Annual Report & Financial Statements 2015 · 2015-11-23 · 2 Energy Technique Plc Annual Report & Financial Statements 2015 Job No.: 22262 Proof Event: 4 Park Communications Ltd

Annual Report & Financial Statements 2015

Contents 1 Chairman’s statement

4 Directors

4 Advisers

5 Strategic report

6 Directors’ report

9 Corporate governance

10 Remuneration report

11 Independent auditors’ report

12 Consolidated statement of comprehensive income

13 Consolidated statement of financial position

14 Consolidated statement of changes in equity

15 Consolidated statement of cash flows

16 Notes to the consolidated financial statements

33 Accounts of the parent company Energy Technique Plc

40 Notice of 2015 Annual General Meeting

44 Financial calendar and corporate information

Fan Coils for One Hyde Park Fan Coils for Heathrow Terminal 2

Fan Coils for Google EMEA HQ Heating for Odeon Cinema

Fan Coils for Abu Dhabi Islamic Bank HQ Fan Coils for De Vere Gardens

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Job No.: 22262 Proof Event: 4 Park Communications Ltd Alpine Way London E6 6LA

Customer: Energy Technique PLC Project Title: Annual Report T: 020 7055 6500 F: 020 7055 6600

Chairman’s statement

Headlines • Sales increased by 12.6% over the previous year to £10.77 million;

• Operating profit of Diffusion increased by 23.6% over the previous year to £1.12 million;

• Group profit before tax increased by 19.6% over the previous year to £776,000;

• EPS growth of 61.7% over the previous year to 29.1 pence per share;

• Final dividend increased by 12.5% to 2.25 pence per share;

• Total dividends for the year increased by 36.4% to 3.75 pence per share;

• Further improvement in net cash to £1.38 million at 31 March 2015 and net assets to £2.22 million;

• High enquiry levels and order intakes produced strong start for the year ending 31 March 2016.

IntroductionI am very pleased to report a continuation of profit improvement for the year ended 31 March 2015. Sales increased by 12.6% over the previous year to £10.77 million, generating improved operating profit for the Company’s trading business, Diffusion, to £1.12 million and of group profit before tax to £776,000. This is the fourth consecutive year of both sales and profit growth, representing another solid set of trading results ahead of management’s expectations.

Fan coils provided the growth driver, attributed to a continuation of stronger UK fan coil market demand and to Diffusion’s premium branded product offering. UK fan coil market demand started to improve two years ago and this continued for the year ended 31 March 2015. 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.

Group trading performanceSales in the year ended 31 March 2015 increased by 12.6% to £10.77 million (2014: £9.56 million). Fan coil sales of £8.74 million (2014: £7.45 million) achieved particularly strong sales growth of 17.3%, arising from a good balance of commercial and high-end residential projects. Sales of the smaller commercial heating range fell marginally to £1.52 million (2014: £1.65 million), consistent with continued difficult trading conditions on the UK high street.

Diffusion’s operating profit increased by 23.6% to £1.12 million (2014: £906,000), representing an improved operating profit margin of 10.4% (2014: 9.5%), equivalent to a return on capital employed of 68.8% for the year. Notwithstanding downward market price pressures, gross profit margins remained stable at 34.2% (2014: 34.6%), due to lean manufacturing methods and a well-balanced sales mix.

Group profit before tax increased by 19.6% to £776,000 (2014: £649,000), after charging Central costs of £320,000 (2014: £210,000) and interest of £24,000 (2014: £47,000). Central costs increased in the year due to one-off costs of £90,000 incurred in pursuing a global franchising strategy. The taxation charge of £81,000 (2014: £143,000) represents non-cash deferred tax. EPS growth showed a very healthy increase of 61.7% to 29.1 pence per share.

SALES

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2012 2013 2014 2015

DIFFUSION OPERATING PROFIT

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2012 2013 2014 2015

EARNINGS PER SHARE (EPS)

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35.0

2012 2013 2014 2015

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Diffusion’s business modelThe Company’s trading subsidiary, Diffusion, enjoys a leading market position as a manufacturer of premium quality fan coils and commercial heating products to the UK commercial and high-end residential sectors, combined with a blue-chip client base, renowned brand and over 50 years trading experience. Diffusion and Energy Technique brands are recognised by the UK heating ventilation and air conditioning sector (“HVAC”) as highly engineered, quality products providing leading edge performance and energy efficiency.

Diffusion’s products are supplied into commercial offices, hotels, airports, retail outlets, schools, and high-end residential developments. Business risk is reduced by third-party M&E contractors installing Diffusion’s products. Fan coils are supplied to developments of the major property owning companies, including Land Securities, Stanhope Properties, Grosvenor Estates and British Land. Commercial heating end users include Marks & Spencer, Sainsbury’s, Tesco, New Look, Boots, ASDA, John Lewis, Fat Face, Lloyds Bank and TK Maxx.

Diffusion’s management team has a demonstrable track record of success, working closely with designers, technicians, support staff and clients across all UK geographical locations to deliver bespoke HVAC solutions of the highest standard. Diffusion operates from a 30,000 sq. ft. facility in West Molesey, Surrey, ideally placed to serve its principal London and South East market by providing a highly valued just-in-time service.

Diffusion’s operating performanceThis is the fourth consecutive year of sales and profit growth, with fan coils providing the growth driver for the year ended 31 March 2015. Diffusion’s experienced sales and marketing team exploited the continuation of improved UK fan coil market demand by achieving a 17.3% growth in fan coil sales. The recently launched ECO 270 fan coil range offering 25% energy savings for no additional capital cost gained further market traction. Agreement has been reached with the motor supplier to further protect the competitive advantage of this product with a five year extension to the existing exclusivity agreement, including wider geographical coverage.

Following successful entry into the high-end residential sector, Diffusion had a well-balanced sales mix between its commercial and high-end residential sectors. Fan coils were supplied into a number of landmark developments and to over 350 different projects in total. Serving this high number of projects spread business risk and contributed to maintaining overall target selling margins.

Fan coils were supplied into the three current London skyline developments of the Shard, Cheesegrater and Walkie-Talkie, together with the high-end residential Riverlight development. Other major commercial developments included American Express, London Bridge Place, Nations House, Hyde Park Hayes and 207-211 Old Street. Other major high-end residential developments included the Shard (mixed commercial/residential), Holland Green and 1 Tower Bridge.

Commercial heating sales fell marginally on the previous year to £1.52 million. Sales of commercial heating products are suffering from weak demand from the UK high street. Despite this, Diffusion continued to serve its long list of blue-chip clients/end-users, including Waitrose, Marks & Spencer, Boots, H&M, Superdry and Next.

Chairman’s statement(continued)

West Molesey site

R & D centre of excellence

Trumpf laser cutter

West Molesey site

R & D centre of excellence

R & D centre of excellenceR & D centre of excellenceTrumpf laser cutter

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Chairman’s statement(continued)

Franchising Diffusion brandCentral costs include one-off costs of £90,000 incurred in pursuing franchises for overseas territories, where franchisees can capitalise on Diffusion’s strong brand name, product innovation and engineering excellence. Heads of terms were reached with Unico Inc of St Louis, Missouri to manufacture and distribute Diffusion fan coils in the USA, Canadian and Caribbean markets. In a complementary manner, Diffusion is to be appointed Unico’s main sales representative in the UK for its small duct high velocity heating and cooling systems. Route to market plans and legal agreements are currently being drawn up.

