Preliminary Results

23rd Mar 2009 07:00



Press release 23 March 2009

VPhase plc

('VPhase' or 'the Group')

Preliminary Results

For the year ended 31 December 2008

VPhase plc (AIM: VPHA), a leading developer of energy saving devices for the home and small commercial/retail applications, announces its preliminary results for the year ended 31 December 2008.

2008 highlights

May - placing of 70 million shares raising £3.5 million gross;

September - letter of intent signed with Scottish and Southern Energy to fund an Ofgem-approved CERT Demonstration Action;

October - VX1 Smart Voltage Management unit had its formal launch at Interbuild; and

October - memorandum of understanding with British Gas Services to distribute the VPhase energy saving product, subject to successful trials.

Post year end:

January 2009 - Ofgem approves Scottish and Southern Energy ('SSE') trials with funding provided by SSE to a cost of up to £240,000; and

The Group is fully funded for current strategic plans.

Adrian Hutchings, Chairman of VPhase, said: "VPhase has made significant progress in 2008 as we formally launched our first product, began partnering with two of the UK's largest utilities and maintained our strong cash position by raising £3.5 million via a placing while exercising strong cash management.

"The Board of VPhase sees 2009 as the critical year of commercialisation as we work with our utility partners to trial and launch our product. Already our products are being trialled in UK homes via the Ofgem CERT Demonstration Action programme. In 2009 we are fully focused on marketing our product and generating volume commercial sales, and we have recruited a full-time in-house team dedicated to those efforts. 

"Our strong IP position, robust engineering principles and partnerships with highly regarded utilities will enable us to readily capitalise on the market opportunities opened up by the increasing demand for energy efficiency worldwide. We look to the future with confidence as we begin a programme to introduce VPhase to mainland European and other geographic markets, and as we move on our roadmap to developing further products utilising our Smart Voltage Management technology." 

For further information please contact:

VPhase Group plc

Dr Lee Juby, Chief Executive Officer  Tel: +44 (0)151 348 2139

Richard Smith, Chief Financial Officer   Tel: +44 (0)151 348 2116

www.vphase.com

Zimmerman Adams  Tel: +44 (0)161 831 1512

Thilo Hoffman

Charity Walmsley

www.zimmint.com

Novum Securities Limited  Tel: +44 (0)20 7562 4700

Henry Turcan  www.novumsecurities.com

 

Media enquiries:

Abchurch Communications   Tel: +44 (0)20 7398 7700

Joanne Shears/Monique Tsang/Jack Ballantyne

[email protected]  www.abchurch-group.com

  Chairman's statement

I am delighted to report that our Group has continued to maintain the excellent progress made in the first six months of 2008. 

The formal launch of our VX1 product at Interbuild in October 2008 was the culmination of a year where we completed the development of the product and undertook rigorous in-house testing with a unit having operated successfully on a continuous basis since March 2008. 

In parallel to our technical progress the Group has made good commercial progress with a memorandum of understanding in place with British Gas Services Limited (part of Centrica plc) and an agreement with Scottish and Southern Energy ('SSE') who is funding an Ofgem-approved Demonstration Action of VX1.

Despite the recent shock to the global economy caused by the banking crisis and the slow down in consumer demand, the need to reduce energy costs and environmental emissions, as well as access to reliable quality power, is as strong as ever. This global need continues to enhance the already favourable market conditions for the Group's products.  Governments across the world are looking to stimulate their economies with one of the key drivers being their policies and investment in clean and alternative energy products.  Indeed, Barack Obama has just announced a plan to help create five million new jobs by strategically investing $150 billion over the next ten years to act as a catalyst for private efforts to build a clean energy future.  Furthermore, the demand for energy efficiency devices is gaining growing global support with governments in the UK, USA, and Europe.

In May 2008, the Group raised £3.31 million (net of costs) though the placing of 70,000,000 new ordinary shares of 0.25 pence each at 5 pence per share and with our strong emphasis on tight cash control, we retain £3.20m at the end of December 2008.  I am pleased that the business is fully funded and has sufficient cash to carry the business through to commercialisation. 

The Group's business processes are now in place to manage the commencement of commercial sales and this, along with the excellent team that we have recruited, leaves the business well placed for success.

