Preliminary Results

RNS Number : 9864I

Energetix Group plc

23 March 2010

 

 

 

 

Press Release

23 March 2010

 

Energetix Group plc

("Energetix" or "the Group")

 

Preliminary Results

For the year ended 31 December 2009

 

Energetix Group plc (AIM:EGX), a company with three cost-effective products (Genlec, Pnu Power and VPhase) to meet the growing demand for alternative and efficient energy, announces its Preliminary Results for the year ended 31 December 2009.

 

2009 Highlights

Group:

●	VPhase and Pnu Power transitioned to CE-marked products
●	Sales commenced, achieving turnover of £255,000 (2008: £32,000)
●	Reduced operating losses to £4,009,000 (2008: £4,202,000 loss)
●	Tight financial control resulting in cash reserves of £5,657,000 (2008: £11,025,000)

 

Products:

●	Genlec - strategic plan to develop an integrated micro-CHP appliance for the UK market - signed CombiVolt product agreement with Daalderop BV, targeting sales of at least 30,000 Genlec micro-CHP units over the next three years
●	Pnu Power - trial sales from: ·; Telecom Italia, Italy ·; Harris Corporation (formerly M/A-COM), USA ·; National Grid, UK ·; Abertis Infraestructuras, Spain; - first phase of contract for Pnu Power units supplied to P&E Automation, USA; - achieved CE marking on its TC1 and TC2 products
●	VPhase - sales to Scottish and Southern Energy (SSE), British Gas, electrical distributors and electricians plus direct to consumers; - achieved CE marking on its first product; and - Ofgem CERT trials funded by SSE commenced

 

Post year end:

●	Genlec - unveiled an integrated micro-CHP appliance for the UK market, trade named Kingston - appliance manufacturers and major utilities expressing interest in taking Kingston to market
●	Pnu Power - secured contract to supply two units to National Grid US - awarded full accreditation under ISO9001 - requests received for quotations for multiple units from trial customers
●	VPhase - commenced field trials with a Northwest-based social housing provider - VPhase staff home trials show savings of £75-135 per annum (depending on the level of incoming voltage and load profile)* - delay in SSE installations likely to defer CERT approval until quarter 2, 2010 * The small size of this sample means it may not be indicative of savings available across the whole of the UK housing stock

 

Alan Aubrey, Chairman of Energetix Group, said: "2009 was the year when Energetix moved from a development company to a commercial business generating initial turnover. During the year we converted our VPhase and Pnu Power technology platforms into commercial products and established a clear route to market for Genlec by the end of 2010. We look to 2010 with optimism as we anticipate further sales conversion."

 

"We have adjusted our strategy during the tough market conditions to capitalise on the immediate sales opportunities across all our businesses. While continuing the development of Genlec, increasing our sales and marketing efforts across two of our three products, and developing the internal infrastructure to take the Group into the next phase, we have also continued to keep our costs down by exercising strong cash management measures. We are pleased to report that the Group has sufficient cash reserves for our current strategic plans. This includes, for 2010, transitioning the Group into a commercially-led business."

- Ends -

 

For further information:

 

Energetix Group plc
Adrian Hutchings, Chief Executive Officer	Tel: +44 (0) 151 348 2100
Richard Smith, Chief Financial Officer	Tel: +44 (0) 151 348 2116
	www.energetixgroup.com
Ambrian Partners Limited	Tel: +44 (0) 20 7634 4700
Andrew Craig/Ben Wright, NOMAD
Shaun Whyte, Corporate Broking	www.ambrian.com
Media Enquiries:
Abchurch Communications	Tel: +44 (0) 20 7398 7710
Justin Heath / Monique Tsang / Quincy Allan
	www.abchurch-group.com

 

Chairman's Statement

 

2009 was a successful year for the Group, during which we progressed from technology development to having products available for sale. We started 2009 with three technology platforms and, despite delays and tough market conditions, we ended the year with two products that were achieving initial sales, VPhase and Pnu Power. These are combined with our third technology, Genlec, for which we have mapped a clear route to market by the end of 2010 - particularly with the unveiling of the Kingston appliance in March 2010.

 

2010 is a major transition year when it is intended that the Group will develop further into a fully commercialised sales and associated services business. In order to manage the transition from technology development to commercial product sales and services, we are currently recruiting the necessary people and putting in place the appropriate processes.

 

The Group has continued to deliver tight cost control during our development phase, ensuring that we have sufficient funds for the transition period through to volume sales, sustainable growth and commercial success. This has resulted in an operating loss £0.2 million lower than last year and cash reserves of £5.7 million at the end of the year.

 

As previously reported, during the year and into the early part of 2010, Pnu Power won orders from National Grid UK, National Grid US, Harris Corporation in the US (formerly M/A COM) and Abertis Infraestructuras in Spain. These orders indicate that we are on our way to making Pnu Power the back-up power system of choice in a number of territories. Pnu Power is now receiving enquiries for multiple units from existing customers which should lead to delivery of a critical KPI for 2010.

 

Genlec has taken advantage of the improving conditions for micro-CHP in the UK market, particularly with the introduction of Feed-in Tariffs, and has developed its own fully integrated UK-specified heating appliance, named Kingston. A number of potential marketing partners have shown significant interest in this appliance, which is a compact low-cost micro-CHP unit.

 

During 2009 we also saw increasing awareness of, and support for, cleaner technologies around the world. This was epitomised by one of the first points made in US President Barack Obama's speech to the Copenhagen Summit: "We have taken bold action at home - by making historic investments in renewable energy; by putting our people to work increasing efficiency in our homes and buildings; and by pursuing comprehensive legislation to transform to a clean energy economy".

 

On our home ground, the UK Government introduced Feed-in Tariffs for microgeneration in February 2010. While we see this as good news in itself, we also believe it is an important recognition that energy efficiency is at least equally important in tackling climate change as renewable energy generation. At Energetix we view the Feed-in Tariffs as useful in helping to drive the uptake of our micro-CHP product, Genlec, which is eligible for the tariff. However, unlike other micro-CHP technologies, our Genlec product is inherently low-cost in initial outlay and maintenance, and its economic case does not rely on any such subsidies.

 

During the year we appointed Ambrian Partners as our Broker and Nomad. This not only consolidates our financial advisors from three firms to one, improving coordination and providing us with greater access to dedicated and specialist counsel specific to the cleantech arena.

