24th Mar 2005 07:00
Inditherm PLC24 March 2005 Press Release 24 March 2005 Inditherm plc Preliminary Results Inditherm plc ("Inditherm" or "the Company") , the provider of innovativeheating solutions, today reports its Preliminary Results for the 12 months ended31 December 2004. Highlights • Turnover up by 159% at £1,598k (2003: £616k) • Pre-tax loss 65% higher at £1,322k (2003: £802k) • Loss per share 6.2p (2003: 7.2p) • Cash balance at year end £3,590k (2003: £5,047k) • New strategy following full review of business and market • Two major football pitch heating contracts, from Chelsea Football Club and Falkirk Community Stadium • Medical sales, notably heated mattresses, up 255% and higher in second half of the year • Growing industrial products sales with move into water utilities market • Development for the construction industry of heating applications associated with concrete curing Commenting on the outlook, Mark Abrahams, Chairman of Inditherm, said: "Effort is now being focused on the pitch heating, medical, water utility andconstruction markets, where we continue to see major potential. Significantly,we have recently won our first order for an accelerated concrete curing heatingsystem, where we are demonstrating the substantial cost savings derived fromusing Inditherm technology. We believe this could be a platform for significantgrowth. "The water utility market is another area where we can demonstrate the value ofInditherm technology and the planned capital spend in that industry over thenext four years represents a new opportunity. "The year has started with volumes well ahead of last year, albeit that thisrepresents slower growth than planned. Much work has been undertaken toestablish the new strategy which we believe will begin to show benefits from thesecond half of this year." For further information, please contact: Inditherm plcRichard Harpum, Chief Executive Tel: +44 (0) 1709 761000 [email protected] Smith, Finance Director www.indithermplc.com [email protected] Media enquiries: AbchurchPeter Curtain Tel: +44 (0) 20 7398 7700Justin [email protected] www.abchurch-group.com Chairman's Statement Following the successful fund-raising in 2003, Inditherm has made considerableprogress on several fronts. Most significantly, we entered the football pitchheating market with two major contracts for Chelsea Football Club and FalkirkCommunity Stadium. Both installations represented challenges as we gainedtechnical experience. However, these projects are now fully operational andprovide a platform for future growth. The concentration of resource on thefootball pitch market and particularly the two projects undertaken, divertedresources away from other activities and resulted in slower sales growth thanoriginally anticipated. Good progress was made by the Medical business with the establishment of directsales in the UK and a number of overseas distributors. During the year we used our financial resources to expand our skills base,particularly on the commercial front. This has given rise to an increased costbase which resulted in a large loss for the year. Results for the Year Turnover for the year increased by 159% to £1,598k (2003: £616k), mainly due tothe large Chelsea contract, worth £775k. Unlike previous years, we did not seea sharp increase in Industrial orders during the last quarter, with manypotential prospects being delayed into 2005. I am pleased to report that someof these have now borne fruit. We also moved into the water utilities market,where Inditherm's solution offers significant benefits and energy savings overalternative technologies. Medical sales increased in the second half, mainlydue to the strengthening of the Medical management and sales team. The cost base was increased through the addition of key people aimed atpromoting sales, resulting in an operating loss of £1,176k before exceptionalitems (2003: £684k). After exceptional costs of £328k relating to thetermination of the Pegasus Distribution Agreement, a provision for a doubtfuldebt and net interest income of £182k (2003: £16k), the pre-tax loss was £1,306k(2003: £786k). The year end cash balance was £3,590k (2003: £5,047k). Dividends As stated in previous years, the Board does not expect to declare a dividendduring the Company's continuing formative period. Management In 2004 we took significant strides to strengthen management with theappointment of Richard Harpum as Chief Executive. Richard was previouslyPresident of ABB Metering and has also held senior positions in FKI Babcock andGEC. Since this appointment, Colin Tarry has been Business Development andTechnical Director but resigned as a director on the 23rd March 2005. He willbe leaving the company later this year to pursue other interests. Colin will beavailable to the company in respect of the technology and has signed aconfidentiality agreement. Pat O'Grady retired as a Director of the Company and has agreed to an exclusivelong-term consultancy in respect of Inditherm technology. I would like to thank both Pat and Colin for their efforts in the formativeyears of the company. In recent weeks the team has been strengthened with three key appointments: aDivisional Director responsible for the Medical business, a Technical Managerand a Projects Director who between them will cover the work currentlyundertaken by Colin Tarry. Employees We continue to invest in and expand our workforce to ensure that we have theappropriate skills with which to grow the business. The workforce is extremelyflexible and has worked very hard during the year to deal with significantfluctuations in demand, especially during the manufacture and installation ofthe heating pads for the Chelsea contract. On behalf of the Board, I thank allour staff members most sincerely for their dedication. Operations & Strategy The concentration of resource on the football pitch projects and futureopportunities was considerable. Whilst this showed positive results withsignificant future potential, the order flow from other markets wasdisappointing. This has highlighted the need to focus on market segments whereour value proposition is most compelling. Accordingly, we have reshaped thesales force to target certain parts of the Industrial market, whilst increasingresources aimed at selling into the Medical market. This new strategy isexpected to take six to twelve months to demonstrate the significant potentialthat we believe is offered by Inditherm technology in these markets. Outlook Effort is now being focused on the pitch heating, medical, water utility andconstruction markets, where we continue to see major potential. Significantly,we have recently won our first order for an accelerated concrete curing heatingsystem, where we are demonstrating the substantial cost savings derived fromusing Inditherm technology. We believe this could be a platform for significantgrowth. The water utility market is another area where we can demonstrate the value ofInditherm technology and the planned capital spend in that industry over thenext four years represents a new opportunity. The year has started with volumes well ahead of last year, albeit that thisrepresents slower growth than planned. Much work has been undertaken toestablish the new strategy which we believe will begin to show benefits from thesecond half of this year. Mark AbrahamsChairman Chief Executive's Review Introduction 2004 was a period of intense change for Inditherm, with the main challenge beingto design, manufacture and install the pitch heating systems at Chelsea FootballClub's training ground and at Falkirk Community Stadium. Both projects weresuccessfully completed, albeit with some major challenges to overcome en route.There was little growth in the core industrial business, and a disappointingfinal quarter, which has traditionally been strong. However, we have found newindustrial applications in the water utilities market, where our technologyoffers significant benefits over alternative heating solutions and is beingwell-received by the market. Following the termination of an exclusive agreement with a third partydistributor in 2003, we effectively had to re-build our Medical business. Wehave put in place new management and a sales team and achieved a 255% increasein sales over the previous year. Following two years of joint development with Sheffield Hallam University, ourConstruction business has now started to generate orders, from the beginning of2005. Strategy Towards the end of the year, a full review of the business and its strategy wasundertaken and a number of key conclusions drawn from this review: • Because of the compelling attraction of the Inditherm conductive polymer technology (CPT), the number of potential applications can be overwhelming. It is therefore vital to identify and focus on only those applications where there is a clear market opportunity, such as sports pitch heating, water utilities and medical. • Until now, the industrial business has adopted a custom design approach to each application. However, it is clear that there are significant opportunities for standardisation, which will not only reduce costs, but make it easier to establish new market channels and distributors both in the UK an overseas. • Although Inditherm is not always the most price competitive solution in the market, the operational benefits and energy savings can lead to significant lifetime cost savings compared to other technologies. • There is room for improvement in the way we execute projects and customer contracts. • Lack of product development and other resources mean that our ability to exploit fully our CPT technology in the short term is resource limited. Until we can afford to build the team, we therefore need to concentrate on those areas that will bring the quickest return for the minimum effort. The business strategy was revised to position ourselves in markets andapplications where we can achieve rapid growth, without having to addsignificant resources or spend significant time developing new applications ormarkets. A detailed analysis identified the following as the key areas of focusfor the next two years: • Industrial solutions, but with a shift in focus to standard products, such as mobile and static tanks, and on key accounts where our technology is already well accepted, UK investment remains robust and the contracts are generally larger. • UK water utilities, where we have a clear competitive advantage and the opportunity to offer more standard products. • Medical, notably in heated mattresses for patient warming, both in the UK and overseas. Having standard products makes exporting attractive. • Sports pitch heating, both in the UK and Europe, and where the Inditherm solution offers an improved solution and significant energy savings over traditional water and cable systems. • Construction, notably in accelerating concrete curing. Our other key strategies are to enhance operational excellence, develop newmarkets, especially for standard products at home and overseas, and to continueto train and develop our people. In summary, these applications generally require heating over often large, flatareas, where other technologies are substantially less effective. Industrial Solutions Sales of Industrial products increased by 8% over 2003, partly as a result ofthe move into the water utilities market in the second half. The final quarter,normally strong in the confectionary and food sectors, was disappointing, withlow levels of orders received. We are strengthening the industrial salesorganisation and streamlining our selling