Preliminary Results

29 May 2012

Energetix Group plc

("Energetix" or "the Group")

Preliminary Results

For the year ended 31 December 2011

Energetix Group plc (AIM:EGX), a company with two cost-effective products (Genlec and Pnu Power) to meet the growing demand for alternative and efficient energy, announces its Preliminary Results for the year ended 31 December 2011.

Highlights

Post Year End Highlights

Clare Spottiswoode, Non-Executive Chairman of Energetix, commented:

"I am pleased with the progress that the Group has made this year towards the goal of building a strategy to commercialise our product set, for both Genlec and Pnu Power. I believe that the Research and Development stage is now complete and we can look forward to implementing our strategy. The certification of Kingston microCHP, reductions in bill of material costs and our new free boiler strategy should put the Group in a good position to accelerate what the Board believes is a unique business model.

"The legislative and commercial environment remains favourable to the Group's products, and following the placing in March 2012 the Group is well positioned to accelerate the commercial development."

For further information:

Chairman's Statement

It is now nearly a year since I joined Energetix as Chairman. It has been an eventful and productive year. At the time I arrived, although the 'boiler for free' model was a glint in Adrian's eye, we were developing a model whereby we sold our boiler as a premium product outright to customers so that they would retain the Feed in Tariff ('FIT')and capture the spark spread between the gas cost of generating the electricity and the cost of buying electricity at retail prices from the grid.

This model was attractive in itself, and indeed we have signed an agreement with Calor Gas for their off-grid LPG network to work with them to provide our product (and on May 18th announced we had CE unit verification for this version of our boiler). We have also signed a similar exploratory agreement with Scottish Power, and will be providing both organisations boilers to test this year.

After much work we believe that we can deliver the 'boiler for free' model, and that this has the prospect of providing significantly higher returns to shareholders than the direct sale model. We are now proposing to offer the boiler and electricity generating unit to customers at no cost, charging only for installation which will vary from household to household. To get our free boiler the customer will have to sign up to a long term contract with us for gas and electricity, and we will provide a price promise along the lines of, say, being the least expensive of the standard tariffs of the big six. We pay for the boiler by charging the customer the retail price of electricity which either costs us nothing (if the customer pays for the gas used to generate the electricity) or the spark spread benefit (if we pay for this gas). We will also receive the FIT while this exists, which is a support for our model, particularly in the early days while the units are more expensive than they will be when we have volume manufacture.

To deliver this business model we not only have to produce the unit, but also sell and install the unit. We also must have an energy supply licence so that we can sell gas and electricity to our customers and the appropriate level of funding to build the infrastructure.

We have recruited Tony Stiff who is creating our gas and electricity supply business, and already have a senior experienced team working with Tony to ensure we can deliver on this essential component of our 'boiler for free' model.

We produced 45 boilers last year. We are providing Scottish Power, Calor, and Canmet in Canada with some of these. We are using others for accelerated life testing and others in aggressive 'shake and bake' testing to destruction (ALT and HALT testing) to ensure that our manufactured product is highly resilient and predicted to be at least as long lived as our competitors. Additionally we are working with Reliability Plus to demonstrate the reliability of the Kingston product using a Design Quality Assurance (DQA), a state of the art process used by leading white goods manufacturers. We have sent other units to Gastech so that we can get verification of the electricity production of the unit under various home and weather configurations. We will use this data to configure the boiler to optimise electricity output. The remainder will be provided to Tony's team to prove the full end to end 'boiler for free' model, selling the concept, installing, providing retail gas and electricity and billing customers. We intend to have real customers using this business model before the end of this year.

We are in the process of choosing a manufacturer to assemble the boiler and the generation module. We are also well advanced in negotiating with suppliers for the full bill of materials we need to create the units. This will put us in a good position for delivery of significant volume into the market next year.

