TIDMETQ
RNS Number : 6365H
Energy Technique PLC
24 June 2013
Energy Technique Plc
("Energy Technique", "ETQ" or the "Company" or the "Group")
Preliminary Announcement of 2013 Results
Chairman's statement
Headlines
-- Diffusion's sales 6% ahead of last year at GBP7.55 million;
-- Diffusion's operating profit 19% ahead of last year at GBP406,000;
-- Group profit before tax on Continuing Operations 16% ahead of last year at GBP200,000;
-- Cash generated by operations 170% ahead of last year at GBP492,000;
-- Strong balance sheet net assets at 31 March 2013 of GBP1.53
million with net cash of GBP590,000;
-- Enquiry levels and order intakes at encouraging levels and
the Board looks forward to another year of successful growth,
despite the continuing challenges facing the UK construction
industry.
Introduction
I am pleased to report another improvement in profitability in
the year ended 31 March 2013, with Diffusion's sales 6 per cent
ahead of last year at GBP7.55 million and Group profit before tax
16 per cent ahead of last year at GBP200,000. This profit
improvement was in line with management's expectations and was
achieved in a continuation of challenging trading conditions within
the UK construction industry.
Diffusion's markets did not show any signs of growth during the
year and selling price pressure remained a market feature. The
Company produced this profit improvement through increased sales,
by maintaining Diffusion's premium branding market position and
pursuing quality jobs likely to return target selling margins,
combined with focused business development activities.
Group trading performance
Sales in the year ended 31 March 2013 increased by 6 per cent to
GBP7.55 million (2012: GBP7.09 million). Increased sales were
achieved for both fan coils and commercial heating products. Fan
coils had a particularly strong year and were installed into a
number of large London based developments, including the Shard
Building, the Cheesegrater and 375 Kensington High Street.
The sales and marketing function was strengthened during the
year producing extra sales to more than counteract the market led
marginal softening of selling margins. The increased sales and
relatively fixed cost base resulted in Diffusion's operating profit
increasing by 19 per cent to GBP406,000. This operating profit
margin of 5.4 per cent represented a high return on Diffusion's
capital employed of 29 per cent.
Central and plc costs were GBP164,000 (2012: GBP130,000) and
interest costs amounted to GBP42,000 (2012: GBP40,000). Central and
plc costs include a non-cash share option charge and other
non-recurring costs. Included under interest costs are notional
interest charges of GBP16,000 (2012: GBP14,000) relating to the
unwinding of the provision set up at 31 March 2010.
The resulting Group profit before tax on Continuing Operations
increased by 16 per cent to GBP200,000 (2012: GBP173,000). The
taxation charge of GBP39,000 (2012: 25,000) represents a non-cash
write off of the deferred tax asset.
About Diffusion
With over 50 years in the heating and ventilation industry
("HVAC"), the Company'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. Diffusion and
Energy Technique are brand names recognised as highly engineered,
quality products providing leading edge performance and energy
efficiency.
Diffusion's products are installed into hotels, commercial
offices, retail outlets, schools, hospitals, and more recently
high-end residential. Diffusion has excellent relationships with
many blue chip clients including Land Securities, Marks &
Spencer, Boots, City Inn Hotels, and Stanhope Properties. 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
This is the third successive year of sales and profit growth for
Diffusion. Sales growth was achieved for both fan coils and
commercial heating products: fan coils by 8 per cent and commercial
heating by 5 per cent. Sales growth resulted from a reorganisation
of the sales and marketing functions.
Fan coils were installed into a number of landmark developments
including the Shard Building, Cheesegrater, Google HQ Dublin, Abu
Dhabi Investment Bank, John Lewis and Jaynes Harbour Barbados.
After the year end, Diffusion also won the first phase to supply
fan coils into the Walkie-Talkie building. This means that
Diffusion has supplied fan coils into all three of the current
London skyline developments.
