28th Sep 2015 08:15
LONDON (Alliance News) - Flowgroup PLC on Monday reported a widened pretax loss for the first half of 2015, as the volume launch of its key Flow Boiler product was delayed due to a VAT ruling by the European Court of Justice, but the company said the relaunch of the product is expected in the first quarter of 2016.
Flowgroup initially launched its Flow boiler in a 'soft launch' in January. However, it opted to delay the volume launch of the product until the fourth quarter of 2015 due to a ruling the European Court of Justice that the UK's reduced 5% rate of value-added tax on energy-saving products is in breach of EU laws, meaning there is the potential that the normal 20% rate would be applied.
A VAT rate of 20% would add more than GBP500 to the cost of the Flow boiler for customers, the company noted, and would increased the cost of installation by nearly 15%. It now expects to restart production and begin selling the product to consumers in the first quarter of 2016.
It has undertaken a cost-cutting programme, with the aim of passing on savings to its customers, and reducing the cost of the product. Due to changes the company has made to the product, it will need to be reassessed for CE certification, Flowgroup said, and it expects to be re-certified before the end of 2015.
For the half year to end-June the company reported a pretax loss of GBP7.0 million, widened from a pretax loss of GBP4.7 million a year before, as a rise in revenue to GBP20.5 million from GBP16.0 million offset a step up in administrative costs related to investment in staff and marketing costs.
"The second half of the year has seen us initiating cost reduction and design enhancement programmes earlier than planned, in close partnership with our manufacturing partner, Jabil, as well as conducting ongoing validation and testing," said Chief Executive Officer Tony Stiff in a statement.
"We also plan to accelerate growth in our energy business and to add to the range of products we can offer our customers through new strategic partnerships, moving us closer to our goal of becoming an energy services business providing an all-encompassing energy and technology offer to the broadest range of customers," Stiff added.
Shares in Flowgroup were up 13% at 11.69 pence Monday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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