Cash flow and net cashNet cash generated by operating activities increased by 10.1% to £863,000 (2014: £784,000). This was partially applied in funding capital expenditure of £264,000 and dividends paid of £84,000. Net cash growth during the year was £507,000 (2014: £283,000), resulting in an improved cash position at 31 March 2015 of £1.38 million (2014: £873,000). The Group remains soundly financed with this level of cash and net assets at 31 March 2015 of £2.22 million (2014: £1.60 million). Cash flow for the current year ending 31 March 2016 will benefit from a six month’s rent free period on the West Molesey lease worth £96,000.

Capital expenditureFurther investment in the West Molesey manufacturing facility was incurred during the year to maintain Diffusion’s competitive market position. Capital expenditure amounted to £264,000, with the largest projects comprising £118,000 on refurbishing and extending the office suites and £65,000 on a new brake press to upgrade metal punching and folding capability. Most of this capital expenditure was of a discretionary nature and the Board does not consider there is a requirement for any significant capital expenditure in the year ending 31 March 2016.

DividendsThe Board recommends payment of a final dividend of 2.25 pence per share, payable on 7 August 2015 to shareholders on the share register on 17 July 2015. The Company paid an interim dividend of 1.50 pence per share on 12 December 2014, taking total dividends for the year ended 31 March 2015 to 3.75 pence per share, an increase of 36.4% over the previous year.

Business strategyOn 26 February 2015, the Board announced 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. Further announcements about the progress of this formal sale process will be made in due course.

Current trading and prospectsWhilst this formal sale process proceeds, the Board is managing the Company for further growth. Trading in the current year ending 31 March 2016 has started well, with sales in April and May in line with management’s expectations. Enquiry levels are high and the order book is strong. Improved UK fan coil market demand that started two years ago is expected to continue for the year ending 31 March 2016 and beyond.

Walter K GoldsmithChairman20 May 2015

New brake press

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Advisers

Auditors RegistrarsMilsted Langdon LLP Capita Asset ServicesWinchester House The RegistryDeane Gate Avenue 34 Beckenham RoadTaunton BeckenhamSomerset TA1 2UH Kent BR3 4TU

Bankers SolicitorsLloyds Bank Plc Sherrards Solicitors LLP39 Threadneedle Street 7 Swallow PlaceLondon EC2R 8AU London W1B 2AG

Stockbrokers Nominated AdviserfinnCap Ltd finnCap Ltd60 New Broad Street 60 New Broad StreetLondon EC2M 1JJ London EC2M 1JJ

Directors

Walter K GoldsmithNon-executive ChairmanWalter Goldsmith joined the Board in May 2007 and was appointed Chairman in March 2010. He is a chartered accountant with substantial board level experience in public and private companies. A considerable part of his career was spent at Black & Decker, the global manufacturer and marketer of power tools, where he was latterly Corporate Vice President and responsible for launching Black & Decker into 22 countries. He was subsequently Group Planning and Marketing Director at Forte Plc, the hotel group and Director General of the Institute of Directors for five years. Walter is currently chairman or director of a number of other private companies. He has a letter of appointment dated 29 January 2015, whereby he is entitled to receive 12 months’ notice of termination, plus a further 12 months’ notice on a change in control of either the Company or Diffusion.

Leigh A StimpsonCEOLeigh Stimpson joined the Board on 23 February 2010. He has been an executive with Diffusion since 1992. Leigh is a seasoned HVAC industry professional, with extensive marketing skills and product knowledge of the sector. Leigh re-joined Diffusion’s executive management on a full time basis in 2006 and was responsible for the day-to-day turnaround since then. He has a service agreement dated 29 January 2015, whereby he is entitled to receive 12 months’ notice of termination, plus a further 12 months’ notice on a change in control of either the Company or Diffusion.

Martin M ReidExecutive Director and Diffusion’s Operations DirectorMartin Reid joined the Board on 15 September 2010 and he has been with Diffusion for over 25 years, where he is currently responsible for all day-to-day operations including procurement, manufacturing excellence and stock control. He has in-depth knowledge of the heating and ventilation sector and is also heavily involved with new product innovation and development. He has a service agreement dated 29 January 2015, whereby he is entitled to receive 12 months’ notice of termination, plus a further 12 months’ notice on a change in control of either the Company or Diffusion.

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Strategic report

This Strategic Report covers only those reporting requirements not already set out in the Chairman’s Statement.

Principal activity The principal activity of the Group during the year was the manufacture and distribution of premium quality fan coils and commercial heating products for commercial offices, airports, hotels, retail outlets, schools and high-end residential developments, together with related spares and maintenance services.

Review of business The Group’s operations comprise Energy Technique Plc, a non-trading holding company for its wholly owned subsidiary ET Environmental Limited, trading as Diffusion. A review of the Group’s financial performance for the year ended 31 March 2015 is set out in the Chairman’s Statement.

Key performance indicators (KPIs)Diffusion’s business progress is monitored and controlled using weekly reported KPIs, prepared using a traffic light dashboard system. These KPIs report all of the key metrics affecting both current trading and future prospects, including:

• Enquiry levels;

• Order intakes;

• Sales levels;

• Manufacturing output;

• Stock levels;

• Overdue debtors and cash positions.

A review of annual KPIs comprising of sales, operating profit, cash flow and net cash in-hand positions, is set out in the Chairman’s Statement.

Principal risks and uncertainties The principal risks and uncertainties affecting the development of Diffusion are:

• Low activity levels in the UK property and construction sector;

• As a small company, loss of executive Directors and other key executives.

Business strategy The Board’s strategy is set out in the Chairman’s Statement.

Current trading and prospects The Board’s strategy is set out in the Chairman’s Statement.

By order of the Board

R M UnsworthCompany Secretary

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Directors’ report

The Directors present their report and the Group financial statements for the year ended 31 March 2015.

DividendsAn interim dividend of 1.50 pence per share was paid on 12 December 2014 and the Directors recommend a final dividend of 2.25 pence per share for approval by shareholders at the 2015 Annual General Meeting.

Research and developmentOperating profit is stated after charging £239,000 (2014: £222,000) on research and development.

Directors and their interestsA current list of Directors is shown on page 4. Details of Directors’ interests in the Company’s shares and options are set out in the Remuneration Report.

Directors’ responsibilities for the financial statementsThe Directors are responsible for preparing the Strategic Report, Directors’ Report and the financial statements in accordance with applicable law and regulations.

The Directors are required under company legislation to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, which are required by law to give a true and fair view of the state of affairs of the Group and of its profit or loss for that period. The financial statements for the Parent Company have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.

In preparing those financial statements, the Directors are required to:

• select suitable accounting policies and apply them consistently;

• make judgments and estimates that are reasonable and prudent;

• state whether applicable United Kingdom Accounting Standards have been followed by the Parent Company and applicable IFRSs as adopted by the European Union have been followed by the Group, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors have reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements.

