Final Results

1 April 2014

CORAC GROUP PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013

Corac Group plc, the innovative, technology-led engineering group, serving the global oil and gas, defence and industrial markets today announces its preliminary results for the year ended 31 December 2013.

Operational highlights

ACI - Strong financial performance and development of international business

· 3rd generation Combined Oxygen Generator System has been successfully proven at sea and will become a core contributor to ACI's business for the next 10 years

· successful delivery of a CO2 scrubber to an Asian customer within a long term, multi-unit programme, and agreement to design and manufacture further improved CO2 scrubbers for the follow-on class of vessels

· first sale of a re-generable CO2 removal system for an Air Independent Propulsion (AIP) submarine to another Asian Navy provides a platform to expand in that emerging market

CET - Proof of core technology and entry to wider applications with additional partners

· compact compressors were proven in customer tests both with industrial process gases in the UK and in methane at CET's proving ground in Cumbria, and more than 6,000 feet underground in a live gas well in Texas

· expander technology in successful testing with our partner which showed economic power generated from waste process gases in a very compact and efficient package

· orders received for design of a compression system for offshore platform application and expander for generation of electricity from waste energy in the gas network

HTT - Successful restructuring and repositioning provides momentum for 2014

· fundamental business review resulting in a change of management, and a refocusing on its core strengths and major customers

· won and completed the early stages of a £1.6m order for five specialised heat exchanger units to be delivered in Saudi Arabia in 2014

· order from the UK division of a global speciality chemical company worth approximately £1.1m for the design and manufacture of 4 exchangers plus a full set of interchangeable spares to be delivered in the UK during 2014

Financial highlights1

· Group revenue of £19.3m (2012: £15.3m)

· Loss before tax of £4.3m (2012: loss £6.1m)

· Adjusted Group EBITDA2 loss of £2.9m (2012: loss £4.1m)

· Group Net Assets of £25.7m (2012: £18.4m)

· £13.7m cash at year end (2012: £6.7m)

· Group year end order book stood at £14.2m (2012: £14.4m)

· Provides strong visibility for 2014 revenue

· Additionally, a significant pipeline of qualified potential sales opportunities.

Phil Cartmell, Chief Executive Officer said:

"We are pleased with the progress made by the Group in 2013 and how we are building for the future. The acquired companies have become strong contributors to Group performance and CET continues to build upon its technical progress.

"We have a clear strategy in place, focusing on delivering our core technologies to a strong customer base supported by industrial partners and talented teams across the businesses."

Ends

For further information please contact:

NOTES TO EDITORS

Corac is a group of innovative UK based engineering companies, active in energy and environmental technologies. Group companies produce valuable solutions in compression systems, atmosphere management and heat exchangers for government, energy and industrial users. It has traded shares on the London Alternative Investment Market (AIM) since July 2001.

Notes

1 The comparative 2012 figures include a 9 month period post acquisition for ACI and HTT.

2 Adjusted EBITDA is defined as operating profit adjusted to add back depreciation of property, plant and equipment, amortisation and impairment of acquired intangible assets, share based payment charges and exceptional items. Exceptional items are those items believed to be exceptional in nature by virtue of their size and or incidence.

Chairman and CEO joint statement

Overview

The year to 31 December 2013 was another exciting period of development for Corac. It was a period in which we made major progress in the integration of ACI and HTT, and saw them deliver a strong second half performance, which sets the Group up for growth in 2014. It was also a period in which we saw significant achievements in technology development by CET. This progress was made in both our compressors in the oil and gas markets, and our expanders in renewable energy applications.

The three group companies complement each other, with ACI and HTT providing a stable and profitable base within established markets. CET is developing a range of innovative compressors and expanders using its own patented technologies, which are now within sight of achieving commercial sales. The common theme is innovation and engineering excellence. This allows us to differentiate ourselves and to find those applications where core technologies can be used to generate exceptional value.

