a new distributor, which proved
to be particularly successful and led to sales being 166 per higher
than the year before.
The combination of increased sales and tight cost control
resulted in Diffusion generating an operating profit of GBP343,000,
representing a turnaround in financial performance from the losses
of GBP137,000 incurred in the previous year. Savings achieved
through shop floor investment in new equipment and processes
allowed Diffusion to compete very competitively in a difficult
market over the last two years.
Central costs were much lower in the financial year ended 31
March 2012 at GBP130,000 (2011: GBP218,000). After net interest
costs of GBP40,000, Group profit before tax on Continuing
Operations was GBP173,000, representing a turnaround in financial
performance from the losses of GBP396,000 incurred in the previous
year.
About Diffusion
With over 50 years in the heating and ventilation industry
("HVAC"), Energy Technique's operating subsidiary Diffusion is one
of the oldest and most established manufacturers of HVAC products
in the UK. Diffusion is a market leader in the manufacture of
premium quality fan coils and commercial heating products. The
Diffusion and Energy Technique brand names are recognised as highly
engineered, quality products providing leading edge performance and
energy efficiency.
Over its long trading life, Diffusion has been involved with
many challenging and prestigious projects across a spectrum of
sectors including hotels, commercial offices, retail, schools,
hospitals, and residential. Diffusion has established excellent
working relationships with many blue chip clients including Land
Securities, Marks & Spencer, Boots, City Inn Hotels, Stanhope
Properties and many more. All products are designed, developed and
manufactured at Diffusion's 30,000 sq. ft. manufacturing facility
in West Molesey, Surrey, offering premium quality products,
designed specifically to meet customers' bespoke requirements.
Diffusion's operating performance
Diffusion's continued investment in sales and marketing
resources has reaped rewards in the current market conditions.
Selling margins were continually under pressure from a combination
of market forces and increased purchase prices arising from
increased world metal prices.
Notwithstanding these challenges, total selling margins were
maintained by more effective purchasing and production
efficiencies. In particular, the Trumpf laser cutter has produced
better quality finished steel work, is environmentally friendly and
importantly has improved productivity and efficiency by reducing
steel wastage down from 25 per cent to just 12 per cent.
During the year, the R & D facilities were also upgraded.
These dedicated R & D test facilities produce accurate air
volume, thermal and acoustic performance data for manufactured
products. They allow the accurate simulation of real-world
operating conditions and configurations, providing customers with
confidence in the performance of Diffusion's products, however
demanding the environment.
Fan coils were supplied into a number of prestigious projects in
the UK including "The Shard Building" in London, Heathrow Terminal
2, Clyde & Co offices in London, Goldman Sachs offices in
London and the "Cheesegrater" at 122 Leadenhall Street in London,
together with the Google European headquarters in Dublin.
The Commercial Heating Division also had a successful year
winning a number of new customers including Krispy Creme, Forever
21, Victoria's Secrets and ASDA local stores. During the year,
Diffusion's commercial heating products were supplied into the
Lincoln Hotel in London, Moet Hennessy in London, Havant Academy,
Lancashire County Cricket Club, Marks & Spencer, The Superdry
Store and the Corn Wallis Academy School. Other end-user customers
continued to be blue chip retailers and shopping centers including
New Look, Next, GAP, Banana Republic, Hugo Boss, Tesco, House of
Fraser, TK Maxx, Primark, the new Westfield Stratford Shopping
Centre and Excel Hotel London.
Diffusion has always offered a spares and service facility and
during the year spares stocks were physically segregated and
controlled from production stocks to provide an improved service to
customers.
Cash flow and nil gearing
Cash generated by operations was GBP182,000 (2011: outflow of
GBP377,000) and the Company had net cash and cash equivalents at 31
March 2012 of GBP237,000 (2011: GBP228,000). The Company remains
soundly financed with this level of liquidity and net assets at 31
March 2012 of GBP1.41 million. During the year, GBP101,000 was
applied in repaying hire purchase obligations on the laser cutting
machine. The last instalment on this machine was paid in May
2012.
Capital expenditure
Capital expenditure during the year was GBP84,000, following the
heavy investment in manufacturing plant and processes in the
previous two years. Capital expenditure in the year related to
upgrading the IT infrastructure, vehicle fleet and the R & D
department. In the coming year ahead, there will be further
improvements to the IT infrastructure, including a CRM system.
