Preliminary Results

Energy Technique Plc

("Energy Technique", "ETQ" or the "Company" or the "Group")

Preliminary Announcement of 2012 results

Chairman's statement

Headlines

• Return to profitability arising from Diffusion's sales 23 per cent ahead of last year at £7.09 million;

• Diffusion generated an operating profit of £343,000, representing a turnaround in performance from the losses of £137,000 incurred in the previous year;

• Group profit before tax of £173,000, representing a significant turnaround from the losses of £396,000 incurred in the previous year;

• Strong balance sheet net assets of £1.41 million with net cash and cash equivalents of £237,000;

• Diffusion's premium branded fan coils and commercial heating products were supplied into many landmark and prestigious commercial developments;

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

Introduction

I am pleased to report the Company's return to profitability in the year ended 31 March 2012 on Diffusion's sales 23 per cent ahead of the previous year at £7.09 million. The combination of increased sales and tight cost control produced a Group profit on Continuing Operations before tax of £173,000, after charging Central costs, representing a turnaround from the losses of £396,000 incurred in the previous year. This was a pleasing trading performance achieved in challenging trading conditions.

Diffusion's markets did not show any signs of growth during the year and selling price pressure remained a market feature. The Company produced its profit turnaround through maintaining Diffusion's premium branding and pursuing quality jobs likely to return target selling margins, combined with focused business development activities.

Trading performance of Continuing Operations

Sales in the year ended 31 March 2012 rose by 23 per cent to £7.09 million (2011: £5.79 million). Increased sales were achieved for both fan coils and commercial heating products. Following the previous year's disappointment with the collapse of the Company's long established distributor in the Republic of Ireland, terms were negotiated with a new distributor, which proved to be particularly successful and led to sales being 166 per higher than the year before.

The combination of increased sales and tight cost control resulted in Diffusion generating an operating profit of £343,000, representing a turnaround in financial performance from the losses of £137,000 incurred in the previous year. Savings achieved through shop floor investment in new equipment and processes allowed Diffusion to compete very competitively in a difficult market over the last two years.

Central costs were much lower in the financial year ended 31 March 2012 at £130,000 (2011: £218,000). After net interest costs of £40,000, Group profit before tax on Continuing Operations was £173,000, representing a turnaround in financial performance from the losses of £396,000 incurred in the previous year.

About Diffusion

With over 50 years in the heating and ventilation industry ("HVAC"), Energy Technique's operating subsidiary 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.

Over its long trading life, 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 premium quality products, designed specifically to meet customers' bespoke requirements.

Diffusion's operating performance

Diffusion's continued investment in sales and marketing resources has reaped rewards in the current market conditions. Selling margins were continually under pressure from a combination of market forces and increased purchase prices arising from increased world metal prices.

Notwithstanding these challenges, total selling margins were maintained by more effective purchasing and production efficiencies. In particular, the Trumpf laser cutter has produced better quality finished steel work, is environmentally friendly and importantly has improved productivity and efficiency by reducing steel wastage down from 25 per cent to just 12 per cent.

During the year, the R & D facilities were also upgraded. These dedicated R & D test facilities produce accurate air volume, thermal and acoustic performance data for manufactured products. They allow the accurate simulation of real-world operating conditions and configurations, providing customers with confidence in the performance of Diffusion's products, however demanding the environment.

Fan coils were supplied into a number of prestigious projects in the UK including "The Shard Building" in London, Heathrow Terminal 2, Clyde & Co offices in London, Goldman Sachs offices in London and the "Cheesegrater" at 122 Leadenhall Street in London, together with the Google European headquarters in Dublin.

The Commercial Heating Division also had a successful year winning a number of new customers including Krispy Crème, Forever 21, Victoria's Secrets and ASDA local stores. During the year, Diffusion's commercial heating products were supplied into the Lincoln Hotel in London, Moet Hennessy in London, Havant Academy, Lancashire County Cricket Club, Marks & Spencer, The Superdry Store and the Corn Wallis Academy School. Other end-user customers continued to be blue chip retailers and shopping centers including New Look, Next, GAP, Banana Republic, Hugo Boss, Tesco, House of Fraser, TK Maxx, Primark, the new Westfield Stratford Shopping Centre and Excel Hotel London.

Diffusion has always offered a spares and service facility and during the year spares stocks were physically segregated and controlled from production stocks to provide an improved service to customers.