Corac's goal is to become a profitable engineering group that can balance technically superior deliveries in our established markets with innovation and development of new propositions to drive future growth.

Profitable and mature businesses

From revenue of £18.3m (2012 9 months: £15.1m) ACI and HTT generated a combined Adjusted EBITDA of £2.6m (2012 9 months: £2.3m) which underpinned the financial performance of the Group. ACI grew its profits last year, and HTT reshaped its management team and put in place the foundations for growth in 2014. The focus of both companies is to grow their businesses organically from their stable markets and strong customer bases. Notable successes have already been seen with additional export business for heat exchangers in Saudi Arabia and CO2 scrubbers in South East Asia.

Both companies provide large-scale technical equipment with the potential for ongoing support business. This provides visibility of a mature pipeline of future commercial value. Long-term relationships also stimulate continuous improvement, and so the products will evolve to remain competitive and offer further growth potential. An example is the investment in advanced CO2 removal systems to meet the demands of future submarine programmes in the UK and abroad over the next thirty years.

Building future value

Long-term value will be built upon the ACI and HTT foundations. In both cases the Group has implemented business development initiatives to focus on key technical strengths to secure a differentiated position in international markets. To support this further, the Group's geographical presence has been extended with the appointment of a commercial agent in North Africa and the opening of discussions with potential partners in South America and Eastern Europe.

CET's focus is to prioritise its most valuable technologies and deliver a business benefit at the earliest opportunity. It will build value by demonstrating the technical readiness of its core systems to partners and established market leaders, and then work with them to deliver commercial use. This modular approach will allow CET to show progress more effectively, and attract commercial revenues earlier in the process.

Additional funding

In December 2013 we raised £10.8m net in a Placing and Open Offer. These additional funds will finance the technical development streams in all three companies, and accelerate CET towards commercial revenue. Specific uses will include refining the development of the core technologies through provision of more robust testing facilities, construction of multiple units for more extensive concurrent testing, and investment in facilities to support early commercial sales.

Board changes

In March 2013, the company announced the appointment of an independent non-executive Chairman, reflecting the significant acceleration of the Group's development in the preceding year, with Chief Executive Officer continuing to focus on providing vision, strategy and communication with investors, customers and staff. Richard King, an existing non-executive director, was appointed non-executive Chairman and Phil Cartmell as Chief Executive Officer.

At the same time, we also appointed Julia Henderson as an additional non-executive director, adding her experience of advising entrepreneurial growth companies in a wide range of sectors.

In July we separated the roles of Chief Financial Officer (CFO) and Chief Operating Officer (COO) to reflect the increasing breadth of business activities. We welcomed Jon Carter as CFO with a background of private equity backed and leveraged companies in the manufacturing and technology sectors, and Mark Crawford, previously CFO, was appointed COO to drive business growth and delivery across the three operating companies.

These changes equip the Board with a range and balance of skills and position us well to continue the expansion of the Group.

Financial results

Group revenue increased to £19.3m (2012: £15.3m), and our Adjusted EBITDA loss before tax was £2.9m (2012: £4.1m). This improvement on 2012 was driven by a full-year Adjusted EBITDA contribution from the ACI/HTT businesses of £2.6m (2012 9 months: £2.3m), and a reduced Adjusted EBITDA loss at CET of £3.5m (2012: £4.7m). The Group's loss before tax for the year was £4.3m (2012: £6.1m).

Following the successful fundraising in December, we closed the year with £13.7m (2012: £6.7m) of cash which allows us to continue to support the key development and growth initiatives across the Group.

Outlook

The Group enjoys long-term successful relationships with a number of tier 1 customers and partners. We have also assembled a high quality leadership team, with an enviable group of talented engineers, technicians, commercial and administrative staff. We also have a growing portfolio of products and an exciting innovation pipeline that will serve us well for many years. The combination of all these factors provides encouragement for 2014 and beyond.

