Preliminary Results

Energetix Group plc

("Energetix" or the "Group")

Preliminary Results

for the year ended 31 December 2012

Energetix Group plc (AIM: EGX), which develops and commercialises alternative and efficient energy products, announces its Preliminary Results for the year ended 31 December 2012.

Financial Highlights

·; Loss before tax of £5.00m (2011: £6.75m)

·; Operating loss of £4.8m (2011: £2.6m) - reflecting investment in resources as the Group moves towards commercialisation

·; £17.1m raised (net) to continue with commercialisation of Flow and Pnu Power products

·; Cash at 31 December 2012 of £12.15m (as at 31 December 2011: £0.49m)

Operational Highlights

·; Independently verified testing at Gastec confirms boiler generation capability

·; Home trials have verified generation in line with Gastec results and business model

·; Programme of testing of key components underway to secure product reliability

·; Supply chain team established to ensure efficiency and value

·; Carillion Energy Services contracted to provide installation services for initial product rollout

·; Launch of Flow brand and consumer website: www.flowenergy.uk.com

·; Pnu Power tenders for 2013-15 National Grid battery replacement programme following Type Registration

Post Year End Highlights

·; Successful launch of Flow Energy with energy only tariffs generating revenue from April 2013

·; Volume production units to be available during 2013 for further testing with commercial production and sales commencing during 2014 for planned volume roll out Autumn 2014

·; Experienced senior management team now in place

Commenting on the results, Clare Spottiswoode, Chairman of Energetix said:

"The Group has continued to make excellent progress with the launch of the Flow brand, the energy supply business and an increasing awareness of the Flow microCHP boiler and Pnu Power products as we move closer to commercialisation.

"We now have the management team and infrastructure to build a market leading energy services business based on the exclusive availability of our market changing microCHP technology and development of the Flow brand."

For further information:

Energetix Group plc

Energetix Group plc is a developer of cost-effective products to meet the growing global demand for alternative efficient energy. Currently Energetix has two subsidiary businesses:

Flow - microCHP energy generation and retail electricity & gas

Pnu Power  - compressed air back-up power for the protection of essential systems

In addition, Energetix has a c.25.7% stake in VPhase plc, an energy efficiency business created by Energetix and subsequently spun out in 2010. VPhase is now a standalone independently funded commercial venture.

With all technology development now completed Energetix is well positioned as it moves to the commercialisation stage of its corporate development.

Flow (formerly Genlec and Kingston Energy) - www.flowenergy.uk.com

Flow Products has developed a highly efficient, compact and light weight, wall mounted microCHP (Combined Heat and Power) appliance known as the Flow Boiler (formerly the Kingston Boiler). The Flow Boiler is specifically designed to generate 1kW of electrical power. The Flow Boiler therefore has an inherent low total cost of ownership (initial outlay plus maintenance) and has already demonstrated industry leading payback cycles which many analysts believe is the key to unlocking this significant market opportunity.

Flow Energy is a unique dual fuel energy company, which will provide microCHP boilers that pay for themselves to its customers in return for a commitment to buy gas and electricity, with a price promise that energy prices will not exceed those of the major energy suppliers.

Pnu Power

Pnu Power focuses on the provision of compressed air back-up power which can ensure an uninterruptible power supply for critical systems, particularly for the telecoms, data centre and power transmission markets. Pnu Power range has been extended to include the DC100 product that can now meet the demand of the rapidly growing Green Data Centre market, providing a low carbon alternative to flywheels. Pnu Power has been successful in achieving repeat trial sales and is now poised to move out of the trial sales phase and into full volume commercial sales.

Energetix Group joined AIM in August 2006. The Group and its subsidiaries are based near Chester, NW England and Ipswich, Suffolk.

Chairman's Statement

The Group has continued to make excellent progress with the launch of the Flow brand and an increasing awareness of the Flow microCHP boiler and Pnu Power products as we move closer to commercialisation.

Industry developments

The future of the energy supply market has been the subject of much public discussion over the past months with energy security and competition / pricing being at the centre of the discussion.

The Government plans to increase competition within the energy market through tariff transparency. These plans, aimed at increasing competition, will reduce the number of available tariffs which should enable new entrants to price competitively while generating profitablemargins over the longer term. This provides Flow with an opportunity to enter this market as an independent player immediately without waiting for the microCHP boiler to be available commercially.