 

I would also like to extend the thanks of the Board to all our employees who, through their hard work and effort, have enabled the Group to achieve another good year. We look forward to a challenging and successful 2010, as the Group continues its commercial growth.

 

Alan Aubrey

Executive Chairman

23 March 2010

 

Chief Executive's Review

I am pleased to present this review of the last twelve months. Whilst encountering delays and difficult market conditions, I am confident that we are now in a position to complete the transition of the Group from a technology development business to a commercial products and services-led business. The Group has made substantial progress, with two of our three technology platforms converted to products and begun commercial sales. Furthermore, we have established a clear path for our third technology to follow.

 

Whilst we are pleased to see both VPhase and Pnu Power products being shipped to our customers, we recognise that it has taken longer than originally anticipated to have these products available for sale. However, as we now have certified products, we are further developing the internal infrastructure associated with the processes, procedures and personnel to deliver our targeted sales.

 

In our Genlec business, we recognised in 2009 that the downturn in market conditions had led to a lack of investment in Genlec appliance development from our European partners, and indeed this has led to a delay in micro-CHP appliances being available for testing in homes in 2009/10, as we had originally envisaged. However, in 2009 we also recognised that the market conditions in the UK were likely to become more favourable for micro-CHP appliances. We therefore took the decision to refine our strategic plan for Genlec to introduce a fully integrated micro-CHP appliance for the UK market. This has resulted in the unveiling today of Kingston, a fully integrated micro-CHP appliance based on our Genlec Organic Rankine Cycle ("ORC") technology. We are currently in negotiations with a major "white goods" appliance manufacturer and with power utilities for both the production and sales of the Kingston appliance in the UK.

 

The sales cycle for our Pnu Power products is longer than originally anticipated, but we are now seeing enquiries for multiple unit orders from key trial customers. In addition, we now have products that can compete in our target sectors on a first-cost basis, and substantially better on a life-cycle cost basis, with battery based UPS products. The multiple unit enquiries are pleasing and add confidence that our chosen strategy for sales has been correct.

 

In our VPhase business, we have been disappointed by the slow progress that has been made in installing the trial units for the Scottish and Southern Energy CERT evaluation; however all installations have now been completed and data is being collected. In the meantime, VPhase has undertaken its own trials that have been independently analysed by EA Technology, a well established power management consultancy company and regular assessor of energy technologies. These trials indicate that the financial benefit of installing a VPhase unit could be significantly higher than originally anticipated, in the order of £75 to £135 per annum based on trials in a few staff homes (dependent upon, amongst other things, the load profile of the property). The small size of this sample means it may not be indicative of the saving across the whole of the UK housing stock.

 

The strict management of our cost base and cash resources has allowed us to deliver a loss that is lower than last year by £0.2 million despite the increased activity, ending the year with £5.7million cash in the bank.

 

The Group has now established the foundations for its vision of becoming a clean energy products and services provider, with a focus on distributed generation, energy storage and energy efficiency.

 

General market review

Whilst the continuing downturn in global markets has impacted our existing and potential customers, particularly those that service the new build markets, this has been offset by further government support for clean technologies and an improvement in general public awareness of the importance of energy efficiency as a carbon reduction mechanism.

 

The directors believe that the UK Government's introduction of Feed-in Tariffs for micro-CHP will provide further incentives to promote sales of our forthcoming Kingston micro-CHP appliance based on our Genlec technology. The Feed-in Tariff seems to be ideally scaled to benefit those micro-CHP appliances, such as Genlec, that are heat-led and produce most of the electricity for use in the home.

 

Global and political framework

Concerns about the high level of greenhouse gas emissions from traditional methods of power generation and usage are increasing worldwide. In the United States, the Obama administration is addressing this issue far more urgently than its predecessor. In Europe, efforts to develop low-carbon methods of producing electricity are intensifying. In Asia similar work is under way.

 

For instance, US President Barack Obama set the tone for 2009 when, on 17 February 2009 and just a month into his term, he signed into law his economic stimulus package - including $71 billion for energy and environmental initiatives and another $20 billion for green tax incentives.

 

Closer to home, and in addition to its adoption of Feed-in Tariffs for the domestic energy sector, the UK Government has recently announced plans for eco home loans. These are designed to fund both the initial purchase of energy-efficient technologies, such as our Genlec and VPhase units, and also to create an ongoing price differential between energy efficient and inefficient homes.

 

The Group's position on such initiatives is clear. Whether provided through Feed-in Tariffs, eco-loans, household efficiency programmes (such as CERT and smart metering), or the proposed renewable heat incentive, they are useful in focusing public opinion on energy conservation and carbon reduction. We prefer, however, to develop products that deliver a compelling economic case without artificial subsidies from current or future governments.

 

Climate change, carbon reduction and energy efficiency dominated the global stage again in December 2009 during the COP-15 United Nations Climate Change Conference in Copenhagen. Views on its success are mixed, but significant achievements included the drafting of the Copenhagen Accord by the USA, China, Brazil, India and South Africa; bringing previously unengaged territories to the table and, longer term, helping to expand the global market for energy-saving technologies. The pressure is now on to build on that progress and create both a politically and legally binding protocol at COP-16 in November 2010.

 

Group operational review

In this year of transition, the Group has put considerable time and effort into securing and developing the internal infrastructure to allow it to commercialise the three product sets of Genlec, Pnu Power and VPhase. This has included a range of new processes and procedures to enable the consistent supply and delivery of quality products to our customers. In particular, I would like to thank the teams who, amongst other things, have risen to the challenge and put in place the processes and controls to enable us to start selling VPhase products - not only to our commercial customers but also to the general public. The whole process was undertaken over a very short period of time and has been operating successfully for the past six months.

 

The Group has now experienced the completion of CE marking for two products, and has learnt valuable lessons on this process that should assist in the CE marking of our Kingston micro-CHP appliance.

 

In addition, Pnu Power has been assessed for ISO9001 compliance which was granted in March 2010. Again the lessons learnt from Pnu Power's experience of this process will be used to the benefit of the Group's wider businesses.