Pnu Power is an impressive compressed air battery which has made significant progress this year in two key markets, emergency back-up power for power grids and data centres. Since these are system critical installations buyers are naturally conservative and need to see Pnu Power systems in operation before committing to orders.

After three years installed on sites Pnu Power has gained full Type Registration with National Grid, an essential prerequisite to obtaining significant orders. We also have our first data centre installation with a 300kW system with the CO-OP Financial Services. This is an excellent demonstration site which should enable us to start to get traction in the datacentre market. We can now build on this solid foundation.

We have produced the first of our bi-monthly updates on our business which can be found on the company's website: www.energetixgroup.com.

I look forward to next year's Chairman's statement when I hope to be able to report significant progress on these ambitious goals.

Clare Spottiswoode

Non-Executive Chairman

29 May 2012

Chief Executive's Review

Genlec

In our 2010 Annual Report we identified that we believed the only outstanding technology risk to the Genlec business was obtaining CE certification of the Genlec power module. This was achieved in June of last year. During 2011 we refined the prototype Kingston product improving the design for manufacture and significantly reducing the Bill of Material ("BoM") both in the number of components and their cost. For example we have removed nearly all of the brass pipe screw fittings replacing them with pipework manufactured joints. Not only has this removed nearly £300 from the BoM but it has also reduced weight and improved product quality by eliminating the risk of water leaks from these joints.

During 2011 we also demonstrated the outsourced assembly of the product, using a boiler manufacturer to assemble the Kingston boiler, and a refrigeration contract assembler to produce the power module. We produced 45 Kingston microCHP boilers with this process, giving us confidence that this is the right method for us to enter volume production. The production of this first batch of product has been an extremely good learning tool for the team and has enabled us to begin the introduction of production and sourcing logistics to ensure we are able to start to deliver a quality product in volume at the start of 2013. We have also commenced the development of an installation training capability and are in the process of installing a dedicated training facility at our offices in Capenhurst. This facility will initially be used to train Carillion and Calor Gas installers.

We have continued to expand and enhance the intellectual property of our Genlec business with our core patent being granted in Canada and in Q1 2012 a further new sub-system patent being granted in the US.

Regarding the first batch of 45 units our initial intention was to place these units into homes over the 2011/12 winter. We have delayed these installations for two reasons. Firstly we would only have had a partial winter to understand the operation of the units, and secondly with setting up of the Energy Supply Company it will be necessary to test that company's systems for Ofgem with a controlled market entry during Q4 2012. We have therefore decided to retain the units we have already produced to support this controlled market entry test. To ensure that we have sufficient confidence in the product we have started an exhaustive testing regime using state of the art Accelerated and Highly Accelerated Life Testing ("ALT" and "HALT") in conjunction with Reliability Plus, adopting the industry standard of Design Quality Assurance ("DQA"). In addition in order to ensure we can maximise the amount of electricity each Kingston produces per year we are working with Gastech using their dynamic test facility to simulate a wide range of property types and environmental conditions. This process will enable us to refine the algorithms in the Kingston control electronics to maximise the electrical output.

In the 2010 Annual Report we highlighted that the take up of product by large corporate customers can be a slow process; therefore during the year I reviewed the options for exploiting the value we have created in the Genlec business with our Kingston microCHP boiler. Over the winter of 2010/11 as the technical development of the Kingston microCHP boiler was predominately completed, I started to reconsider the options to maximise the value from what I believed was going to be the only low cost microCHP solution. It was during this period that the concept of the Free Boiler model was generated. In 2011, having developed an initial business model, I tested this with a small number of industry experts who gave me confidence that not only was this a sound concept but also the value and scale of the Free Boiler opportunity had the potential to be considerably larger than that of selling the units at a premium price compared to a normal boiler. On this basis, we are currently pursuing various funding and additional strategic opportunities to enable the free boiler model to be implemented in a measured way.