The maintenance and integrity of the corporate and financial information included on the Company’s website is the responsibility of the Directors. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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Directors’ report(continued)

Substantial shareholdingsAt 18 May 2015, the Company was aware of the following interests of 3% or more of the issued share capital:

Ordinary shares of 10p each

No.%

Interest

Peter Gyllenhammar 605,612 25.3

Folio (UK) Limited Pension Plan 260,931 10.9

John Cawthorne 224,480 9.4

Leigh A Stimpson (Director) 175,654 7.3

Martin M Reid (Director) 121,606 5.1

Walter K Goldsmith (Director) 109,980 4.6

Barclayshare Nominees Limited 94,463 4.0

Daniel Francis 82,204 3.4

EnvironmentIn an attempt to address the environmental and energy issues surrounding HVAC products, particular emphasis is placed in the product development programme on energy efficiency and air quality.

Communication InvestorsThe Company considers that communication with shareholders is very important. In addition to the interim and annual reports, the Company keeps its website up to date with news affecting the business. All shareholders are encouraged to attend the Annual General Meeting.

EmployeesEmployee consultation, participation and involvement in matters affecting their interests continue to be developed. The Group gives equal consideration to applications for employment from people regardless of their sex, ethnic origin, age or disability. It is Group policy, wherever practicable, to continue to employ, train and promote the career development of existing employees with equal consideration.

Financial risk managementThe Group’s operations expose it to a variety of financial risks including the effects of changes in market prices and credit risk.

Liquidity and cash flow riskThe Group monitors cash flow as a part of its normal activities. Cash positions are monitored daily and forecasts are discussed by the Board on a monthly basis to ensure sufficient liquid resources are available.

Price riskThe Group is exposed to commodity price risk as a result of its operations. However, given the size of the Company’s operations, the cost of managing this exposure exceeds any potential benefits. The Directors regularly revisit the appropriateness of this policy. The Company has no exposure to equity securities price risk.

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Directors’ report(continued)

Credit riskThe Group has implemented policies requiring appropriate credit checks on significant customers before sales are made and it seeks to obtain credit insurance on all major trade receivables.

Market riskThe Group’s performance is impacted by the economic environment and in particular the UK commercial property market. To mitigate this risk, the Company strives to deliver quality products and services at competitive prices. The Company invests heavily in research and development to produce high energy efficient products.

Future developmentsA review of the Group’s future developments is included in the Chairman’s Statement.

AuditorsA resolution is to be proposed at the 2015 Annual General Meeting for the reappointment of Milsted Langdon LLP as auditors of the Company.

There is no relevant audit information (that is, information needed by the Company’s auditors in connection with preparing their report) of which the Company’s auditors are not aware. The Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

Annual General MeetingNotice of the 2015 Annual General Meeting is set out on pages 40 to 44.



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Corporate governance

So far as is possible, given the Company’s size and the constitution of the Board, the Directors comply with the principles of best practice as set out in the UK Corporate Governance Code on Corporate Governance.

The Audit CommitteeThe Board has appointed an Audit Committee consisting of Walter Goldsmith (Committee Chairman) and Robert Unsworth (Company Secretary). This Committee meets at least twice annually and is responsible for ensuring the financial performance of the Company is properly reported and monitored and for meeting the auditors and reviewing their reports in relation to the financial statements and internal control systems.

The Audit Committee reviews the services provided by the external auditors on an annual basis. This review includes consideration of the confirmation on an annual basis of their independence to the Company and of the services they provide, in order to ensure their independence is not compromised.

The Remuneration CommitteeThe Board has appointed a Remuneration Committee consisting of Walter Goldsmith (Committee Chairman) and Robert Unsworth (Company Secretary). The Remuneration Committee is responsible for reviewing the performance of the Executive Directors and for setting the scale and structure of their remuneration and the basis of their service contracts. The Executive Directors set the scale and structure of the remuneration of the Chairman and Company Secretary.

Given the small size of the Company, the Remuneration Committee will also act as the Nomination Committee responsible for considering and recommending to the Board any changes in the Board’s composition and membership.

Going concernAfter making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Internal auditDue to the Company’s small size and the active involvement of the Executive Directors in its day-to-day activities, the Board does not consider there is a need for an internal audit function. This decision is reviewed annually.

Health and safetyDiffusion has its own Health and Safety Officer who advises as to its compliance and responsibility. The Board ensures that all recommendations are implemented in a reasonable time period and full supervision and guidance is given. Diffusion provides training for relevant staff on statutory health and safety requirements and written guidance is given in the Company’s health and safety manual.



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Remuneration report

Remuneration policy and Directors’ service agreementsWalter K Goldsmith, Chairman, has a letter of appointment dated 29 January 2015, whereby he receives remuneration by way of fees, currently of £40,000 per annum. He participates in profit performance related bonuses at a rate of 50% payable to the Executive Directors but he does not receive any other benefits in kind or participate in the EMI share option scheme.

Leigh A Stimpson, CEO, has a service agreement dated 29 January 2015, whereby he receives a salary, currently of £136,590 per annum plus annual car allowance of £12,000, 10% personal pension contributions and profit performance related bonuses.

Martin M Reid, Executive Director, has a service agreement dated 29 January 2015, whereby he receives a salary, currently of £103,437 per annum plus annual car allowance of £12,000, 10% personal pension contributions and profit performance related bonuses.

Directors’ remunerationThe remuneration of the Directors was as follows:

Salary 2015 Salary 2014 & fees Bonus Total Pension & fees Bonus Total Pension £000 £000 £000 £000 £000 £000 £000 £000

Walter K Goldsmith(1) 35 15 50 – 30 11 41 –

Leigh A Stimpson 143 30 173 14 139 23 162 13

Martin M Reid 111 30 141 11 106 23 129 9

289 75 364 25 275 57 332 22

(1) Walter K Goldsmith’s remuneration comprised fees paid to The Walter Goldsmith Consultancy, a partnership where he has a 50% share.

Directors’ interests in shares of 10 pence each 31 March 2015 31 March 2014 Shares Options Shares Options No. No. No. No.

Walter K Goldsmith 109,980 – 109,980 –

Leigh A Stimpson 175,654 83,262 169,511 83,262

Martin M Reid 121,606 83,262 120,000 83,262

Share options were issued on 4 December 2012 under an EMI scheme at a price of 43.5 pence per share not normally exercisable until the expiry of two years after grant. There were no changes to the Directors’ share interests between 31 March 2015 and 20 May 2015. The charges relating to the issue of the Directors’ share options was £3,000 each for Leigh A Stimpson and Martin M Reid.



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Independent auditors’ reportto the members of Energy Technique Plc

We have audited the Group financial statements of Energy Technique Plc for the year ended 31 March 2015 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body for our audit work, for this report or for the opinions we have formed.

Respective responsibilities of Directors and auditors As explained more fully in the Directors’ responsibilities statement set out on page 6, the Directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Strategic Report and the Directors’ Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion the financial statements:

• give a true and fair view of the state of the Group’s affairs as at 31 March 2015 and of the Group’s profit and the Group’s cash flows for the year then ended;

• have been properly prepared in accordance with IFRSs as adopted by the European Union; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the Group financial statements are prepared is consistent with the Group financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Other matterWe have reported separately on the Parent Company financial statements of Energy Technique Plc for the year ended 31 March 2015.