We understand and have identified the various channels to market for VX1 and subsequent products are well understood and the Group will be targeting additional channels as 2009 progresses.

I believe that VPhase's technology can play an important part in supporting CO2 reduction targets, helping home owners reduce their energy costs and, by reducing energy wastage, increasing the security of supply.

A C Hutchings

Chairman

23 March 2009

Chief Executive's Review

I am delighted to report that the Group has successfully delivered its key objective of positioning its first product VX1 so as to be ready for the next stage of commercialisation in 2009 and to place VX1 in an Ofgem Demonstration Action programme.  This programme has been fully funded by Scottish and Southern Energy plc ('SSE') to a value of up to £240,000, and it is anticipated that these trials of VX1 will demonstrate significant carbon dioxide savings when used in UK domestic properties.

Additionally, the Group is starting a programme of commercial partnerships to introduce VPhase initially to European and then to other geographic markets.  We have already entered into a memorandum of understanding with British Gas Services Limited (part of Centrica plc) to consider routes to market for VPhase products in the UK and also into North America through Direct Energy, one of America's leading integrated energy companies and another Centrica-owned business.  We have also initiated dialogue with consumer unit (fuse box) manufacturers, social housing organisations and energy efficiency companies.

Furthermore, we have examined both technically and commercially the potential to expand the VPhase technology platform to additional products and markets. Whilst we are focused on delivering the VX1 product, we believe that further products can be readily produced for delivery into a wider range of geographical markets such as North America and dedicated to high-end energy saving applications.

We have filed another patent on the basis of development work carried out that expands the potential footprint, and the protection, for our Smart Voltage Management technology.

The Group has made excellent progress in 2008, having established an experienced in-house team and working with a specialist provider for design for manufacture and initial volume manufacturing services, culminating in the trade launch of the Group's first product VX1.

The VX1 product was previewed at a trade launch at the Interbuild Exhibition held in October 2008.  Interest in the product and the principles of Smart Voltage Management was strong from a broad section of the building and property industry, and the Group is currently recruiting additional sales resource to respond to this demand.

In May 2008, the Group raised £3.5 million (gross) by way of a placing of 70,000,000 ordinary shares of 0.25 pence each, comprising 10.1% of the enlarged issued share capital, at a price of 5 pence per share.  This share placing has enabled the Group to accelerate the time and access to routes to market, and to investigate other potential opportunities for Smart Voltage Management, such as further domestic and small commercial applications and other geographic regions.

The Group has teamed with the two biggest utility companies in the UK who jointly supply energy to around 40% of UK households. 

The Group continues to exercise strong cash management and ends the year with a substantially strengthened balance sheet and a well defined route forward to commercialisation, with a view to delivering growth and shareholder value.

Key priorities for 2009 include the CE marking of VX1; the expansion of our capacity to supply; capitalising on market opportunities to generate revenue; and the development of further products utilising our Smart Voltage Management technology.

Overall, we expect 2009 to be another year of progress and growth for VPhase plc and I look forward to updating you on our progress at the time of our interims.

Dr L JubyChief Executive Officer23 March 2009

Finance Review

During the year to 31 December 2008 the Group made a pre tax loss of £769,000 (2007: £727,000), representing a positive variance to internal projections.

On 11 May 2008, the Group raised £3,305,000 (net of costs) through the placing of 70,000,000 new ordinary 0.25 pence shares at 5 pence per share.

Cash utilised in the year, before the proceeds of the placing and interest receipts of £84,000 (2007: £6,000), was £737,000 (2007: £229,000). The cash was utilised on:

 

 

The Group has a strong focus on cash management and is confident that the business is fully funded. The cash balance at the end of the year was £3,203,000 (2007: £551,000).

Cash is managed within the Group to optimise the value from surplus cash giving priority to security then to liquidity and then to yield, and to preserve the principal value of the investment by investing surplus funds only with institutions of a high credit standing.  This strategy has resulted in interest earnings during the year of £84,000 (2007: £6,000).

The Board has not recommended a dividend given the stage of development of the Group and no dividends were paid during the year.