It was clear to me that the Energetix Group board did not at that stage have the credibility or experience to deliver such a business model and I initiated a recruitment programme that successfully brought Clare and Tony into the company. Tony then used his wealth of experience in the energy supply industry to build a new business model that not only underpinned the benefits and scale of the Free Boiler opportunity but also identified additional benefits that only someone steeped in the energy supply field could identify.

It is also clear that in addition to Clare and Tony's skills we also need someone with the background and experience to ensure we can produce, deliver and install the large number of Kingston microCHP boilers we anticipate will be demanded. On an interim basis I have been undertaking this role, and am very pleased with my team on their ability to refocus from being a technology development team to the beginnings of a product delivery team. However my skill sets are in technology development, and hence I have been carrying out a further recruitment process to find someone with the expertise, credibility and experience in producing and delivering volume white goods products to take over this role. I hope to be able to report on the progress of this process in the coming months.

On completion of this recruitment, and following a suitable handover period, I intend to stand down as the Group CEO, a role I have undertaken for nearly 15 years since I founded the Company in 1998. The intention is that I will then be able to focus on a role where I can concentrate on my technology development expertise.

Pnu Power

Our Pnu Power business had a slow year with limited sales as the company continued to prove its products in the very conservative mission critical sector. However the DC100 datacentre product was launched at the beginning of 2011 and later in the year the first deal for an installation of three DC100's was concluded with CO-OP Financial Services. This 300kW datacentre system was subsequently installed, commissioned and set live Q1/2 2012. This will be used as a platform to promote Pnu Power products to the datacentre market.

Pnu Power has also continued to develop a potential sales channel to National Grid securing provisional Type Registration from National Grid for its Compressed Air Energy System solution, Type TC3, in October last year and this was converted into full unrestricted Type Approval early in 2012. Negotiations with National Grid are in progress to secure a proportion of the framework agreement National Grid have to procure backup power for their network. It is understood that placement of this contract is scheduled for Q4 2012.

During 2011 VPhase plc secured an additional round of funding and we currently hold shares in VPhase equating to approximately 27% of its share capital.

I would like to take this opportunity to thank the Energetix team for all their hard work over the years and to let them know it has been a privilege to have led them during this period.

Adrian Hutchings

Chief Executive Officer

29 May 2012

Finance Review

Set out below is an extract of the Group Financial Statements for the year ended 31 December 2011 and 2010 together with an analysis for the Group's Key Performance Indicators.

Revenue

Revenue from continuing operations was £128,000 higher than 2010 at £26,000.

Overheads

Overheads after capitalisation of intangible expenditure (excluding depreciation and amortisation) of £1,824,000 were incurred in the year (2010: £2,314,000), a decrease of £458,000. Following the disposal of VPhase plc in 2010, Energetix Group plc recognises its share of the former subsidiary's loss and this amounted to £803,000 (2010: £166,000).

Depreciation of fixed assets and intangible amortisation

Depreciation of property, plant and equipment from continuing operations totalled £80,000 (2010: £175,000) on continuing operations.

Amortisation of intangible assets from continuing operations of £727,000 (2010: £727,000).

Deemed Disposal of associate

During the year, the Chairman and Chief Executive of VPhase plc each subscribed for new ordinary shares in VPhase plc which resulted in a deemed loss to Energetix Group plc of £2,000. In addition, the Group also recognised a further deemed loss following the placing in VPhase plc amounting to £1,504,000 giving a total on deemed disposals of £1,506,000. Following the deemed disposals in VPhase plc, the Group retains 27.01% of the issued share capital of VPhase plc and is still considered an associated undertaking virtue of its shareholding.

Impairment in associate

During the year, the Group has impaired its investment in VPhase plc down to its market value, a charge of £1,721,000.

Finance costs/income

Interest earned on money held on deposit for continuing operations totalled £6,000 (2010: £19,000). The fair value adjustment of long term borrowings attributable to interest rate risk has resulted in a charge of £92,000 during the period (2010: £148,000 charge).

