TIDMETQ
RNS Number : 2601F
Energy Technique PLC
11 November 2015
Energy Technique Plc
("Energy Technique" or the "Company")
Half-Year Report
30 September 2015
Headlines
-- Sales increased by 9.2% over the corresponding half-year to GBP5.95 million;
-- Operating profit of Diffusion increased by 21.9% over the
corresponding half-year to GBP768,000;
-- Group profit before tax increased by 33.6% over the
corresponding half-year to GBP613,000;
-- EPS increased by 47.7% over the corresponding half-year to 22.3 pence per share;
-- Further improvement in net cash to GBP1.70 million at 30
September 2015 and net assets to GBP2.78 million;
-- Enquiries and order intakes are at high levels and the Board
believes this will translate into another year of growth for the
year ending 31 March 2016.
Chairman's statement
Introduction
I am very pleased to report a continuation of profit improvement
for the half-year ended 30 September 2015. Sales increased by 9.2%
over the corresponding period to GBP5.95 million, generating
improved operating profit for the Company's trading business,
Diffusion, to GBP768,000 and of group profit before tax to
GBP613,000. The Company is now midway through its fifth consecutive
year of both sales and profit growth and the Board considers these
half-year results have laid the foundations for continued growth in
the year ending 31 March 2016.
Financial performance
Sales in the half-year ended 30 September 2015 increased by 9.2%
to GBP5.95 million (2014: GBP5.44 million). Sales of the largest
product group, fan coils, increased by 6.9% to GBP4.66 million
(2014: GBP4.36 million), attributed to a continuation of stronger
UK fan coil market demand and to Diffusion's premium branded
product offering. Sales of the smaller commercial heating range
were much stronger in the half-year, increasing by 12.8% to GBP0.88
million (2014: GBP0.78 million), despite continued difficult
trading conditions on the UK high street.
Diffusion's operating profit increased by 21.9% to GBP768,000
(2014: GBP630,000), representing an improved operating profit
margin of 12.9% (2014: 11.6%). Notwithstanding downward market
price pressure, gross profit margins remained stable at 35.3%
(2014: 35.2%) due to lean manufacturing methods and a well-balanced
sales mix. Group profit before tax increased by 33.6% to GBP613,000
(2014: GBP459,000) after charging reduced Central costs of
GBP140,000 (2014: GBP150,000).
The taxation charge includes a corporation tax charge of
GBP86,000, which the Board anticipates will reverse in the second
half of the year ending 31 March 2016 should tax relief become
available on the exercise of share options, resulting in a nil
corporation tax charge for the year ending 31 March 2016.
Diffusion's operating performance
The number and size of commercial and high-end residential
developments and refurbishments currently being carried out and
planned by the leading property owning companies are providing
ideal trading conditions for Diffusion.
The ECO 270 fan coil range offering 25% energy savings for no
additional capital cost continues to provide Diffusion with a
strong competitive advantage and to protect this position, an
agreement has been signed with the motor supplier for a five-year
extension to the existing exclusivity agreement, but including
wider overseas geographical coverage. Diffusion has also been
appointed an OEM supplier by a leading controls company, allowing
Diffusion to supply a higher added value fan coil product,
incorporating software configured control units.
Following successful entry into the high-end residential sector,
Diffusion had a well-balanced sales mix in the half year between
its commercial and high-end residential sectors. Fan coils were
supplied into a number of landmark developments and to over 200
different projects in total, thereby mitigating business risk and
contributing to the maintenance of overall target selling margins.
Larger fan coil projects included Chiswick Park, 7 Lacon House, 8
Finsbury Circus, 109 Lambeth Road, Eland House, Riverwalk
(Apartments & Penthouses) and St James Market.
Over the last two years, commercial heating sales were adversely
impacted by difficult trading conditions in the retail sector,
resulting in reduced demand due to store closures. Against this
background, it is pleasing to report that commercial heating sales
increased by 12.8% in the half year. Diffusion continues to serve
its long list of blue-chip clients/end users including Waitrose,
Marks & Spencer, Boots, H&M, SuperDry and Next.