Dividends
The Board does not recommend payment of a dividend (2011:
GBPnil). The Board will seek approval from shareholders in
connection with a share reorganisation and application to the Court
for a capital reduction, so as to allow the Company to pay
dividends in the future. Further details about this will be set out
in a separate circular to be posted to shareholders shortly.
Board changes
Martin Kirkham, who was previously the managing director of SIAS
FM, resigned from the Board on 6 April 2011 following the earlier
disposal of SIAS FM on 24 March 2011.
Business strategy
Following the disposal of SIAS FM in March 2011, the Board has
focused on the Company's core Diffusion subsidiary and it remains
committed to this strategy in the year ahead.
Current trading and prospects
Diffusion has an excellent brand name with a high quality
reputation. Whilst no significant improvement in overall demand
from the Company's markets is expected during the current financial
year, enquiry levels and order prospects for quality projects
remain encouraging.
A number of quality export fan coil projects are currently being
pursued in the Middle East and Diffusion expects to enhance its
product offering during the current financial year with the launch
of a number of new energy efficient products for both fan coils and
commercial heating products.
The expected timetable for completion of the share
reorganisation and capital reduction is around October 2012. If
trading continues at current levels, the Board may consider
declaring a dividend at that time.
Walter K Goldsmith
Chairman
Contacts:
Walter Goldsmith, Chairman, Energy Technique Plc: 020 8783
0033
Leigh Stimpson, Executive Director, Energy Technique Plc: 020
8783 0033
Ed Frisby/Ben Thompson, finnCap Limited (Nominated Advisor): 020
7220 0500
Consolidated statement of comprehensive income
for the year ended 31 March 2012
2011
2012 As restated
Note GBP000 GBP000
CONTINUING OPERATIONS
Revenue 4.2 & 4.5 7,093 5,786
Cost of sales (5,102) (4,297)
Gross profit 1,991 1,489
Distribution costs (1,383) (1,392)
Administration expenses (395) (452)
Operating profit/(loss)
--------------------------------------------- --------- ------- -----------
Before exceptional items 213 (247)
Exceptional items -- (108)
--------------------------------------------- --------- ------- -----------
4.2 213 (355)
Finance revenue -- 1
Finance costs (40) (42)
Profit/(loss) before tax 173 (396)
Income tax charge (25) -
Profit/(loss) for the year from continuing
operations 4.2 148 (396)
DISCONTINUED OPERATIONS
Profit/(loss) for the year attributable
to discontinued operations 12 (740)
Total comprehensive income/(loss) for the
year 4.2 160 (1,136)
Earnings/(losses) per share:
Basic and diluted 5 0.48p (3.43)p
Basic and diluted from continuing operations 5 0.45p (1.20)p
There are no other recognised gains or losses other than as
recorded in the consolidated statement of comprehensive income for
the year.
Consolidated statement of financial position
at 31 March 2012
2011
2012 As restated
Note GBP000 GBP000
ASSETS
Non-current assets
Intangible assets 25 25
Plant and equipment 336 325
Deferred tax asset 280 305
------------------------------------------------------- -------- -----------
Total non-current
assets 641 655
Current assets
Inventories 673 745
Trade and other receivables 1,382 1,137
Cash 393 417
------------------------------------------------------- -------- -----------
Total current assets 2,448 2,299
Total assets 4.3 & 4.5 3,089 2,954
LIABILITIES
Current liabilities
Trade and other payables (1,205) (1,143)
Current tax liabilities (160) (150)
Obligations under hire purchase agreements (27) (96)
Invoice discounting (156) (189)
------------------------------------------------------- -------- -----------
Total current liabilities (1,548) (1,578)
Non-current liabilities
Obligations under hire purchase agreements (22) (16)
Provisions (110) (111)
Total liabilities 4.3 & 4.5 (1,680) (1,705)
Net assets 1,409 1,249
EQUITY
Equity attributable to equity holders
Issued capital 7,773 7,773
Reserves 7,449 7,449
Retained earnings (13,813) (13,973)
Total equity 1,409 1,249
Consolidated statement of changes in equity
for the year ended 31 March 2012
Share Share Retained
capital premium Reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2010 4,351 3,422 7,449 (12,726) 2,496
Prior period adjustment - - - (111) (111)
Comprehensive loss - - - (1,136) (1,136)
Total comprehensive loss - - - (1,247) (1,247)
At 31 March 2011 (as restated) 4,351 3,422 7,449 (13,973) 1,249
Comprehensive income - - - 160 160
Total comprehensive income - - - 160 160
At 31 March 2012 4,351 3,422 7,449 (13,813) 1,409
Prior period adjustment
The prior period adjustment at 1 April 2010 of GBP111,000 is the
establishment of a provision for the onerous liabilities of
employers' national insurance and pension contributions on annual
payments made under a permanent health insurance policy. These
payments have been made since 2006 and the Directors consider it
was more appropriate to establish a provision for such costs rather
than the previous practice of expensing the payments as incurred,
formerly charged under administration expenses.