Loss before tax

The loss before tax from continuing operations of £6,748,000 (2010: £3,511,000) has increased from last year's reported loss largely due to the deemed disposal and impairment in VPhase plc.

Tax

During the year, the Group received a tax credit of £217,000 (2010: £458,000) in relation to research and development expenditure. We are now preparing claims for 2011 although, in accordance with the Group's accounting policies, no further amounts have been accrued for subsequent accounting periods as the amount expected to be recovered cannot be reliably measured.

Loss per share

The loss per share, basic and diluted, from continuing operations was 10.25 pence (2010: 5.54 pence).

(Loss)/profit for the year and (loss)/profit attributable to equity shareholders

Loss for the year of £6,531,000 (2010: £1,627,000 profit) is stated after taking account of £Nil (2010: £667,000) of losses in VPhase plc which are not attributable to equity holders of Energetix Group plc. Loss attributable to equity holders of Energetix Group plc amounts to £6,531,000 (2010: £2,294,000 profit).

Investment in property plant and equipment

During the year £51,000 (2010: £56,000) was invested in property plant and equipment.

Investment in intangible assets

Investment in intangible assets from continuing operations during 2011 amounted to £1,377,000 (2010: £1,070,000). This investment is the internally generated product development costs capitalised in accordance with IAS 38. Further details are contained in note 4.

Inventories

The production of 45 boilers during the year has been expensed on the basis that these units will be utilised in various tests and trial programmes as outlined within the Chairman's Statement.

Cash and cash equivalents

At 31 December 2011, the Group had cash and cash equivalent reserves of £493,000. On 20 March 2012, the Group raised a further £4,224,000 net of expenses following the placing of 18,266,600 new ordinary shares of 5 pence each at 25 pence per share. In addition, the Group are currently pursuing various funding and strategic opportunities to enable the new energy supply model to be implemented.

Adrian C Hutchings

Chief Executive Officer

29 May 2012

Group Income Statement

For the year ended 31 December 2011

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 2011

Group Financial Statement of Position

As at 31 December 2011

Group Statement of Cash flows

For the year ended 31 December 2011

Notes

1. Basis of preparation

While the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards ("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 2010 annual report. They are also consistent with those in the full financial statements which have yet to be published. The preliminary results for the year ended 31 December 2011 were approved by the board of directors on 29 May 2012.

The financial information set out in this preliminary announcement does not constitute the Group's financial statement for the years ended 31 December 2011 and 2010. The financial information for the year ended 31 December 2010 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s498(2) or s498(3) of the Companies Act 2006.

 The statutory accounts for the year ended 31 December 2011 will be delivered to the Registrar of Companies following the Company's annual general meeting.

As announced on 29 February 2012, the group are creating a new energy supply company and revised strategic approach to its current business model, which will provide free Kingston microCHP boilers to its customers in return for a commitment to purchase gas and electricity for a fixed period. In addition, on 2 April 2012, the group announced the acquisition of the entire issued share capital of Circuit Energy Supply Limited, a company which has a pre-accredited electricity supply licence which will enable the Group to trade electricity in the UK.

The Group is currently pursuing various funding and additional strategic opportunities to enable this new energy supply model to be implemented. This new business model, when implemented, will require levels of funds that are greater than the Group's existing cash facilities. Although these funds have not yet been secured, based on negotiations conducted to date, the directors have a reasonable expectation that the various strategic opportunities, including partnering arrangements, will secure additional finance facilities in line with the required new business model.

If the Company does not raise the full amount it needs to fund the 'boiler for free' model, it will revert to the original plan to sell boilers upfront to customers through other organisations already in the energy market, such as Calor and Scottish Power with whom it has already signed contracts, and it will also sell through its own distribution channels. Alternatively, the Company has the ability to dispose of its investment in VPhase plc to generate additional funds if and when appropriate. The range of options open to the directors, whilst leading to uncertainty, gives the directors sufficient confidence to adopt the going concern status. Nevertheless, these decisions do not need to be taken immediately, giving the Company time to make decisions in a measured way. Accordingly, the directors continue to adopt the going concern basis in preparing the annual report and accounts. In the event that the Group is only partially successful in raising funds which enable it to continue as a going concern, the value of the intangible assets may become impaired.