processes, so as to improveperformance in 2005. The recent move into water utilities is expected to enable us to take advantagein the second half of 2005 of the new AMP4 spending round that starts in April2005. We have developed solutions that are significantly superior totraditional approaches, not only in the mode of operation but also in energysavings. The main areas are in heating chemical dosing lines and chemicaltanks, and supplying removable heated or insulated jackets to pumps, valves andpipework. Medical Medical sales increased by 255%, with the recruitment of a new sales team and aCommercial Director, who has since been promoted to Divisional Director. Salesin previous years were mainly to our sole distributor, with whom we ended ourexclusive arrangement towards the end of 2003. This has necessitated developingmarket channels and demonstrating to hospitals that the Inditherm patientwarming solution has significant advantages over traditional air warming andother technologies. Although the medical industry is inherently conservative, there has beensignificant interest in the Inditherm heated mattresses, not only becauseclinical trials have shown that patient warming improves recovery, but also thatInditherm is a superior solution. In addition, hospitals find that they can geta payback in about 6 months using Inditherm, compared to other systems that usedisposable products. Although we see Medical as a core part of our business,market inertia means that it will take time to grow this business sector to itsfull potential. Good progress was made in establishing new overseas distributorships, which weexpect will lead to significant sales growth in 2005. Pitch heating The main growth in the business in 2004 came from the two contracts at FalkirkCommunity Stadium and Chelsea Football Club's training grounds in Surrey. Thesehave enabled us to prove that Inditherm is a superior technology to establishedtechniques in a number of ways. Firstly, with no moving parts, the system isinherently reliable compared to mechanical solutions. In addition, the controlsystem gives groundsmen the ability to manage temperatures in different zones ofthe pitch. We have also seen improved grass growth. Finally, the energy savingsare significant, typically being 75% better than alternatives; our measurementsshow that during the winter months, savings can be substantial. Although all pitch heating systems are likely to be bespoke, these two projectshave not only proved that the concept works but have also given us a significantlevel of data and expertise in this application. There is now significantinterest from several clubs in the UK and Europe, who are planning to installpitch heating systems during the next two years and who are recognising theadvantages that Inditherm offers over alternative systems. Construction Throughout the year we continued to work with the Centre for InfrastructureManagement at Sheffield Hallam University on heating applications associatedwith concrete and other areas in the construction industry, notably railwayinfrastructure. There are a number of avenues of research taking place, notablyin accelerating concrete curing, and embedding Inditherm polymer within concretefor infrastructure warming. During early 2005, we started to receive orders for trials for concrete curingsystems and these should enable us to gather data on how strong a valueproposition the Inditherm solution is. We are also carrying out trials in anumber of railway-related applications. Custom products In the past, Custom products have absorbed significant development effort, andsome have graduated to new business lines; the notable examples in 2004 werepitch heating and concrete curing. Sales of food heating bags and otherproducts have progressed during the year but we are limiting ongoing developmentefforts, concentrating on those products that offer rapid returns over the nexttwo years. We are being ruthless in assessing new market "opportunities". However, it isimportant to analyse these carefully up front to ensure that we do not miss anythat can result in quick wins. Future developments The key activities over the coming months will be to exploit our CPT technologyin those areas where we perceive there to be the greatest growth potential.Considerable efforts are being put into water utilities ahead of the AMP 4spending round, which starts in April. Other Industrial sales will focus on keyaccounts, larger projects and more standard products. We anticipate steady pitch heating sales in 2005 to some well-known clubs and asa new entrant in this market, we will also use the year to consolidate ourreputation. The prospects for 2006 are encouraging, as we are already gettinginvolved in a number of stadia projects where there is strong interest in oursolution. As our patient warming solution is clearly superior, and with a strong salesinfrastructure now in place, we anticipate that Medical sales will growstrongly, from the modest base established this year. Although the market potential has still to be proved, we are optimistic aboutthe opportunities in the construction sector. The challenges facing Inditherm in 2005 are demanding but the opportunities areexciting. 