Cash flow and nil gearing

Cash generated by operations was £182,000 (2011: outflow of £377,000) and the Company had net cash and cash equivalents at 31 March 2012 of £237,000 (2011: £228,000). The Company remains soundly financed with this level of liquidity and net assets at 31 March 2012 of £1.41 million. During the year, £101,000 was applied in repaying hire purchase obligations on the laser cutting machine. The last instalment on this machine was paid in May 2012.

Capital expenditure

Capital expenditure during the year was £84,000, following the heavy investment in manufacturing plant and processes in the previous two years. Capital expenditure in the year related to upgrading the IT infrastructure, vehicle fleet and the R & D department. In the coming year ahead, there will be further improvements to the IT infrastructure, including a CRM system.

Dividends

The Board does not recommend payment of a dividend (2011: £nil). The Board will seek approval from shareholders in connection with a share reorganisation and application to the Court for a capital reduction, so as to allow the Company to pay dividends in the future. Further details about this will be set out in a separate circular to be posted to shareholders shortly.

Board changes

Martin Kirkham, who was previously the managing director of SIAS FM, resigned from the Board on 6 April 2011 following the earlier disposal of SIAS FM on 24 March 2011.

Business strategy

Following the disposal of SIAS FM in March 2011, the Board has focused on the Company's core Diffusion subsidiary and it remains committed to this strategy in the year ahead.

Current trading and prospects

Diffusion has an excellent brand name with a high quality reputation. Whilst no significant improvement in overall demand from the Company's markets is expected during the current financial year, enquiry levels and order prospects for quality projects remain encouraging.

A number of quality export fan coil projects are currently being pursued in the Middle East and Diffusion expects to enhance its product offering during the current financial year with the launch of a number of new energy efficient products for both fan coils and commercial heating products.

The expected timetable for completion of the share reorganisation and capital reduction is around October 2012. If trading continues at current levels, the Board may consider declaring a dividend at that time.

Walter K Goldsmith

Chairman

Contacts:

Walter Goldsmith, Chairman, Energy Technique Plc: 020 8783 0033

Leigh Stimpson, Executive Director, Energy Technique Plc: 020 8783 0033

Ed Frisby/Ben Thompson, finnCap Limited (Nominated Advisor): 020 7220 0500

Consolidated statement of comprehensive income

for the year ended 31 March 2012

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

Consolidated statement of financial position

at 31 March 2012

Consolidated statement of changes in equity

for the year ended 31 March 2012

Prior period adjustment

The prior period adjustment at 1 April 2010 of £111,000 is the establishment of a provision for the onerous liabilities of employers' national insurance and pension contributions on annual payments made under a permanent health insurance policy. These payments have been made since 2006 and the Directors consider it was more appropriate to establish a provision for such costs rather than the previous practice of expensing the payments as incurred, formerly charged under administration expenses.

Consolidated cash flow statement

for the year ended 31 March 2012

Notes

1. Adoption of new and revised standards

Standards and Interpretations effective in the current period

There were no new Standards adopted by the Group during the current period.

Standards and Interpretations in issue not early adopted

At the date of authorisation of these financial statements, the following Standards, Interpretations and Amendments to existing standards were in issue but not yet effective for the reporting period of the Group:

The directors anticipate that the adoption of these Standards, Interpretations and Amendments to existing standards in future periods will have no material impact on the financial statements of the Group.

2. Significant accounting policies

Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

Basis of preparation

The financial statements have been prepared on the historic cost basis.

Basis of consolidation

The Group financial statements consolidate the accounts of the Company and all its subsidiary undertakings, which are all made up to 31 March each year.

Goodwill

Goodwill represents the excess of the cost of acquisitions over the fair value of the identifiable assets acquired (including intangible assets of the acquired business) at the date of acquisition. Goodwill is recognised as an asset and assessed for impairment at least annually. Any impairment is recognised immediately in the statement of comprehensive income. The directors consider that goodwill has an infinite useful life.

In accordance with the transitional rules of IFRS, goodwill that has been written off to reserves cannot be restated or recycled, either on transition or at any later date. On the subsequent disposal or termination of a previously acquired business, the profit or loss on disposal or termination is calculated after charging goodwill previously taken to reserves.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and similar allowances.

Revenue from the sale of goods and services is recognised when all of the following conditions are satisfied:

·; the Group has transferred to the buyer the significant risks and rewards of ownership;

·; the Group retains neither continuing management involvement to the degree usually associated with ownership, nor effective control over the goods and services sold;

·; the amount of revenue can be measured reliably;

·; it is probable that the economic benefits associated with the transaction will flow to the entity; and

·; the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Interest revenue

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Operating leases

Payments under operating leases are charged to profits on a straight-line basis over the life of the lease.