Cash flow and net cash
Cash generated by operating activities increased by 7.0% to
GBP427,000 (2014: GBP399,000). Capital expenditure in the half-year
was GBP54,000 (2014: GBP28,000) and dividends paid amounted to
GBP54,000 (2014: GBP48,000). The resulting growth in net cash
during the half year was GBP319,000 (2014: GBP317,000), resulting
in an improved cash position at 30 September 2015 of GBP1.70
million (31 March 2015: GBP1.38 million). The Company is soundly
financed with this level of liquidity and net assets at 30
September 2015 of GBP2.78 million (31 March 2015: GBP2.22
million).
Formal sale process
On 26 February 2015, the Board announced that it had resolved to
offer the Company for sale by means of a formal sale process, in
accordance with Note 2 on Rule 2.6 of the City Code on Takeovers
and Mergers. Whilst the Board believes the Company has a secure
future as an independent business, the Board took this decision to
seek to unlock and crystallise value for shareholders. The Company
appointed Cavendish Corporate Finance LLP as financial adviser to
conduct the sale process.
At the same time as releasing these half-year accounts, the
Board is also pleased to announce an offer to acquire the Company
by Volution Group plc at a price of GBP3.45 per share, together
with a recommendation by the directors to vote in favour of this
offer. Full details of this offer are set out in a separate
announcement also released on 11 November 2015.
Dividends
The Board usually declares an interim dividend at the same time
as releasing its half-year accounts. However, the Board will not be
declaring an interim dividend for the current financial year,
because the offeror has determined its offer price on the condition
that no interim dividend is paid.
Current trading and prospects
Whilst this formal sales process completes, the Board is
managing the Company for continued growth. Improved UK fan coil
market demand that started over two years ago is expected to
continue for the year ending 31 March 2016 and beyond. Enquiry
levels remain high and the order book is strong. The Board is
confident the results for the half-year ended 30 September 2015
have laid the foundations for achieving another successful year of
growth for the full year ending 31 March 2016.
Walter Goldsmith
Chairman
11 November 2015
Contacts:
Energy Technique Plc: 020 8783 0033
Leigh Stimpson, Chief Executive
Robert Unsworth, Company Secretary
finnCap Ltd (Nominated Adviser): 020 7220 0500
Ed Frisby/Scott Mathieson
Consolidated statement of comprehensive income
For the six months ended 30 September 2015
6 months 6 months
to to Year to
30 September 30 September 31 March
2015 2014 2015
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
--------------------------------- ------------- ------------- ---------
Revenue 5,946 5,443 10,775
Cost of sales (3,846) (3,529) (7,088)
--------------------------------- ------------- ------------- ---------
Gross profit 2,100 1,914 3,687
Distribution costs (974) (927) (1,877)
Administration expenses (498) (507) (1,010)
--------------------------------- ------------- ------------- ---------
Operating profit 628 480 800
Analysed as:
--------------------------------- ------------- ------------- ---------
Diffusion 768 630 1,120
Central costs (140) (150) (320)
--------------------------------- ------------- ------------- ---------
Finance costs (15) (21) (24)
--------------------------------- ------------- ------------- ---------
Profit before taxation 613 459 776
Taxation (79) (98) (81)
--------------------------------- ------------- ------------- ---------
Profit for the financial period 534 361 695
Earnings per share:
Basic 22.3 15.1p 29.1p
Fully diluted 20.0 13.5p 26.0p
--------------------------------- ------------- ------------- ---------
There are no other recognised gains or losses other than as
recorded in the consolidated statement of comprehensive income for
the period.
Property costs of GBP163,000 (31 March 2015: GBP334,000 and 30
September 2014 GBP167,000) have been reclassified from cost of
sales to administration expenses, so as to report underlying gross
profit margins. There is no impact on reported operating
profit.
