Half Yearly Report

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 £5.95 million;

· Operating profit of Diffusion increased by 21.9% over the corresponding half-year to £768,000;

· Group profit before tax increased by 33.6% over the corresponding half-year to £613,000;

· EPS increased by 47.7% over the corresponding half-year to 22.3 pence per share;

· Further improvement in net cash to £1.70 million at 30 September 2015 and net assets to £2.78 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 £5.95 million, generating improved operating profit for the Company's trading business, Diffusion, to £768,000 and of group profit before tax to £613,000. 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 £5.95 million (2014: £5.44 million). Sales of the largest product group, fan coils, increased by 6.9% to £4.66 million (2014: £4.36 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 £0.88 million (2014: £0.78 million), despite continued difficult trading conditions on the UK high street.

Diffusion's operating profit increased by 21.9% to £768,000 (2014: £630,000), 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 £613,000 (2014: £459,000) after charging reduced Central costs of £140,000 (2014: £150,000).

The taxation charge includes a corporation tax charge of £86,000, 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 £427,000 (2014: £399,000). Capital expenditure in the half-year was £54,000 (2014: £28,000) and dividends paid amounted to £54,000 (2014: £48,000). The resulting growth in net cash during the half year was £319,000 (2014: £317,000), resulting in an improved cash position at 30 September 2015 of £1.70 million (31 March 2015: £1.38 million). The Company is soundly financed with this level of liquidity and net assets at 30 September 2015 of £2.78 million (31 March 2015: £2.22 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 £3.45 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

For the six months ended 30 September 2015

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 £163,000 (31 March 2015: £334,000 and 30 September 2014 £167,000) 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.

For the six months ended 30 September 2015