11/6/2010

Eruma plc Chariman Statement for Year End 2009

Introduction and Financial Results

Eruma plc, as a specialist solutions provider of counter terrorism, intruder prevention and intelligent emergency lighting and energy saving products, has the ability to save lives, reduce risk, prevent disruption and loss, and dramatically reduce energy consumption and consequently the ongoing operating costs of businesses. We believe this represents a compelling proposition to any organisation seeking innovative ways to improve their businesses performance and protect their assets.

During 2009 we continued to take our products and message to market in line with our business plan which is designed to achieve operational profitability and further expansion of our addressable market and portfolio of solutions. Whilst we did not achieve operational profitability we achieved some significant milestones throughout the year that demonstrate significant progress towards our goals. In 2009 we achieved in comparison to 2008 the following:

1). a 47% increase in revenue from £658,000 to £966,000
2). a 59% increase in gross profit from £217,000 to £346,000
3).an improvement in gross profit percentage from 33% to 36%
4). a 26% reduction in distribution and administration expenses
5). a 36% reduction in our loss before tax from £1.48 million to £945,000
6). a 50% reduction in loss per share (basic and fully diluted)

We made much progress in the period in forging new partnerships both in the UK and overseas. This combined with significant new contracts wins for our intelligent lighting, counter terrorism and intruder prevention solutions and the raising of additional working capital provided for a strong platform to finish the year off.

We made improvements to our operational efficiency and production processes which improved our gross profit percentage overall. This was further helped by better tracking systems for development expenditure across the whole business.

In the final quarter of the year we saw a slow down in sales orders but an increase in our pipeline of business across all products. Our analysis of this issue suggested a slight blip in economic confidence within the market and decisions began to slip on key contracts. Many of the contracts that were delayed have subsequently converted to orders in 2010.

Unfortunately, like many other businesses, we were impacted severely by the adverse weather conditions that started in mid December in the United Kingdom. This frustrated our efforts to complete new sales and critically to install orders already placed by customers. This was due in most part to closure of customer facilities and lack of accessibility to key decision makers in relation to new business. This placed a significant burden on the business in terms of cash flow and put pressure on our working capital.

In spite of these challenges the directors and employees of Eruma plc and its subsidiaries continued to demonstrate total commitment to the success of the business and servicing customers requirements.

Security Blinds

Our subsidiary Security Blinds Ltd. is a manufacturer of physical systems providing protection from multiple threats ranging from burglary, ram raids, to blasts from terrorist attacks and other forms of explosions. Throughout the reporting period Eruma has continued to seek improvements in our core SecurTM product range and develop extensions to the range such as our new Anti Ram Raid Gate product was officially launched in August 2009. This product makes it very difficult for intruders to break into organisations that have roller shutters installed. The new product has been enthusiastically
received by organisations with distribution centres and warehousing facilities, who currently experience major loss of stock due to "ram-raid" style tactics being used to gain entry to premises. Many suffer multiple raids on a regular basis. Our solution can be installed retrospectively in existing facilities or as part of the design of a new facility.

We pushed forward with our plans to open up international markets, especially where the continued and growing threat of terrorism is a reality on a daily basis saw a significant increase in our sales pipeline. We have recruited a number of agents and partners in specific regions around the world. We have seen the rewards for these efforts begin to materialise in 2010 with receipt of orders from new customers. Much of the investment and work in relation to developing these customers was completed during 2009.

Illuminex

Our subsidiary Illuminex Ltd, is a manufacturer of intelligent lighting solutions that reduce costs through saving energy and reducing carbon footprint of organisations using them. Throughout the period we continued our investment in the Illuminex Xscape product portfolio of intelligent emergency lighting solutions and added added further LED and Induction lighting based solutions to the portfolio in order to offer a broader solution set to meet clients requirements for total lighting solutions.

The scope and size of the projects we have been bidding for has increased significantly and our decision to add a direct sales channel targeting end user organisations has resulted in significant increase in interest in our solutions and the award of a number of pilot projects and new contracts which will deliver revenue in 2010.

