Half Yearly Report

Energy Technique Plc

("Energy Technique" or the "Company")

Half-Yearly Report

30 September 2012

Headlines

·; Sales increased by 12 per cent over the corresponding half year to £3.67 million;

·; Diffusion's operating profit increased by 18 per cent over the corresponding half year to £176,000;

·; Group profit before tax and an exceptional item, increased by 18 per cent over the corresponding half year to £77,000;

·; Strong balance sheet net assets at 30 September 2012 of £1.46 million and cash and cash equivalents of £285,000;

·; Diffusion's premium branded fan coils and commercial heating products fitted into many landmark and prestigious developments;

·; Energy efficient fan coil development programme under way with exciting new products expected to be launched in the spring of 2013;

·; Enquiry levels and order intakes are at encouraging levels and the Board looks forward to a successful second half year, despite the continuing challenges facing the UK construction industry.

Chairman's statement

Introduction

I am very pleased to report a continuation of profitable trading in the half year ended 30 September 2012. Sales increased by 12% over the corresponding half year to £3.67 million, producing an operating profit for Diffusion of £176,000 and a group profit before tax of £77,000, before an exceptional item. This was a pleasing trading performance, broadly in line with management's expectations, and achieved in a continuation of challenging trading conditions in the UK property and construction markets.

Financial performance

Sales in the half year ended 30 September 2012 increased by 12 per cent to £3.67 million (2011: £3.29 million). Fan coil sales were particularly strong with sales increasing by 26 per cent to £2.55 million (2011: £2.02 million), but commercial heating sales fell marginally to £0.95 million (2011: £1.10 million). The reduction in commercial heating sales was attributed to reduced market demand from the UK retail sector.

Diffusion's operating profit increased by 18 per cent to £176,000 (2011: £149,000), representing an improved operating profit margin of 4.8 per cent (2011: 4.5 per cent). Overall selling contribution margins fell marginally in the half year because of a slightly weaker sales mix, but the overall operating profit margin was maintained through higher sales levels.

Group profit before tax increased by 18 per cent to £77,000, before an exceptional item of £25,000 (2011: £65,000) after charging Central and plc related costs of £74,000 (2011: £64,000) and interest of £25,000 (2011: £20,000). The exceptional charge of £25,000 relates to the costs associated with the capital reorganisation and reduction approved by the Court on 19 September 2012. This course of action was necessary to allow the Company to be able to pay dividends in the future.

Cash flow and net cash

Operating income before changes in working capital was £117,000 (2011; £121,000). Working capital absorbed on higher sales was much smaller this half year at £21,000 (2011: £239,000) and after interest charges of £25,000 (2011: £20,000), net cash generated by operating activities was £71,000 (2011: cash absorbed £138,000). There was no requirement for any significant capital expenditure in the half year and cash used in financing activities reduced from June 2012 onwards, following payment of the last installment on the Trumpf laser cutter.

The Company is soundly financed with strong net assets at 30 September 2012 of £1.46 million (2011: £1.43 million) and ample liquidity provided by cash at bank of £388,000 (2011: £388,000), together with a modest draw down of £103,000 (2011: £350,000) under its invoice discounting facility.

Diffusion

Diffusion's markets did not show any signs of growth in the half year and selling price pressure remained a market feature. The Company produced its continued profitability by maintaining Diffusion's premium branding and pursuing quality projects likely to return target selling margins, combined with focused business development activities. Recent investments in sales and marketing resources, upgrading of the research and development facilities and capital expenditure on the Trumpf laser cutter have all contributed to this success.

Diffusion has continued to improve its share of the UK fan coil market. The growth in fan coil sales is a continued testament to Diffusion's quality products, engineering excellence and product innovation. During the half year ended 30 September 2012, Diffusion has worked on many prestigious developments including Abu Dhabi Investment Council, Walbrook House, Goldman Sachs, BskyB, 375 Kensington Residential, Jaynes Harbour Barbados, St Marys Axe and Shard Residential. In 2011, Diffusion appointed a new distributor in the Republic of Ireland and sales through this distributor have been an important contributor to fan coil sales.

The commercial heating range enjoys the same reputation for engineering quality as Diffusion's fan coils and customers particularly like the short lead times, combined with a specialist bespoke service. Commercial heating sales fell marginally in the half year, attributed to lower demand from its traditional high street customer base. Nevertheless, Diffusion's products were fitted into a number of prestigious projects including Oasis Academy (Enfield), Serpentine Galley (London), Croydon CURV, Starbucks (Canary Wharf), Islington Arts & Media College, Genting Casino (Sheffield), and MTV Studio's (London). A number of changes have been made to the sales management of commercial heating sales that are already starting to show through in improved sales in September and October.