Nigel Fry (Senior Statutory Auditor)For and on behalf of Milsted Langdon LLPChartered Accountants and Statutory AuditorsTaunton20 May 2015

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Consolidated statement of comprehensive incomefor the year ended 31 March 2015

2015 2014 Note £000 £000

Revenue 5 10,775 9,565

Cost of sales (7,088) (6,251)

Gross profit 3,687 3,314

Distribution costs (1,877) (1,710)

Administration expenses (1,010) (908)

Operating profit 6 & 7 800 696

Analysed as:

Diffusion 1,120 906

Central costs (320) (210)

Finance costs 10 (24) (47)

Profit before tax 776 649

Income tax charge 11 (81) (143)

Total comprehensive income for the year 6 & 23 695 506

Earnings per shareBasic 12 29.1p 18.0p

Fully diluted 12 26.0p 16.8p

There are no other recognised gains or losses other than as recorded in the Consolidated Statement of Comprehensive Income for the year.

Property costs of £334,000 (2014: £366,000) 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.

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Consolidated statement of financial positionat 31 March 2015Company number 00013273

2015 2014 Note £000 £000

ASSETSNon-current assetsIntangible assets 13 25 25

Plant and equipment 14 420 240

Deferred tax asset 11 40 98

Total non-current assets 485 363

Current assetsInventories 16 884 771

Trade and other receivables 17 1,749 1,752

Cash and cash equivalents 25 1,380 873

Total current assets 4,013 3,396

Total assets 4,498 3,759

LIABILITIESCurrent liabilitiesTrade and other payables 18 (1,900) (1,826)

Current tax liabilities (243) (213)

Obligations under hire purchase agreements 26 – (10)

Total current liabilities (2,143) (2,049)

Non-current liabilitiesProvisions 19 (114) (115)

Deferred tax liability 11 (23) –

Total non-current liabilities (137) (115)

Total liabilities (2,280) (2,164)

Net assets 2,218 1,595

EQUITYEquity attributable to equity holdersIssued capital 21 239 239

Reserves 22 94 94

Retained earnings 23 1,885 1,262

Total equity 2,218 1,595

Approved and authorised by the Board on 20 May 2015 and signed on its behalf by:

W K Goldsmith L A Stimpson

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Consolidated statement of changes in equityfor the year ended 31 March 2015

Share Retained capital Reserves earnings Total £000 £000 £000 £000

At 1 April 2013 333 – 1,198 1,531

Share options – – 12 12

Dividends paid – – (43) (43)

Comprehensive income – – 506 506

Share reorganisation costs – – (11) (11)

Share buy-backs (94) 94 (400) (400)

Total comprehensive income (94) 94 64 64

At 31 March 2014 239 94 1,262 1,595

Share options – – 12 12Dividends paid – – (84) (84)Comprehensive income – – 695 695

Total comprehensive income – – 623 623

At 31 March 2015 239 94 1,885 2,218

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Consolidated statement of cash flowsfor the year ended 31 March 2015

2015 2014 Note £000 £000

Cash flows from operating activitiesProfit before tax 776 649

Finance costs 10 24 47

Depreciation 7 & 14 84 79

Share option charge 12 12

Profit on disposal of plant and equipment (2) –

Operating cash flows before changes in working capital 894 787

(Increase)/reduction in inventories (113) 17

Reduction/(increase) in trade and other receivables 3 (226)

Increase in trade and other payables 103 253

Cash generated by operations 887 831

Finance costs 10 (24) (47)

Net cash generated by operating activities 863 784

Cash flows from investing activitiesPurchase of plant and equipment 14 (264) (35)

Proceeds from sale of plant and equipment 2 –

Net cash used in investing activities (262) (35)

Financing activitiesRepayments under hire purchase agreements (10) (12)

Dividends (84) (43)

Share reorganisation costs – (11)

Share buy-backs – (400)

Net cash used in financing activities (94) (466)

Net increase in cash and cash equivalents 25 507 283

Cash and cash equivalents at beginning of year 873 590

Cash and cash equivalents at end of year 1,380 873

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Notes to the consolidated financial statements

1. General informationEnergy Technique Plc (the “Company”) is a public limited company incorporated in England and Wales. The Company is domiciled in the United Kingdom and its registered office and principal place of business is 47 Central Avenue, West Molesey, Surrey KT8 2QZ. The principal activities of the Company and its subsidiary (the “Group”) are described in note 6. The financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.

2. Adoption of new and revised standardsStandards and Interpretations effective in the current periodThere were no new Standards adopted by the Group that have a material impact on the Group in the current period.

Standards and Interpretations in issue not early adoptedAt the date of authorisation of these financial statements, there are no new Standards, Interpretations and Amendments that will have a material impact on the financial statements of the Group.

3. Significant accounting policiesStatement of complianceThe financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

Basis of preparationThe financial statements have been prepared on the historic cost basis.

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

Revenue recognitionRevenue 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 revenueInterest revenue is recognised on a receipts basis.

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Notes to the consolidated financial statements(continued)

3. Significant accounting policies (continued)Operating leasesPayments under operating leases are charged to the Statement of Comprehensive Income on a straight-line basis over the life of the lease.

Research and development expenditureResearch 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 by International Accounting Standard 38 (Intangible Assets), in which case it would be recognised as an asset of the Group.

Foreign currenciesMonetary assets and liabilities denominated in foreign currencies are translated into sterling at the closing rate of exchange and differences taken to the Statement of Comprehensive Income. 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 Statement of Comprehensive Income on a paid basis.

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 Statement of Comprehensive Income.

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 IFRSs, 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.

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 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

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3. Significant accounting policies (continued)InventoriesInventories are 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 goods, 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 instruments 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 as 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 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.

Share based payments The Company operates an EMI share option scheme for Executive Directors and certain other executives. The options can normally be exercised based on time periods ranging from between 2 years and 10 years from the date of grant. Options are forfeited if an employee leaves the Group. The fair values of the options are calculated using a Black-Scholes option pricing model.

4. Critical accounting judgments and key sources of estimation uncertaintyIn the application of the Group’s accounting policies, which are described in note 3, the Directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The Directors do not consider there are any critical judgments or key sources of estimation uncertainty made in the process of applying the Group’s accounting policies and the amounts recognised in the financial statements.

5. Revenue 2015 2014 £000 £000

Continuing operationsSale of goods 10,267 9,101

Rendering of services 508 464

10,775 9,565

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6. Business segments6.1. 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 ET Environmental Limited trading as 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.

6.2. Segment revenue and segment result Segment revenue Segment result

2015 2014 2015 2014 £000 £000 £000 £000

Diffusion 10,775 9,565 1,120 906

Central costs – – (320) (210)

Revenue and operating profit 10,775 9,565 800 696

Finance costs – Diffusion – – (24) (47)

Profit before tax – – 776 649

Income tax credit/(charge) – Company – – 40 –

Income tax charg e – Diffusion – – (121) (143)

I – – (81) (143)

Consolidated revenue and result for the year 10,775 9,565 695 506

Revenue represents sales to external customers. Inter-segment sales in the year amounted to £538,000 (2014: £352,000), which is eliminated on consolidation. Diffusion had one customer (2014: one) with revenue in excess of 10%, which amounted to £1,099,000 (2014: £1,582,000).

