RNS Number:2388T
Energy Technique PLC
15 December 2003
Energy Technique Plc
Interim Report
30 September 2003
Results
In the trading statement announced at the Annual General Meeting on 26 September
2003, I explained that the Group's results in the first quarter of the current
financial year had been adversely impacted by the sharp slowdown in business
affecting the whole property and construction sector at the time of the Iraq
war. The Group responded rapidly to this unexpected downturn with a redundancy
programme to reduce the cost base, and by increasing its marketing efforts.
I am pleased to report that during the second quarter of the current financial
year, both ET Environmental and Diffusion Refrigeration and Distribution
experienced a sharp improvement in order intakes as business conditions started
to improve. Sales in the second quarter recovered strongly and were 43% higher
than in the first quarter, resulting in a much-reduced Group loss for the second
quarter.
Set against this market background, the results for the six months ended 30
September 2003 show group sales of #4.954 million (2002: #6.303 million) and a
loss after exceptional items of #679,000 (2002: profit #346,000), of which
#583,000 was incurred in the first quarter. This was caused by three main
factors:
* The sudden downturn in the air conditioning market, which started in
January 2003 and continued into the first quarter of the current financial year.
* Redundancy costs of #75,000 incurred in the first quarter.
* Continuing management and development costs for the new Nightingale
UVGI air treatment unit of #108,000.
Operations
ET Environmental
Sales for the first half-year were #3.537 million (2002: #6.171 million) and the
operating loss before exceptional items was #241,000 (2002: profit #649,000).
The operating loss for the first half-year was all incurred in the first
quarter. ET Environmental traded profitably in the second quarter on sales
levels 32% higher than in the first quarter.
Demand for ET Environmental's core fan coil and commercial heating products were
at historically low levels during the first quarter of the current financial
year, caused by the sharp downturn in the hotel and office property sectors,
which started in January 2003. ET Environmental has not experienced such a
sharp and prolonged downturn in recent years, with sales of only #1.524 million
during the first quarter, representing a reduction of 42% compared with last
year. As a consequence, 25 redundancies were announced in May 2003, at a cost
of #75,000, to reduce the ongoing cost base.
Business confidence started to improve markedly in the second quarter, resulting
in substantially improved sales of #2.013 million, and a return to
profitability.
During the first half-year, ET Environmental's products have featured in a
number of prestigious developments, including the London Stock Exchange,
Scottish Parliament, and Aspreys New Bond Street. Our award winning and
patented Ambassador hotel fan coil unit gained further accolade from the City
Inn Westminster hotel, where the external design team were successful in winning
the best new hotel award at the recent European Hotel and Design Conference.
Diffusion Refrigeration and Distribution
This start up company was established in August 2002 to distribute the Panasonic
and LG Electronics ranges of packaged air conditioning equipment. The company
started with a small-established team of highly experienced industry
professionals, and the Board is very pleased with the organic growth achieved so
far.
Sales for the first half-year were #1.417 million (2002: #0.132million) and the
operating loss was #36,000 (2002: loss #87,000). The operating loss for the
first half-year was all incurred in the first quarter. Diffusion Refrigeration
and Distribution traded profitably in the second quarter on sales levels 74%
higher than the first quarter. The low sales achieved during the first quarter
of #518,000 were caused by the same adverse market factors affecting ET
Environmental. However, the hot summer months produced much improved second
quarter sales of #899,000, resulting in an operating profit of #27,000 for the
second quarter.
UVGI
In November 2002, the Company announced the prototype of its new Nightingale
UVGI Air Treatment unit and a 55% joint venture, UVGI Systems Limited, to market
the product. In April 2003, the product won the coveted Air Movement Product of
The Year Award at the 2003 HVAC industry's H & V Awards.
During 2003 a second generation production model has been developed,
incorporating more powerful ultra violet lamps, revised filters and GSM remote
monitoring, and the accreditation test of the production model is being
undertaken now. Active marketing of the product to the hospital and medical
sector has started, but selling into the NHS is proving far more difficult and
protracted than anticipated.
Of significant importance however, an NHS hospital has agreed to install two
Nightingale UVGI units in its Accident and Emergency Department, starting before
the end of 2003. Two further units are expected to commence trials in a new
isolation department of the same NHS hospital in Autumn 2004, but the results
are unlikely to be received until late 2005. The Board anticipates these
installations will allow it to initiate sales of the Nightingale UVGI unit into
other NHS hospitals.
Discussions are continuing with a number of parties who are interested in
licensing the Nightingale UVGI unit in their respective markets and countries.