During the year, the fees of the Group's brokers have been settled by the issue of 4,992,960 new ordinary shares of 0.25 pence each and the Group has a commitment to issue a further 4,992,960 shares for services provided up to 30 September 2009.  Accordingly, the fair value of these share based payments relating to 2008 has been recorded in the Income Statement. 

R H Smith

Chief Financial Officer

23 March 2009

  Group Income Statement

For the year ended 31 December 2008

		Year ended 31 December
	Note	2008		2007
		£		£
Revenue		-		-
Cost of sales		-		-
Gross profit		-		-
Administrative expenses		(852,722)		(733,615)
Operating loss		(852,722)		(733,615)
Finance income		83,936		6,332
Loss before income tax		(768,786)		(727,283)
Income tax	3	-		-
Loss for the year		(768,786)		(727,283)
Attributable to:
Equity holders of the Company		(768,786)		(727,283)
Loss per share attributable to the equity holders of the Company during the year:
Total and continuing:
- Basic and diluted	4	(0.11)p		(0.14)p

All revenue and costs originate from continuing activities.

  Group Statement of Changes in Equity

For the year ended 31 December 2008

		Attributable to equity holders of the Company
	Share capital	Share premium	Merger relief reserve	Capital redemption reserve	Retained earnings	Reverse acquisition reserve	Warrant reserve	Other reserves	Total equity
	£	£	£	£	£	£	£	£	£
Balance at 1 January 2007	1	-	-	-	(56,136)	-	-	-	(56,135)
Loss for the year and total recognised loss for the year	-	-	-	-	(727,283)	-	-	-	(727,283)
Other share based payments	-	-	-	-	-	-	-	20,200	20,200
Shares issued by legal subsidiary before reverse acquisition:
- 4 May 2007	99	-	-	-	-	-	-	-	99
- 28 August 2007	-	115,009	-	-	-	-	-	-	115,009
- 3 September 2007	33	599,967	-	-	-	-	-	-	600,000
Share issue expenses	-	(12,005)	-	-	-	-	-	-	(12,005)
Cost of reverse acquisition	-	-	-	-	-	572,272	-	-	572,272
Reallocation of reserves on reverse acquisition	1,460,168	698,021	1,149,737	993,726	-	(4,254,374)	-	(47,278)	-
Shares issued by legal parent after reverse acquisition
- 26 September 2007	100,000	57,000	-	-	-	-	-	-	157,000
- 19 October 2007	2,500	-	-	-	-	-	-	-	2,500
Share issue expenses	-	(88,493)	-	-	-	-	-	-	(88,493)
Balance at 31 December 2007	1,562,801	1,369,499	1,149,737	993,726	(783,419)	(3,682,102)	-	(27,078)	583,164
Loss for the year and total recognised loss for the year	-	-	-	-	(768,786)	-	-	-	(768,786)
Share based payments	-	-	-	-	-	-	-	106,794	106,794
Proceeds from placing	175,000	3,325,000	-	-	-	-	-	-	3,500,000
Share issue expenses - cash	-	(195,000)	-	-	-	-	-	-	(195,000)
Share issue expenses - warrants	-	(105,000)	-	-	-	-	105,000	-	-
Shares issued by legal parent in consideration for services	-	-	-	-	-	-	-	-	-
- 13 February 2008	3,120	16,880	-	-	200	-	-	(20,200)	-
- 12 June 2008	3,120	16,880	-	-	-	-	-	-	20,000
- 14 August 2008	3,120	16,880	-	-	-	-	-	-	20,000
- 8 October 2008	3,121	16,879	-	-	-	-	-	-	20,000
Other share based payments	-	-	-	-	-	-	-	20,000	20,000
Balance at 31 December 2008	1,750,282	4,462,018	1,149,737	993,726	(1,552,005)	(3,682,102)	105,000	79,516	3,306,172

Total recognised income and expense recognised directly to equity amounts to £Nil (2007: £Nil).

Merger relief reserve

Merger relief reserve represents the premium on the shares issued to acquire Energetix Voltage Control Limited.

Capital redemption reserve

Capital redemption reserve represents the cancellation of 100,376,460 deferred shares at 0.99 pence each on 24 September 2007.

Reverse acquisition reserve

The reverse acquisition reserve relates to the reverse acquisition between Energetix Voltage Control Limited and VPhase plc on 25 September 2007.