Following on from the success of installing fan coils into the
high-end residential development at No. 1 Hyde Park in London,
Diffusion has now supplied fan coils into other high end
residential developments including 375 Kensington High Street,
DeVere Gardens and the Battersea redevelopment scheme. The Board
expects further sales growth from this high end residential
sector.
Commercial heating enjoys the same reputation for engineering
quality as Diffusion's fan coils and customers like the short lead
times, combined with a specialist bespoke service. The growth in
commercial heating sales was a commendable effort achieved in weak
retail market conditions. Diffusion's commercial heating products
were installed into many prestigious projects including Broadgate
Tower, 2 Waterhouse Square, Serpentine Gallery (London), Starbucks
(Canary Wharf) and MTV Studios (London).
A number of new sales initiatives have recently been launched,
including the appointment of a seasoned HVAC industry professional
as Business Development Director. The new eco-friendly 270 range of
fan coils was launched in April 2013 offering energy savings of up
to 25% over existing fan coils and a new CRM database system for
tracking order prospects goes live in July 2013. All of these
initiatives are expected to contribute to Diffusion's future growth
strategy.
Cash flow and net cash
Cash generated by operations increased by 170% to GBP492,000
(2012: GBP182,000) with the Group having net cash equivalents at 31
March 2013 of GBP590,000 (2012: GBP237,000). The Group is soundly
financed with this level of liquidity and net assets at 31 March
2013 of GBP1.53 million, equivalent to 46 pence per share. Cash
generated during the year benefited from the absence of hire
purchase installments on the Trumpf laser cutter after May 2012,
when the last payment was made.
Capital expenditure
Capital expenditure during the year was modest at GBP27,000,
comprising further investment in the Group's IT infrastructure and
CRM database systems. This is not a capital intensive business and
the main items of future capital expenditure will largely comprise
replacement expenditure only.
Dividends
The Board recommends payment of a final dividend of 0.75 pence
per share, payable on 30 August 2013 to shareholders on the share
register on 2 August 2013. The Company paid an interim dividend of
0.75 pence per share in December 2012, taking total dividends for
the year ended 31 March 2013 to 1.5 pence per share. At a share
price of 60 pence per share, this is equivalent to a dividend yield
of 2.5 per cent.
General meeting on 16 May 2013
At the General Meeting of shareholders held on 16 May 2013,
shareholders approved the resolution to buy back up to 940,000
shares at 42.5 pence from its then largest shareholder, Elsina
Limited, on the terms set out in the Circular to shareholders dated
23 April 2013. In accordance with the terms of the Buy-Back
agreement, 470,000 shares were bought back after the General
Meeting, for a consideration of GBP200,000. The remaining 470,000
shares are subject to two call options.
Business strategy
The Board's strategy is to build on the success of the last two
years and to continue to grow Diffusion's sales and profits
organically. The Board does not consider shareholders' best
interests will be served by evaluating merger and acquisition
opportunities at the present time. Once the Board has achieved its
strategic objective of growing Diffusion's sales and profits
organically, then it will seek a strategic partnership so as to
fully realise shareholder value.
At a share price of 60 pence per share, the Company's market
capitalisation of GBP1.72 million represents a low multiple of 4.2
times Diffusion's operating profit for the year ended 31 March
2013. The Board believes this represents an opportunity to enhance
shareholder value in line with its organic growth strategy for
Diffusion.
Current trading and prospects
Trading in the current year ending 31 March 2014 has started
very well, with sales in April and May 2013 in line with
management's expectations. In addition, enquiry levels for quality
projects are encouraging and the order book is at very acceptable
levels, recently bolstered by winning the first phase of fan coils
for the Walkie-Talkie development.
The Company has high expectations for its new eco-friendly 270
range of fan coils launched in April 2013. Whilst the Company's
markets are not expected to change materially in the coming
financial year, the Board looks forward to another year of
successful growth.
