Inspiration Hlt Regulatory News (IHC)

RNS Number : 1482J

Inditherm PLC

25 March 2010

 

 

 

Press Release

25 March 2010

 

 

Inditherm plc

("Inditherm" or "the Company")

 

Preliminary Results

 

 

Inditherm plc, the provider of innovative specialised heating solutions, today reports its Preliminary Results for the 12 months ended 31 December 2009.

 

Highlights

·;	Revenue decreased to £1,152k (2008: £1,983k)
·;	Overheads contained at £1,577k before exceptional costs (2008: £1,607k)
·;	Year end cash balance of £2,092k (2008: £3,115k)
·;	Post-tax loss of £1,082k (2008: £283k)
·;	Overall Medical orders in 2009 grew by 10%
·;	Redirection and focus in the Industrial sector has continued to deliver improved contribution margins
·;	Received the national Suppliers Delivering Sustainability award in February 2010 for part of the Medical range
·;	Secured a significant Industrial order at the end of 2009

 

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

"As was the case for many businesses, 2009 was undoubtedly a difficult year for Inditherm, however the progress we have made in recent months is more encouraging. While broadly our customers have been impacted by the economic situation, we were pleased to see growth in some areas of the business, notably in Medical orders through our overseas distributors and in the margins for the Industrial business. We have focussed our resources on these areas and are optimistic that the positive trends we are seeing in enquires and orders will continue into 2010."

 

- Ends -

 

 

For further information, please contact:

 

Inditherm plc
Nick Bettles, Chief Executive nbettles@indithermplc.com	Tel: +44 (0) 1709 761000
Ian Smith, Finance Director ismith@indithermplc.com	www.inditherm.com

 

Collins Stewart Europe Limited (Nomad)
Tom Hulme THulme@collinsstewart.com	Tel: +44 (0) 207 523 8350

 

Media enquiries:

 

Abchurch
Sarah Hollins/Simone Elviss simone.elviss@abchurch-group.com	Tel: +44 (0) 207 398 7728

 

Inditherm plc

Chairman's Statement

 

Overview

The economic conditions during 2009 were even more challenging than originally anticipated and this continued into the second half of the year.

 

The Medical business continued growth but at rates lower than in recent years. There has been modest take-up in the USA following the launch stock sales seen in 2008.

 

The redirection and focus in the Industrial sector has continued to deliver improved contribution margins, albeit on reduced sales. The cost base was reduced during the year to match market conditions. In doing so we focussed our resources on those applications where we already have proven credibility and in the latter part of the year the benefit of this approach started to show.

 

The outcome for the second half was in line with expectations at the Interim stage; however there have been encouraging signs of improvement during the recent months.

 

Results

Revenue for the year fell by 42% to £1,152k (2008: £1,983k), with a large part of this difference due to sales of start-up stock for Smiths Medical in 2008. This was in line with expectations following the results reported for the first half of the year. Gross profit was 41% (2008: 56%) due largely to under-recovery of fixed costs with lower revenue.

 

Overheads were kept under control during the year, and before exceptional costs were £1,577k (2008: £1,607k), resulting in operating loss before exceptional items at £1,039k (2008: £502k). Exceptional costs of £109k were associated with restructuring during the year (2008: nil) and with net interest income much lower at £27k (2008: £179k), the post-tax loss was £1,082k (2008: £283k).

 

The year end cash balance was £2,092k (2008: £3,115k), representing a net outflow from operating activities of £981k (2008: £263k).

Operations

Overall Medical orders in 2009 grew by 10%. This comprised 18% growth in orders from our non-US distributors, diluted by a flat performance in the UK. Sales in the USA amounted to £31k. Spending pressures within the NHS temporarily halted what has previously been a steady growth trend. We recently received a national award for this part of our range and hope that this will help in overcoming reluctance in some parts to adopt Inditherm technology to meet the National Institute for Clinical Excellence (NICE) guidelines.

 

We continued our strategy of focusing on specific key areas in the Industrial markets. Contribution margins again increased and were nine percentage points higher than the previous year, in line with our strategy to concentrate on applications where we can offer clear benefit for the customer at competitive prices. Restructuring of this part of the business during the year has helped to align costs to the less diverse and time-consuming areas of activity. We are working closely with a few major international companies and secured a significant order at the end of 2009 as a result. We anticipate further progress in sales penetration during 2010.