Warrant reserve

In May 2008 VPhase plc granted 3,500,000 warrants to its Broker in relation to the placing of 70,000,000 shares as part of the agreed placing costs. The fair value of warrants is calculated using the Black-Scholes model at the time of grant and is charged to the share premium account.  Further costs in relation to this placing of shares, £195,000, were settled in cash.

Other reserves

Other reserves comprise of share based payments for the cost of share options granted, £106,794 (2007: £Nil); £20,000 (2007: £20,200) for other share based payments to the joint brokers in payment for services received  and, in addition, an investment in own shares amounting to £47,278 which comprises the shares held by FG Employee Trustee Company Limited.  These shares were originally purchased to satisfy options under Flightstore Group plc's Employee Share Option Trust.  At 31 December 2008, 4,491,344 (2007: 4,491,344) shares in Flightstore Group plc were held by FG Employee Trustee Company Limited.  The market value of these shares at 31 December 2008 was £291,937 (2007: £179,654).

  

Group Balance Sheet

At 31 December 2008

		As at 31 December
	Note	2008		2007
		£		£
ASSETS
Non-current assets
Intangible assets		221,707		-
Property, plant and equipment		71,659		1,134
		293,366		1,134
Current assets
Trade and other receivables		144,125		62,437
Cash and cash equivalents		3,203,163		551,477
		3,347,288		613,914
Total Assets		3,640,654		615,048
LIABILITIES
Current liabilities
Trade and other payables		334,482		31,884
Total liabilities		334,482		31,884
EQUITY
Capital and reserves attributable to equity holders of the Company
Share capital		1,750,282		1,562,801
Share premium		4,462,018		1,369,499
Merger relief reserve		1,149,737		1,149,737
Capital redemption reserve		993,726		993,726
Retained earnings		(1,552,005)		(783,419)
Reverse acquisition reserve		(3,682,102)		(3,682,102)
Warrant reserve		105,000		-
Other reserves		79,516		(27,078)
Total shareholders' equity		3,306,172		583,164
Total equity		3,306,172		583,164
Total equity and liabilities		3,640,654		615,048

  

Group Cash Flow StatementFor the year ended 31 December 2008

		Year ended 31 December
	Note	2008		2007
		£		£
Cash flows from operating activities
Cash consumed by operations	5	(439,825)		(258,031)
Cash flows from investing activities
Expenditure on intangible fixed assets		(221,707)		-
Purchases of property, plant and equipment		(75,718)		(934)
Cash acquired on reverse acquisition		-		30,000
Interest received		83,936		6,332
		(213,489)		35,398
Cash flows from financing activities
Net proceeds from the issue of ordinary shares		3,305,000		774,110
Net increase in cash and cash equivalents		2,651,686		551,477
Cash and cash equivalents at the beginning of the year		551,477		-
Cash and cash equivalents at the end of the year		3,203,163		551,477

Notes

1. Basis of preparation

The preliminary results for the year ended 31 December 2008 have been extracted from the audited financial statements which have not yet been delivered to the Registrar of Companies. The financial information set out in this announcement does not constitute statutory financial statements for the year ended 31 December 2008 or 31 December 2007.  The financial information for the year ended 31 December 2008 was unqualified and did not contain a statement under section 237 of the Companies Act 1985. The statutory financial statements for the year ended 31 December 2007 have been delivered to the Registrar and were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, while the statutory financial statements for the year ended 31 December 2008 will be delivered to the Registrar following the Company's Annual General Meeting. The preliminary results have been prepared in accordance with IFRS as adopted by the European Union. The Group accounting policies used in the preliminary results are consistent with those applied in its most recent annual financial statements. Going concern

The Group has considerable financial resources and, together with contractual arrangements with certain economic partners in different geographical areas and industries, this provides a sound platform for launching the Group's products and generating future sales.  As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

The Groups' forecasts and projections, which have been prepared for the period to 31 March 2011 and taking account of reasonably possible changes in performance, show that the Group should be able to operate within the level of its current cash resources.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

Critical accounting estimates and judgments

The preparation of financial statements in conformity with IFRS as adopted by the European Union requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. 

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the present circumstances. 

The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Group financial statements are disclosed below.