New Air Treatment Division
The Board proposes to capitalise on the strong growth expected in the air
treatment market by creating a new Air Treatment Division, centered on the
Nightingale UVGI Air Treatment unit and the Group's existing range of Lifebreath
products. The Board believes the creation of an Air Treatment Division will
result in the realisation of profit returns earlier than by concentrating solely
on the existing Nightingale UVGI unit alone.
It is intended that the new Air Treatment Division will develop a lower
specification UVGI unit and develop or license for manufacture complementary
products incorporating ultra violet technology, aimed at the commercial air
treatment market. The new Division will also include distribution of the
Group's existing range of Lifebreath products, where new Building Regulations
will act as a strong driver for growth.
ET Environmental is the sole UK distributor of Nutech, the Canadian company's
patented range of heat recovery, heating, cooling, and ventilation products
under the Lifebreath name. The Part L1 Building Regulations introduced in 2002
require high standards for the conservation of fuel and power in dwellings and
Lifebreath products supply fresh air ventilation to offset the airtight
construction, and at the same time, recover up to 75% of normal heating energy
loss. The first product was delivered in March 2003, achieving sales in the
first half-year of #89,000, including a 60 unit housing development of Sunley
Estates. Sales growth over the next two years is expected to be strong, as the
Building Regulations become increasingly more compulsory in April 2004 and April
2005. Owing to the success of ET Environmental with this product it has now
been agreed, subject to contract, that Nutech will grant ET Environmental the
sole European-wide distributorship for Lifebreath products.
Finance
The impact of the losses, which were substantially incurred in the first quarter
of the half-year, has inevitably put a strain on the Group's finances. Whilst
balance sheet gearing at 30 September 2003 was 297%, the Group's bankers and
suppliers all remain supportive.
Current trading and prospects
Sales in October and November for ET Environmental continued their upward trend
at levels higher than in the second quarter, and for Diffusion Refrigeration and
Distribution sales fell, following the ending of the summer air conditioning
season. Much marketing effort is being directed towards reducing the impact of
this seasonality by targeting larger project led work. The impact of this,
combined with the increasing presence of Diffusion Refrigeration and
Distribution in the market place is starting to show through. Combined sales
for Diffusion Refrigeration and Distribution in October and November 2003
represented year on year growth of 220%. The Group incurred a small loss in
October due to the ongoing management and development costs associated with the
Nightingale UVGI Air Treatment product.
The Company's capital base has been depleted by the ongoing costs of developing
and managing the Nightingale UVGI Air Treatment unit since early 2002, which has
been compounded by the losses incurred in the current half-year. As a
consequence, the Group will not be able to fully develop the proposed Air
Treatment Division further without additional capital. To this end, as
previously announced, the Board has been actively exploring opportunities to
raise this capital and hopes to make an announcement in early 2004.
G R Mackenzie
Chairman
3 months to 3 months to 6 months to 6 months to Year to
30 June 30 Sep 30 Sep 28 Sep 31 March
2003 2003 2003 2002 2003
Unaudited Unaudited Unaudited Unaudited Audited
#000 #000 #000 #000 #000
Turnover 2,042 2,912 4,954 6,303 11,704
Cost of sales (1,784) (2,162) (3,946) (4,138) (7,884)
Gross profit 258 750 1,008 2,165 3,820
Distribution costs (567) (599) (1,166) (1,274) (2,388)
Administrative expenses (253) (219) (472) (489) (1,063)
Operating (loss)/profit
Before exceptional items (487) (68) (555) 402 369
Exceptional items (included in cost of sales) (75) - (75) - -
(Loss)/profit before interest (562) (68) (630) 402 369
Interest payable (21) (28) (49) (56) (106)
(Loss)/profit on ordinary activities before (583) (96) (679) 346 263
taxation
Tax on (loss)/profit on ordinary activities - - - - -
(Loss)/profit for the financial period (583) (96) (679) 346 263
Dividends on equity shares - - - - -
Transfer (from)/to reserves (583) (96) (679) 346 263
Earnings/(loss) per share:
Basic (0.93)p 0.47p 0.36p
Diluted (0.93)p 0.44p 0.31p
Before exceptional items (0.83)p 0.47p 0.36p
30 Sep 28 Sep 31 March