Research and development expenditure

Research expenditure is written off as incurred. Development expenditure is generally written off as incurred unless it meets the recognition criteria of an intangible asset, as defined in International Accounting Standard 38 (Intangible Assets), in which case it would be recognised as an asset of the Group.

Foreign currencies

Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the closing rate of exchange and differences taken to the comprehensive income statement. Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction.

Borrowing costs

Borrowing costs are recognised in the comprehensive income statement in the period in which they are incurred.

Retirement benefit costs

A number of the Group's permanent employees are members of personal pension plans, which are defined contribution schemes (money purchase). Contributions to these schemes are recognised as an expense when employees have rendered services entitling them to the contributions.

Taxation

No corporation tax arises on the results for the year because of the availability of losses brought forward.

Full provision is made for deferred taxation, using the liability method without discounting, to take account of the temporary differences between the incidence of income and expenditure for taxation and accounting purposes. Deferred tax assets are recognised to the extent that they are considered recoverable in the foreseeable future. Any changes in the deferred tax asset are recognised immediately in the comprehensive income statement.

Plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and impairment charges.

Depreciation is provided on the cost of plant and equipment on a straight-line basis in order to write them down to estimated realisable value over their estimated useful lives as follows:

Rate

Plant and equipment between 10% and 33% per annum

Inventories

Inventories have been valued at the lower of cost and net realisable value, using the First In First Out (FIFO) cost basis, with due allowance made for obsolete and slow moving items. For work in progress and finished stocks, cost consists of direct materials, labour and appropriate works overheads.

Financial assets

Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as receivables, which are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Financial liabilities and equity instruments issued by the Group

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Provisions

A provision has been made to cover the onerous liabilities of employers' national insurance and pension contributions on annual payments to be made under a permanent health insurance policy.

The provision is measured at the present value of the expenditures expected to settle the obligation using pre-tax rates that reflects current market assessments of the time value of money and the risks specific to the obligations.

3. Basis of preparation of financial statements

The financial information set out above does not constitute statutory financial statements for the year ended 31 March 2012 or 2011 but is derived from those financial statements. Statutory financial statements for the year ended 31 March 2011 have been delivered to the Registrar of Companies. Statutory financial statements for the year ended 31 March 2012 were approved by the Board of Directors on 14 June 2012, are audited and will be delivered to the Registrar of Companies following the Annual General Meeting on 19 July 2012.

The Company's auditors, Milsted Langdon LLP, have reported on the 2012 and 2011 financial statements and those reports were:

(i) Not qualified;

(ii) Did not include a reference to any matters to which the auditors drew attention to by way of emphasis without qualifying their report; and

(iii) Did not contain a statement under Section 498(2) and 498(3) of the Companies Act 2006 in respect of the financial statements for the year ended 31 March 2012 and 31 March 2011.

4. Business segments

4.1. Products and services within each business segment

For management purposes, the Group is organised into two operating activities: the Diffusion business and Central costs. The principal products and services of these activities are as follows:

Diffusion Manufacture and distribution of fan coils and commercial heating products, together with after sales spares and service from its facility in West Molesey, Surrey.

Central costs Costs associated with being a public company and maintaining the AIM quotation on the London Stock Exchange.

SIAS FM, the Company's former building maintenance subsidiary, became non-core during the previous financial year and was sold on 24 March 2011. As a consequence, its results have been included under Discontinued Operations.

4.2. Segment revenue and segment result

Revenue reported above represents revenue generated from external customers. Inter-segment sales in the year amounted to £nil (2011: £nil). Diffusion had one customer (2011: nil) with revenue in excess of 10%.

The net interest paid under Continuing Operations of £40,000 (2011: £41,000) comprises interest received of £nil (2011: £1,000) and interest paid of £40,000 (2011: £42,000) by Diffusion.

4.3. Segment assets and liabilities

4.4. Other segment information

4.5. Geographical segments

5. Earnings/(losses) per share

The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows:

6. Posting of Annual Report and Financial Statements

The 2012 Annual Report and Financial Statements will be posted by 22 June 2012 to those shareholders who have elected to receive them and will be available to view at the Company's website www.diffusion-group.co.uk.

The 2012 Annual General Meeting of the members of Energy Technique Plc will be held at 35 Park Lane, London W1K 1RB on 19 July 2012 at 12.00 Noon.