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 2013
2013 2012
Notes GBP000 GBP000
CONTINUING OPERATIONS
Revenue 7,550 7,093
Cost of sales (5,506) (5,102)
Gross profit 2,044 1,991
Distribution costs (1,381) (1,383)
Administration expenses (421) (395)
Operating profit 242 213
Finance costs (42) (40)
Profit before tax 200 173
Income tax charge (39) (25)
Profit for the year from Continuing
Operations 161 148
-------------------------------------- ----- ------- -------
DISCONTINUED OPERATIONS
Profit for the year attributable
to Discontinued Operations - 12
Total comprehensive income for
the year 161 160
-------------------------------------- ----- ------- -------
Earnings per share
Continuing Operations 5 4.8p 4.5p
Discontinued Operations - 0.3p
-------------------------------------- ----- ------- -------
Basic earnings per share 4.8p 4.8p
-------------------------------------- ----- ------- -------
Fully diluted earnings per share 4.8p 4.8p
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 2013
2013 2012
GBP000 GBP000
ASSETS
Non-current assets
Intangible assets 25 25
Plant and equipment 284 336
Deferred tax
asset 241 280
Total non-current
assets 550 641
Current assets
Inventories 788 673
Trade and other
receivables 1,526 1,382
Cash 590 393
-------------------------------------- ------- --------
Total current
assets 2,904 2,448
Total assets 3,454 3,089
LIABILITIES
Current liabilities
Trade and other
payables (1,578) (1,205)
Current tax liabilities (212) (160)
Obligations under hire purchase
agreements (12) (27)
Invoice discounting - (156)
Total current
liabilities (1,802) (1,548)
Non-current liabilities
Obligations under hire purchase
agreements (10) (22)
Provisions (111) (110)
Total liabilities (1,923) (1,680)
Net assets 1,531 1,409
EQUITY
Equity attributable to equity holders
Issued capital 333 7,773
Reserves - 7,449
Retained earnings 1,198 (13,813)
Total equity 1,531 1,409
-------------------------------------- ------- --------
Consolidated statement of changes in equity
for the year ended 31 March 2013
Share Share Retained
capital premium Reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 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
Capital reorganisation
and reduction (4,018) (3,422) (2,336) 9,776 -
Reclassifications - - (5,113) 5,113 -
Sale of Treasury Shares - - - 11 11
Share options - - - 4 4
Dividends paid - - - (25) (25)
Comprehensive income - - - 161 161
Share reorganisation
costs - - - (29) (29)
Total comprehensive
income (4,018) (3,422) (7,449) 15,011 122
At 31 March 2013 333 - - 1,198 1,531
Consolidated cash flow statement
for the year ended 31 March 2013
2013 2012
GBP000 GBP000
Cash flows from operating activities
Profit before tax 200 185
Residual profit on disposal of
SIAS FM - (12)
Net finance costs 42 40
Depreciation (net of disposal
profits) 79 71
Share option charge 4 -
Operating income before changes
in working capital 325 284
(Increase)/reduction in inventories (115) 72
Increase in trade and other receivables (144) (245)
Increase in trade and other payables 426 71
Cash generated by operations 492 182
Finance costs (42) (40)
Net cash generated by operating
activities 450 142
Cash flows from investing activities
Purchase of plant and equipment (27) (84)
Disposal of plant and equipment - 2
Disposal of SIAS FM - 12
Net cash used in investing activities (27) (70)
Financing activities
Receipts under hire purchase
agreements - 38
Repayments under hire purchase
agreements (27) (101)
Dividends (25) -
Sale of Treasury Shares 11 -
Share reorganisation costs (29) -
Net cash used in financing activities (70) (63)
Net increase in cash and cash
equivalents 353 9
Cash and cash equivalents at
beginning of year 237 228
Cash and cash equivalents at
end of year 590 237
---------------------------------------- ------ ------
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,
there are no new Standards, Interpretations and Amendments that
will have a 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 its subsidiary undertaking, 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 IFRSs, 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 recognised on a receipts basis.
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 by
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 on a paid basis.
