Energy Technique - Take Off Imminent on Nightingale Sales?

Results out...........



Energy Technique PLC
31 December 2004


Energy Technique Plc
Interim Report
30 September 2004

These are the first financial results to be announced by your Company since my
appointment as Chairman at the Annual General Meeting in October, and they are
published as the Company begins to implement some of the profound changes I
believe are needed to reposition it for the challenges ahead.

Results

I am sorry to have to report that the Group incurred a loss of £924,000 (2003:
£679,000) in the half year to September 30 on sales of £6.115 million (2003:
£4.954 million). This was as a consequence of extremely difficult trading
conditions in the second quarter at Diffusion Heating and Cooling, which were
not envisaged when results for the year ended 31 March 2004 were announced in
July. As we position ourselves for the challenges ahead, I and my fellow
directors are taking full account of the new competitive pressures that have
impacted our performance, and are seeking to maximise the opportunities arising
from newer areas of business such as the distribution agreements within
Diffusion DX Air Conditioning and the Nightingale UVGI unit developed by our Air
Treatment division.

Diffusion Heating and Cooling

Sales in the six months were up, at £3.886 million (2003: £3.448 million), but
the operating loss deepened to £398,000 (2003: £316,000). The losses for the
period were all incurred in the second quarter and were directly attributed to
an unexpected sharp downturn in the fan coil business at our West Molesey
operation during July, August and September. Since that time there has been a
modest upswing, though new competition from Europe and Asia continue to affect
the structure of our market.

Promisingly, the West Molesey operation also concentrates on the manufacture and
distribution of the Diffusion Heating range of commercial heating products,
together with distribution of the Kampmann range of trench heaters. Both of
these ranges have given the Company fresh confidence in the quality of the
product delivered. Consequently, we are devoting our engineering expertise to
new product development in the Diffusion Commercial Heating business, in
particular technologically advanced, energy saving, door curtains used on the
high street for retail store doorways.

We have already been successful in winning new retail accounts including HBOS,
Waitrose, and ASDA.

Diffusion DX Air Conditioning

Our packaged air conditioning distribution business, Diffusion DX Air
Conditioning, has enjoyed continual sales growth (month on month in comparison
with the previous year) from its inception in August 2002. Sales for the six
months grew impressively to £2.111 million (2003: £1.417 million) resulting in a
maiden operating profit of £23,000 (2003: loss of £36,000). Moving into a
larger distribution warehouse in Basingstoke, Hampshire and expanding our
product offering have hallmarked the continued expansion.

We are, moreover, not only distributing our own Diffusion range of Commercial
Heating products from this base but are also now leading heating and cooling
distributors for Panasonic, Fujitsu and LG. By distributing these leading brand
names, our trade customer base is not only increasing but also has the potential
to expand into our other product offerings which have considerable positive
margin impact on profits.

Air Treatment

Sales in the six months for the newly formed Air Treatment division were also
up, at £108,000 (2003: £89,000), although as explained below, the operating loss
increased to £369,000 (2003: £108,000). Sales comprised substantially the
Lifebreath range of fresh air ventilation products, for which our quote book is
very encouraging, so that we expect to see sales improvements from March 2005
onwards.

A significant part of the operating loss was incurred in marketing the Company's
Nightingale UVGI air treatment product, together with NQ Environmental Inc's
range of air treatment products, which also incorporate UVGI technology. Whist
we are beginning to make headway in convincing the public of the wide-ranging
benefits of UVGI technology in air purification across many sectors of industry
and commerce, sales take-up to-date has been minimal.

This is particularly disappointing in light of the fact that we have now
obtained positive results from two definitive verification programmes, including
one from the Health Protection Agency, which attest to the efficacy of our
Nightingale air treatment product, currently undergoing clinical trials lasting
several months at a new NHS unit in Basingstoke. We remain frustratingly
hampered by the lack of capital funding available to the NHS to purchase
products such as the Nightingale.

Whilst we believe the medical sector will prove an important long-term sales
outlet for the Company, we are now also aggressively exploring other
commercially exploitable fields such as food processing, which involve degrees
of efficacious air purification.