6.3. Segment assets and liabilities Assets Liabilities

2015 2014 2015 2014 £000 £000 £000 £000

Diffusion 4,381 3,735 2,231 2,107

Central costs 117 24 49 57

4,498 3,759 2,280 2,164

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6. Business segments (continued)6.4. Other segment information Additions to Depreciation non-current assets

2015 2014 2015 2014 £000 £000 £000 £000

Diffusion 84 78 264 35

Central costs – 1 – –

84 79 264 35

6.5. Geographical segments Acquisition of Revenue Segment assets segment assets

2015 2014 2015 2014 2015 2014 £000 £000 £000 £000 £000 £000

United Kingdom 10,033 8,997 4,498 3,759 264 35

Europe 741 555 – – – –

Rest of World 1 13 – – – –

10,775 9,565 4,498 3,759 264 35

7. Operating profit for the year 2015 2014 £000 £000

Profit for the year has been arrived at after charging:Impairment loss on trade receivables 10 78

Depreciation of plant and equipment 84 79

Research and development costs expensed immediately 239 222

Hire of plant and equipment 12 7

Auditors’ remuneration 20 21

Operating lease – land and buildings 191 191

Operating lease – plant and machinery 115 124

Remuneration paid to the auditors for non-audit services amounted to £4,000 (2014: £6,000) for taxation services.

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8. Employees 2015 2014 No. No.

The average number of people, including Directors, employed by the Group was:

Operations 50 47

Sales and service 23 21

Administration 5 5

78 73

£000 £000

Employee costs:

Wages and salaries 2,608 2,345

Social security charges 292 262

Pension costs 56 47

2,956 2,654

The Directors’ remuneration is disclosed within the Remuneration Report on page 10.

9. Retirement benefit plansThe Group contributes to defined contribution retirement benefit plans for certain qualifying employees. The assets of the plans are held separately from those of the Group in funds under the control of trustees.

The total expense recognised in the Statement of Comprehensive Income of £56,000 (2014: £47,000) represents contributions payable to these plans by the Group at rates specified in the rules of the plans. Outstanding contributions at 31 March 2015 of £6,000 (2014: £3,000) were paid over subsequent to the year end.

10. Finance costs 2015 2014 £000 £000

Invoice discounting 9 26

Obligations under hire purchase agreements – 1

Notional interest on provisions 15 20

24 47

The weighted average capitalisation rate, excluding service charges, on funds borrowed was approximately 0.8% per annum (2014: 8.1%).

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11. Taxation11.1. Taxation charge 2015 2014 £000 £000

Current tax

– UK corporation tax on profit for the year – –

Deferred tax (Note 11.2)

– Charge in relation to utilisation of tax losses 81 143

Total income tax charge for the year 81 143

The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 21% (2014: 23%). The differences are explained below:

2015 2014 £000 £000

Profit from operations 776 649

UK corporation tax at 21% (2014: 23%) 163 149

Adjusted for:

Income not taxable 39 25

Research and development uplift (29) (6)

Tax losses utilised (51) (29)

Capital allowances (more)/less than depreciation (42) 3

Movement in other short-term timing differences 1 1

Total income tax charge for the year 81 143

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11. Taxation (continued)11.2. Deferred tax asset Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 20%

(2014: 21%).

The movement on the deferred tax account is as shown below:

Opening Closing balance Movement balance £000 £000 £000

Accelerated capital allowances (27) 3 (24)

Short-term timing differences 24 1 25

(3) 4 1

Losses 1,416 (179) 1,237

31 March 2014 1,413 (175) 1,238

Accelerated capital allowances (24) (38) (62) Short-term timing differences 25 (1) 24

1 (39) (38) Losses 1,237 (183) 1,054

31 March 2015 1,238 (222) 1,016

Deferred tax asset split:

Energy Technique Diffusion Plc Total £000 £000 £000

Accelerated capital allowances (24) – (24)

Short-term timing differences 25 – 25

Losses 97 1,140 1,237

31 March 2014 98 1,140 1,238

Accelerated capital allowances (62) – (62) Short-term timing differences 24 – 24 Losses 15 1,039 1,054

31 March 2015 (23) 1,039 1,016

A deferred tax liability has been recognised for Diffusion, the Company’s trading subsidiary, to take account of the temporary differences between the incidence of income and expenditure for taxation and accounting purposes.

A deferred tax asset of £40,000 has been recognised as the recovery of a proportion of the losses in Energy Technique Plc is now considered to be reasonably certain.

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11. Taxation (continued)11.2. Deferred tax asset (continued) Deferred tax asset recognised:

2015 2014 £000 £000

Deferred tax asset to be recovered within 12 months 40 98

In addition to the trading losses shown above, the Group has capital losses of £3.8 million (2014: £3.8 million) not recognised as a deferred tax asset because recovery is not considered reasonably certain.

12. Earnings per share 2015 2014 Pence Pence

Basic 29.1 18.0

Diluted 26.0 16.8

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

2015 2014 £000 £000

Total comprehensive income for the year 695 506

2015 2014 No. No.

Weighted average number of ordinary shares in issue 2,390,516 2,817,379

Weighted average number of ordinary shares on a diluted basis 2,673,622 3,013,951

Potential dilutive share options under the Group’s share option scheme was 283,106 (2014: 196,572).

13. Intangible assets 2015 2014 £000 £000

Cost:

At beginning and end of year 25 25

Goodwill is not amortised, but tested annually for impairment with the recoverable amount being determined from value in use calculations. These have been prepared using discounted cash flow forecasts for the forthcoming year and a pre-tax discount rate of 15%.

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14. Plant and equipment 2015 2014 £000 £000

Cost:

At beginning of year 828 793

Additions 264 35

Disposals and adjustments (148) –

At end of year 944 828

Depreciation:


Provided in the year 84 79

Disposals and adjustments (148) –


Net book value:



Included in the total net book value of plant and equipment is £Nil (2014: £17,000) of assets held under hire purchase agreements on which depreciation of £Nil (2014: £10,000) has been charged in the year.

15. SubsidiariesDetails of the Company’s operating subsidiary at 31 March 2015 is as follows:

Name of Group % shares % votingundertaking Incorporated held held Principal activity

ET Environmental England 100% 100% Manufacture and distribution of Limited (trading as commercial air conditioning and Diffusion) heating products

All shares held are ordinary shares and are held by Energy Technique Plc. The Group undertaking operates in the United Kingdom and is engaged in manufacturing, distribution and maintenance. Diffusion Environmental Systems Limited, a dormant Group undertaking, has been excluded by virtue of section 394A of the Companies Act 2006 and is exempt from audit. Under section 448A of the Companies Act 2006, Diffusion Environmental Systems Limited is exempt from filing accounts with the Registrar of Companies.

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16. Inventories 2015 2014 £000 £000

Raw materials and consumables 736 678

Work in progress 8 7

Finished goods 140 86

884 771

The cost of inventories recognised as an expense during the year was £4.87 million (2014: £4.26 million). The cost of inventories recognised as an expense was £nil (2014: £nil) in respect of write downs of inventories to net realisable value.

17. Trade and other receivables 2015 2014 £000 £000

Trade receivables 1,648 1,734

Allowance for doubtful debts (45) (91)

1,603 1,643

Prepayments and accrued income 146 109

1,749 1,752

The average period of credit on sales is 48 days (2014: 48 days). Interest is generally not charged on overdue debts. The Group has provided for all trade receivables based on estimated irrecoverable amounts.

The Group aims to obtain credit insurance for all of the trade receivables of Diffusion, although in the current economic environment this has become more difficult. The trade receivable due from the largest customer at the year end was £211,000 (2014: £347,000). In addition, there were four other customers (2014: three customers) who accounted for more than 5% of trade receivables.

In determining the recoverability of a trade receivable, the Group considers any change in the quality of the trade receivable from the date credit was initially granted up to the reporting date. With the availability of credit insurance and the limited concentration of credit risk due to the large customer base, the Directors believe there is no further credit provision required in excess of the allowance for doubtful debts.