 

Genlec

 

Business review

Genlec has made considerable progress this year in transforming its patented ORC micro-CHP technology platform into a fully operating, domestic wall-hung appliance. As part of the ongoing development of the technology, Genlec is required to undertake laboratory tests to determine the heating and electrical performance of heat-led micro-CHP packages, primarily intended for heating private dwellings. Using an independent company specialising in design and certification services for the gas industry, Genlec has completed the assembly of a compact wall-hung appliance suitable for the UK market. This appliance, the Kingston, is undergoing these tests and is being taken through to full UK certification, including CE compliance, which is expected to conclude in 2010.

 

The appliance is designed to generate 1kWe of power which can be utilised in the home, and any excess not used can be exported to the national electricity grid using the G83 protocol. The unit is compact, wall-hung, and tailored for installation in UK homes - a prerequisite for volume sales in the UK market. The target performance of the Kingston appliance is to have an overall efficiency equivalent to a high-efficiency boiler and an electrical efficiency of 10%.

 

At the core of the appliance is a new Genlec scroll expander generator which has been designed in collaboration with a large scroll manufacturing corporation. In parallel with the UK product development, Genlec's partner in the Netherlands, Daalderop, continues to develop the CombiVolt micro-CHP appliance. Daalderop has the right to produce, develop, manufacture, promote and market its wall-mounted CombiVolt boilers, incorporating the Genlec micro-CHP unit, principally in the Netherlands and the Belgian domestic heating market.

 

On the commercial front, Genlec has continued to develop its relationships in the major markets in Europe. In Germany, Stiebel Eltron, an international leader in heating, ventilation, air-conditioning and refrigeration and systems technology, has undertaken several months of testing on the ORC technology platform and is now evaluating a programme to bring the technology to market. Genlec's two other partners, one each in Italy and Germany, continue to test the technology.

 

Genlec held several development meetings with a number of partners who may act as routes to market during 2009, and with the evolution of the Kingston appliance, the directors believe the potential for marketing a volume micro-CHP appliance in the UK following certification within the next 12 months has been considerably enhanced.

 

On the regulatory front, Genlec has been active, in conjunction with other important players in the micro-CHP market, in framing future regulations surrounding micro-CHP installations. This includes the Microgeneration Certification Scheme ("MCS") which will give recognition of high-quality microgeneration products and services in the market place, and provide consumers with confidence and assurance when purchasing and installing these technologies. It should also guide consumers with realistic expectations of the performance of microgeneration systems in practice.

 

Also, Genlec has attended several trade association meetings and has provided significant input to the Department of Energy and Climate Change ("DECC") in respect of the proposed Feed-in Tariff scheme.

In April 2010, the Government's proposed Feed-in Tariffs will come into effect whereby producers of small-scale renewable and efficient energy will be paid a guaranteed fixed rate for every kilowatt of electricity they produce, including the electricity they consume, for a 25-year period. Furthermore, as well as being paid for all the electricity generated, an extra premium is paid for any surplus exported to the national grid.

 

Householders generating electricity in the home in this manner will benefit from the opportunity to use their electricity in the home to offset some or all of the electricity they would otherwise have had to buy. As a result they will be shielded to some extent from future price rises in electricity. In order to qualify for Feed-in Tariffs all installations must be carried out using MCS certified companies. Non-renewable micro-CHP is included in the scheme.

 

Kingston case study: micro-CHP comparison

Energetix has developed all its technologies on the premise that they are inherently cost-efficient even in the absence of artificial subsidies. In particular, the directors believe that our Genlec-enabled product is substantially more affordable than our micro-CHP competitors. As a case in point, the following table compares the economics of our Kingston product with other micro CHP technologies in 2010 and the potential position in 2020.

 

	Organic Rankine Cycle  2010	Organic Rankine Cycle 2020 (estimate)	Stirling engine, 2010	Stirling engine 2020 (estimate)	Fuel cell, 2012	Fuel cell 2020 (estimate)
Payback with Feed-in Tariff (yrs)	7	2	15	5	10	5
Payback without Feed-in Tariffs (yrs)	17	4	109	14	56	17
Annual energy cost savings with Feed-in Tariff (£)	385	433	400	463	1,033
Annual energy cost savings without Feed-in Tariff (£)	155	169	141	176	343

The values presented in the table above are illustrative and do not necessarily represent actual performance of a particular product.

 

Source: Delta Energy & Environment Ltd, Micro-CHP in the UK - An Economic Model, March 2010

 

Even at this early stage of commercialisation, Genlec demonstrates clear advantages over competing technologies whether with or without the Feed-in Tariff incentives.

 

Pnu Power

 

Business review

During the year, Pnu Power has concentrated its efforts into those market segments and geographies where it is able to demonstrate sustainable competitive advantage against the incumbent technology of lead-acid batteries. These segments are principally utility high-voltage switching, land mobile radio systems and telecommunication transmission networks. Environmental legislation is becoming increasingly onerous with respect to installation and disposal of lead-acid batteries which, combined with a comparatively short life expectancy necessitating more replacements in the duty life cycle, has made the Pnu Power compressed air solution a viable alternative for more than just economic reasons. Following successful trials, which are currently continuing, full demand for the Pnu Power system is anticipated from several major companies. These include: the National Grid UK and USA, which are amongst the world's largest utility and transmission and distribution companies and are focused on delivering energy to many millions of people across Great Britain and Northeastern US; Harris Corporation, which provides end-to-end wireless network solutions to the growing $9 billion global land mobile radio systems market, and Telecom Italia a leader in the Italian telecommunication market, with around 10,000 base transceiver stations.

 

Pnu Power has also installed a 20kW grid-connected system with a premier US aerospace and defence company. This installation is part of a US Department of Energy grant project to develop and demonstrate a diverse system of renewable distributed generation that will produce a verifiable, on-demand reduction of at least 15% of the facility's substation load with no disruption of facility operations. Phase two of this programme is scheduled for 2010.

 

Product development has been focused on streamlining the range with product platforms developed at 2kW, 4kW and 10kW in both AC and DC configurations. Pnu Power has undertaken in-house scroll development programmes to supply a scroll at each of these ratings. The scroll design used is essentially the same across the range, with the design simply uprated in order to meet each power requirement. The supply chain necessary to meet planned production levels is now in place. All supply partners are Tier 1, ISO9001 OEM manufacturers.