Current trading

Although the Group has incurred further losses since 30 September 2004 - due
primarily to the continuation of losses at Heating and Cooling and to low sales
in the Air Treatment division - we are now seeing renewed interest in our core
products as well as in our technologically advanced door curtains. In our
distribution division turnover on a month to month basis, in comparison to
previous year's month to month, continues to grow.

As your new chairman, I am obviously disappointed with the results we have to
announce today, but hope you will join me in believing that the rationalisation
and repositioning we are now beginning to implement takes account of the
realities of a changed marketplace and will produce a strongly positive outcome
in the longer term. Your shareholder interest and support is deeply appreciated
by management and employees as we continue on our new course to turn the Company
around and return to long term growth.

G M Thompson
Chairman

6 months to 6 months to Year to
30 September 30 September 31 March
2004 2003 2004
Unaudited Unaudited Audited
£000 £000 £000
____________________________________________________________________________________________________________
Turnover 6,115 4,954 10,819
Cost of sales (4,941) (3,946) (8,508)
____________________________________________________________________________________________________________
Gross profit 1,174 1,008 2,311
Distribution costs (1,567) (1,166) (2,466)
Administrative expenses (477) (472) (889)


Operating loss
____________________________________________________________________________________________________________
Before exceptional items (836) (555) (969)
Exceptional items (included in cost of sales) (34) (75) (75)
____________________________________________________________________________________________________________
Loss before interest (870) (630) (1,044)
Loss on disposal of fixed asset investment - - (311)
Interest payable (54) (49) (117)
____________________________________________________________________________________________________________
Loss on ordinary activities before taxation (924) (679) (1,472)
____________________________________________________________________________________________________________
Tax on loss on ordinary activities - - -
____________________________________________________________________________________________________________
Loss for the financial period (924) (679) (1,472)
Dividends on equity shares - - -
____________________________________________________________________________________________________________
Transfer from reserves (924) (679) (1,472)
____________________________________________________________________________________________________________


Loss per share:
Basic (0.67)p (0.93)p (2.01)p
Diluted (0.67)p (0.93)p (2.01)p
Before exceptional items (0.64)p (0.83)p (1.48)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.


30 September 30 September 31 March
2004 2003 2004
Unaudited Unaudited Audited
£000 £000 £000
__________________________________________________________________________________________________________________
Fixed assets
Intangible assets 17 - 17
Tangible assets 300 362 317
Investments - 514 -
__________________________________________________________________________________________________________________
317 876 334
Current assets
Stocks 1,726 1,163 1,323
Debtors 2,825 2,610 2,654
__________________________________________________________________________________________________________________
4,551 3,773 3,977
Creditors - amounts falling due within one year (3,248) (4,013) (4,515)
__________________________________________________________________________________________________________________
Net current assets/(liabilities) 1,303 (240) (538)
__________________________________________________________________________________________________________________
Total assets less current liabilities 1,620 636 (204)

Creditors - amounts falling due after more than one year - (99) (7)
__________________________________________________________________________________________________________________
1,620 537 (211)
__________________________________________________________________________________________________________________
Capital and reserves
Called up share capital 1,526 731 746
Share premium account 3,562 1,557 1,587
Other reserves 7,449 7,449 7,449
Profit and loss account (10,917) (9,200) (9,993)
__________________________________________________________________________________________________________________
Equity shareholders' funds 1,620 537 (211)
__________________________________________________________________________________________________________________

6 months to 6 months to Year to
30 September 30 September 31 March
2004 2003 2004
Unaudited Unaudited Audited
£000 £000 £000
____________________________________________________________________________________________________________________
Loss for the financial period (924) (679) (1,472)
Issue of ordinary shares 780 - 15
Increase in share premium account 1,975 - 30
____________________________________________________________________________________________________________________
Movements in shareholders' funds 1,831 (679) (1,427)

Shareholders' funds at beginning of period (211) 1,216 1,216
____________________________________________________________________________________________________________________
Shareholders' funds at end of period 1,620 537 (211)
____________________________________________________________________________________________________________________