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 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 are 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 goods, 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 instruments 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 as
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 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 2013 or
2012 but is derived from those financial statements. Statutory
financial statements for the year ended 31 March 2012 have been
delivered to the Registrar of Companies. Statutory financial
statements for the year ended 31 March 2013 were approved by the
Board of Directors on 21 June 2013, are audited and will be
delivered to the Registrar of Companies following the Annual
General Meeting on 25 July 2013.
The Company's auditors, Milsted Langdon LLP, have reported on
the 2013 and 2012 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 2013 and 31 March 2012.
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, operating through ET Environmental Limited.
Central costs Costs associated with being a public company and
maintaining the AIM quotation on the London Stock Exchange.
4.2. Segment revenue and segment result
Segment revenue Segment result
2013 2012 2013 2012
GBP000 GBP000 GBP000 GBP000
CONTINUING OPERATIONS
Diffusion 7,550 7,093 406 343
Central costs - - (164) (130)
Revenue and operating profit 7,550 7,093 242 213
Net finance costs - - (42) (40)
Profit before tax 200 173
Income tax charge - - (39) (25)
Profit for the year from
Continuing
Operations - - 161 148
DISCONTINUED OPERATIONS
SIAS FM - - - 12
Revenue and operating profit - - - 12
Finance costs - - - -
Profit before tax - - - 12
Income tax charge - - -
Profit for the year from - - -
Discontinued Operations - - - 12
Consolidated revenue and
result for the year 7,550 7,093 161 160
----------------------------- -------- ------- ------- -------
Revenue reported above represents revenue generated from
external customers. Inter-segment sales in the year amounted to
GBPnil (2012: GBPnil). Diffusion had no customers (2012: One) with
revenue in excess of 10%.
The net finance costs under Continuing Operations of GBP42,000
(2012: GBP40,000) comprises finance revenue of GBPnil (2012:
GBPnil) and finance costs of GBP42,000 (2012: GBP40,000) incurred
by Diffusion.
4.3. Segment assets and liabilities
Assets Liabilities
2013 2012 2013 2012
GBP000 GBP000 GBP000 GBP000
Diffusion 3,446 3,087 1,878 1,658
Central
costs 8 2 45 22
3,454 3,089 1,923 1,680
---------- ------ ------ -------- -------
4.4. Other segment information
Additions to
non-current
Depreciation assets
2013 2012 2013 2012
GBP000 GBP000 GBP000 GBP000
Diffusion 79 73 27 83
Central costs - - - 1
79 73 27 84
-------------- ------------ ------ -------- --------
4.5. Geographical segments
Acquisition
of
Revenue Segment assets segment assets
2013 2012 2013 2012 2013 2012
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
United Kingdom 7,056 6,248 3,454 3,089 27 84
Europe 371 792 - - - -
Middle East 123 53 - - - -
7,550 7,093 3,454 3,089 27 84
--------------- ------ -------- ------- ------- --------- ---------
5. Earnings per share
2013 2012
Pence Pence
Basic earnings per share
Continuing Operations 4.8 4.5
Discontinued Operations - 0.3
--------------------------- -------------- -----
4.8 4.8
Diluted earnings per share 4.8 4.8
The earnings and weighted average number of ordinary shares used
in the calculation of basic and diluted earnings per share, with
the comparatives adjusted for the 16 August 2012 share
reorganisation, are as follows:
2013 2012
GBP000 GBP000
Continuing Operations 161 148
Discontinued Operations - 12
------------------------------------ ----------- ---------
Earnings used in the calculation
of basic and diluted earnings per
share 161 160
No. No.
Weighted average number of ordinary
shares in issue 3,323,572 3,312,016
Weighted average number of ordinary
shares on a diluted basis 3,328,103 3,316,547
6. Posting of Annual Report and Financial Statements
The 2013 Annual Report and Financial Statements will be posted
by 28 June 2013 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 2013 Annual General Meeting of the members of Energy
Technique Plc will be held at 35 Park Lane, London W1K 1RB on 25
July 2013 at 12.30 pm.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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