The microCHP sector has great potential especially with the concerns over energy security and the reduction in nuclear, coal and gas fired generation capability. Indeed, over the recent winter period, peak demands have left the UK with little effective reserve and this will only be reduced as old and less environmentally suitable capacity is taken offline. A dispersed pool of microCHP boilers provides local power generation which is significantly more efficient than the large generation power plants. As power is produced when heat is required, electricity is produced at peak load times reducing the need for investment in new power station capacity and displacing marginal expensive, carbon intensive generation. Thus, the development of individual home based generation capability has national significance, as well as individual benefit. The system benefits underpin the value of cost effective microCHP technology and in particular the Flow boiler.

Business overview

The boiler and energy supply business has been rebranded as Flow giving the business a new customer facing brand. Brand values are being established with an emphasis on building customer trust and loyalty through value and service.

Flow Energy entered the market on 2 April 2013 and is generating revenue with an "energy only" offer. This launch enables us to engage with new customers ahead of the roll out of the Flow boiler as well as generating a revenue and profit stream.

The Flow microCHP boiler has completed initial testing with home based trials now underway. Initial production units will be available during 2013 and will be extensively tested both in the laboratory and in homes. The Board has decided to conduct extended testing of the boiler in its production version prior to launching in commercial volume to ensure a high level of reliability. As a consequence we currently anticipate that commercial production will commence early2014 with the volume roll-out being in the second half of 2014 in time for Winter, later than originally anticipated.

Pnu Power has continued to gain recognition for its back up power systems with increasing industry awareness following the successful installation within Co-op Financial Services. We have also had successful trials with National Grid, where we have Type Registration. We are now in the final stages of tendering for the National Grid's 2013-2015 battery replacement framework.

Board and Management changes

The past year has seen significant changes to the Board and its management as the business has moved towards commercialisation.

Peter Richardson, who joined as Group Chief Executive Officer in September 2012, is stepping down from the board with immediate effect. Following a recent review the Board and Peter, working together, concluded that his appointment was not working in the way it was intended. As a result all parties decided that it would be beneficial to shareholders that action was taken earlier rather than later, and mutually agreed that Peter would stand down from his position.

Tony Stiff, Managing Director of Flow Energy is taking over as Group Chief Executive Officer. He has successfully established Flow Energy on time and within budget and will now apply his experience of building and growing businesses to the development of the integrated boiler and energy business through to volume manufacture. Giovanni Suero has recently joined us from Flextronics to head the manufacturing operation, while Geoff Barker heads the development programme. Accordingly we now have strong and experienced management in place for all aspects of the Flow business.

In addition Henry Cialone, will spend time in the UK to work with the Flow Products management team as the microCHP programme comes to commercial market launch.

David Grundy, Non-Executive Director, joined in August 2012 and has extensive financial experience primarily within high growth businesses. David is Chair of the Audit Committee, and will also spend more time over the next few months overseeing the financial aspects of the business and ensuring that we have good strategic advice and oversight as the business ramps up to volume manufacture.

Adrian Hutchings, having fully transferred his responsibilities as Chief Executive, decided to step down from the Board so that he can continue his interests in technology development. On behalf of the Board I express my thanks for his contribution to the development of the Flow boiler and for the creation of the business to exploit the opportunity.

Funding

The Group has raised funds twice during 2012.

In March 2012 a placing secured £4.2m and in October 2012 the Group received net proceeds of £12.9m from a placing and open offer. Both fund raisings were strongly supported by existing shareholders. They were also joined by new investors who recognised the opportunity to participate in future growth from our market leading technologies.

Whilst the Group has cash balances of £12.15m as at 31 December 2012 the Board expects that further funding will be required for the commencement of volume production and sales. There are a number of funding options being considered which may or may not involve additional equity.

However, as explained in note 1 there is a risk that the Group will not have adequate resources to develop production quality boilers by Q1 2014 or thereafter will not secure the required funding to support future sales.

The Board is confident that the Group can move forward in a measured way and has confidence in the strategy. On that basis the Board considers that it has a reasonable expectation that the Group has adequate resources to continue in operational existence in the foreseeable future and continue to adopt the going concern basis of preparation in preparing the financial statements.