6 months to 6 months to Year to
30 September 30 September 31 March
2004 2003 2004
Unaudited Unaudited Audited
£000 £000 £000
____________________________________________________________________________________________________________________
Cash outflow from operating activities (1,759) (581) (905)
Returns on investment and servicing of finance (54) (49) (117)
Capital expenditure and financial investment (34) (20) (33)
Expenditure on intangible assets - - (17)
Disposal of shares in London & Boston Investments plc - - 203
____________________________________________________________________________________________________________________
Cash outflow before financing (1,847) (650) (869)
Financing:
Issue of share capital 2,755 - 45
(Reduction)/Increase in debt (908) 464 638
____________________________________________________________________________________________________________________
Reduction in cash during period - (186) (186)
____________________________________________________________________________________________________________________

Reconciliation of net cash flow to movement in net debt
2004 2003 2004
£000 £000 £000
____________________________________________________________________________________________________________________
Reduction in cash in period - (186) (186)
Reduction/(increase) in debt 908 (464) (638)
____________________________________________________________________________________________________________________
Change in net debt resulting from cash flows 908 (650) (824)
New finance leases - - -
____________________________________________________________________________________________________________________
Reduction/(increase) in net debt 908 (650) (824)
Net debt at start of period (1,771) (947) (947)
____________________________________________________________________________________________________________________
Net debt at end of period (863) (1,597) (1,771)
____________________________________________________________________________________________________________________


Reconciliation of operating loss to operating cash flows
2004 2003 2004
£000 £000 £000
____________________________________________________________________________________________________________________
Operating loss before exceptional items (836) (630) (969)
Exceptional items (34) - (75)
____________________________________________________________________________________________________________________
Operating loss after exceptional items (870) (630) (1,044)
Depreciation and amortisation 51 59 117
Stocks (403) (123) (283)
Debtors (171) (457) (501)
Creditors (366) 570 806
____________________________________________________________________________________________________________________
Operating cash flows (1,759) (581) (905)
____________________________________________________________________________________________________________________


6 months to 6 months to Year to
30 September 30 September 31 March
2004 2003 2004
Unaudited Unaudited Audited
£000 £000 £000
____________________________________________________________________________________________________________________
Turnover
Diffusion Heating and Cooling 3,896 3,448 7,994
Diffusion DX Air Conditioning 2,111 1,417 2,643
Diffusion Air Treatment 108 89 182
____________________________________________________________________________________________________________________
6,115 4,954 10,819
____________________________________________________________________________________________________________________

Operating (loss)/profit
Diffusion Heating and Cooling
____________________________________________________________________________________________________________________
Before exceptional items (314) (241) (196)
Exceptional items (34) (75) (75)
____________________________________________________________________________________________________________________
After exceptional items (348) (316) (271)
Diffusion DX Air Conditioning 23 (36) (124)
Diffusion Air Treatment (369) (108) (338)
____________________________________________________________________________________________________________________
Before central and plc costs (694) (460) (733)
Central and plc costs
____________________________________________________________________________________________________________________
Before exceptional items (176) (170) (311)
Exceptional items - - (311)
____________________________________________________________________________________________________________________
After exceptional items (176) (170) (622)
____________________________________________________________________________________________________________________
(870) (630) (1,355)
____________________________________________________________________________________________________________________

1. Financial information

The financial information provided for the six months ended 30 September
2004 has been prepared using consistent accounting policies as used in the
preparation and filing of the statutory accounts for the year ended 31
March 2004. 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 full review by our company
auditors, which is in accordance with our normal 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 to 6 months to Year to
30 September 30 September 31 March
2004 2003 2004
Unaudited Unaudited Audited
£000 £000 £000
____________________________________________________________________________________________________________
Basic
Loss after tax (924) (679) (1,472)
____________________________________________________________________________________________________________


Before exceptional items
Operating loss (836) (555) (969)
Interest payable (54) (49) (117)
Tax payable - - -
____________________________________________________________________________________________________________
Loss after tax (890) (604) (1,086)
____________________________________________________________________________________________________________

No No No
____________________________________________________________________________________________________________
Weighted average number of shares in issue 138,197,809 73,075,456 73,337,751
____________________________________________________________________________________________________________
Weighted average number of shares on a diluted basis 160,732,003 84,828,723 83,612,779
____________________________________________________________________________________________________________

4. Posting to shareholders

This interim report will be posted to shareholders on 10 January 2004.


This information is provided by RNS
The company news service from the London Stock Exchange