2003 2002 2003
Unaudited Unaudited Audited
#000 #000 #000
Fixed assets
Tangible assets 362 404 401
Investments 514 514 514
876 918 915
Current assets
Stocks 1,163 884 1,040
Debtors 2,610 3,458 2,153
Cash at bank - 230 186
3,773 4,572 3,379
Creditors - amounts falling due within one year (4,013) (4,067) (2,949)
Net current (liabilities)/assets (240) 505 430
Total assets less current liabilities 636 1,423 1,345
Creditors - amounts falling due after more than one year (99) (124) (129)
Provisions for liabilities and charges - - -
537 1,299 1,216
Capital and reserves
Called up share capital 731 731 731
Share premium account 1,557 1,557 1,557
Other reserves 7,449 7,449 7,449
Profit and loss account (9,200) (8,438) (8,521)
Equity shareholders' funds 537 1,299 1,216
6 months to 6 months to Year to
30 Sep 28 Sep 31 March
2003 2002 2003
Unaudited Unaudited Audited
#000 #000 #000
(Loss)/profit for the financial period (679) 346 263
Movements in shareholders' funds (679) 346 263
Shareholders' funds at beginning of period 1,216 953 953
Shareholders' funds at end of period 537 1,299 1,216
6 months to 6 months to Year to
30 Sep 28 Sep 31 March
2003 2002 2003
Unaudited Unaudited Audited
#000 #000 #000
Cash (outflow)/inflow from operating (581) 262 487
activities
Returns on investment and servicing of (49) (56) (106)
finance
Capital expenditure and financial investment (20) (107) (142)
Expenditure on intangible assets - - (30)
Cash (outflow)/inflow before financing (650) 99 209
Financing:
Increase in debt 464 168 14
(Reduction)/increase in cash during period (186) 267 223
Reconciliation of net cash flow to movement in net debt
2003 2002 2003
#000 #000 #000
(Reduction)/increase in cash in period (186) 267 223
(Increase) in debt (464) (168) (14)
Change in net debt resulting from cash flows (650) 99 209
New finance leases - - (26)
(Increase)/reduction in net debt (650) 99 183
Net debt at start of period (947) (1,130) (1,130)
Net debt at end of period (1,597) (1,031) (947)
Reconciliation of operating profit to operating cash flows
2003 2002 2003
#000 #000 #000
Operating (loss)/profit (630) 402 369
Depreciation and amortisation 59 57 149
Stocks (123) (160) (316)
Debtors (457) (819) 487
Creditors 570 782 (202)
(581) 262 487
3 months to 3 months to 6 months to 6 months to Year to
30 June 30 Sep 30 Sep 28 Sep 31 March
2003 2003 2003 2002 2003
Unaudited Unaudited Unaudited Unaudited Audited
#000 #000 #000 #000 #000
Turnover
ET Environmental 1,524 2,013 3,537 6,171 10,930
Diffusion Refrigeration & Distribution 518 899 1,417 132 774
2,042 2,912 4,954 6,303 11,704
Operating profit/(loss)
ET Environmental
Before exceptional items (263) 22 (241) 649 883
Exceptional items (75) - (75) - -
(338) 22 (316) 649 883
Diffusion Refrigeration & Distribution (63) 27 (36) (87) (258)
Before UVGI costs (401) 49 (352) 562 625
UVGI costs (see note below) (59) (49) (108) - -
Before central and plc costs (460) - (460) 562 625
Central and plc costs (102) (68) (170) (160) (256)
Before exceptional items (487) (68) (555) 402 369
Exceptional items (75) - (75) - -
(562) (68) (630) 402 369
The continuing management and development costs associated with the Nightingale
UVGI Air Treatment unit, which have been borne by ET Environmental, have been
shown separately for the six months ended 30 September 2003 only. Total
research and development costs incurred in the year ended 31 March 2003,
including the Nightingale UVGI Air Treatment unit, amounted to #417,000.
1. Financial information
The financial information provided for the six months ended 30 September 2003
has been prepared using consistent accounting policies as used in the
preparation and filing of the statutory accounts for the year ended 31 March
2003. 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. Earnings/(loss) per share
The earnings/(loss) per share calculations have been arrived at by reference to
the following earnings and weighted average number of shares in issue during the
year.
6 months to 6 months to Year to
30 Sep 28 Sep 31 March
2003 2002 2003
Unaudited Unaudited Audited
#000 #000 #000
Basic
Profit/(loss) after tax (679) 346 263
Before exceptional items
Operating profit (555) 402 369
Interest payable (49) (56) (106)
Tax payable - - -
Profit after tax (604) 346 263
No No No
Weighted average number of shares in issue 73,075,456 73,075,456 73,075,456
Weighted average number of shares on a diluted basis 84,828,723 78,709,228 84,828,723
4. Posting to shareholders
This interim report will be posted to shareholders on 23 December 2003.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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