 In view of the significance of the factors outlined above, the auditors' report contained in the statutory accounts for the year ended 31 December 2011 drew attention by way of emphasis without qualification to the existence of these uncertainties and their impact on the Group's ability to continue in operational existence as a going concern for the foreseeable future. Their report in the statutory accounts for the year ended 31 December 2011 did not contain a statement under section 498 (2) or 498 (3) of the Companies Act 2006.

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 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, management uses a variety of sources including third party published reports and knowledge from discussions with potential partners as outlined in note 2.2 and note 14.  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 new business model is not implemented, the carrying value of the intangible 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 negotiations conducted to date.

Discount rate on intangible assets and financial liabilities

Management have exercised judgment in selecting the appropriate discount rate for application against intangible assets and have selected 10.0% (2010: 10.00%) to represent the best estimate of the current cost of capital to the Group.

Critical accounting judgment

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 and loss (FVTPL).

2. Income tax

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

Unrelieved tax losses of £18,632,000 (2010: £15,238,000) remain available to offset against future 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 £6,531,000 (2010: profit of £1,627,000) and 63,702,953 (2010: 55,155,008) ordinary shares of 5 pence each, being the weighted average number of shares in issue during the year. The diluted earnings include the effects of all potentially dilutive ordinary shares, which increased the average number of shares to Nil (2010: 56,214,267). All shares have been included in the computation based on the weighted average number of days since issuance.

4. Other intangible assets

All additions during the year arise from internal development. In addition, of the above amortisation £Nil relates to discontinued activities (2010: £90,000).

5. Disposal of VPhase plc

On 17 November 2011, VPhase plc, an AIM listed associated undertaking, issued 470,000,000 new ordinary shares at 0.50 pence per share. On 29 December 2011, VPhase plc issued 910,087 new ordinary shares at 0.575 pence per share. Energetix Group plc subscribed for no shares reducing its interest in VPhase plc from 42.86% to 27.01%.

The reductions in the Group's interest in VPhase plc constituted deemed disposals at Group level and resulted in a loss to the Group as calculated below:

Deemed disposal 1

Placing of 470,000,000 shares on 17 November 2011:

Following the deemed disposal in VPhase plc, the Group held 27.03% of the ordinary share capital of VPhase plc.

Deemed disposal 2

New VPhase plc shares to VPhase executive directors on 29 December 2011:

Following the deemed disposal in VPhase plc, the Group held 27.01% of the ordinary share capital of VPhase plc.

Total gains are therefore summarised as follows:

6. Borrowings

8. Business Combinations

On 2 April 2012, the Group acquired from Utiligroup Limited, part of Bglobal plc, the entire issued share capital of Circuit Energy Supply Limited, a company which has a pre-accredited electricity supply licence which will enable the Group to trade electricity in the UK.

Circuit Energy Supply Limited has the benefit of the accreditation from Elexon, which demonstrates that it accedes to the Balancing and Settlement Code, the rules that govern electricity trading.

The cost of acquiring Circuit Energy Supply Limited amounted to £150,000. Circuit Energy Supply Limited has no other assets or liabilities other than the pre-accredited electricity supply licence.

9. Availability of financial statements

Copies of the full statutory financial statements will be available from the registered office from Monday 25 June 2012 and will also be available from the Group's website at www.energtixgroup.com.

10. Annual General Meeting

The Annual General Meeting will be held at 12 Noon on 25 June 2012 at the Company's registered office Castlefield House, Castlefield, Liverpool Road, Manchester, M3 4SB.

- Ends -