Dividends

The capital reorganisation and reduction was approved by the Court on 19 September 2012, thereby eliminating the previous deficit on the Company's distributable reserves. The payment of fractional entitlements to shareholders arising from the capital reorganisation will follow as soon as possible after the announcement of these interim results.

The Board is now pleased to declare an interim dividend of 0.75 pence per share payable on 28 December 2012 to those shareholders on the register at the close of business on 7 December 2012. The total cost of this dividend will be £25,000. It is the Board's intention to consider payment of a final dividend at the time of releasing the audited accounts for the full year ended 31 March 2013.

Current trading and future prospects

The Company is planning to enhance fan coil sales through product innovation and higher export sales. A new range of highly energy efficient fan coils is expected to be released in the spring of 2013 and a number of Middle East projects are being pursued to improve export sales, but the order lead times on these projects is turning out to be far longer than originally anticipated.

Diffusion has market leadership and a high quality reputation allowing for the successful pursuit of major commercial projects. We continue to experience high levels of enquiries at the premium end of the market, including the high-end residential sector, together with an improved order book. Sales in October were in line with management's expectations. Whilst it is too early to predict the outturn for the remainder of the current year ending 31 March 2013, there is presently cause for optimism.

Walter Goldsmith

Chairman

28 November 2012

Contacts:

Energy Technique Plc: 020 8783 0033

Walter Goldsmith, Chairman

Leigh Stimpson, Managing Director

finnCap (Nominated Adviser): 020 7220 0500

Ed Frisby/Ben Thompson

Consolidated statement of comprehensive income

For the six months ended 30 September 2012

There are no other recognised gains or losses other than as recorded in the consolidated statement of comprehensive income for the period.

Consolidated statement of financial position

At 30 September 2012

Consolidated statement of changes in equity

Consolidated cash flow statement

For the six months ended 30 September 2012

Consolidated segmental analysis

For the six months ended 30 September 2012

Notes to the consolidated interim report

For the six months ended 30 September 2012

1. GENERAL INFORMATION

Energy Technique Plc ("the Company") is a public limited company incorporated in the United Kingdom (registration number 13273). The Company is domiciled in the United Kingdom and its registered office address is 47 Central Avenue, West Molesey, Surrey KT8 2QZ. The Company's Ordinary Shares are traded on the AIM market of the London Stock Exchange.

2. BASIS OF PREPARATION

Energy Technique Plc has adopted International Financial Reporting Standards ("IFRS") as adopted by the European Union. The financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated. The accounting policies and methods of computation used in the preparation and presentation of this half-yearly report are in a form consistent with that which will be adopted in the Company's annual accounts.

3. REPORTING UNDER INTERNATIONAL REPORTING STANDARDS

As permitted, the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in preparing these half-yearly financial statements and therefore the half-yearly financial information is not in full compliance with IFRS.

4. EARNINGS PER SHARE

The earnings per share calculations have been arrived at by reference to the following earnings and weighted average number of shares in issue during the period. The average number of shares in issue has been adjusted for the capital reorganisation approved at a General Meeting of shareholders on 16 August 2012.

5. OTHER INFORMATION

The half-yearly financial statements do not constitute statutory accounts as defined by Section 434 of the Companies Act 2006. It does not therefore include all the information and disclosures required in the annual financial statements. The financial information for the year ended 31 March 2012 has been extracted from the statutory financial statements for the Company for that period. These published financial statements prepared in a form consistent with International Financial Reporting Standards, as adopted by the European Union, were reported on by the auditors without qualification or an emphasis of matter reference and did not include a statement under Section 498(2) or (3) of the Companies Act 2006 and have been delivered to the Registrar of Companies.

6. POSTING TO SHAREHOLDERS

In an effort to further reduce costs and in accordance with the AIM Rules for Companies, this half-yearly report will be announced on a Regulatory Information Service and published on the Company's website, www.diffusion-group.co.uk, but it will not be posted to shareholders.

NOTES TO EDITORS

With over 50 years in the Heating & Ventilation ("HVAC") industry, Energy Technique's operating company Diffusion, is one of the oldest and most established manufacturers of HVAC products in the UK. Diffusion is a market leader in the manufacture of premium quality fan coils and commercial heating products. The Diffusion and Energy Technique brand names are recognised as highly engineered, quality products, providing leading edge performance and energy efficiency, which have been fitted into projects including the Shard and No 1 Hyde Park.

Diffusion has been involved with many challenging and prestigious projects across a spectrum of sectors including hotels, commercial offices, retail, schools, hospitals, and residential. Diffusion has established excellent working relationships with many blue chip clients including Land Securities, Marks & Spencer, Boots, City Inn Hotels, Stanhope Properties and many more. All products are designed, developed and manufactured at Diffusion's 30,000 sq. ft. manufacturing facility in West Molesey, Surrey, offering the best possible products, designed specifically to meet customers' bespoke requirements.