Consolidated cash flow statement
for the year ended 31 March 2012
2011
2012 As restated
Note GBP000 GBP000
Cash flows from operating activities
Profit/(loss) before tax 185 (1,136)
Loss on disposal of SIAS FM (12) 416
Net finance costs 40 47
Depreciation (net of disposal profits) 71 92
-------------------------------------------------- ------ -----------
Operating income/(loss) before changes
in working capital 284 (581)
Reduction/(increase) in inventories 72 (29)
Increase in trade and other receivables (245) (161)
Increase in trade and other payables 71 394
-------------------------------------------------- ------ -----------
Cash generated/(absorbed) by operations 182 (377)
Finance costs (40) (48)
Net cash generated/(absorbed) by operating
activities 142 (425)
Cash flows from investing activities
Purchase of plant and equipment (84) (26)
(84) (26)
Disposal of plant and equipment 2 -
Finance income -- 1
Disposal of SIAS FM:
Consideration 12 23
Costs of disposal -- (9)
Cash in company on disposal -- (136)
Net cash used in investing activities (70) (147)
-------------------------------------------------- ------ -----------
Financing activities
Receipts under hire purchase agreements 38 --
Repayments under hire purchase agreements (101) (91)
Net cash used in financing activities (63) (91)
-------------------------------------------------- ------ -----------
Net increase/(reduction) in cash and cash
equivalents 9 (663)
Cash and cash equivalents at beginning
of year 228 891
Cash and cash equivalents at end of year 237 228
Notes
1. Adoption of new and revised standards
Standards and Interpretations effective in the current
period
There were no new Standards adopted by the Group during the
current period.
Standards and Interpretations in issue not early adopted
At the date of authorisation of these financial statements, the
following Standards, Interpretations and Amendments to existing
standards were in issue but not yet effective for the reporting
period of the Group:
-- IFRS 9 'Financial Instruments' effective 1 January 2013
-- IFRS 13 'Fair value measurement' effective 1 January 2013
The directors anticipate that the adoption of these Standards,
Interpretations and Amendments to existing standards in future
periods will have no material impact on the financial statements of
the Group.
2. Significant accounting policies
Statement of compliance
The financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union.
Basis of preparation
The financial statements have been prepared on the historic cost
basis.
Basis of consolidation
The Group financial statements consolidate the accounts of the
Company and all its subsidiary undertakings, which are all made up
to 31 March each year.
Goodwill
Goodwill represents the excess of the cost of acquisitions over
the fair value of the identifiable assets acquired (including
intangible assets of the acquired business) at the date of
acquisition. Goodwill is recognised as an asset and assessed for
impairment at least annually. Any impairment is recognised
immediately in the statement of comprehensive income. The directors
consider that goodwill has an infinite useful life.
In accordance with the transitional rules of IFRS, goodwill that
has been written off to reserves cannot be restated or recycled,
either on transition or at any later date. On the subsequent
disposal or termination of a previously acquired business, the
profit or loss on disposal or termination is calculated after
charging goodwill previously taken to reserves.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable. Revenue is reduced for estimated customer
returns, rebates and similar allowances.
Revenue from the sale of goods and services is recognised when
all of the following conditions are satisfied:
-- the Group has transferred to the buyer the significant risks and rewards of ownership;
-- the Group retains neither continuing management involvement
to the degree usually associated with ownership, nor effective
control over the goods and services sold;
-- the amount of revenue can be measured reliably;
-- it is probable that the economic benefits associated with the
transaction will flow to the entity; and
-- the costs incurred or to be incurred in respect of the
transaction can be measured reliably.
