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Inditherm plc

Preliminary Results

Inditherm plc ("Inditherm" or "the Company"), the provider of innovative heating solutions, today reports its Preliminary Results for the 12 months ended 31 December 2007.

Highlights

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

" Trading in the first two months of 2008 has been positive, with strong sales as single large orders are completed and good margins delivering an operating profit for the first time in the Company's history. Whilst we believe we are still several quarters from breaking even, we anticipate significant progress in the year ahead. "

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Chairman's Statement

Overview

The start of 2007 saw a strengthening of the balance sheet with the cash placing in January which raised £2.8m net of expenses. We believe this has provided the Company with adequate funds to meet its medium term needs.

Although sales in 2007 grew modestly, order intake increased by 30% with substantial growth in Medical. The football pitch heating system for Aston Villa's new training facility and the Smiths Medical launch stock had a significant one-off impact on this growth. Improved margins, particularly in the core business, reduced operating losses by 25%.

Performance in Industrial markets showed no growth and actions are already underway to change the performance of this area of the business in the year ahead. The strategy will be redirected to focus on standardising the product range. This should enable Inditherm to meet many of the current Industrial customers' requirements in a much more efficient manner, thereby leading to improved margins.

Results

Turnover for the year rose by 19% to £1,861k (2006: £1,564k), due to growth in Medical sales and work completed on the pitch heating system for Aston Villa. This maintained the growth rate reported in the first half of the year.

Administrative expenses were kept under control during the year, with an increase of 5%. Administrative expenses before exceptional costs were £1,605k (2006: £1,571k), resulting in a 23% improvement in operating loss before exceptional items at £799k (2006: £1,087k). After exceptional costs of £128k (2006: £152k) and net interest income of £213k (2006: 83k), the post-tax loss was £699k (2006: £1,132k).

The year end cash balance was £3,485k (2006: £1,747k), representing a net outflow from operating activities of £1,044k (2006: £876k) offset by the fundraising. The year-on-year difference is largely due to a growth in the level of polymer stocks held and an increase in trade receivables at the year end due to the pitch heating system at Aston Villa.

Operations

Sales in the Industrial markets fell by 10%, however percentage margins doubled. During the year we continued our growth in the food sector with notable orders from two leading international confectionery manufacturers. Progress has otherwise been disappointing in this area of the business, although it remained the largest proportion of annual sales.

Medical orders excluding the USA grew by 40% over the previous year, which was further boosted by orders for launch stocks from Smiths Medical. Although progress with Smiths in developing US Medical end user sales has been slower than anticipated, the first signs of progress are emerging. We will keep this situation under review to determine whether additional channels need to be developed.

We now have over 30 distributors and overseas partners in the rest of the world, giving us a firm base from which to continue the growth of our export business. UK orders grew by 36% as acceptance of our technology in the market increases; we anticipate that the award of an NHS PASA (Purchasing & Supply Agency) contract during the year will help us to continue this growth.

Commercial exploitation of our technology in the pre-cast concrete industry continued during the year with a small number of manufacturers. This has demonstrated significant advantages to our customers. We are now focused on developing these relationships to gain valuable reference sites.

In August 2007, we were awarded the contract to heat a football pitch at the new Aston Villa training ground, worth £199k. This adds a further reference site, and has helped maintain high utilisation of the factory. The heating pads were installed on schedule before the end of the year; installation of electrical panels and controls are planned during the second quarter of 2008.

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 2007. The Board does not expect to declare a dividend during the Company's continuing development.

Management

Following the successful growth and encouraging signs of the Company's Medical business, the Board decided to promote Nick Bettles to the position of Chief Executive. Richard Harpum retired and left the Company in November 2007.

I would like to thank Richard for all his efforts and commitment during his three years as Chief Executive.

We further strengthened our management team with the appointment of a new Technical Manager in September 2007. In addition to this, an Operations Manager has been appointed in March 2008.

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

Trading in the first two months of 2008 has been positive, with strong sales as single large orders are completed and good margins delivering an operating profit for the first time in the company's history. However, we do not expect this to continue in the immediate future.

The Medical business, outside the USA, is encouraging, with increasing order flow. We anticipate the same rate of growth in this sector in the year ahead.

In our Industrial and Construction businesses, the change of strategy involves us in concentrating on standardised product ranges, with improvements in efficiency and higher margins on a lower volume of sales.

Whilst we believe we are still several quarters from breaking even, we anticipate significant progress in the year ahead.

Mark Abrahams

Chairman

27 March 2008

Chief Executive's Review

Overview

The Company saw some further sales growth during 2007, but this was modest at just under 20%. However, operating losses were reduced by 25%.