Business prospects

With the necessary changes made recently, the Group now has the management team and infrastructure to build a market leading energy services business based on the exclusive availability of our market changing microCHP technology and development of the Flow brand.

Tony Stiff has the proven ability to deliver a quality complex service to time and to budget, knows the product and is highly respected within the Company. He will be strongly supported by the business General Managers and by our Non-Executive Directors. Tony will drive the business forward with vigour and ensure we bring quality products to the market.

I look forward to reporting our further progress in my next Chairman's statement.

Clare Spottiswoode

Executive Chairman

30 April 2013

Operating and Financial Review

The Energetix Group has made significant progress over the past year as we prepare for market launch. With the recent appointment of the General Manager (Manufacturing and Service), all commercial and operational functions are now in place to support the commercialisation of the business.

A significant number of key milestones have been achieved:

·; Launch of the Flow brand

·; Development of fully accredited energy business

·; Assembly of the initial batch of pre production boilers

·; Preliminary testing of the pre production boilers

·; Initial boiler installations in the home environment for winter evaluation

We also announced following the period end that we had successfully completed the Controlled Market Entry phase. This has now been further built on with the successful launch of an energy only supply business by Flow Energy. With this Flow Energy is now generating revenue and cash flow for the Group.

Key objectives for 2013 include:

·; Completion of retail energy market entry

·; Agreement with boiler assembly partners and development of volume capability

·; Set up of distribution and installation infrastructure

·; Completion of the final boiler testing and progress to type approval

·; Pnu Power to secure significant infrastructure order

The Flow brand will then be poised to develop as an integrated home services business supplying boilers and energy services.

Branding

The launch of our new energy services business needed a brand which embodied our fresh approach to customer service and value. Flow has been adopted as both the boiler and energy brand. A new customer focussed website has been launched which embodies the foundations on which we will build giving a friendly and proactive customer interface.

The Group now has two businesses:

·; Flow (microCHP boilers and retail energy services)

·; Pnu Power (compressed air back up services)

Flow Products

The transition to a commercial structure has seen the development of distinct organisational areas:

·; Technology and product development

·; Supply chain and manufacturing

The technology teams have conducted independently verified testing at Gastec which confirms the generation capability of the boiler. The quality of the design processes has been enhanced and there has been a focus on component maturity to support the transition to production. A programme of testing of key components has been established in order to secure product reliability. Recruitment has been undertaken to build capability in manufacturing transition, power electronics and quality assurance. Through the winter period pre-production units have been installed in the home environment testing both installation and product operation. Further testing is to be carried out through 2013 with initial production grade units available from mid-year being subject to rigorous reliability testing prior to initial sales in Q1 2014 ahead of the full volume customer roll out planned for Autumn 2014.

Our supply chain team has been established during the year. 45 boilers have been assembled on a pre-production basis and used for testing and the initial customer installations. A material requirements planning system has been procured to control production processes and stocks. Senior personnel have been recruited to focus on lead times and cost. As components are signed off by the technical teams they are transferred to supply chain to drive efficiency and value.

Carillion Energy Services have been contracted to provide installation services for the initial product rollout. Flow Products has developed an in-house training and support function which has supported Carillion in the trial installations to date. Product support manuals are being written and tested in the field.

Unique technology underpins the Flow boiler and the Group protects its intellectual property and know-how through patents in all major world jurisdictions. Investment in research and development continues in order to streamline manufacturing processes and enhance operation / performance in terms of efficiency and power generation.

Flow Energy

The ability to supply the Flow boiler to the homeowner and cover the cost of these boilers with the margin from an underlying energy supply contract gives Flow Energy a unique opportunity to build a residential supply business whilst providing the wider community with energy security.

During the year our UK based operations centre has been developed with key management recruited, market leading customer / billing systems implemented and core staff fully trained. Having completed the controlled market entry in February 2013 Flow Energy is now fully accredited for unrestricted entry into the UK retail energy markets, a great achievement in a short period of time.

Development of the Flow website (www.flowenergy.uk.com) and the customer interface is complete. Building on the Flow brand the interface will be readily accessible and customer focused. It also has full functionality enabling customers to transfer to Flow Energy on line.