The operational improvements made at ACI and HTT have already led to further orders being secured soon after the year end (as announced 14 January 2014). This growth of the Group order book since the year end provides greater visibility of revenue for the balance of 2014.

We anticipate the business development initiatives in these companies to extend their products into new markets and build propositions for emerging products. These plans are expected to yield additional sales this year.

Building upon the technical milestones achieved this year, the CET strategy is to focus on the demonstration of functioning systems that can deliver the performance and reliability expected by the markets in which we operate. We are then confident of moving to the next phase of the product life with follow on orders in 2014, and in some cases the preparation for manufacturing by our industrial partners.

Overall, we are pleased with the progress made in 2013 and how we are building the future value of the Group.

Richard King, Non-executive Chairman

Phil Cartmell, Chief Executive Officer

Finance and Operations statement

Operational Focus

The operational focus in 2013 has concentrated on a number of areas:

• Bedding in the ACI and HTT businesses and providing the platform for growth

• Restructuring the HTT management team

• Focus on the core technologies at CET and their applications in different sectors

• Using the CET innovation skills to enhance the solutions across the group

• Delivering the milestones on the CET partner programmes

Financial overview

The Group narrowed its losses in the year and is focusing on becoming profitable within the next two years. The decision to acquire ACI and HTT in 2012 has positioned the Group with two businesses generating profits and cash, and poised for growth. CET is moving towards commercialisation and continuing to invest in compressor and expander technology. The successful fundraising in December 2013 helped to boost cash reserves to £13.7m at year end, and Group Net Assets to £25.7m (2012: £18.4m). The Group reduced its loss before tax by £1.8m to £4.3m and its Adjusted EBITDA loss by £1.2m to £2.9m.

Note: The comparative 2012 figures for ACI and HTT were for a 9 month period post acquisition in 2012.

December 2013 Share Placing and Open Offer

The Group raised £10.8m (net of expenses) in a Placing and Open Offer completed in December 2013. The funds were raised principally to accelerate the CET path to commercialisation by funding the completion of the existing research programmes, capital expenditure to fund improved testing facilities and the build of multiple systems, permitting parallel testing to increase the efficiency of the development cycle.

Group Financial Key Performance Indicators

The Group Board and Executive Board monitor the performance of the business through monthly reporting packs and in particular the following Key Performance Indicators ("KPIs")

Note: The comparative 2012 figures for ACI and HTT were for a 9 month period post acquisition in 2012.

Revenue

The Revenue movement was driven by the full year impact at ACI and HTT. This compares with a 9 month post acquisition period reported in 2012 for these businesses. ACI revenue increased slightly on a pro-rata basis to £10.7m (2012 9 months £7.5m). HTT revenue for the full year in 2013 of £7.6m was equivalent to the £7.6m achieved in 9 months in 2012, reflecting a weak first half year followed by the disruption caused by the management changes. Revenue at CET grew to £1.0m from £0.2m in 2012 as the development contracts progressed steadily.

Order Book

The Group Order book remained steady at £14.2m (2012 £14.4m) providing strong visibility for revenue in 2014, as the majority of this work will be delivered in the year. Furthermore, the pipeline of qualified opportunities was substantial at the year end and new orders taken since the year end have led to the order book growing in the early part of 2014.

Adjusted EBITDA Loss

The Group Adjusted EBITDA loss was £2.9m (2012: £4.1m), which is an improvement on 2012, driven principally by an improved Adjusted EBITDA performance from the ACI/HTT businesses of £2.6m (2012 9 months: £2.3m), and a reduced Adjusted EBITDA loss at CET of £3.5m (2012: £4.7m).

The movement between Group EBITDA loss and Group Adjusted EBITDA loss was £68k related to share based payments. The statutory operating loss before tax for the year was £4.3m (2012: £6.1m).

Group Balance Sheet

The Group's net assets increased to £25.7m (2012: £18.4m), principally due to the Placing and Open offer which raised £10.8m net of expenses. 

