Inspiration Hlt Regulatory News (IHC)

Inditherm plc

("Inditherm" or "the Company")

Preliminary Results

Inditherm plc (AIM: IDM), the provider of innovative specialised heating solutions, today reports its Preliminary Results for the 12 months ended 31 December 2013.

Highlights

Commenting on the outlook, Mark Abrahams, Chairman of Inditherm, said:

"We expect our underlying growth in sales to continue, albeit that the uneven order flow pattern will persist. This year, given the current level of active enquiries, we anticipate income to be biased towards the second half. Inevitably this creates some uncertainty over the rate of progress we can achieve. We are applying our strengthened resources towards accelerating growth."

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Strategic Report and Operating & Financial Review

Overview

As indicated in our Interim Report, the strong start to the year which reflected an overhang of orders from the previous year, settled back to an underlying flatter performance. This uneven order pattern has continued, particularly in the NHS. We believe that the apparent slowing of growth is caused in the UK by ever-tightening financial constraints, particularly with regard to capital expenditure in the NHS, rather than a dampening of enthusiasm for our products.

To offset this apparent growth pause, we took on distributorship of the ATOM neonatal product range. This has shown very promising early signs and enabled us to maintain an overall growth track. In the export markets a combination of economic circumstances, national healthcare priorities and some under-performing distributors led to flat year-on-year order performance. We have increased our resources and already implemented some changes to strengthen our overseas sales channels, and have already seen some encouraging signs at the start of 2014.

The arrangement with ADI Group for the industrial process solutions sector has been discontinued, following the difficulty in gaining traction in those markets. As we had already decided not to pursue these markets directly it will not have any material impact on the business. We strengthened the sales resource for the standard products sector of our Industrial business towards the end of 2013 and this is showing signs of delivering improved performance. These activities continue to deliver a positive contribution without diverting our attention from the core medical business.

With increased turnover for the business, losses were reduced by 47%. Increased investment in sales resource offset the higher contribution margin to constrain profitability, as anticipated in the Interim Report.

We generated positive cash flow during the year.

Results

The turnover for the year increased by 23% to £2,062k (2012: £1,673k). Gross profit rose 21% to £1,163k (2012: £960k) in line with turnover, reflecting sustained operating margins.

Reflecting the strengthening of the sales force, overheads increased by 10% during the year, to £1,262k (2012: £1,146k), resulting in a nearly halved operating loss of £99k (2012 £186k). The post-tax loss was £77k (2012: £164k).

The year end cash and cash equivalents balance was £1,635k (2012: £1,578k), representing an inflow of £57k (2012: outflow £50k), reflecting improved trading, tight control of working capital and significant cash flow benefit from long-term support contracts.

Sales and Marketing:

Overall Medical revenue in 2013 grew by 30%, with sizeable orders placed in the first quarter of the year, some of which were delayed from 2012. Our successful launch as distributor for the ATOM product ranges in the UK market resulted in an 11% contribution to sales revenues during the year.

In the UK Medical sector our sales team delivered a substantial increase in order intake over the previous year, helped by the credibility that the recommendations from NICE (National Institute for Health & Care Excellence) have given us. Nevertheless the constraints on capital equipment costs within the NHS affect buying patterns and create delays in both decision-making and implementation of change. Despite this we managed to grow our UK order levels by 66% in 2013, excluding the additional revenues from the ATOM products, with neonatal orders holding steady despite the financial constraints and perioperative orders doubled. The increased orders included a significant level of extended warranty and maintenance contracts representing business that will translate into revenue in future periods. Even excluding the order overhang from 2012, the underlying year on year growth was around 45%.

A recent case study prepared with the Pennine Acute NHS Trust portrayed a very positive view on implementing Inditherm patient warming for the perioperative area seen from a practical perspective. We have also continued to work with NICE who are expected to publish a site demonstrator pack in April 2014, that is targeted to improve uptake of our perioperative patient warming technology into the NHS. With these and an increasing number of NHS hospitals using Inditherm for perioperative patient warming we expect confidence will grow, reducing the barriers to change.

We saw good progress from a number of our distributors during the year, underlining the potential for our export activities; however there were also some disappointing performances. We have taken action in these cases and this is starting to show promise of improving results. Product registration issues in a few countries hampered progress, but some of these are now resolved and others appear to be nearing a conclusion. We have increased our resource for export activities during the year and believe this will allow us to increase our focus in this area of the business and drive progress with our overseas distribution channels, although some degree of variability in business levels remains inevitable. We continue to strengthen and expand our distributor network and that process will continue into 2014.

In the USA we did see some signs of encouragement towards the end of the year, but it still remains unclear whether this will be sustained moving forward. We will therefore continue our efforts to identify and evaluate any options that would allow progress. This market offers potential future up-side to our medium term plans, but we will ensure that the allocation of resources is proportionate and does not therefore threaten our overall export growth.

During the year we were appointed as the exclusive distributor for the ATOM range of products in the UK & Ireland. ATOM is one of the top three global suppliers of neonatal incubators with a strong reputation. This strengthens our image in the neonatal market and provides a welcome additional revenue stream.

In our Industrial business, orders for our standard products grew by over 64% compared to the previous year, whilst ADI orders fell by a similar percentage. The ADI licence agreement has been terminated and we will consider alternative partners for this sector if any can be identified. This is not material to the short or medium term outlook.

We see an opportunity to continue growth of the standard heating jacket part of our Industrial business, which we believe will more than offset the loss of any process solutions revenue. Standard product sales which are under our direct control, provide a useful contribution and an opportunity for some growth. As a result we will continue to focus our Industrial sector efforts in the standard product area.