2004 was a year of radical change in our business model and we arenow well positioned to exploit our targeted market sectors. However, these willtake time to develop, as customers gain confidence in Inditherm's polymertechnology and in our ability to deliver value-added solutions. Richard HarpumChief Executive Preliminary announcement of Consolidated profit and loss account for the yearended 31 December 2004 2004 2003 £'000 £'000 Turnover 1,598 616 Cost of sales (1,080) (349) ________ ________Gross profit 518 267 Administrative expenses (2,022) (1,085) Operating loss before exceptional items (1,176) (684)Exceptional costs (328) (134) _______ ________Operating loss (1,504) (818) Interest receivable 186 23Interest payable (4) (7) ________ ________Loss on ordinary activitiesbefore taxation (1,322) (802) Taxation credit from loss onordinary activities 16 16 ________ ________ Sustained deficit for the year (1,306) (786) ________ ________ Loss per share - basic and diluted (6.2) pence (7.2) pence ________ ________ All amounts relate to continuing activities. All recognised gains and losses are included within the profit and loss account. Preliminary announcement of results for the year ended 31 December 2004Consolidated balance sheet Restated 2004 2003 £'000 £'000 £'000 £'000Fixed assetsIntangible assets 56 69Tangible assets 294 309 ______ ______ 350 378Current assetsStocks 224 69Debtors: amounts falling due within one 468 572yearDebtors: amounts falling due afterone year 39 -Investment 250 250Cash at bank and in hand 3,590 5,047 ________ _______ 4,571 5,938Creditors: amounts falling due within one year (538) (627) ________ ________Net current assets 4,033 5,311 _______ _______ Total assets less current liabilities 4,383 5,689 Creditors: amounts falling due after more than one year (7) (21) Provision for liabilities and charges (272) (258) ________ _______ Net assets 4,104 5,410 ________ _______ Capital and reserves - equityCalled up share capital 211 211Share premium 7,409 7,409Other reserve 50 50Profit and loss account (3,566) (2,260) ________ ______Shareholders' funds 4,104 5,410 __________ _______ Approved by the Board on 24 March 2005 and signed on its behalf by: R Harpum ID SmithDirector Director Preliminary announcement of results for the year ended 31 December 2004Consolidated cash flow statement 2004 2003 £'000 £'000 £'000 £'000 Net cash outflow fromoperating activities (1,554) (495) Returns on investments and servicing of financeInterest received 186 23Interest paid - -1Interest element of hire purchase payments (4) (6) _____ ____ Net cash inflow from returns on investments and servicing 182 16of finance Taxation 16 16 Capital expenditure and financial investmentPurchase of tangible fixed assets (92) (33)Sale of tangible fixed assets 24 38 _____ ____ Net cash (outflow)/inflow from capital expenditure and (68) 5financial investment ______ _____ Net cash outflow before managementof liquid resources and financing (1424) (458) Management of liquid resourcesDecrease/(increase) in cash onshort-term deposit 1034 -3,764 FinancingIssue of shares - 5,268Expenses paid in connection with share issues - (553)Capital element of hire purchase payments (33) (31)Movement on factoring account - (69) _____ ____ Net cash (outflow)/inflow from financing (33) 4,615 ______ _____ (Decrease)/increase in cash (423) 393 ______ _____ Preliminary announcement of results for the year ended 31 December 2004Consolidated cash flow statement Reconciliation of operating loss to net cash outflow from operating activities 2004 2003 £'000 £'000 Operating loss (1504) (818)Depreciation and amortisation 92 87Loss on disposal of fixed assets 4 -(Increase) in stocks (155) (6)Decrease/(increase) in debtors 65 (290)(Decrease)/increase in creditors (70) 282Increase in provisions 14 250 _______ _______ Net cash outflow from operating activities (1,554) (495) _______ _______ Analysis of changes in net funds 01-Jan 31-Dec 2004 Cashflow 2004 £'000 £'000 £'000 Cash at bank and in hand 5,047 (1457) 3590Less: Term deposits treated as liquid resources (4,606) 1034 (3572) _______ _______ _______ 441 -423 18 Obligations under hire purchase contracts (52) 33 (19)Term deposits 4,606 (1,034) 3,572 _______ _______ _______ 4,995 (1,424) 3,571 _______ _______ _______ Reconciliation of net cash flow to movement in net funds 2004 2003 £'000 £'000 (Decrease)/increase in cash in year (423) 393Cash outflow from decrease in debt 33 100Cash (inflow)/outflow from (decrease)/increase in liquid resources (1,034) 3,764 _______ _______ (Decrease)/increase in net funds from cash flows (1,424) 4,257 ________ ________ Net funds at the beginning of the year 4,995 738 _______ _______ Net funds at the end of the year 3,571 4,995 _______ _______ Preliminary announcement of results for the year ended 31 December 2004(continued) NOTES The preliminary results have been prepared under the historical cost convention, in accordance with applicable Accounting Standards in the United Kingdom and with the company's accounting1 policies as set out in the financial statements for the year ended 31 December 2003. The preliminary results were approved by the Board on 22 March 2005 and are unaudited. The financial information contained in this unaudited preliminary announcement statement does not constitute accounts as defined by Section 240 of the Companies Act 1985. The financial information for the year ended 31 December 2003 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 237 (2) or Section 237 (3) of the Companies Act 1985. The statutory accounts for the year ended 31 December 2004 and the auditors report thereon will be finalised based on the information in this preliminary announcement and will be delivered to the Registrar of Companies following the company's AGM. 2 The calculation of loss per ordinary share is based on losses of £1,306,000 (2003: £786,000) and on a weighted average of 21,069,980 (2003: 10,967,935) ordinary shares in issue during the year. The share options are anti-dilutive due to the loss in the year. Copies of the 2004 Annual Report and Accounts will be sent to all shareholders. Copies will be available from the Company Secretary at Inditherm plc, Inditherm House, Houndhill Park, Bolton3 Road, Wath upon Dearne, Rotherham, S63 7LG. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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