Group Cash Flow

The Group ended the year with cash reserves of £13.7m (2012: £6.7m). The Placing and Open offer increased cash reserves, and significantly reduced the financial risk profile of the business. Such funding should permit the Group to progress the journey towards profitability as ACI and HTT improve their revenue streams and CET technologies reach commercial readiness. The Group's operations continue to absorb cash, £3.7m (2012: £4.1m) to fund the development projects, despite the reduction in loss before tax reducing from £6.1m in 2012 to £4.3m in 2013. The relative size of the Group's contracts continue to impact on the working capital requirements of the business, as the movement in inventories, receivables and payables in 2013 was an outflow of £1.5m (2012: inflow £0.2m). This is due to the material nature of the cash flows of each project, rather than any issues over recoverability of cash.

Going concern

The Directors are satisfied that, notwithstanding economic uncertainty, the Group has adequate resources to continue in business for the foreseeable future, and accordingly continue to adopt the going concern basis in preparing the accounts. In reaching this conclusion, the directors have considered forecasts that cover a period of greater than twelve months from the date of the approval of these financial statements. The forecasts take into account the Group's existing cash resources, and include consideration of certain downside scenarios, in particular in relation to CET where there is inherently greater uncertainty as to the future cash flows of that business. The Directors have also considered the mitigating actions available to them, including the ability of management to make certain reductions to the Group's discretionary expenditure if required.

Atmosphere Control International

In the first full year of Group ownership, ACI has made good progress. Revenue and Adjusted EBITDA were slightly ahead of the comparative figures for the 9 month period of ownership in 2012, and Adjusted EBITDA margins were consistent at around 23%. The segment operating profit of ACI was £1.5m (2012 9 months: £1.1m). The order book did reduce from an exceptionally high £9.6m in 2012 (following the DCNS order announced in October 2012) to £5.9m in 2013, the majority of which is due for completion in 2014. More than £3m in new orders have since been taken in the first quarter of 2014.

Management priorities

ACI enjoys a very strong relationship with its primary customers, the UK MoD and BAeSystems, the prime contracting shipbuilder. Established over many years and providing the bulk of the company's revenue, maintaining these relationships is a priority. The approach is to deliver committed work to expectations whilst also being proactive to understand future needs and respond effectively to provide long-term business.

Growth will be incremental, and will come from two sources - other international programmes specifying ACI's existing technologies, and cross selling other ACI equipment to extend the reach in existing UK and international customers. Greater focus was paid to the business development activity in 2013 with presence at exhibitions, new marketing material and lead generation initiatives creating a pipeline of sales opportunities that are expected to mature during 2014.

Submarine breathing system

Defence is a nationally focused business where large naval fleets will typically look for a domestic source for major systems. ACI is the only UK provider of atmosphere management systems for submarines. It also competes very effectively for business in nations that may not have their own national source. In 2013 ACI was awarded contracts by two countries in the Asia Pacific region, one for a further unit to continue an existing successful programme and one was to enter a new programme, which was secured against international competition. In these fleets, the submarines are smaller, Air Independent Propulsion (AIP) boats, more commonly known as diesel-electric.

Development lead times are long in this sector, and work has started on an enhanced CO2 scrubbing system that will form the backbone of ACI's business over the next thirty years, as it responds to calls for lower threshold levels of CO2 on future vessels.

Textile ducting - TexVent

ACI's TexVent product has received a lot of business development support during the year. As a result of enhanced marketing effort, it was showcased at the DSEI exhibition at Excel in the London Docklands. This has led to engagement with several potential new customers and opportunities to apply the system beyond naval vessels. Civilian maritime markets and other military uses such as temporary buildings, field hospitals etc. are all potential uses for this product.