We have continued to pursue OEM opportunities during the year and the first of these has now resulted in an Inditherm patient warming mattress being incorporated in our partner's new resuscitation and radiant warming product that has a planned launch in 2014. The partner's product, in which the Inditherm is an optional item, has been previewed and received favourable comments. We have already received our first order for a pre-production batch, with a production call-off in 2014, totalling 50 units. Other OEM projects are still in the development phase with some of those appearing to make promising progress.

Product Development

We have continued to enhance our products during the year, expanding a number of our ranges and adding new features. Work with potential original equipment manufacturer partners ("OEM") has also been undertaken in order to help move some of those projects forward. We believe that these new additions will strengthen our product proposition and in some cases open new market opportunities. We will continue to develop new products, with a focus on those that use our core technology or that fit with our existing competencies and routes to market.

Operations

We have maintained a dedicated and adaptable production team that allows us to react to variations in product demand and meet our anticipated growth plans. We also invest as necessary in tooling and equipment to meet the needs of our manufacturing processes and the Medical Device regulations.

We have invested further in our sales and marketing team and believe this will have a positive impact on our results. Feedback from our customers and distributors remains positive, confirming that they consider the quality of Inditherm's products and the service and support provided to be excellent.

Dividends

As stated in previous years, the Board intends to devote the Company's financial resources to business development. This intention, which the Board believes is in the best interest of the shareholders, has continued during 2013 and the Board does not expect to declare a dividend during the Company's continuing development.

Employees

We continue to invest in our workforce to ensure we have the appropriate skills with which to grow the business. We have continued our policy of retaining our loyal staff through the short term peaks and troughs of demand. This rewarded us particularly in the busier period early in the year. On behalf of the Board, we thank our staff most sincerely for their continued support.

Outlook

The peaks and troughs in orders from the UK during the year underline the variability in demand that typify capital equipment sales to the NHS, exacerbated when new technology is involved. However we do expect the increasing installed base, availability of case studies and pressure on costs will continue to generate growing interest, particularly for our perioperative products. We are introducing a managed service approach in the belief that this could break down barriers to adoption, allowing implementation of Inditherm technology using revenue, rather than capital, budgets and giving us an ongoing revenue stream; this is in the early stages so the potential impact cannot yet be assessed. The compelling arguments for Inditherm's cost saving potential in the operating theatre area, backed by the support of NICE guidance, are likely to continue to attract attention from the NHS in its current economic situation. The orders growth in our UK business in 2013 was buoyed by projects carried over from 2012 and maintenance contracts that will attract revenue over a number of years, so we cannot expect growth to continue at the same rate.

The additional revenue from distribution of the ATOM product range in the UK and Ireland has given a welcome boost to our UK business. We are competing against large, long established, multi-national competitors with these systems; however our success in being accepted onto the NHS Supply Chain framework agreement leaves us well-placed. This, combined with the product strengths and our good reputation in the neonatal market, makes us optimistic that we can make further progress in this sector in the year ahead.

Although we did not experience growth in export orders for our Medical business in 2013, we have recruited additional resource. This should provide us with a sharper focus on the territories that offer the greatest potential and where we can devote more time to providing support to our distributors. We have also strengthened our distributor base and changed those who have been less successful. With this renewed enthusiasm we plan to return to export growth.

We saw a modest upturn in orders from the USA at the end of 2013 but it is unclear as yet whether this will be sustained into 2014. This market represents a relatively small proportion of our total sales, and we will pursue any opportunities we can identify to accelerate progress, subject to maintaining a balanced use of our resources.

We have continued to progress a number of potential projects involving the use of Inditherm technology in third party products (OEM). We believe that one of these will start to produce a modest revenue stream in the year ahead, with the potential for growth if our partner is successful in their target neonatal markets worldwide. Other projects, both medical and industrial, are making progress and have the potential to start generating orders towards the end of this year. We anticipate that our Industrial standard product business will deliver growth that will allow us to offset the loss of ADI sales.

We expect our underlying growth in sales to continue, albeit that the uneven order flow pattern will persist. This year, given the current level of active enquiries, we anticipate income to be biased towards the second half. Inevitably this creates some uncertainty over the rate of progress we can achieve. We will continue to apply all our efforts to driving the business forward faster whilst evaluating the options available to us. We can see opportunities in both the UK and export medical markets, with additional potential up-side in the OEM and industrial activities, and we are applying our strengthened resources towards accelerating growth.

2 April 2014

Preliminary announcement of results for the year ended 31 December 2013

Consolidated Statement of Comprehensive Income

All recognised gains and losses are included in the Consolidated Statement of Comprehensive Income. As such there is no other comprehensive income.

There is no material difference between the Loss on ordinary activities before taxation and the Loss for the year attributable to the owners of the parent company as above and their historic cost equivalents.

 Preliminary announcement of results for the year ended 31 December 2013

Consolidated and Company Balance Sheet

Preliminary announcement of results for the year ended 31 December 2013

Consolidated and Company Statement of Changes in Shareholder Equity

Preliminary announcement of results for the year ended 31 December 2013

Consolidated and Company Cash Flow Statement

 NOTES

Forward looking statements

Certain statements contained in this document constitute forward-looking statements. Such forward-looking statements involve risks, uncertainties and other factors which may cause the actual results, performance or achievements of Inditherm plc to be materially different from any future results, performance or achievements expressed or implied by such statements. Such risks, uncertainties and other factors include, among others: general economic conditions and the business environment.

Annual Report

Copies of the 2013 Annual Report and Financial Statements will be sent to all shareholders today. Copies will be available from the Company Secretary at Inditherm plc, Inditherm House, Houndhill Park, Bolton Road, Wath upon Dearne, Rotherham, S63 7LG.

A PDF version of the 2013 Annual Report and Financial Statements will be available on the company's website http://www.inditherm.com today.

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