Interest revenue
Interest revenue is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable.
Operating leases
Payments under operating leases are charged to profits on a
straight-line basis over the life of the lease.
Research and development expenditure
Research expenditure is written off as incurred. Development
expenditure is generally written off as incurred unless it meets
the recognition criteria of an intangible asset, as defined in
International Accounting Standard 38 (Intangible Assets), in which
case it would be recognised as an asset of the Group.
Foreign currencies
Monetary assets and liabilities denominated in foreign
currencies are translated into sterling at the closing rate of
exchange and differences taken to the comprehensive income
statement. Transactions in foreign currencies are recorded using
the rate of exchange ruling at the date of the transaction.
Borrowing costs
Borrowing costs are recognised in the comprehensive income
statement in the period in which they are incurred.
Retirement benefit costs
A number of the Group's permanent employees are members of
personal pension plans, which are defined contribution schemes
(money purchase). Contributions to these schemes are recognised as
an expense when employees have rendered services entitling them to
the contributions.
Taxation
No corporation tax arises on the results for the year because of
the availability of losses brought forward.
Full provision is made for deferred taxation, using the
liability method without discounting, to take account of the
temporary differences between the incidence of income and
expenditure for taxation and accounting purposes. Deferred tax
assets are recognised to the extent that they are considered
recoverable in the foreseeable future. Any changes in the deferred
tax asset are recognised immediately in the comprehensive income
statement.
Plant and equipment
Plant and equipment is stated at cost less accumulated
depreciation and impairment charges.
Depreciation is provided on the cost of plant and equipment on a
straight-line basis in order to write them down to estimated
realisable value over their estimated useful lives as follows:
Rate
Plant and equipment between 10% and 33% per annum
Inventories
Inventories have been valued at the lower of cost and net
realisable value, using the First In First Out (FIFO) cost basis,
with due allowance made for obsolete and slow moving items. For
work in progress and finished stocks, cost consists of direct
materials, labour and appropriate works overheads.
Financial assets
Trade receivables and other receivables that have fixed or
determinable payments that are not quoted in an active market are
classified as receivables, which are measured at amortised cost
using the effective interest method, less any impairment. Interest
income is recognised by applying the effective interest rate,
except for short-term receivables when the recognition of interest
would be immaterial.
Financial liabilities and equity instruments issued by the
Group
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recorded at
the proceeds received, net of direct issue costs.
Provisions
A provision has been made to cover the onerous liabilities of
employers' national insurance and pension contributions on annual
payments to be made under a permanent health insurance policy.
The provision is measured at the present value of the
expenditures expected to settle the obligation using pre-tax rates
that reflects current market assessments of the time value of money
and the risks specific to the obligations.
3. Basis of preparation of financial statements
The financial information set out above does not constitute
statutory financial statements for the year ended 31 March 2012 or
2011 but is derived from those financial statements. Statutory
financial statements for the year ended 31 March 2011 have been
delivered to the Registrar of Companies. Statutory financial
statements for the year ended 31 March 2012 were approved by the
Board of Directors on 14 June 2012, are audited and will be
delivered to the Registrar of Companies following the Annual
General Meeting on 19 July 2012.
The Company's auditors, Milsted Langdon LLP, have reported on
the 2012 and 2011 financial statements and those reports were:
(i) Not qualified;
(ii) Did not include a reference to any matters to which the
auditors drew attention to by way of emphasis without qualifying
their report; and
(iii) Did not contain a statement under Section 498(2) and
498(3) of the Companies Act 2006 in respect of the financial
statements for the year ended 31 March 2012 and 31 March 2011.
4. Business segments
4.1. Products and services within each business segment
For management purposes, the Group is organised into two
operating activities: the Diffusion business and Central costs. The
principal products and services of these activities are as
follows:
Diffusion Manufacture and distribution of fan coils and
commercial heating products, together with after sales spares and
service from its facility in West Molesey, Surrey.
Central costs Costs associated with being a public company and
maintaining the AIM quotation on the London Stock Exchange.
SIAS FM, the Company's former building maintenance subsidiary,
became non-core during the previous financial year and was sold on
24 March 2011. As a consequence, its results have been included
under Discontinued Operations.