Hunt Thermal Technologies

HTT had a challenging year during which the management team was restructured and many of the processes in the business were re-engineered. Following a weak first half performance, HTT delivered an Adjusted EBITDA of £0.3m (2012 9 months: £0.6m), which was achieved principally in the second half of the year. The segment operating profit for HTT was £0.1m (2012 9 months: £0.6m). Furthermore, the improved processes have led to a closing order book of £5.4m (2012: £3.4m) all of which will be completed in the early stages of 2014.

Management priorities

HTT has capabilities in design and manufacturing with advanced metals, which differentiate it from the mass market (which tends to be commoditised, and with lower margins) and management priorities are to exploit these qualities and maximise their impact and growth potential.

The management restructuring led the company to recognise and play to these strengths. Neville Vickery, an experienced engineering business leader was recruited from David Brown Ltd, as Managing Director. There followed a restructuring programme that reinforced the existing operational management with new hires in finance and business development.

This leadership team has concentrated on what differentiates HTT from the commodity market and promoted high specification systems in domestic and international markets. The result has followed through into the order book with significant new orders and an active pipeline to prepare the business for 2014.

HTT Renaming

Hunt Graham Limited was renamed to Hunt Thermal Technologies Limited at the end of the year. The change provided an opportunity to reflect more accurately the nature of the business and its strengths in the market.

Shell and tube heat exchangers

HTT set out in 2013 to consolidate its core business in the UK petrochemical sector, build upon this and also extend into new export business that would be driven from its capability in complex and large thermal systems.

This approach led to a significant contract award, as announced in July 2013, to supply multiple heat exchangers to a major project in Saudi Arabia. This was secured through a competitive bid process against an international peer group and demonstrates that HTT can compete on a global scale where complex, high integrity systems are the key requirement.

The order was placed by a global Engineering, Procurement and Construction (EPC) company who are a leading supplier of process systems to the Oil and Gas industry. That project was valued in excess of £1.6m to deliver five specialised heat exchanger units for delivery within one year. This route to market is expected to be an increasing part of HTT's future business approach.

The contract has further value for the Group as it extends our activities in Saudi Arabia, alongside Corac Energy Technologies' gas field compressor project and demonstrates the Group's strategy of extending geographic presence and supporting key clients across the combined range of Corac Group business.

Corac Energy Technologies

CET has continued to invest in the development of its compressor and expander technology, resulting in the Adjusted EBITDA loss narrowing to £3.5m (2012: £4.7m). The segment operating loss for CET was £4.0m (2012: £5.1m). Revenue at CET of £1.0m (2012: £0.2m) was a fivefold increase on 2012, and was achieved across a number of development projects in both the oil and gas and industrial sectors. Furthermore the order book at year end stood at £2.9m (2012: £1.4m) of which £2.2m is in the oil and gas sector and £0.7m is in the industrial sector. The order book relates to the value of partner funding for the development projects rather than true commercial sales, which are expected to follow in 2014. The R&D spend of £3.0m (2012: £3.2m) remains significant, but was lower than the previous year due to greater focus on efficiency and cost control.

Management priorities

At CET there has been much progress made during the year on the core technology elements. Extensive testing of compressors and expanders has demonstrated the readiness of the core technologies and the opportunities to develop them further towards new applications.

The management focus has evolved to ensure that the building blocks of technology are robust and demonstrable. Field deployments of integrated systems rely on a number of external factors, many outside of our control. The focus has therefore evolved to maximise the confidence in the building blocks and then to work with partners to put them into field applications.

Compact compressor - single stage

This is the application group that is growing from the original downhole systems. It is, relatively speaking, the simpler of the methane compression systems, with a single stage of compression per motor. Each motor/compressor unit produces a modest pressure ratio and will be deployed with several in series to deliver higher ratios.

Following extensive testing in workshop and flowloop conditions, both at the Slough Technology Centre and the methane test facility in Cumbria, compressors were deployed for the first time as part of an integrated downhole compressor in a producing gas well in Texas in April 2013. The compressors performed well for 140 hours at depths in excess of 6,000 feet, with inlet temperatures approaching 100 degrees Celsius, and with condensate and other fluids in the gas stream. These conditions are as harsh as these solutions are expected to meet in the intended application wells. Work with the development partner continues in order to optimise the resilience of the compressor to erosion and fouling challenges.