Critical accounting estimates

Research and development activities

Management have reviewed the Group's research and development activities and have made estimates and judgments on the amount of development expenditure it is appropriate to capitalise.

Placing costs

Management have reviewed the expenditure related to VPhase plc's placing of 70 million shares on AIM and, where appropriate, made judgments as to how much of the expenditure related to the placing of existing shares, and should therefore be charged to the Income Statement, and how much related to the placing of new shares, and should therefore be charged against share premium.

Impairment of intangible assets

Management have conducted an impairment review of intangible assets and have to make judgments as to the likelihood of them generating future cash flow, the period over which those cash flows will be received and what costs are attributable against them.  The recoverable amount is determined using the value in use calculation.  The use of this method requires the estimation of future cash flows and the selection of a suitable discount rate in order to calculate the present value of these cash flows.  In support of the assumptions used management uses a variety of sources including third party published reports and knowledge from discussions with partners and potential partners in both the supply and distribution channels.

Share based incentive arrangements and warrants

Share based incentive arrangements are provided to management and certain employees.  These are valued at the date of grant using the Black-Scholes option pricing model and management have to exercise judgment over the likely exercise period, interest rate and share price volatility.  Management uses various sources of information including its own share price performance, or where there is insufficient history the performance of comparable listed entities, experience from the historical exercise of options and published data on bank base rates.

During the year the Group has issued shares to its joint broker for services rendered and has entered into a commitment to pay fees to its joint broker for services provided to VPhase plc up to September 2009. These share based payments have been valued at their fair value as they are received and are charged to the Income Statement with a corresponding credit to equity.

In addition, during the year the Group has issued warrants to its broker, as part of agreed placing costs.  These warrants have been valued at their fair value as they are received based upon the Black-Scholes option pricing model and are charged against the Share premium account.

Taxation

Management have not provided for deferred tax in relation to unrelieved tax losses as the recoverability is currently uncertain.

Critical accounting judgmentsAmortisation of development assets

Development costs capitalised, which form part of the Group's intangible assets, are amortised on a straight line basis over a period not exceeding 15 years starting from the point that those products resulting from the development activity commence mainstream sales. Sales of prototype products are deemed to still be in the development phase and accordingly no amortisation have been charged to the income statement.

 

2. Segmental information

 

The business of the Group comprises one segment, energy efficiency, and as such no segmental information is provided. The Group currently operates entirely within the United Kingdom.

 

Unrelieved tax losses of approximately £788,000 (2007: £231,000) remain available to offset against future taxable trading profits. No deferred tax asset has been recognised in respect of the losses, as recoverability is uncertain.

 

4. Loss per ordinary share

The loss per ordinary share is based on the loss of £768,786 (2007: loss of £727,283) and 670,317,974 (2007: 532,238,143) ordinary shares of 0.25p each, being the weighted average number of shares in issue during the year.  All shares have been included in the computation based on the weighted average number of days since issuance.

	2008		2007
Loss attributable to equity holders of the Company (£)	(768,786)		(727,283)
Weighted average number of ordinary shares in issue	670,317,974		532,238,143
Basic and diluted loss per share (pence)	(0.11)		(0.14)

The share options and warrants in issue are anti-dilutive in respect of the basic loss per share calculation and have therefore not been included.

 

 

		2008		2007
		£		£
Loss before income tax		(768,786)		(727,283)
Adjustments for:
- Depreciation		5,193		320
- Other income		(83,936)		(6,332)
- Share based payments		106,794		-
- Other share based payments		80,000		20,200
- Cost of reverse acquisition		-		542,272
Changes in working capital:
- Increase in trade and other receivables		(81,688)		(61,578)
- Increase/(decrease) in trade and other payables		302,598		(25,630)
Cash consumed by operations		(439,825)		(258,031)

 

 

Copies of the full statutory financial statements will be available from the registered office at Steam Packet House, 76 Cross Street, Manchester, M2 4JU from 21 May 2009 and will also be available from the Group's website at www.vphase.com.

 

The Annual General Meeting will be held at 12pm on 20 May 2009 at the Company's registered office, Steam Packet House, 76 Cross Street, Manchester, M2 4JU.

ENDFR EAPDEADFNEFE

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Related Shares:

365.LFlowgroup