We successfully qualified our products to be eligible for Carbon Trust funding schemes such as Salix in the public sector and other schemes for the SME markets. We are now in a position to offer clients access to interest free funds to enable them to invest in our solutions sooner and realise the benefits they afford in protection and energy reduction.

We have invested in producing return on investment models and tools to help our customers understand the true cost of the energy and the total carbon foot print they generate from their lighting solutions and how our products can provide significant reductions in carbon footprint and running costs with payback periods that make for a compelling economic and environment argument in favour of investing in our solutions.

Fundraising

During the period the Company sought a number of means of raising additional working capital to support the business?s operational requirements and journey towards operational profitability, this ranged from trade finance facilities, a convertible loan note and the issue of shares. The convertible loan note was struck in February 2009 for a maximum of £1million in multiples of £1,000. It was designed to enable people to invest in Eruma in the form of a loan with rights to convert the loan to shares in the business at an agreed price of 1.125pence at any point within a five year period. During the loan period we would pay interest of 10% annually on the loan. If and when an investor wished to convert the loan to equity they would also qualify for 1 warrant of Eruma stock at a strike price of 2.5pence for every four shares they converted. By the end of 2009 we had raised £315,000 in convertible loan notes of which £20,000 have already been converted to equity.

We raised £803,831 through the issue of 74,998,843 shares during the year at an average price of 1.132pence a share. This was broken down as follows £125,000 in July 2009 for 11,111,111 shares at 1.125 pence each and £670,338 in September 2009 for 59,585,600 shares at 1.125 pence each, £32,500 in November for 2,888,889 shares at 1.125 pence purchased by our Chief Executive and Sales and Marketing Director and a further £21,260 from two suppliers electing to take equity in the company at 555,555 shares at 1.125pence a share and 857,698 shares at 1.75pence a share.

The Board

We have operated throughout the year without the appointment of a Finance Director, following the resignation of our Finance Director in February 2009. We have been supported by a management accountant who in conjunction with book keeping team, myself and Chief Executive have implemented and operated a management reporting solution for the business which has delivered a greater level of granularity and visibility of the businesses key performance indicators.

The board has remained stable and focused and committed to the execution of the business plan and the drive towards improved performance. Throughout the year the board members have made many personal sacrifices in the interest of the company and its shareholders including reductions in salary and I would personally like to thank each of them for their contribution and commitment in what can only be described as challenging yet exciting times.

We have begun the search for a Finance Director which we hope to appoint in 2010 once a suitable candidate has been found who can take over and develop further our management systems.

Structure

Following our decision to create a single sales and marketing function selling our whole range we have been pleased with the results which have delivered improved coverage and increased account penetration. We have decided to consolidate our two subsidiaries Security Blinds Limited and Illuminex Limited through the transfer of trade, assets, and liabilities into Eruma plc. This will reduce administration and audit costs significantly. This was implemented with effect from the 31st December 2009. We will continue to trade as a Security Blinds and Illuminex brands as these are established in their core markets.

Outlook

2009 was about turning the overall performance and trajectory of the business around following some extremely challenging economic circumstances that affected the markets we serve and the supply chain we use to create our products and solutions. Whilst we did not achieve operational profitability all of our other key indicators improved significantly.

We have seen significant upturn in our pipeline growth, our operational efficiency and the recognition of the value of our products to our customers. We are seeing increased volumes of repeat orders from existing clients where our solutions are designed in or specified as the standard solution, this is reducing our cost of sale. We have won major contracts already in 2010 that dwarf anything previously won and we have secured key international new business contracts for out counter terrorism, blast protection solutions.

We believe that 2010 is a critical year for the business in terms of a tipping point as our Illuminex product portfolio begins to deliver significant revenue to the business and generates cash, along with the continued growth of our security blinds portfolio of products both in the UK and critically internationally. We have already seen our orders for 2010 in the first five months of the year almost exceed the whole of 2009. However, in order for the business to deliver the growth in the order book it will need to secure further funding. The Board is therefore actively exploring potential sources of further financing for the Company.

We believe our business plan is sound and we only seek to accelerate its achievement and streamline our operational performance where ever possible.

David E Alexander
Non-Executive Chairman
10 June 2010