 

We have seen a steady increase in enquiry levels over the last six months. Order flow improved in the second half and was 30% up on the first half. We took Industrial orders for over £200k in the last two months of 2009 that will be fulfilled in 2010.

 

The second half operating loss before exceptional items was 22% lower than the first half, reflecting both the reduction in overheads and an improvement in performance from medical distributors.

 

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 2009 and the Board does not expect to declare a dividend during the Company's continuing development.

 

Management

As part of restructuring of the business during the year we combined the technical and manufacturing management roles.

 

Employees

We continue to invest in our workforce to ensure we have the appropriate skills with which to grow the business. On behalf of the Board, I thank our staff most sincerely for their continued support.

 

Outlook

Growth of the Medical sector during 2009 continued, but at a lower rate than in recent years. We saw a 49% increase in distributor orders in the second half of 2009 over the first half and this trend has continued into the start of 2010. The UK market for our medical products did not grow as expected however prospect levels have been rising steadily over the last six months and we are expecting these to translate into order growth in 2010. Market penetration in the USA remains slow and whilst we continue to pursue this with our distribution partners we are redirecting some of our efforts to other overseas markets where the opportunities for progress in the short term seem greater.

 

In our Industrial sectors the change of strategy instigated in 2008 has continued to deliver higher contribution margins. Our focus with a number of key manufacturers in the confectionery, chemicals and pre-cast concrete sectors has yielded several technical approvals and endorsements of our technology. We expect further progress in the year ahead with potential for repeat business with key customers.

 

The world economic situation has undoubtedly had a major impact in slowing the take-up of new projects in the last year. However there are signs that matters are improving in our Industrial markets. Pressure on budgets in the UK NHS is driving up enquiry levels for our products due to the combination of improved clinical care with reduced cost but it is not yet fully clear what level of conversion to orders can be achieved.

  

The business environment was more challenging than expected in 2009; however we have seen improvements in order intake over recent months. In the last three months order intake has been twice the level of the comparable period in the previous year and cash consumption has halved. If this continues we believe that we can reach break-even with our own resources in the foreseeable future.

 

Mark Abrahams

Chairman

25 March 2010

Inditherm plc

Chief Executive's Review

 

Overview

With difficult trading conditions in all markets, 2009 saw a fall in sales and higher losses. However with actions taken and an improving market situation we saw some improvement in the second half of the year.

 

In our Medical business sales through distributors showed modest growth in the first half but returned close to historic growth rates in the second half. The UK market remained flat, but with steady growth in enquiries in the last six months.

 

The additional focus introduced to our Industrial business during 2009 has delivered good orders growth towards the end of the year. Further cost reductions in this part of our operations have been made, in line with our target of concentrating on very specific market segments and key customers.

 

Sales and Marketing

In the Medical business we saw further growth, but at a lower rate than we have achieved historically. Our UK sales of operating theatre patient warming systems remained static as cost constraints in the NHS restricted investment. A NICE guideline published in 2008 introduced recommendations to warm more patients during surgical procedures; however Inditherm was only briefly mentioned as a potential technology. There remains significant pressure to warm more patients and, in the current economic climate within the health service, Inditherm has a compelling case to offer. We have been promoting the cost advantages of Inditherm's solution and the steady increase in enquiries over the last six months suggests that we are now being more readily considered as a route to compliance with NICE guidelines.

 

The Company received an award for Suppliers Delivering Sustainability in February 2010, which recognised our contribution to reducing cost, improving clinical performance and reducing environmental impact. We believe that this will further help to highlight our technology within the NHS.

 

Many of our overseas Medical distributors have also seen difficult market conditions in 2009, with decision-making stalled. There was no growth in this part of our business during the first six months of the year, but we were encouraged by a return to historic growth rates in the second half. Our distributor conference in March 2009 was attended by 28 delegates and was very successful, stimulating renewed activity from a number of our overseas partners. We are now in the process of expanding our operations in the Middle East, where the medical equipment market appears more buoyant than most other regions, which should give us further opportunities to secure continued export growth.

 

The USA market has continued to prove slow, with constraints on spending in the capital equipment sector. We now have a second distributor for our operating room product range; they are active in the market and working to strengthen national sales coverage for our products. Smiths Medical remains a non-exclusive distributor, but the majority of their sales have been made from their existing start-up stocks acquired in 2008.