17.1. Ageing of past due date but not impaired 2015 2014 £000 £000

More than 60 days – –

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17. Trade and other receivables (continued)17.2. Movement in the allowance for doubtful debts 2015 2014 £000 £000


Impairment losses 10 78

Amounts written off (56) (5)


18. Trade and other payables 2015 2014 £000 £000

Trade creditors 1,524 1,512

Other creditors and accruals 376 314

1,900 1,826

The average period of credit on purchases is 60 days (2014: 76 days). The Company has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. As a consequence, interest is generally not payable on trade payables.

19. Provisions 2015 2014 £000 £000


Notional interest 15 20

Payments (16) (16)

114 115

The provisions relate to the onerous liabilities of employers’ national insurance and pension contributions on annual payments made under a permanent health insurance policy.

The annual payments include a provision for an increase under RPI which has been estimated at 2%. The pre-tax discount rate applied to the amounts payable is 15%.

20. BorrowingsThe Group provided Lloyds Bank Plc with fixed and floating charges over all of the Group’s assets, including cross guarantees, as security for the invoice discounting facility previously provided. The Group now has sufficient in hand cash balances to accommodate short term fluctuations in working capital. As a consequence, the former invoice discounting facility has been suspended, but it is a requirement to maintain these fixed and floating charges until such time as the facility is formally terminated.

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21. Share capital 2015 2014 £000 £000

Allotted, called up and fully paid2,390,516 (2014: 2,390,516) Ordinary Shares of 10 pence each 239 239

239 239

22. Reserves 2015 2014 £000 £000

At beginning of year 94 –

Share buy-backs – 94


This reserve arose on the buy-back of shares in the year ended 31 March 2014.

23. Retained earnings 2015 2014 £000 £000

At beginning of year 1,262 1,198

Dividends (84) (43)

Profit for the year 695 506

Share option reserve 12 12



At end of year 1,885 1,262

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24. Financial instruments24.1. Capital risk management

The Group manages its capital to ensure it will be able to continue as a going concern while maximising the returns to stakeholders. The capital structure of the Group consists of cash and equity of the parent, comprising issued capital and retained earnings. The Group is not subject to any externally imposed capital requirements.

24.2. Short-term trade payables and receivablesShort-term trade payables and receivables have been excluded from all of the following disclosures.

24.3. Gearing ratioThe Group had no net borrowings at either 31 March 2014 or 31 March 2015.

24.4. Significant accounting policiesDetails of the significant accounting policies and methods adopted, in respect of each class of financial asset and financial liability are disclosed in note 3 to the financial statements.

24.5. Categories of financial instrument 2015 2014 £000 £000

Cash and cash equivalents 1,076 279

Invoice discounting in-hand balance 304 594

Obligations under hire purchase agreements – (10)

1,380 863

Cash and cash equivalents represents amounts deposited with Lloyds Bank Plc.

24.6. Financial risk managementThe Directors do not consider any material benefit would accrue to the Group by using derivative instruments.

24.7. Market risk Foreign currency risk management

The Directors do not consider there is any material exposure to foreign currency fluctuations.

Interest rate risk management Interest on the cash deposits with Lloyds Bank Plc is variable and based on current rates available. Interest payable on the invoice discounting facility, when drawn down, is 2.50% (2014: 2.50%) over base rate.

If interest rates had been 50 basis points higher and all other variables were held constant, then the profit for the year and net equity at the year end would have decreased by approximately £1,000 (2014: £3,000).

24.8. Financing facilitiesThe Group had cash deposits of £1.38 million at 31 March 2015 (2014: £873,000), which is used to finance short-term fluctuations in working capital. The Group’s former invoice discounting facility with Lloyds Bank Plc has been suspended at the Company’s request in view of the availability of cash deposits to finance short-term fluctuations in working capital.

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24. Financial instruments (continued)24.9. Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The carrying amount of financial assets recorded in the financial statements, net of impairment losses, represents the Group’s maximum exposure to credit risk.

The credit risk on liquid funds deposited with Lloyds Bank Plc was in excess of 5% of monetary assets, but this is limited because the counterparty is a bank with a high credit rating assigned by international credit rating agencies.

The credit risk on trade receivables is managed by selling to a large number of customers and obtaining credit insurance wherever possible.

24.10. Liquidity risk managementThe Group manages liquidity risk by maintaining adequate reserves and banking facilities, monitoring cash balances on a daily basis and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

24.11. Fair value of financial instrumentsThe Directors consider the carrying amounts of financial assets and liabilities recorded at amortised costs in the financial statements approximates to fair value.

25. Cash and cash equivalents Beginning Cash Non-cash End of year flow changes of year £000 £000 £000 £000

Cash at bank 279 797 – 1,076Invoice discounting in-hand balance 594 (290) – 304

873 507 – 1,380Obligations under hire purchase agreements (10) 10 – –

863 517 – 1,380

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26. Operating leases26.1. Leasing arrangements

Operating leases relate to properties and certain company vehicles. The lease on the West Molesey property expired on 9 April 2015 and a reversionary lease has been entered into commencing on that date for a period of 10 years, with an upwards only rent review after 5 years, subject to a 6 months’ rent free period commencing on 9 April 2015. Car leases are generally taken out for a term of four years.

26.2. Payments recognised as an expense 2015 2014 £000 £000

Land and buildings 191 191

Plant and machinery 115 124

306 315

26.3. Non-cancellable operating lease commitments Land & buildings Other 2015 2014 2015 2014 £000 £000 £000 £000

Total future minimum lease payments falling due:

Within 1 year 96 191 42 57

Between 2 and 5 years 764 669 48 74

Between 6 and 10 years 955 956 – –

Between 11 and 15 years – 191 – –

1,815 2,007 90 131

26.4. Present value of hire purchase agreements Plant

2015 2014 £000 £000

Within 1 year – 10

– 10

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27. EMI share optionsThe Company operates an EMI share option scheme for Executive Directors and certain other executives. The options can normally be exercised based on time periods ranging from between 2 years and 10 years from the date of grant. Options are forfeited if an employee leaves the Group.

Details of the share options outstanding are as follows:

2015 2014

Exercise Exercise Options price Options price No. (pence) No. (pence)

Outstanding at beginning of year 333,050 43.5 333,050 43.5

Issued during the year – – – –

Outstanding at end of year 333,050 43.5 333,050 43.5

The weighted average remaining life of share options outstanding at the year end was 7.75 years (2014: 8.75 years). There were no share options exercisable at the year end.

The fair values of the options were calculated using a Black-Scholes option pricing model. The weighted average inputs into the model were as follows:

2014

Weighted average share price 43.8p

Weighted average exercise price 43.5p

Expected volatility 34.7%

Expected life 10.0

Risk free rate 1.8%

Expected dividend yield 3.3%

The expected volatility was determined by calculating the historical volatility of the Company’s shares over the previous two years prior to the date of grant.

The group recognised a charge of £12,000 (2014: £12,000) for equity-settled share-based transactions in the year.

28. Post balance sheet eventsThe Directors recommend a final dividend of 2.25 pence per share for approval by shareholders at the 2015 Annual General Meeting.

29. Approval of financial statementsThe financial statements were approved by the board of Directors and authorised for issue on 20 May 2015.