Consolidated statement of financial position
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At 30 September 2015
30 September 30 September 31 March
2015 2014 2015
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
--------------------------------------- ------------- ------------- ---------
ASSETS
Non-current assets
Intangible assets 25 25 25
Plant and equipment 426 231 420
Deferred tax asset 126 - 40
Total non-current assets 577 256 485
Current assets
Inventories 757 860 884
Trade and other receivables 2,216 1,833 1,749
Cash 1,699 1,190 1,380
Total current assets 4,672 3,883 4,013
Total assets 5,249 4,139 4,498
--------------------------------------- ------------- ------------- ---------
LIABILITIES
Current liabilities
Trade and other payables (1,916) (1,842) (1,900)
Current tax liabilities (333) (262) (243)
Hire purchase obligations - (4) -
Total current liabilities (2,249) (2,108) (2,143)
Non-current liabilities
Provisions (114) (117) (114)
Non-current tax liabilities (86) - -
Deferred tax liability (23) - (23)
--------------------------------------- ------------- ------------- ---------
Total non-current liabilities (223) (117) (137)
Total liabilities (2,472) (2,225) (2,280)
--------------------------------------- ------------- ------------- ---------
Net assets 2,777 1,914 2,218
--------------------------------------- ------------- ------------- ---------
EQUITY
Equity attributable to equity holders
Issued capital 239 239 239
Other reserves 94 94 94
Retained earnings 2,444 1,581 1,885
--------------------------------------- ------------- ------------- ---------
Total equity 2,777 1,914 2,218
--------------------------------------- ------------- ------------- ---------
Consolidated statement of changes in equity
Share Other Retained
capital reserves earnings Total
GBP000 GBP000 GBP000 GBP000
------------------------------------ --------- ---------- ---------- --------
Half year ended 30 September
2015 - Unaudited
At 1 April 2015 239 94 1,885 2,218
Deferred tax on share options - - 79 79
Dividends paid - - (54) (54)
Comprehensive income - - 534 534
At 30 September 2015 239 94 2,444 2,777
------------------------------------ --------- ---------- ---------- --------
Half year ended 30 September
2014 - Unaudited
At 1 April 2014 239 94 1,262 1,595
Share options charge - - 6 6
Dividends paid - - (48) (48)
Comprehensive income - - 361 361
At 30 September 2014 239 94 1,581 1,914
------------------------------------ --------- ---------- ---------- --------
Year ended 31 March 2015 - Audited
At 1 April 2014 239 94 1,262 1,595
Share options charge - - 12 12
Dividends paid - - (84) (84)
Comprehensive income - - 695 695
At 31 March 2015 239 94 1,885 2,218
------------------------------------ --------- ---------- ---------- --------
Consolidated cash flow statement
For the six months ended 30 September 2015
6 months 6 months Year to
to to 31 March
30 September 30 September 2015
2015 2014 Audited
Unaudited Unaudited GBP000
GBP000 GBP000
-------------------------------------------- -------------- -------------- ----------
Cash flows from operating activities
Profit before taxation 607 459 776
Finance costs 15 21 24
Depreciation 48 40 84
Share option charge 6 6 12
Profit on disposal of plant and equipment - - (2)
-------------------------------------------- -------------- -------------- ----------
Operating income before changes in working
capital 676 526 894
Reduction/(increase) in inventories 127 (89) (113)
(Increase)/reduction in trade and other
receivables (467) (81) 3
Increase in trade and other payables 106 64 103
-------------------------------------------- -------------- -------------- ----------
Cash generated by operations 442 420 887
Finance costs (15) (21) (24)
-------------------------------------------- -------------- -------------- ----------
Net cash generated by operating activities 427 399 863
-------------------------------------------- -------------- -------------- ----------
Cash flows from investing activities
Purchase of plant and equipment (54) (28) (264)
Proceeds from sale of plant and equipment - - 2
Net cash used in investing activities (54) (28) (262)
-------------------------------------------- -------------- -------------- ----------
Cash flows from financing activities
Repayments under hire purchase obligations - (6) (10)
Dividends (54) (48) (84)
Net cash used in financing activities (54) (54) (94)
-------------------------------------------- -------------- -------------- ----------
Net increase in cash and cash equivalents 319 317 507
Cash and cash equivalents at beginning
of period 1,380 873 873
Cash and cash equivalents at end of
period 1,699 1,190 1,380
-------------------------------------------- -------------- -------------- ----------
Consolidated segmental analysis
For the six months ended 30 September 2015
6 months 6 months
to to Year to
30 September 30 September 31 March
2015 2014 2015
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
-------------------------------------- ------------- ------------- ---------
Revenue
United Kingdom 5,413 5,085 10,033
Europe 533 358 741
Rest of World - - 1
-------------------------------------- ------------- ------------- ---------
5,946 5,443 10,775
-------------------------------------- ------------- ------------- ---------
Operating profit
Diffusion 768 630 1,120
Central costs (140) (150) (320)
Operating profit 628 480 800
Interest (net) (15) (21) (24)
-------------------------------------- ------------- ------------- ---------
Profit before tax 613 459 776
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