The success of this work was the stimulus for other projects to take the single stage compressor into new application areas. After much investigation of the potential for the technology, we signed a Master Service Agreement in July 2013 with BP Trinidad and Tobago to create a larger variant of the base compressor to be deployed on the deck of an unmanned offshore production platform. This is an exciting development as it builds upon successful R&D work already completed to find a new application point on high production rate wells.

Compact compressor - multi stage

This is regarded within CET as a separate development path with different challenges to the single stage machines. Based on a single, high power motor, this compressor has multiple stages mounted on a single shaft within the enclosed compressor casing that sits between flanges in the production pipework. The first application is under development with Saudi Aramco, having agreed an extension to the original contract during 2013. The intent is to deploy the compressor with supporting liquid management systems close to the wellhead.

Compact expander

The expander has been developed as a further variant to the compact single stage compressor as a means of identifying further application areas for the core technology. In this case, pressurised gas spins the impeller to drive a permanent magnet generator, running on gas bearings, similar to those used in the compressor, to produce electricity. The first system of its kind was developed with our industrial partner and successfully tested to show function and performance at the intended levels. The system has since completed endurance testing over several months at the partner site.

A further contract was signed in December 2013 to extend the use of these systems in renewable energy applications.

Outlook

The next phase of the Group's evolution will focus on getting the balance right between costs in the operational businesses and investment across the Group to drive growth. We will invest in new technologies plus any necessary facilities to improve operational efficiency and other support to maximise returns from the regular business activities.

There will also be challenges as a result of growth. Capacity, skills, processes and the general ability to deliver will be closely managed alongside external factors such as the supply chain to add value and efficiency from the increased scale of the Group's activities.

J P Carter, Chief Financial Officer

M S Crawford, Chief Operating Officer

Consolidated Statement of Comprehensive Income for the year ended 31 December 2013

Consolidated and Parent Company Statement of Financial Position for the year ended 31 December 2013

Consolidated Statement of Changes in Equity for the year ended 31 December 2013

Parent Company Statement of Changes in Equity for the year ended 31 December 2013

Consolidated and Parent Company Statement of Cash Flows for the year ended 31 December 2013

Notes to the Preliminary Announcement

1 Basis of preparation

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in May 2014.

This financial information does not constitute the company's statutory accounts for the years ended 31 December 2012 or 2013, but is derived from those accounts. Statutory accounts for 2012 have been delivered to the Registrar of Companies and those for 2013 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498 (2) or (3) Companies Act 2006.

2 Going concern

The Directors are satisfied that the Group has adequate resources to continue in business for the foreseeable future, and accordingly continue to adopt the going concern basis in preparing the accounts. In reaching this conclusion, the directors have considered forecasts that cover a period of greater than twelve months from the date of the approval of these financial statements. The forecasts take into account the Group's existing cash resources, and include consideration of certain downside scenarios, in particular in relation to CET where there is inherently greater uncertainty as to the future cash flows of that business. The Directors have also considered the mitigating actions available to them, including the ability of management to make certain reductions to the Group's discretionary expenditure if required.

3. Segmental Reporting

Business segments

For management purposes, the Group is treated as three business units comprising:

• Atmosphere Control International - activities include the provision of air purification equipment for submarines including oxygen/hydrogen generation and purification, air handling and distribution systems.

• Corac Energy Technologies - specialises in the research and development of technologies in the field of gas compression and the design and manufacture of high speed motors and generators using proprietary permanent magnetic rotor and oil-less bearings

• Hunt Thermal Technologies - activities include the manufacture of heat exchange equipment used in the heating and cooling of large scale industrial processes.

Group Central Team - costs incurred to support the businesses are charged out to the operating companies leaving central unallocated costs that relate specifically to the Corac Group Plc operations.