 

National Grid and other global transmission system operators ("TSOs") have been earmarked as key customers for the product. National Grid has its own certification standards and Pnu Power is currently working in conjunction with National Grid to produce a unit specifically to meet their requirements. In order to meet all of Pnu Power's certification requirements, we have established an excellent working relationship with TRAC-TRL, a world-renowned organisation specialising in all aspects of certification.

 

Pnu Power has worked closely with the British Standards Institute throughout 2009 towards achieving ISO9001 accreditation as a "designer and manufacturer of pneumatic battery systems". This accreditation is a prerequisite for meeting the vendor approval requirements of many of Pnu Power's customer base. Full accreditation to ISO9001 was achieved in March 2010.

 

Case studies

Telecom Italia - Turin

The objective:	to provide a low life-time cost solution to back-up power applications in a small regional central office supporting land line and broadband
The application:	with a 2.5kW typical load and a 4kW maximum load
Existing battery installation to be replaced:	flooded lead acid batteries, requiring; regular maintenance, climate control to maintain the temperature at less than 20C, special safety measures for acid and lead and a controlled disposal process
Pnu Power system provided:	a fully integrated autonomous solution to provide 1 hour back-up in their small central office near Turin. The unit supplied was a TC4 Pnu Power unit producing 4kW with 48V DC output, along with a specially designed in-line compressor that can automatically refill cylinders after a power outage and a compressed air cylinder bank. The system was fully installed and commissioned within the existing facility
Benefits of the Pnu Power system	• high reliability; • the system now only needs an annual inspection, compared to monthly maintenance for batteries; • the system only uses energy after a power outage, whereas battery systems require constant float charge through an installed rectifier; • the Pnu Power unit does not need any environmental control compared to batteries that need air conditioning to control their temperature; and • the Pnu Power system has an installed life of 20 years

 

National Grid UK - Chester

The objective:	to be cheaper first cost and lower life time cost than the existing battery installations
The application:	both a 110V DC output for switching at 400kV to 132kV as well as support a 48V DC output for communications loads from a single Pnu Power product
Existing battery installation to be replaced:	VRLA lead-acid batteries which require regular maintenance and testing, condition reporting which is expensive and unreliable, battery condition and runtime available, do not necessarily correlate, and to meet the output requirement there needs to be two separate battery systems
Pnu Power system provided:	a TC4 dual output system that backs up both the 110V DC and the 48V DC loads which utilises the existing compressed air main that is used to provide arc suppression during a switching moment. As this unit is provided to IP54 standard it can be operated outdoors avoiding the need for additional infrastructure costs such as a brick built block house in new installations
Benefits of the Pnu Power system	• single system instead of two systems backing up both 110V and 48V DC loads; • low cost installation, total time for installation and commissioning less than two hours whereas a typical battery installation usually requires about two days; • maintenance is reduced to an annual inspection rather than a monthly maintenance programme; • known system condition and operational predictability through graphical user information system which can be accessed remotely; and • reduced infrastructure costs

 

Harris Corporation (formerly M/A-COM) - Florida

The objective:	the system has to deliver very high levels of availability and reliability supporting emergency service networks, Police, Fire, etc
The application:	an AC load of around 2.5kW with a maximum load of 4kW
Existing battery installation to be replaced:	consists of VRLA batteries which require regular maintenance, climate control to keep the temperature below 20oC, in an area where summer temperatures reach 32oC and even winter temperatures can be above 21oC. Using lead- acid batteries requires annual issue of permits for their operation with associated costs
Pnu Power system provided:	An autonomous Pnu Power solution which provides 15 minutes of back- up supply producing 4kW AC split phase output with a specially designed in-line compressor that automatically refills cylinders after a power outage and a compressed air cylinder bank. The system meets all local USA and Florida state regulations
Benefits of the Pnu Power system	• low costs, installation and life time; • the system only requires an annual inspection; • the only energy used by the system is after a power outage when the compressor will refill the cylinders; • no need for air conditioning, saving in excess of $120 per month; and • has an installed life of twenty years compared to a five year life for VRLA batteries

 

 

 

 

 

 

 

 

 

 

 

VPhase

 

Business review

The Company has been increasing the profile of VPhase and promoting the VPhase message:

 

"VPhase is the smart new way to cut your energy costs immediately without changing your supplier or your lifestyle. By reducing and managing the voltage coming into your home, a VPhase device will ensure many of your electrical appliances use less electricity and cost less to run. It will also lower your carbon emissions. The device is simple to install by a qualified electrician and requires no maintenance. It's simply a matter of fit, forget and save instantly!"

 

In the first half of 2009 VPhase completed the development of its first domestic energy saving device which achieved CE marking in June 2009, declaring that the product complies with the essential requirements of the relevant European health, safety and environmental protection legislation and, therefore, permitting sales across the UK and continental Europe. Initially sales have been focused in the UK.

 

Achieving the CE milestone also enabled the commencement of Ofgem's formal product Demonstration Action of the VPhase unit, in conjunction with Scottish and Southern Energy (SSE), for the UK Government's CERT scheme. The results from this trial will indicate the level of lifetime carbon dioxide savings that utility companies can claim through the CERT scheme from the sale of the VPhase product. These trials are expected to conclude in the second quarter of 2010, which is later than we anticipated due to delays in the SSE customer selection and installation programme. These trial units are now fully installed.

 

Trials are also being conducted with a major Northwest-based social housing provider, British Gas, and in VPhase staff homes for both product performance and marketing opportunities. Independently analysed results from staff homes have shown annualised savings of between £75 to £135 per home, dependent upon the level of incoming voltage and load profile of the property. The small size of the staff home sample means it may not be indicative of the savings across the whole of the UK housing stock.

 

During the year, we have increased our sales and marketing activity and have promoted the VPhase device at: Ecobuild, the world's biggest trade and consumer event for sustainable design, construction and the built environment; on the BBC's Working Lunch television programme; and in the national press. We recruited a head of sales and have established training sessions with the National Association of Professional Inspectors and Testers (NAPIT). These training sessions allow VPhase to train electrical contractors in the benefits of and installation of VPhase whilst also introducing them to the additional revenue opportunity afforded by VPhase. We have established a programme of these training sessions for 2010 and are organising product familiarisation days with electrical distributors for their customers along with a series of training days for electricians at VPhase's premises in Capenhurst, Chester.