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Accounts of the parent companyEnergy Technique Plc

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Independent auditors’ reportto the members of Energy Technique Plc

We have audited the Parent Company financial statements of Energy Technique Plc for the year ended 31 March 2015 which comprise the Parent Company Balance Sheet, the Parent Company Statement of Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors As explained more fully in the Directors’ responsibilities statement set out on page 6, the Directors are responsible for the preparation of the Parent Company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Parent Company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Strategic Report and the Directors’ Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion the Parent Company financial statements:

• giveatrueandfairviewofthestateoftheCompany’saffairsasat31March2015;

• havebeenproperlypreparedinaccordancewithUnitedKingdomGenerallyAcceptedAccountingPractice;and

• havebeenpreparedinaccordancewiththerequirementsoftheCompaniesAct2006.

Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the Parent Company financial statements are prepared is consistent with the Parent Company financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if in our opinion:

• adequateaccountingrecordshavenotbeenkeptbytheParentCompany,orreturnsadequateforouraudithave not been received from branches not visited by us; or

• theParentCompanyfinancialstatementsarenotinagreementwiththeaccountingrecordsandreturns;or

• certaindisclosuresofDirectors’remunerationspecifiedbylawarenotmade;or

• wehavenotreceivedalltheinformationandexplanationswerequireforouraudit.

Other matterWe have reported separately on the Group financial statements of Energy Technique Plc for the year ended 31 March 2015.

Nigel Fry (Senior Statutory Auditor)For and on behalf of Milsted Langdon LLPChartered Accountants and Statutory AuditorsTaunton20 May 2015

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Energy Technique Plc – Balance sheetat 31 March 2015Company number 00013273

2015 2014 Note £000 £000

ASSETSFixed assetsTangible assets 3 – –

Investments 4 2,127 2,127

Deferred tax asset 5 40 –

Total fixed assets 2,167 2,127

Current assetsTrade and other debtors 6 345 192

Cash at bank 1 1

Total current assets 346 193

Total assets 2,513 2,320

LIABILITIESCurrent liabilitiesTrade and other creditors 7 (64) (58)

Total current liabilities (64) (58)

Total liabilities (64) (58)

Net assets 2,449 2,262

EQUITYEquity attributable to equity holdersIssued capital 8 239 239

Reserves 9 94 94

Retained earnings 10 2,116 1,929

Total equity 2,449 2,262

Approved and authorised by the Board on 20 May 2015 and signed on its behalf by:

W K Goldsmith L A Stimpson

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Energy Technique Plc – Changes in equityfor the year ended 31 March 2015

Share Retained capital Reserves earnings Total £000 £000 £000 £000

At 1 April 2013 333 – 2,229 2,562

Share reorganisation costs – – (11) (11)

Share options – – 12 12

Dividends – – (43) (43)

Comprehensive income – – 142 142

Share buy-backs (94) 94 (400) (400)

Total recognised income and expense (94) 94 (300) (300)

At 31 March 2014 239 94 1,929 2,262

Share options – – 12 12Dividends – – (84) (84)Comprehensive income – – 259 259

Total recognised income and expense – – 187 187

At 31 March 2015 239 94 2,116 2,449

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Energy Technique Plc – Notes to the financial statements

1. Significant accounting policiesBasis of preparationThe financial statements have been prepared on the historic cost basis and in accordance with UK GAAP.

DepreciationDepreciation is provided on the cost of fixed assets on a straight-line basis in order to write them down to estimated realisable value at the rate of 33% per annum.

Deferred taxationFull 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.

Investments in subsidiary undertakingsInvestments in subsidiary undertakings are stated at cost, less provisions for any impairment losses.

Financial assetsTrade debtors and other debtors that have fixed or determinable payments that are not quoted in an active market are classified as debtors, 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 debtors when the recognition of interest would be immaterial.

Financial liabilities and equity instruments issued by the CompanyDebt and equity instruments are classified as either financial liabilities or as equity instruments 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 Company are recorded as the proceeds received, net of direct issue costs.

2. Profit and loss account 2015 2014 £000 £000

Profit for the year dealt with in the accounts of the Company 259 142

As permitted by section 408 of the Companies Act 2006, a separate profit and loss account of the Company is not presented.

2015 2014 £000 £000

Auditors’ remuneration 5 6

Remuneration paid to the auditors for non-audit services amounted to £2,000 (2014: £3,000) for taxation services.

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Energy Technique Plc – Notes to the financial statements(continued)

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3. Tangible fixed assets 2015 2014 £000 £000

Cost:

At beginning and end of year 1 1

Depreciation:


Provided in the year – 1

At end of year 1 1

Net book value:

At end of year – –

At beginning of year – 1

4. Investments Shares in Group undertakings

2015 2014 £000 £000

Cost:

At beginning and end of year 8,464 8,464

Provisions:


Net book value:


5. Deferred taxSee note 11 to the Group financial statements.

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Energy Technique Plc – Notes to the financial statements(continued)

6. Trade and other debtors 2015 2014 £000 £000

Amounts owed by Group undertakings 254 169

Current tax asset 15 3

Prepayments and accrued income 76 20

345 192

7. Trade and other creditors 2015 2014 £000 £000

Trade creditors 10 10

Other creditors and accruals 54 48

64 58

8. Share capitalSee note 21 to the Group financial statements.

9. Reserves 2015 2014 £000 £000


Share buy-backs – 94


10. Retained earnings 2015 2014 £000 £000

At beginning of year 1,929 2,229

Dividends (84) (43)

Profit for the year 259 142

Share option reserve 12 12



At end of year 2,116 1,929

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Notice of Annual General Meetingof Energy Technique Plc

Notice is hereby given that the 2015 Annual General Meeting (the “Meeting”) of the members of Energy Technique Plc (the “Company”) will be held at the offices of finnCap Limited, 60 New Broad Street, London EC2M 1JJ on 9 July 2015 at 12.00 Noon for the following purposes:

ORDINARY BUSINESS

1. To receive and adopt the directors’ report and financial statements for the year ended 31 March 2015.

2. To adopt the Board’s report on remuneration.

3. To declare a dividend of 2.25 pence per share.

4. To consider and, if thought fit, to pass the following resolution, which will be proposed as an ordinary resolution:

“It is resolved that Milsted Langdon LLP be and are hereby reappointed auditors of the Company to hold office from the conclusion of this meeting until the conclusion of the next general meeting at which accounts are laid before the Company at a remuneration to be determined by the directors.”

5. To re-elect Leigh Stimpson as a director.

SPECIAL BUSINESS

6. To consider and, if thought fit, to pass the following resolution, which will be proposed as an ordinary resolution:

“In accordance with section 551 of the Companies Act 2006 (“the Act”), the Directors be and are generally and unconditionally authorised to exercise all powers of the Company to allot shares in the Company or to grant rights to subscribe for or to convert any security into shares in the Company up to a maximum aggregate nominal amount of £72,000, provided that this authority shall (unless previously revoked, varied or renewed by the Company) expire on the date falling on the earlier of 15 months from the date hereof or the conclusion of the Company’s next annual general meeting to be held in 2016, save that the Company may make prior to such expiry an offer or agreement which would or might require such shares or rights to be allotted or granted after the expiry of the said period and the directors may allot such shares or grant such rights in pursuance of any such offer or agreement notwithstanding the expiry of the authority given by this resolution.”

