Half Yearly Report

Energy Technique Plc

("Energy Technique" or the "Company")

Half-Year Report

30 September 2014

Headlines

· Sales increased by 24% over the corresponding half-year to £5.44 million;

· Operating profit of Diffusion increased by 93% over the corresponding half-year to £630,000;

· Group profit before tax increased by 127% over the corresponding half-year to £459,000;

· EPS increased by 180% over the corresponding half-year to 15.1 pence per share;

· Strong net cash equivalents at 30 September 2014 of £1.19 million and net assets of £1.91 million;

· Enquiries and order intakes are at high levels and with M&E consultants experiencing high workloads, the Board believes this will translate into another year of growth for the year ending 31 March 2015.

Chairman's statement

Introduction

I am very pleased to report a continuation of profit improvement for the half-year ended 30 September 2014. Sales increased by 24% over the corresponding half-year to £5.44 million, producing a substantial improvement in both operating profit of Diffusion to £630,000 (2013: £326,000) and of group profit before tax to £459,000 (£202,000). This represents another solid set of trading results ahead of management's expectations.

Financial performance

Sales in the half-year ended 30 September 2014 increased by 24% to £5.44 million (2013: £4.40 million). Fan coils generated this sales growth, increasing by 30% to £4.36 million (2013: £3.36 million), attributed to a combination of improving UK fan coil market conditions and to Diffusion's premium branded product offering. Sales of the smaller commercial heating range fell marginally to £0.78 million (2013: £0.85 million), consistent with continued difficult trading conditions on the UK high street.

Diffusion's relatively high operational gearing resulted in sales increases flowing substantially through to bottom line operating profit. Diffusion's operating profit increased by 93% to £630,000 (2013: £326,000), representing an improved operating profit margin of 11.6% (2013: 7.4%). Despite market pressures, overall selling contribution margins remained stable due to continued lean manufacturing methods.

Group profit before tax increased by 127% to £459,000 (2013: £202,000) after charging Central costs of £150,000 (2013: £96,000) and interest of £21,000 (2013: £28,000). Interest costs include notional charges of £11,000 (2013: £10,000) relating to the unwinding of a provision set up at 31 March 2010. The taxation charge of £98,000 (2013: £42,000) represents non-cash deferred tax.

Diffusion's operating performance

This is the fourth successive year of sales and profit growth for Diffusion, with fan coils providing the current growth driver. With its leading edge product offering, Diffusion is benefiting from improving UK fan coil market conditions, resulting in a 30% growth in fan coil sales in the half-year. The ECO 270 fan coil range offers 25% energy savings for no additional capital cost, has continued to gain increased market traction and the Board believes its sales will continue to grow in the future.

Diffusion fan coils were supplied into continuing phases of all three of the current London skyline developments of the Shard, Cheesegrater and Walkie-Talkie. In total, fan coils were supplied into over 200 different projects during the half-year, including other large developments at London Bridge Place, Hyde Park Hayes, 207-211 Old Street, American Express and Park House.

Following on from its initial success at No. 1 Hyde Park in London, Diffusion continued to supply fan coils into other high-end residential developments in the half-year, including Tideway Riverlight, No.1 Tower Bridge and Holland Green. The Board views Diffusion's successful entry into the high-end residential sector as a major growth driver for the future.

Commercial heating sales fell marginally in the half-year ended 30 September 2014, due to continuing difficult trading conditions on the UK high street, but order intakes are now improving, albeit slowly. Commercial heating products were fitted into many prestigious sites during the half-year, including Superdry Hamburg, H&M Dublin, Ampersands Hotel London, Lanesborough Hotel London, Chelmsford Racecourse, Nike Taplow and two Marks & Spencer stores in Paris.

Cash flow and net cash

The high profit levels resulted in net cash generated by operations of £399,000 (2013: 207,000). There was a short-term increase in stocks in the half-year, but this is expected to reverse by the year-end. There was no requirement for any significant capital expenditure in the half-year.

The Company remains soundly financed with net assets at 30 September 2014 of £1.91 million (31 March 2014: £1.59 million) and ample liquidity provided by net cash of £1.19 million (31 March 2014: £873,000). The previous invoice financing facility is suspended, as the Company's net cash can now accommodate short-term working capital variations.

Dividends

The Board is pleased to declare a 100% increase in the interim dividend to 1.50 pence per share (2013: 0.75 pence per share), payable on 12 December 2014 to those shareholders on the register at the close of business on 21 November 2014.

Business strategy

The Board's stated strategy is to continue building shareholder value by growing Diffusion's sales and profits organically. A good measure of this objective was achieved in the year ended 31 March 2014 and further progress has been made in the half-year ended 30 September 2014. The share price has increased more than six fold between 31 March 2013 and its current level of £3.27 on 7 November 2014.

The Board has identified the granting of franchises into overseas territories as a potential additional growth driver. At the end of October 2014, Diffusion exhibited at the major HVACR Exhibition 2014 in Indonesia and it has also advertised for franchisees in a number of leading overseas trade publications. The results of these and other initiatives are being evaluated.

Once the Board has fully achieved its ongoing organic growth objective, then it would seek a strategic partnership to realise shareholder value. In the meantime, the Board will not be distracted from this organic growth strategy by evaluating acquisitions.

Current trading and prospects

Trading in the half-year ended 30 September 2014 has laid the foundations for a very successful year ending 31 March 2015. M&E consultants continue to experience improved activity levels and this is providing sales momentum and growth opportunities. Diffusion is ideally placed to benefit from this, with its ECO 270 range of energy efficient fan coils gaining increasing market traction.

An additional organic growth driver is being evaluated of granting franchises in overseas territories. It is too early to predict the outcome of this initiative, but it is important to emphasise that this proposition involves negligible downside financial risk.

We are experiencing high levels of fan coil enquiries and improving commercial heating enquiries, together with an improved order book. Whilst it is too early to predict the outturn for the remainder of the current year ending 31 March 2015, the Board looks forward to another successful year of growth.

Walter Goldsmith

Chairman

7 November 2014

Contacts:

Energy Technique Plc: 020 8783 0033

Walter Goldsmith, Chairman

Leigh Stimpson, Chief Executive

finnCap (Nominated Adviser): 020 7220 0500

Ed Frisby/Ben Thompson

Consolidated statement of comprehensive income

For the six months ended 30 September 2014

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 2014

Consolidated statement of changes in equity

Consolidated cash flow statement

For the six months ended 30 September 2014

Consolidated segmental analysis

For the six months ended 30 September 2014

Notes to the consolidated interim report

For the six months ended 30 September 2014

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.

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 2014 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 renowned for highly engineered, quality products, providing leading edge performance and low energy efficiency, which have been fitted into projects including No 1 Hyde Park, the Walkie-Talkie, Heathrow T2, Abu Dhabi Investment Council, the Cheesegrater, the Shard and DeVere Gardens.

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, Grosvenor Estates, Stanhope Properties, Marks & Spencer, Boots, City Inn Hotels, Sainsbury's and Tesco. 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.