 

Case studies

VPhase has begun receiving results from the trials with SSE, British Gas, the Northwest-based social housing provider and in staff homes, and the data is being independently analysed.

 

In the case of the staff home trials, VPhase supplied recorded data from several properties that had been fitted with a VPhase unit. EA Technology, a well established power management consultancy and regular assessor of energy technologies, has analysed the electricity consumption data for these properties, for the period between December 2009 and February 2010. The energy savings over this period ranged, for these properties, from 6% to 12%. Energy savings of this magnitude, provided they are sustained over a whole year, would result in annual savings of between £75 and £135 at these properties. For example:

 

·; One test home is a five-bedroom detached house which has between 3 and 5 people living in it. The property is gas centrally heated with a gas hob and an electric oven. The typical voltage reduction that VPhase is delivering is 8.9%. This is a property is in a rural location with an average voltage supply of 232V, which is lower than the national average of 245V. The annualised saving from VPhase is £75 per annum.

 

·; Another property is an urban 4-bedroom detached house with a family of 5 in occupation. It is gas centrally heated and has an electric cooker. The average incoming voltage of 247V is marginally higher than the national average and VPhase is delivering a typical voltage reduction of 10.3% giving projected savings of £135 per annum.

 

The small size of this sample means that it may not be indicative of the savings across the whole of the UK housing stock.

 

In addition, VPhase has been carrying out back-to-back testing on a range of appliances. The typical energy savings demonstrated are:

 

·; 17% on fridges and freezers

·; 15% on lighting

·; 10% on new energy saving light bulbs

·; 30% on cordless phones

·; 13% on hi-fi's.

 

Whilst actual results may vary depending on the type and age of appliance and the level of incoming voltage, VPhase is consistently demonstrating encouraging levels of savings.

 

People

In 2009 we continued to control costs, and our team of 41 people (2008: 38) has delivered excellent performance for the Group. We have begun the process of growing the teams necessary to deliver commercial success for the Group and 2010 will see further addition of sales and marketing professionals.

 

Financial position and outlook

We finished the year in a stronger financial position than the Directors' expectations in terms of reduced losses and higher retained cash, leaving us well placed to capitalise on growing our sales through 2010.

 

 

Adrian Hutchings

Executive Chairman

23 March 2010

 

 

 

 

 

 

Finance Review

Chief Financial Officer's Review

 

Key highlights

 

Operating results

Revenue was £223,000 higher than 2008 at £255,000 (2008: £32,000) through VPhase and Pnu Power product sales.

 

Continuing operations	2009 £'000	2008 £'000
Revenue	255	32
Gross profit	33	Nil
Operating loss	(4,009)	(4,202)
Cash reserves 31 December	5,657	11,025

 

 

Overheads

Overheads (excluding depreciation and amortisation) of £3,245,000 were incurred in the year (2008: £3,741,000), a reduction of £496,000, mainly through the restructuring carried out in January 2009. This is consistent with the stage of development of the business, the majority of these costs relating to employment of staff £2,458,000 (2008: £2,910,000).

 

Depreciation of fixed assets and Intangible amortisation

Depreciation of property, plant and equipment totaled £206,000 (2008: £125,000), reflecting the full-year charge of expenditure incurred largely in 2008.

Amortisation of intangible assets increased during the year as both Pnu Power and VPhase have transitioned from the development phase into the commercial phase and the intangible research and development asset that was generated is now being amortised over its useful life. This has resulted in an increase in the amortisation charge of £255,000 to £591,000 (2008: £336,000).

 

Net finance costs

Interest earned on money held on deposit totaled £45,000 (2008: £615,000). The reduced amount reflects the lower interest rates that have prevailed throughout 2009 as compared to 2008, the lower quantum of cash held and the Group's policy of giving priority to security, then liquidity and finally yield in its choice of where to invest surplus cash.

 

The fair value adjustment of long term borrowings attributable to interest rate risk has resulted in a charge of £48,000 during the period (2008: £296,000 gain).

 

Other gains

Other gains of £12,000 (2008: £1,629,000) were made during the year from the issue of shares to the Group's former joint Broker for services provided to the Group's subsidiary, VPhase plc, giving rise to a deemed gain on disposal. All liabilities to issue shares for services to VPhase plc and the Group have been extinguished and no amounts are outstanding at the year end.

 

Loss before tax

The loss before tax of £3,982,000 (2008: £1,662,000) has increased from last year's reported loss largely due to the non-monetary gains made in 2008 of £1,925,000 arising from other gains, fair value adjustments and lower interest earnings. The underlying performance of the business is better represented by the reduced operating loss.

 

Tax

During the year, the Group received a tax credit of £135,000 (2008: £nil) in relation to research and development expenditure in 2006/07. We are now preparing claims for 2008 and 2009 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, was 6.08 pence (2008: 2.31 pence); the increase reflecting the impact of the non-monetary gains reported in 2008.

 

Investment in property plant and equipment

During the year £76,000 (2008: £335,000) was invested in property plant and equipment and is consistent with the Group's business model of outsourcing manufacturing operations to minimise capital investment requirements.

 

Investment in intangible assets

Investment in intangible assets during 2009 amounted to £1,393,000 (2008: £2,255,000). This investment is the internally generated product development costs capitalised in accordance with IAS38. The reduction in 2009 reflects VPhase and Pnu Power transferring from the product development phase to commercialisation. Further details are contained in note 4.

 

Cash and cash equivalents

At 31 December 2009, the Group had cash and cash equivalent reserves of £5,657,000.

 

 

Rick Smith

Chief Financial Officer

23 March 2010 Group Income Statement

for the year ended 31 December 2009

		Year ended 31 December
	Note	2009		2008
		£'000		£'000
Revenue		255		32
Cost of sales		(222)		(32)
Gross profit		33		-
Administrative expenses		(4,042)		(4,202)
Operating loss		(4,009)		(4,202)
Net finance (costs)/income		(3)		911
Other gains		30		1,629
Loss before income tax		(3,982)		(1,662)
Income tax	2	135		-
Loss for the year		(3,847)		(1,662)
Attributable to:
Equity holders of the Company		(3,350)		(1,272)
Minority interest		(497)		(390)
		(3,847)		(1,662)
Loss per share attributable to the equity holders of the Company during the year:
Total and continuing - Basic and diluted	3	(6.08)p		(2.31)p

 

All revenue and costs originate from continuing activities.