 

The Industrial business, including construction applications, has been most badly affected by the global economic situation, with protracted decision making and project delays. We do not believe we have lost any significant amount of business to competition. We have reduced our operational overheads in this segment during 2009 and further emphasised our concentration on market segments and key customers where we can offer greatest added value and thus most compelling sales proposition.

 

Our product offering has been strengthened by the integration of a new food grade cladding system and an advanced control and monitoring package. We have seen that this is helping to generate more interest in the Inditherm solution, particularly in the food and confectionery markets. We have been working closely with a number of major international manufacturers to gain formal approvals and endorsement of our technology in their businesses and have achieved a number of successful outcomes. Several projects are ongoing and we see prospects for repeat business in a number of areas. This follows on from a strong order intake at the end of 2009 which allowed us to carry an order book of over £200k into 2010.

  

Product Development

A number of new medical products were released in 2009 and others are going through final medical device approvals. These are expected to improve our growth potential in the year ahead. We have introduced design changes on our patient warming systems during the year that have allowed us to deliver improved clinical product performance.

 

Our advanced process monitoring solution has been further developed in 2009, giving us unrivalled control for temperature critical processes. Our IndithermPro insulation and cladding system has been installed on a number of projects during the year and has attracted significant interest and very positive feedback from a number of major manufacturers, particularly in the confectionery industry. These two additions are proving to be enabling technologies that add to the drive for customers to convert to Inditherm heating technology.

 

We have expanded our range of standard container heating jackets, with the addition of a high power variant. This should give further opportunity for growth of this sector.

 

Operations

As part of the process of structuring the business to match market conditions, we combined the manufacturing and technical management roles during 2009. Our further move to focus on core applications has also allowed us to devolve some of the production management processes and reduce our operational overheads during the year.

 

Our policy of holding reasonable levels of standard medical products in stock has allowed us to continue to offer short delivery times and fast turn-round of orders received.

 

We believe that we continue to be perceived by our customers as delivering high quality products and service and continue to receive positive feedback.

 

We actively manage the preservation of our cash resources and the cash implications of business decisions, forecasts and business plans are monitored closely.

 

 

Outlook

The increase in enquiries and orders in our Medical business over the last six months gives us optimism that we can return to historic growth levels in 2010. We continue to pursue acceleration of progress in the USA with our distributors there, but will ensure that our resource allocation is balanced so that we maximise the global market opportunities.

 

The pressure on budgets in the NHS and many overseas healthcare systems, combined with our marketing of the cost savings our technology offers, is driving up the interest in our products, particularly in the operating room sector. We believe that take-up will increase in the year ahead, although it is difficult to know how fast the decision-making process will progress.

 

Our approach in the Industrial markets has yielded improved order intake at the end of 2009. Work we are doing with key customers in our core target sectors should lead to further progress in 2010 and we are already in discussions about a number of significant projects.

 

Nick Bettles

Chief Executive

25 March 2010

Preliminary announcement of results for the year ended 31 December 2009

Consolidated Income Statement

 

		2009		2008
	Notes	£'000		£'000
Revenue		1,152		1,983
Cost of sales	2	(676)		(878)
Gross profit		476		1,105
Administrative expenses		(1,624)		(1,607)
Operating loss before exceptional items		(1,039)		(502)
Exceptional costs	2	(109)		-
Operating loss		(1,148)		(502)
Finance income		27		179
Finance costs		-		(1)
Loss on ordinary activities before taxation		(1,121)		(324)
Taxation credit from loss on ordinary activities		39		41
Deficit for the year attributable to equity holders		(1,082)		(283)
Loss per share - basic and diluted	3	(2.1p)		(0.6p)

 

 

All amounts relate to continuing activities.

 

All income and expenditure has been recognised in the income statement and therefore no statement of comprehensive income is required.