The following table presents group revenue, profit and certain net asset information for each business segment. The comparatives for 2012 include the post-acquisition results of Atmosphere Control International Limited and Hunt Thermal Technologies Limited for the nine months from 5 April to 31 December 2012.

The segment operating result for HTT includes an impairment loss on intangible assets of £76,000 (2012: £nil) arising on the change of name of Hunt Graham Limited to Hunt Thermal Technologies Limited.

Geographical segments

The Group's operations are solely in the United Kingdom although some of the Group's revenues are to customers outside the UK. All segment assets are located in the UK. The Group's revenues from external customers are analysed into the following geographical areas:

Results by segment

1 EBITDA is defined as operating profit adjusted to add back depreciation of property, plant and equipment and amortisation and impairment of acquired intangible assets.

2 Adjusted EBITDA is defined as operating profit adjusted to add back depreciation of property, plant and equipment, amortisation and impairment of acquired intangible assets and any other acquisition related charges, share based payment charges and exceptional items. Exceptional items are those items believed to be exceptional in nature by virtue of their size and or incidence. There are no exceptional items in the current year. In the year to 31 December 2012 they comprise costs of £980,000 associated with the acquisitions of ACI and HTT on 5 April 2012 and the associated equity fundraising on 2 April 2012.

4 Operating Loss

The Group operating loss for the year is stated after charging the following. The comparatives for 2012 include the post-acquisition results of Atmosphere Control International Limited and Hunt Thermal Technologies Limited for the nine months from 5 April to 31 December 2012.

Included in wages and salaries is a total expense of share-based payments of £68,000 (2012: £143,000), all of which arises from transactions accounted for as equity-settled share-based payment transactions.

Exceptional costs in 2012 relate to costs associated with the due diligence, advisor and broker fees relating to the acquisition of Atmosphere Control International Limited and Hunt Thermal Technologies Limited on 5 April 2012.

Staff numbers

The average number of employees, including Directors, employed by the Group during the year (2012 includes employees of Atmosphere Control International Limited and Hunt Thermal Technologies Limited from 5 April 2012) was as follows:

Pension costs

The Group operates a money purchase and a group stakeholder pension scheme. The assets of this scheme are held separately from those of the Group in separately administered funds. The pension cost charge represents contributions payable by the Group to these funds and amounted to £384,000 (2012: £326,000). No contributions were prepaid or overdue at 31 December 2013 (2012: £nil). The nature of the Group's scheme is such that there is no possibility of a surplus or deficiency in funding arising from past service.

5 Taxation

Credit to consolidated income statement

The tax credit for the period is lower than the standard rate of corporation tax in the UK of 23.25% (2012: 24.5%). The differences are explained as follows:

At the balance sheet date the Group has approximately £16.5m (2012: £15.1m) of unrelieved tax losses for offset against future taxable profit. A deferred tax asset of £0.1m (2012: £0.1m) has been recognised in respect of £0.5m (2012: £0.5m) of such losses. No deferred tax asset has been recognised in respect of the remaining £16.0m (2012: £14.6m), due to the uncertainty of timing of the generation of future taxable profits.

6 Loss per Share

The calculation of basic loss per share for the year ended 31 December 2013 is based upon a loss after tax of £3,556,000 (2012: £5,224,000) and a weighted average number of shares of 310,164,087 (2012: 291,007,168). The weighted average number of shares has been reduced by the weighted average number of shares held by the Employee Benefit Trust.

The issue of additional shares on exercise of employee share options would decrease the basic loss per share and there is therefore no dilutive effect of employee share options.

7 Cash and cash equivalents

The funds were placed on floating interest rate deposit as follows:

Notice of Annual General Meeting

The Annual General Meeting of Corac Group plc will be held at 10.30am on 14 May 2013 at MHP Communications, 60 Great Portland Street, London W1W 7RT.

END