4.2. Segment revenue and segment result
Segment revenue Segment result
2012 2011 2012 2011
GBP000 GBP000 GBP000 GBP000
------------------------------------- -------- -------- ------- --------
CONTINUING OPERATIONS
Diffusion
Before exceptional items 7,093 5,786 343 (74)
Exceptional items - - - (63)
------------------------------------- -------- -------- ------- --------
After exceptional items 7,093 5,786 343 (137)
-------------------------------------
Central costs
Before exceptional items - - (130) (173)
Exceptional items - - - (45)
------------------------------------- -------- -------- ------- --------
After exceptional items - - (130) (218)
------------------------------------- -------- -------- ------- --------
Revenue and operating profit/(loss) 7,093 5,786 213 (355)
------------------------------------- -------- -------- ------- --------
Net finance costs (40) (41)
------------------------------------- -------- -------- ------- --------
Profit/(loss) before tax 173 (396)
Income tax charge (25) -
------------------------------------- -------- -------- ------- --------
Profit/(loss) for the year from
Continuing Operations 148 (396)
------------------------------------- -------- -------- ------- --------
DISCONTINUED OPERATIONS
SIAS FM - 1,709 12 (734)
Revenue and operating profit/(loss) - 1,709 12 (734)
------------------------------------- -------- -------- ------- --------
Interest charge - (6)
------------------------------------- -------- -------- ------- --------
Profit/(loss) before tax 12 (740)
Income tax charge - -
------------------------------------- -------- -------- ------- --------
Profit/(loss) for the year from
Discontinued Operations 12 (740)
------------------------------------- -------- -------- ------- --------
Consolidated revenue and result
for the year 7,093 7,495 160 (1,136)
------------------------------------- -------- -------- ------- --------
Revenue reported above represents revenue generated from
external customers. Inter-segment sales in the year amounted to
GBPnil (2011: GBPnil). Diffusion had one customer (2011: nil) with
revenue in excess of 10%.
The net interest paid under Continuing Operations of GBP40,000
(2011: GBP41,000) comprises interest received of GBPnil (2011:
GBP1,000) and interest paid of GBP40,000 (2011: GBP42,000) by
Diffusion.
4.3. Segment assets and liabilities
Assets Liabilities
2011
2012 2011 2012 As restated
GBP000 GBP000 GBP000 GBP000
Diffusion 3,087 2,929 1,658 1,651
Central costs 2 25 22 54
3,089 2,954 1,680 1,705
-------------- ------ ------ ------ -----------
4.4. Other segment information
Additions to
Depreciation non-current assets
2012 2011 2012 2011
GBP000 GBP000 GBP000 GBP000
Diffusion 73 68 83 9
Central costs -- 2 1 -
Discontinued -- 22 -- 17
73 92 84 26
4.5. Geographical segments
Acquisition of
Revenue Segment assets segment assets
2012 2011 2012 2011 2012 2011
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
United Kingdom 6,248 6,666 3,089 2,954 84 26
Europe 792 297 -- - -- -
Middle East 53 532 -- - -- -
7,093 7,495 3,089 2,954 84 26
5. Earnings/(losses) per share
2012 2011
Pence Pence
Basic and diluted earnings per share
Continuing Operations 0.45 (1.20)
Discontinued Operations 0.03 (2.23)
0.48 (3.43)
The earnings and weighted average number of ordinary shares used
in the calculation of basic and diluted earnings per share are as
follows:
2012 2011
GBP000 GBP000
Profit/(loss) from Continuing Operations 148 (396)
Profit/(loss) from Discontinued Operations 12 (740)
Earnings/(losses) used in the calculation of
basic and diluted earnings per share 160 (1,136)
No. No.
Weighted average number of ordinary shares
in issue 33,120,160 33,120,160
Weighted average number of ordinary shares
on a diluted basis 33,120,160 33,120,160
6. Posting of Annual Report and Financial Statements
The 2012 Annual Report and Financial Statements will be posted
by 22 June 2012 to those shareholders who have elected to receive
them and will be available to view at the Company's website
www.diffusion-group.co.uk.
The 2012 Annual General Meeting of the members of Energy
Technique Plc will be held at 35 Park Lane, London W1K 1RB on 19
July 2012 at 12.00 Noon.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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