Preliminary announcement of results for the year ended 31 December 2009

Consolidated Statement of Changes in Shareholders' Equity

 

 

		Share	Share based
	Share	premium	payment	Retained
	capital	account	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000
At 1 January 2008	511	9,929	110	(6,736)	3,814
Credit for share based payments	-	-	12	-	12
Loss for the year	-	-	-	(283)	(283)
At 31 December 2008	511	9,929	122	(7,019)	3,543
Credit for share based payments	-	-	12	-	12
Loss for the year	-	-		(1,082)	(1,082)
At 31 December 2009	511	9,929	134	(8,101)	2,473

 

Preliminary announcement of results for the year ended 31 December 2009

Consolidated Balance Sheet

		2009	2008
		£'000	£'000
Assets
Non-current assets
Property, plant and equipment		52	115
Intangible assets		95	92
		147	207
Current assets
Inventories		144	175
Trade and other receivables		265	317
Tax recoverable		79	40
Cash and cash equivalents		2,092	3,115
		2,580	3,647
Liabilities
Current liabilities
Trade and other payables		(249)	(311)
		(249)	(311)
Net current assets		2,331	3,336
Non-current liabilities
Provisions for liabilities and charges		(5)	-
Net assets		2,473	3,543
Shareholders' equity
Called up share capital		511	511
Share premium account		9,929	9,929
Share based payment reserve		134	122
Retained earnings		(8,101)	(7,019)
Total equity		2,473	3,543

 

Preliminary announcement of results for the year ended 31 December 2009

Consolidated Cash Flow Statement

 

Group and Company		2009	2008
		£'000	£'000
Cash flow from operating activities
Cash used in operations		(1,009)	(481)
Interest received		27	179
Interest paid		-	(1)
Taxation		-	40
Net cash outflow from operating activities		(982)	(263)
Cash flow from Investing activities
Purchase of property, plant and equipment		(4)	(17)
Capitalised development costs		(40)	(91)
Sale of property, plant and equipment		3	1
Sale of investment		-	-
Net cash (used in)/generated from investing activities		(41)	(107)
Net (decrease)/increase in cash and cash equivalents		(1,023)	(370)
Cash and cash equivalents at the beginning of the period		3,115	3,485
Cash and cash equivalents at the end of the period		2,092	3,115

 

Preliminary announcement of results for the year ended 31 December 2009

Reconciliation of Operating Loss to Cash used in Operations

 

	2009	2008
	£'000	£'000
Operating loss	(1,148)	(502)
Profit on disposal of property, plant and equipment	(3)	(1)
Depreciation and amortisation	64	78
Exceptional write down of Inventories	51	-
Exceptional write down of Fixed Assets	22	-
Write off of Development costs	18	-
Share based payments	12	12
Decrease/(increase) in inventories	(20)	17
Decrease in trade and other receivables	52	280
Decrease in trade and other payables	(62)	(311)
Increase/(Decrease) in provisions	5	(54)
Net cash outflow from operating activities	(1,009)	(481)

NOTES

 

1	The preliminary results have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRIC interpretations as adopted by the EU and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The preliminary announcement does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. This announcement has been agreed with the company's auditors for release.   This preliminary results announcement contains information extracted from the audited financial statements of the group for the year ended 31 December 2009. The statutory accounts for the year ended 31 December 2009 will be sent to the shareholders shortly. The preliminary results were approved by the Board on 25 March 2010.   The statutory accounts for the year ended 31 December 2009, which have been delivered to the Registrar of Companies, included an audited report which was unqualified and which did not contain a statement under Section 498 of the Companies Act 2006.
2	The exceptional costs of £109k comprises of three elements:   Provision against inventory £51k Provision against fixed assets £22k Costs of a redundancy programme £36k   On 27 July 2009 the company made a trading statement which explained trading had suffered in the light of the worldwide recessionary conditions. In response the company announced it had taken the decision to divert resources from the Industrial segment to the Medical segment and reduce headcount by approximately 20%. In the Industrial segment greater focus would be placed on the sectors where the Company could offer standardised products and gain repeat business. As a result, a review of assets and inventory was undertaken to reassess expected useful lives and net realisable values and provisions were made for assets the value of which was impaired by this adjustment to business strategy. Provisions against inventories of £51k and £11k of the provision against fixed assets is included in cost of sales and £11k of the provision against fixed assets and the cost of the redundancy programme are included in administrative costs.
3	The calculation of loss per ordinary share is based on losses of £1,082k (2008: £283k) and on a weighted average of 51,112,581 (2008: 51,112,581) ordinary shares in issue during the year. The share options are anti-dilutive due to the loss in the year.

 

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 2009 Annual Report and Accounts will be sent to all shareholders. Copies will be available from the Company Secretary at Inditherm plc, Inditherm House, Houndhill Park, Bolton Road, Wath upon Dearne, Rotherham, S63 7LG.

 

 

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