Agreements are in place for the purchase of energy giving the ability to purchase as customers join us. As the counterparties for these forward purchases require cash deposits customer growth requires a supporting input of working capital. Energy forecasting software will facilitate the implementation of energy procurement strategies to minimise risk and the utilisation of cash resources. The arrangements are flexible giving access to competitive market rates and the ability to take advantage of the opportunities which arise with the increasing scale of the business.

From April 2013, Flow Energy entered the retail energy market with a competitive energy only tariff providing the initial customer base and revenues for the business. This is an important step in establishing the market presence for the Flow brand building awareness before the full boiler launch and for the group moving out of the pre revenue stage.

Pnu Power

Pnu Power has continued to gain market awareness within the UK, Europe and worldwide.

The SU4 unit, our compressed air energy system solution, has been type approved by National Grid after a lengthy testing period and we are now in the final stages of the tender for the National Grid 2013 -2015 battery replacement framework. This provides a strong platform for us to develop the commercial sales proposition and to exploit similar operations overseas.

The DC100 units, which provide a low carbon alternative to fly wheels for data centre power back up, are fully operational within the Co-op Financial Services Data Centre in Stockport and have been the subject of considerable industry interest and comment. A marketing campaign to build on this and fully establish Pnu Power within the data centre market has been launched. The market leading capability of the call centre unit has been recognised within the industry as Pnu Power secured the Innovative Power Product of the Year Award at the Electrical Industry Awards 2012.

Acceptance by National Grid and the data centre markets in the UK should give further opportunities in the broader market place. The proven energy and CO2 saving potential of the units continues to stimulate interest in the use of the technology.

Financial Review

Set out below is an extract of the Group Financial Statements for the years ended 31 December 2012 and 2011 together with an analysis of the Group's key performance indicators.

Results

The outturn for the year reflects the continued investment in the cost base as the Group moves towards commercialisation and away from being a development business. The increase in operating loss derives from the recruitment of staff and procurement of other resource to bring the required skills to the Group.

Impairment and other charges related to VPhase plc

From the 1 January 2012 the investment in VPhase plc has been carried as an investment rather an as an associate as the Group no longer exercises a significant influence over its operations.

Accordingly it was stated at market value as at 31 December 2012 with an impairment loss of £170,000 being recognised during the year.

Tax

The Group accounts for the receipt of tax relief on research and development expenditure when it is received from HMRC. No amounts were received during the year ended 31 December 2012 however further claims are in preparation and in accordance with the Group's accounting policy will be recognised on receipt of payment from HMRC.

Loss for the year and loss attributable to equity shareholders

The loss attributable to equity holders of Energetix Group plc amounts to £5,000,000 (2011: £6,531,000) giving a loss per share of 5.63p (2011: 10.25p).

Investment in tangible fixed assets

During the year £541,000 (2011: £51,000) was invested in property, plant and equipment.

Investment in intangible fixed assets

Investment in intangible assets, being the continued development costs of the microCHP boiler, amounted to £1,930,000 (2011: £1,377,000). These comprise the internally generated development costs capitalised in accordance with IAS 38.

Cash and cash equivalents

At 31 December 2012 the Group had cash and cash equivalents of £12,148,000 (2011: £493,000).

During the year the Group raised £17,092,000 in two tranches with a placing in March 2012 providing £4,224,000 and a further placing and open offer realising £12,868,000 during October 2012.

Further funding will be required in order to take the microCHP boiler to initial production and sales from Q1 2014 and support volume sales planned from Autumn 2014.

Employees

On behalf of the Board I would like to welcome the new employees who have joined the team during the year as we build our commercial proposition. We have also made considerable progress in all business areas and I would thank all employees for their hard work during the year.

All Energetix Group businesses are well positioned to take advantage of the opportunities available within the changing energy markets expected over the coming years.

Tony Stiff

Group Chief Executive Officer

30 April 2013

Group Income Statement

for the year ended 31 December 2012

The Group has no items of other comprehensive income to be recognised in the "Group statement of comprehensive income" and consequently this statement has not been shown.

Group Statement of Changes in Equity

for the year ended 31 December 2012

Group Statement of Financial Position

as at 31 December 2012

Group Statement of Cash Flows

for the year ended 31 December 2012

Notes

1. Basis of preparation

The Group Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, IFRIC interpretations and the Companies Act 2006. 