 

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

 

 

Group Statement of Changes in Equity

	Attributable to equity holders of the Company
	Share capital	Share premium	Retained earnings	Reverse acquisition reserve	Warrant reserve	Other reserves	Total shareholders' equity	Minority interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2008	2,752	15,376	(155)	(821)	256	144	17,552	251	17,803
Share based payments	-	-	6	-	-	22	28	-	28
Other share based payments -2007	-	-	20	-	-	(20)	-	-	-
Other share based payments -2008	-	-	-	-	-	16	16	-	16
Issue of warrants in VPhase plc	-	-	-	-	105	-	105	-	105
Issue of warrants	-	(230)	-	-	230	-	-	-
Deemed disposal in Vphase plc	-	-	-	-	-	-	-	1,651	1,651
Shares issued:
- 13 February 2008	1	11	-	-	-	(12)	-	-	-
- 12 June 2008	1	11	-	-	-	-	12	-	12
- 14 August 2008	1	15	-	-	-	-	16	-	16
- 8 October 2008	1	15	-	-	-	-	16	-	16
Transactions with owners	2,756	15,198	(129)	(821)	591	150	17,745	1,902	19,647
Loss for the year and total comprehensive income	-	-	(1,272)	-	-	-	(1,272)	(390)	(1,662)
Balance at 31 December 2008	2,756	15,198	(1,401)	(821)	591	150	16,473	1,512	17,985
Shares issued
- 4 June 2009	1	15	-	-	-	-	16	-	16
- 6 August 2009	1	15	-	-	-	-	16	-	16
Lapse of share based payments	-	-	68	-	-	(68)	-	-	-
Share based payments	-	-	-	-	-	(16)	(16)	-	(16)
Other share based payments	-	-	-	-	-	11	11	-	11
Lapse of warrants	-	-	256	-	(256)	-	-	-	-
Deemed disposal in VPhase plc	-	-	-	-	-	-		13	13
Share buy-back	-	-	(43)	-	-	-	(43)	-	(43)
Transactions with owners	2,758	15,228	(1,120)	(821)	335	77	16,457	1,525	17,982
Loss for the year and total comprehensive income	-	-	(3,350)	-	-	-	(3,350)	(497)	(3,847)
Balance at 31 December 2009	2,758	15,228	(4,470)	(821)	335	77	13,107	1,028	14,135

For the year ended 31 December 2009

 

 

 

 

 

 

Warrant reserve

On 15 August 2006 Energetix Group plc (the "Company") granted 1,350,000 warrants to its then Broker and Nominated Advisor in relation to the flotation which lapsed during the year. On 1 August 2007, as part of the agreed placing costs, the Company granted 500,000 warrants to its then broker. 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. In 2008 warrants were issued by VPhase plc in part settlement of its costs for placing shares in May 2008.

 

 

Minority interest

As at 31 December 2008, a minority interest existed due to the Group owning less than 100% of VPhase plc. The Group's shareholding has been further diluted during the year by the issue of shares to its former broker for services rendered up to June 2009. The Group appointed Ambrian Partners Limited as broker and nominated advisor from July 2009 and associated fees will be settled in cash.

 

 

 

Group Statement of Financial Position

At 31 December 2009

		As at 31 December
	Note	2009		2008
		£'000		£'000
ASSETS
Non-current assets
Goodwill		311		311
Other intangible assets	4	9,865		9,063
Property, plant and equipment		284		415
		10,460		9,789
Current assets
Inventories		375		-
Trade and other receivables		272		415
Cash and cash equivalents		5,657		11,025
		6,304		11,440
Total Assets		16,764		21,229
LIABILITIES
Non-current liabilities
Borrowings	6	1,600		1,625
		1,600		1,625
Current liabilities
Borrowings	6	85		264
Trade and other payables		944		1,355
		1,029		1,619
Total liabilities		2,629		3,244
EQUITY
Capital and reserves attributable to equity holders of the Company
Share capital		2,758		2,756
Share premium		15,228		15,198
Retained earnings		(4,470)		(1,401)
Reverse acquisition reserve		(821)		(821)
Warrant reserve		335		591
Other reserves		77		150
Total shareholders' equity		13,107		16,473
Minority interest		1,028		1,512
Total equity		14,135		17,985
Total equity and liabilities		16,764		21,229

 

 

Group Statement of Cash Flows

For the year ended 31 December 2009		Year ended 31 December
	Note	2009		2008
		£'000		£'000
Cash flows from operating activities
Cash consumed by operations	7	(3,804)		(2,933)
Taxation
Tax received		135		-
Cash flows from investing activities
Expenditure on intangible assets	4	(1,393)		(2,255)
Purchases of property, plant and equipment		(76)		(335)
Interest received		45		615
		(1,424)		(1,975)
Cash flows from financing activities
Net proceeds from the issue of ordinary shares		-		3,305
Repayment of financial liabilities		(232)		(150)
Share buy back		(43)		-
		(275)		3,155
Net (decrease)/increase in cash and cash equivalents		(5,368)		(1,753)
Cash and cash equivalents at the beginning of the year		11,025		12,778
Cash and cash equivalents at the end of the year		5,657		11,025

 

 

 

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 2008 annual report, apart from the adoption of IAS 1 Presentation of Financial Statements (Revised 2007), IFRS 7 Financial Instruments: Disclosures and IFRS 8 Operating Segments. 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 2009 were approved by the board of directors on 23 March 2010.

 

The financial information set out in this preliminary announcement does not constitute the Group's financial statement for the years ended 31 December 2009 and 2008. The financial information for the year ended 31 December 2008 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 s237(2) or (3) of the Companies Act 1985. The statutory accounts for the year ended 31 December 2009 will be delivered to the Registrar of Companies following the Company's annual general meeting.

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 Group's forecasts and projections, which have been prepared for the period to 31 December 2012 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 Group Financial Statements.

 

Critical accounting estimates and judgments

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

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.

 

Discount rate on future deferred receivables and liabilities

Management have exercised judgment in selecting the appropriate discount rate for application against intangible assets and financial liabilities, in particular in relation to the exclusion of market returns between 2008 and 2009 due to economic conditions, and have selected 11.60% (2008: 12.50%) to represent the best estimate of the current cost of capital to the Group.