Order intake grew substantially in Medical but fell slightly in Industrial, giving an overall increase in orders of 30%. The sale of a football pitch heating system and start-up trading with Smiths Medical for the USA market had an impact on this growth at a level that is unlikely to be repeated in the short term. Gross margins almost doubled to £806k, primarily due to improvements in the Industrial sector and the greater proportion of Medical business.

Sales and Marketing

Sales and orders in the Industrial markets were down by around 10% year-on-year. The results from this area of the business were not satisfactory, largely due to the conversion rates and the proportion of bought-in components and subcontracted activities. This is largely a result of Inditherm acting as the main contractor on larger projects.

Medical sales and orders grew by over 80% in 2007; however this was boosted significantly by the demonstration systems and launch stock ordered by Smiths Medical for the USA market. Excluding the USA, Medical orders grew by 40%. Neonatal sales increased by over 60% in the UK market, where we believe we are now the clear market leader for our sector, although uptake has been slower in the export territories.

Our products for operating theatres and neonatal warming were awarded an NHS PASA contract during the year and are now offered through NHS Logistics to hospitals. This allows hospitals to purchase without the need to go to tender and we expect this to help in increasing uptake within the NHS in the years ahead. We have identified a distributor for our neonatal range in the USA and expect to conclude a formal agreement and fully launch the product in the first half of 2008.

Commercial results from Construction markets were disappointing. However, activities with a small number of customers during the year have allowed us to determine where the best opportunities lie. Our intention is to focus on the pre-cast concrete market in the immediate future, where Inditherm technology appears to offer a unique solution that delivers real benefit to the customer.

We secured the order for heating of the new Aston Villa training pitch, which should further enhance our credibility in this market. However, the profitability in this application has been marginal and it has been decided that now we have good reference sites we will only pursue such projects in the future if reasonable margins can be realised.

Product Development

Our development team has been substantially strengthened during the year and we are already beginning to realise the benefits. Further work on developing products for Industrial applications continued, with particular focus on some of the standard products towards the end of the year.

Work on our Medical product range saw the launch of new products at our distributor conference in October 2007. These included systems for veterinary warming and A&E departments. Further developments are in progress.

Activity in the construction field has delivered systems for warming pre-cast concrete by integration into the manufacturers' moulds. This is proving a superior solution to the original blanket type design and further work in this area continues.

Work on the heating of railway tracks has continued, with successful trials concluded that have demonstrated that Inditherm can meet the heating specifications required. The primary focus is now on developing the solution to meet the practical needs for routine use. This is a longer term project, although we hope to realise revenue from funded development work and large scale evaluations in the short term.

Operations

We continue to be perceived by our customers as delivering high quality products and being a responsive supplier. The potential for further improvements in efficiency remains and this is being addressed.

The growth in Medical product orders has proved a challenge; however we have added to this team during the year and have already demonstrated that we can now cope with the increased output.

Outlook

In order to secure a faster route to profitability we intend to focus on areas where we have already demonstrated greatest strength and opportunity.

Performance in the Medical markets has already shown good growth and profitability and we will devote our energy to continue this trend and accelerate wherever possible. This is heavily dependent on the success of Smiths Medical in the USA, therefore we intend to focus on trying to drive forward that relationship.

In Industrial applications we plan to reduce our activity in several areas which require disproportionate effort for poor returns. This will allow us to focus on developing market areas where we can deliver a larger proportion of standard products. Wherever possible we will restrict ourselves to the supply of heating components, and work with strategic partners who can deliver the associated infrastructure such as pipes, tanks and cladding.

Our Construction activity will focus particularly on the pre-cast concrete market, where we have demonstrated that we can deliver significant customer benefits. This will ensure that we concentrate on areas that can deliver growth, in both the short and longer term, realise good margins, and avoid distractions that reduce market penetration.

Inditherm still faces significant challenges, however the proven performance in Medical combined with a more focused approach in Industrial and Construction, give reason for optimism. A trading profit in the first two months of 2008 gives further encouragement, although this is highly influenced by the delivery of USA launch stocks.

Nick Bettles

Chief Executive

27 March 2008

Preliminary announcement of results for the year ended 31 December 2007

Consolidated Income Statement

All amounts relate to continuing activities.

Preliminary announcement of results for the year ended 31 December 2007

Consolidated Statement of Changes in Shareholder Equity

Preliminary announcement of results for the year ended 31 December 2007

Consolidated balance sheet

Preliminary announcement of results for the year ended 31 December 2007

Consolidated cash flow statement

Preliminary announcement of results for the year ended 31 December 2007

Consolidated cash flow statement (continued)

NOTES