The Group Financial Statements have been prepared under the historical cost convention, except that they have been modified to include the revaluation of certain non-current liabilities at fair value through profit and loss.While the financial information included in this preliminary announcement has been computed in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The accounting policies used in preparation of this preliminary announcement have remained unchanged from those set out in the Group's 2011 statutory financial statements. They are also consistent with those in the Group's statutory financial statements for the year ended 31 December 2012 which have yet to be published. The preliminary results for the year ended 31 December 2012 were approved by the board of directors on 30 April 2013.

The financial information set out in this preliminary announcement does not constitute the Group's statutory financial statements for the year ended 31 December 2012 but is derived from those financial statements which were approved by the Board of Directors on 30 April 2013. The auditors have reported on the Group's statutory financial statements and the report was unqualified and did not contain a statement under section 498 (2) or 498 (3) Companies Act 2006. The statutory financial statements for the year ended 31 December 2012 have not yet been delivered to the Registrar of Companies and will be delivered following the Company's Annual General Meeting.

The comparative figures are derived from the Group's statutory financial statements for the year ended 30 April 2011 which carried a unqualified audit report, did not contain a statement under section 498 (2) or 498 (3) Companies Act 2006 and have been filed with the Registrar of Companies.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement and Operating and Financial Review. The financial position of the Group, its cash flows and liquidity position are described in the Operating and Financial Review.

The Group raised £12.9m in October 2012, which based on business plans will be in the directors' opinion, be sufficient to fund the initial customer acquisition and working capital requirements of the retail energy business and complete the development of the boiler through to production quality in Q1 2014. Thereafter volume boiler sales will require additional funding to be in place to support sales, supply chain and customer debtors. The Directors are considering a number of funding structures in order to meet the requirements and, given the nature of the requirements and the Group's business model and products, the directors are of the opinion that all necessary funding will be made available at the appropriate time.

There is a risk that the Group will not have adequate resources to develop production quality boilers available by Q1 2014, or thereafter will not secure the required funding to support future sales. These factors indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. Nevertheless, the directors are confident in the future business strategy and given that decisions do not need to be taken immediately the Group can move forward in a measured way. On this basis they have a reasonable expectation that the Group has 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, which do not include adjustments that would result if the Group were unable to continue as a going concern.

Critical accounting estimates

The preparation of the Group 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

Impairment of intangible assets

Management have assessed indications of impairment and conducted an impairment review of intangible assets. They 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, management uses a variety of sources. In addition, management have undertaken scenario analyses, including a reduction in sales forecasts which would not result in the value in use being less than the carrying value of the cash generating unit. However, if the business model is not implemented, the carrying value of the intangible assets would be impaired and would require writing down. Management stress that this merely represents one modelled scenario and they do not believe any impairment is currently required based on current circumstances.

Critical accounting judgments

Financial liabilities

Management have considered the terms of agreement with Battelle Memorial Institute and consider the obligation for future repayments based on a percentage of mainstream sales to be a non-financial item which is inherently linked to the new revised business model outlined above. Due to the instrument containing an embedded derivative, the Group has designated the entire instrument as fair value through profit or loss ("FVTPL").

2. Income tax

The adjustment in respect of prior year originates from a tax credit received in cash arising from research and development activities.

Unrelieved tax losses of £23,570,000 (2011: £18,632,000) 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.

3. Loss per ordinary share

The loss per ordinary share is based on the loss of £5,000,000 (2011: £6,531,000) and 88,796,953 (2011: 63,702,953) ordinary shares of 5 pence 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.

4. Intangible assets

All additions during the year arise from internal development.

Intangibles include internally generated product development costs capitalised in accordance with IAS 38 and purchased intellectual property held at cost less amortisation following the disposal of Energetix Micropower Limited. Other intangibles relate to purchased software.

5. Borrowings

6. Cash Consumed by operations

7. Availability of financial statements

Copies of the full statutory financial statements will be available from the registered office from Monday 17 June 2013 and will also be available from the Group's website at www.energtixgroup.com.

8. Annual General Meeting

The Annual General Meeting will be held at 12 Noon on 17 June 2013 at the Company's registered office Castlefield House, Castlefield, Liverpool Road, Manchester, M3 4SB.

- ENDS -