 

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 flows, 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 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 former joint broker for services rendered up to June 2009. These share based payments have been valued at the fair value of the services received and are charged to the Income Statement with a corresponding credit to equity. The Group appointed Ambrian Partners Limited as broker and Nominated Adviser from July 2009 and associated fees will be settled in cash.

 

Taxation

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

 

Critical accounting judgments

Part disposal of VPhase plc

Management consider the "parent company concept" to be the most appropriate basis of consolidation. Under this method where a disposal of an interest in a subsidiary occurs and the relevant entity remains a subsidiary, the minority interest will increase by the carrying amount of the net identifiable assets that are now attributable to the minority interest due to the decrease in the Group's interest. Accordingly, any gain or loss is recognised as the difference between the proceeds of the disposal and the portion of the carrying amount of the net assets that have been disposed of, including goodwill. This accounting policy differs from the "entity concept", whereby any gain or loss recognised on the sale of the subsidiary would be reported within equity. In addition, minority interest would not be deducted in arriving at the profit or loss for the financial year and would be shown as equity in accordance with IAS 1. See note 5 for further details.

 

Control over VPhase plc

Following the deemed disposals in VPhase plc, the Group holds 49.1% (2008: 49.1%) of the ordinary share capital of VPhase plc. The Group continues to consolidate the results of the subsidiary on the basis that it controls the financial and operating polices of VPhase plc through Board members. In addition, the Group has control over 53.3% (2008: 53.7%) of the voting rights of the ordinary shares in VPhase plc as a result of retaining the voting rights over shares held by an Employee Benefit Trust. 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. Accordingly, the instrument is considered an embedded derivative and the Group has designated the entire instrument as fair value through profit and loss (FVTPL). See note 6 for further details. Amortisation 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 by Energetix Genlec Limited are deemed to still be in the development phase and accordingly no amortisation has been charged to the Group Income Statement for this subsidiary. Management deem that mainstream sales commenced in June 2009 for Energetix (Pnu) Power Limited and September 2009 for VPhase plc and, consequently, amortisation of these development costs began from these respective dates.

 

2. Income tax

	2009		2008
	£'000		£'000
Current tax
Prior year adjustment	135		-

 

The prior year adjustment originates from a tax credit received in cash arising from research and development activities during the financial years ending 31 December 2006 and 2007 undertaken in Energetix Genlec Limited (£78,000), Energetix (Pnu) Power Limited (£52,000) and Energetix Voltage Control Limited (£5,000).

 

Unrelieved tax losses of approximately £16,891,000 (2008: £12,260,000) 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 £3,350,000 (2008: loss of £1,272,000) and 55,138,105 (2008: 55,087,756) 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.

 

	2009		2008
Loss attributable to equity holders of the Company (£'000)	(3,350)		(1,272)
Weighted average number of ordinary shares in issue	55,138,105		55,087,756
Basic and diluted loss per share (pence)	(6.08)		(2.31)

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.

4. Intangible Assets

	Micro-CHP			Compressed air battery	Smart voltage management
	Distributed generation and load shifting			Power quality and reliability	Energy efficiency
	Intellectual property	Research and development asset	Total	Research and development asset	Research and development asset	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Year ended 31 December 2008
Opening net book value	5,249	808	6,057	1,087	-	7,144
Additions	-	1,298	1,298	735	222	2,255
Amortisation	(336)	-	(336)	-	-	(336)
Closing net book value	4,913	2,106	7,019	1,822	222	9,063
Year ended 31 December 2009
Opening net book value	4,913	2,106	7,019	1,822	222	9,063
Additions	-	1,075	1,075	142	176	1,393
Amortisation	(336)	-	(336)	(228)	(27)	(591)
Closing net book value	4,577	3,181	7,758	1,736	371	9,865
At 31 December 2009
Cost	5,787	3,181	8,968	1,964	398	11,330
Accumulated amortisation	(1,210)	-	(1,210)	(228)	(27)	(1,465)
Closing net book value	4,577	3,181	7,758	1,736	371	9,865
At 31 December 2008
Cost	5,787	2,106	7,893	1,822	222	9,937
Accumulated amortisation	(874)	-	(874)	-	-	(874)
Closing net book value	4,913	2,106	7,019	1,822	222	9,063

 

All additions during the year arise from internal development.

 

 

 

Capitalised product development costs

The Group currently has internally generated intangible assets from development of its micro-CHP module, compressed air battery and smart voltage management unit. All other development work has been written off as incurred where the criteria for recognition as an asset are not met.

 

Development costs are capitalised by the Group until the commencement of mainstream sales. Management determine that such sales began in Energetix (Pnu) Power Limited in June 2009 and in Energetix Voltage Control Limited in September 2009. Consequently, capitalisation of development costs ceased and amortisation of the carrying amount of the development assets within these businesses began in these months. Development costs continue to be capitalised under IFRS for Energetix Genlec Limited as mainstream sales are yet to commence.

 

Following the commencement of mainstream sales in VPhase and Pnu Power, development costs relating to products that are now being sold are expensed to the Income Statement and no longer capitalised. Subsequent to the commencement of mainstream sales, Energetix (Pnu) Power Limited incurred £48,000 and Energetix Voltage control Limited £15,000 of development costs that have been expensed to the Income Statement.

 

Impairment review

In accordance with IAS 36, the Group has undertaken an impairment review by cash generating unit. The Group determines that the following cash generating units exist and that their individual costs of capital are:

 

Technology	Cash generating unit	Cost of capital %	Total intangible carrying value £'000
Micro-CHP	Energetix Genlec Limited	11.6%	7,758
Compressed air battery	Energetix (Pnu) Power Limited	11.6%	1,736
Smart voltage management unit	VPhase plc	8.8%	371

 

Following a review of each business, the Directors do not believe that the carrying value in any of the Group's cash generating units is impaired and, hence, no charge has been made.

 

Key assumptions

All assumptions are applicable to each cash generating unit. In determining value in use, forecasts have been prepared for the five years following the Balance Sheet date. These forecasts were constructed with:

 

• the most recent approved forecasts and, where forecasts have not been approved;

• prudent extrapolations of the above.