7. To consider and, if thought fit, to pass the following resolution, which will be as a special resolution:

“Subject to the passing of the previous resolution, the Directors be and are generally empowered in accordance with section 570 of the Act to allot equity securities (as defined in section 560 of the Act) for cash, pursuant to the authority conferred on it by the resolution above, as if section 561(1) of the Act did not apply to any such allotment, provided that this power is limited to:

(1) the allotment of equity securities up to an aggregate nominal amount of £23,900;

(2) the allotment (otherwise than pursuant to paragraph 7(1) above) of equity securities up to an aggregate nominal amount of £23,900 representing no more than 10% of the issued share capital at the date of the notice of the AGM pursuant to the exercise of any options under any option arrangements entered into by the Company for the benefit of the officers and executives of the Company; and

this authority shall, unless revoked, varied or renewed by the Company prior to such time, expire on the date falling 15 months after the date of the passing of this resolution, or the conclusion of the next Annual General Meeting of the Company to be held in 2016, whichever is the earlier, save that the Company may make prior to such expiry an offer or agreement which would or might require relevant securities to be allotted after the expiry and the directors may allot equity securities in pursuance of any such offer or agreement as if the power conferred hereby had not expired.

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Notice of Annual General Meeting(continued)

This resolution revokes and replaces all unexercised powers previously granted to the Directors to allot equity securities as if section 561(1) of the Act did not apply but without prejudice to any allotment of equity securities already made or agreed to be made pursuant to such authorities.”

8. To consider and, if thought fit, to pass the following resolution, which will be proposed as a special resolution:

“THAT the Company is hereby generally and unconditionally authorised to make market purchases (within the meaning of section 693(4) of the Act) of Ordinary Shares of 10p each in the capital of the Company (“Ordinary Shares”) provided that:

(1) the maximum number of Ordinary Shares hereby authorised to be purchased is 478,103 (representing 20% of the issued ordinary share capital of the Company, excluding Ordinary Shares held in treasury, as at the date of this Notice);

(2) the maximum price (exclusive of expenses) which may be paid for each Ordinary Share is an amount equal to 125% of the average of the middle market quotations of an Ordinary Share taken from the AIM appendix to the Stock Exchange Daily List for the five business days immediately preceding the day on which the Ordinary Share is contracted to be purchased;

(3) the minimum price (exclusive of expenses) which may be paid for each Ordinary Share is the lower of 10p and an amount equal to 75% of the average of the middle market quotations of an Ordinary Share taken from the AIM appendix to the Stock Exchange Daily List for the five business days immediately preceding the day on which the Ordinary Share is contracted to be purchased; and

(4) this authority shall, unless revoked, varied or renewed by the Company prior to such time, expire on: the date falling 15 months after the date of the passing of this resolution; or the conclusion of the next Annual General Meeting of the Company, whichever is the earlier, save that the Company may enter into contracts of purchase which would or might be completed after the expiry and the Company may acquire shares pursuant to such contracts as if the authority conferred hereby had not expired.”


R M Unsworth Registered officeCompany Secretary 47 Central Avenue12 June 2015 West Molesey SurreyRegistered in England No. 00013273 KT8 2QZ

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NOTES TO THE NOTICE OF ANNUAL GENERAL MEETINGEntitlement to attend and vote1. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only

those members registered on the Company’s register of members at:

• 6.00pmon7July2015;or

• ifthisMeetingisadjourned,at6.00pmonthedaytwodayspriortotheadjournedMeeting,

shall be entitled to attend and vote at the Meeting.

Appointment of proxies2. If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a proxy

to exercise all or any of your rights to attend, speak and vote at the Meeting and you should have received a proxy form with this notice of meeting. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form.

3. A proxy does not need to be a member of the Company but must attend the Meeting to represent you. Details of how to appoint the Chairman of the Meeting or another person as your proxy using the proxy form are set out in the notes to the proxy form. If you return the proxy form with no name inserted for your proxy, the Chairman of the meeting will be deemed to be your proxy.

4. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting. If you want your proxy to make any comment on your behalf, you will need to appoint someone other than the Chairman of the Meeting and give them the relevant instructions directly.

Appointment of proxy using hard copy proxy form5. The notes to the proxy form explain how to direct your proxy to vote on each resolution or withhold their vote.

To appoint a proxy using the form, the form must be:

• completedandsigned;

• sentordeliveredtoCapitaAssetServices,PXS1,34BeckenhamRoad,Beckenham,KentBR34TU;and

• received by Capita Asset Services no later than 12.00Noon on 7 July 2015 (being the time that is48 hours before the Meeting).

In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company.

Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be included with the proxy form.

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Appointment of proxies through CREST6. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment

service may do so for the Meeting and any adjournment(s) thereof by utilising the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.

In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (EUI) specifications and must contain the information required for such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by the issuer’s agent (ID RA10) by 12.00 Noon on 7 July 2015. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.

CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.

Changing proxy instructions7. To change your proxy instructions simply submit a new proxy appointment using the methods set out above.

Note that the cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded. Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions usinganotherhard-copyproxyform,pleasecontactCapitaAssetServices,PXS1,34BeckenhamRoad,Beckenham, Kent BR3 4TU. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence.

Termination of proxy appointments8. In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard copy

notice clearly stating your intention to revoke your proxy appointment to Capita Asset Services, PXS 1,34 Beckenham Road, Beckenham, Kent BR3 4TU to be received by no later than 12.00 Noon on 7 July 2015. In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice. If you attempt to terminate your proxy’s appointment but the revocation notice is received after the time specified, your proxy’s appointment will remain valid.

Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have appointed a proxy and attend the Meeting in person, your proxy appointment will automatically be terminated.

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Issued shares and total voting rights9. As at 5.00pm on 12 June 2015, the Company’s issued share capital comprised 2,390,516 ordinary

shares of 10 pence each. Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting rights in the Company as at 5.00pm on 12 June 2015 is 2,390,516.

Communication10. Except as provided above, members who have general queries about the Meeting should call our

shareholder helpline on 0871 664 0300 (no other methods of communication will be accepted). Calls cost 10p per minute plus network extras. Lines are open from 8.30am to 5.30pm, Monday to Friday.

You may not use any electronic address provided either:

• inthisnoticeofAnnualGeneralMeeting;or

• anyrelateddocuments(includingthechairman’sletterandproxyform),

to communicate with the Company for any purposes other than those expressly stated.

Financial calendar and corporate information

Key datesPreliminary announcement of the results for the year 21 May 2015

2015 Annual Report and Financial Statements posted to shareholders by 12 June 2015

Annual General Meeting 9 July 2015

Half-year results to 30 September 2015 announced by 27 November 2015

Registered officeEnergy Technique Plc47 Central AvenueWest MoleseySurrey KT8 2QZ

Website addresswww.diffusion-group.co.uk

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Fan Coils for Ben Ainslie Racing Team HQ

Fan Coils for Walkie Talkie Heating for Tottenham Hotspur Fan Coils for Cheesegrater

Heating for Arsenal Training Centre

Fan Coils for The Shard

Energy Technique Plc

47 Central Avenue

West Molesey

Surrey

KT8 2QZ

Tel: +44 (0)20 8783 0033

Documents

Annual Report & Financial Statements 2015 · 2015-11-23 · 2 Energy Technique Plc Annual Report & Financial Statements 2015 Job No.: 22262 Proof Event: 4 Park Communications Ltd