 

Revenues were computed using:

 

• signed commercial agreements;

• memoranda of understanding with commercial partners; and

• management's assertions following discussion with various potential customers.

 

Costs have been calculated using existing cost bases adjusted for achievement of the above revenues.

 

Growth rates contained within the forecasts are based on management's assertions following discussions with potential customers and increase by various rates throughout the forecasted period. The forecasted value in use period is five years and is based on the Board approved forecasts for the period to 31 December 2012 and reasonably possible extrapolations thereon for the following two years.

 

The sales growth rate used beyond the forecast period in all businesses is 15% per annum. Management asserts that such a growth rate is appropriate as the products of each CGU are novel and once customer adoption begins in earnest, a growth rate significantly in excess of UK GDP is to be expected.

 

Cost of capital

The Capital Asset Pricing Model (CAPM) has been used to arrive at the costs of capital stated above.

 

The components of this calculation were determined as follows:

 

Risk-free rate: lower range of UK Gilts as provided by the website of the Debt Management Office website (http://www.dmo.gov.uk/).

 

Market-return rate: taken as the annual return on the 'Industrial Engineering' and 'Electronics and Electrical Equipment' sectors within AIM for each year from 2 January 2004 to 31 December 2007. Returns for the 12 months to 31 December 2008 and 2009 have been excluded from the analysis as management do not believe they are representative of the return demanded by investors.

 

Beta: taken from MoneyAM (http://www.moneyam.com).

 

Management note that the cost of capital may increase substantially across all companies before any material impact is noted.

 

Effect of reasonably possible changes

Management have undertaken scenario analyses, including a reduction in sales, and in no scenario does the value in use of any of the cash generating units approach the carrying value.

5. Part disposal of a business

On 5 June 2009, VPhase plc, an AIM listed subsidiary, issued 416,666 shares to Novum Securities Limited in settlement of broker services received.

 

From July 2009, Ambrian Partners Limited was appointed broker and nominated adviser for the Group and the associated fees will be settled in cash.

 

The Group's interest in VPhase plc reduced from 49.11% to 49.09% following these transactions. The reduction in the Group's interest in VPhase plc constituted a deemed disposal at Group level and resulted in a gain to the Group as calculated below.

 

Deemed disposal

 

	2009
	Group		Minority Interest		Total
	£		£		£
Fair value of consideration	25,000		-		25,000
Share of net assets disposed of	(13,151)		13,151		-
Gain on deemed disposal	11,849		13,151		25,000

 

Following the deemed disposals in VPhase plc, the Group held 49.1% of the ordinary share capital of VPhase plc. The Group continues to consolidate the results of the subsidiary on the basis that it controls the financial and operating polices of VPhase plc through Board members.

 

The Group has control over 53.3% (2008: 53.7%) of the voting rights of the ordinary shares in VPhase plc as a result of retaining the voting rights over shares held by an employee benefit trust.

 

 

6. Borrowings

The Group agreed with Axiomlab Group plc that £610,000 of the loan notes due to them was converted to £500,000 of equity on the flotation of the Group on the AIM Market of the London Stock Exchange. Conversion was at the flotation price. The remaining £250,000 of the loan notes due to Axiomlab Group plc was deferred for repayment within two to five years. In accordance with this agreement, £232,000 was paid to Axiomlab Group plc in July 2009 in full settlement of the liability with the Group receiving an £18,000 discount.

 

In July 2006, Energetix (Europe) Limited and Energetix Genlec Limited entered into an arrangement with Battelle Memorial Institute (Battelle) under which Battelle agreed to waive all rights to subscribe for 40% of the share capital of Energetix Genlec Limited in exchange for a £3,000,000 preference debt in Energetix Genlec Limited. The preference debt has been discounted at 11.60% (2008: 12.50%) from the date of assuming the preference debt until anticipated settlement date giving rise to a non current liability of £1,600,000 (2008: £1,625,000) and a current liability of £85,000 (2008: £14,000). The terms are that it is not interest bearing, that £500,000 was repaid over the two years ending August 2008 and that the balance will be repaid by (i) an amount equal to 10% of any licence fees paid to Energetix Genlec Limited by any third party and (ii) 2% of amounts received by Energetix Genlec Limited in respect of all mainstream sales. The obligation for future repayments based on a percentage of mainstream sales is considered an embedded derivative. During the year, £Nil (2008: £150,000) was repaid and the discounting of future repayments at 11.60% (2008: 12.50%) has resulted in a £48,000 increase (2008: £296,000 reduction) to the carrying value of the liability. The amount contractually repayable at 31 December 2009 was £2,500,000 (2008: £2,500,000).

 

Financial liabilities are recognised when the Group becomes party to the contractual agreement of the instrument. All interest related charges and changes in an instrument's fair value are reported in the Group Income Statement and are shown within finance income.

 

The change in value of the financial liability is derived from the level of mainstream sales expected to be obtained and as such is not attributable to changes in the credit risk of the liability.

 

There are no other borrowing facilities or arrangements in place for the Group as at 31 December 2009 and 31 December 2008.

 

7. Cash consumed by operations

		2009		2008
		£'000		£'000
Loss before income tax		(3,982)		(1,662)
Adjustments for:
- Depreciation		206		125
- Amortisation		591		336
- Finance income		(45)		(615)
- Other income		48		(296)
- Other gains on part disposal of VPhase plc		(12)		(1,629)
- Share based payments		11		28
- Other share based payments		16		136
- Issue of warrants in subsidiary		-		105
- Deemed fair value of consideration on deemed disposal		25		-
- Discount on settlement of Axiomlab liability		(18)		-
Changes in working capital:
- (Increase)/decrease in inventories		(375)		58
- Decrease/(increase) in trade and other receivables		143		(55)
- (Decrease)/increase in trade and other payables		(412)		536
Cash consumed by operations		(3,804)		(2,933)

 

8. Availability of financial statements

Copies of the full statutory financial statements will be available from the registered office from 21 May 2010 and will also be available from the Group's website at www.energtixgroup.com.

 

9. Annual General Meeting

The Annual General Meeting will be held at 12pm on 20 May 2010 at the Company's trading address, Unit 1 Capenhurst Technology Park, Capenhurst, Chester, CH1 6EH.

 

This information is provided by RNS

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