8th Apr 2008 07:01
Energetix Group plc08 April 2008 Press Release 8 April 2008 Energetix Group plc ("Energetix" or "the Group") Preliminary Results for the year ended 31 December 2007 Energetix Group plc (AIM: EGX), a leading developer of new and sustainablealternative energy products, today announces its preliminary results for theyear ended 31 December 2007: Financial highlights • August 2007 placing of 10 million shares at 120 pence per share raising £12 million before expenses; • September 2007 reversal of Energetix Voltage Control Limited into AIM shell, £12.4 million unrealised gain (mid market price) at 31 December 2007; • First sales of Genlec units in November 2007; • First sale of a Pnu Power TC1 product in November 2007; • Cash utilisation lower than internally forecast. Operational highlights • Genlec micro-CHP unit installed and operated in a test house for 12 months; • Genlec partnership agreements entered into with two boiler manufacturers; • Genlec partnership agreement awarded by E.ON to develop and deploy Genlec micro CHP enabled appliances; • Second generation Genlec designed, built and delivered to partners; • Genlec units now operating in three different types of boiler with OEM partners in 2 different countries; • Pnu Power launched first product (TC1) at Intelec in October 2007; • Pnu Power first order received, delivered and installed with Eskom, S.Africa; • VPhase plc's voltage control device showing c.10% energy savings in laboratory test. 2008 activities • appointment of Dr. Lee Juby as CEO of VPhase plc, who started in January 2008; • Dr. H Cialone joins Group board in March 2008; • A Genlec enabled Daalderop boiler was exhibited at VSK in Holland in February 2008; • Continued commercialisation of existing three businesses; • Further opportunities identified in key sectors; • Head of New Projects appointed. Commenting on the results, Adrian Hutchings, Chief Executive Officer, said: "Our first full year as a publicly quoted company has been extremely successful.We achieved or exceeded our goals in 2007 and I look forward to repeating thissuccess in 2008. I would like to thank our dedicated team who have enabled us toachieve so much in such a short period of time." For further information please contact: Energetix Group plcAdrian Hutchings, Chief Executive Officer Tel: +44 (0)151 348 2111Richard Smith, Chief Financial Officer Tel: +44 (0)151 348 2116 www.energetixgroup.com Zeus Capital Tel: +44 (0)161 831 1512Alex ClarksonBen Thompson www.zeuscapital.co.uk Novum Securities Limited Tel: +44 (0)20 7562 4700Michael BrennanHenry Turcan www.novumsecurities.com Media enquiries:Abchurch Communications Tel: +44 (0)20 7398 7700Justin Heath/ Monique [email protected] www.abchurch-group.com Chairman's statement I am pleased to report another successful year for the Group with furtherexcellent progress on all aspects of the business; technical, commercial andfinancial. At Genlec, the new smaller and lighter weight micro-CHP module has beenundergoing field trials which have demonstrated that a Genlec enabled device canbe operated at an overall efficiency of up to 95%. Genlec signed agreements withtwo boiler manufacturers and in addition, we concluded an agreement with E.ON todevelop and deploy our technology with the intention of Genlec boilers becomingpart of E.ON's highly regarded microgeneration portfolio. In November, wedelivered our first prototype product sales to our boiler partners in mainlandEurope. These devices are now installed and operating in their premises andDaalderop, a Genlec boiler partner, exhibited CombiVolt a Daalderop enabledGenlec boiler at the VSK 2008 International Trade Fair in February 2008. Pnu Power launched its first compressed air battery product at Intelec, Rome inOctober 2007 and has delivered its first order to South African utility Eskom.This unit has completed trials at Stellenbosch University and has been installedin a live switch-room, in George on the Southern Cape of South Africa. Theappointment of Neil Bright as Chief Executive Officer of Pnu Power hassignificantly increased the focus and scope of opportunities available to theCompany using his 38 years experience from the battery industry. In September 2007, the Group reversed one of its subsidiaries, Energetix VoltageControl Limited into VPhase plc (formerly Flightstore Group plc) and thiscompany was admitted to trading on the AIM Market of the London Stock Exchange.Energetix Group plc still holds 55.1% of the ordinary share capital of VPhaseplc. With the funds made available from this transaction, the business has madesubstantial technical progress and is in discussions with potential partners forroutes to market. In addition, the Group has begun establishing a dedicatedmanagement team for VPhase plc and is pleased that Dr. Lee Juby has joined theboard as Chief Executive Officer with effect from 1 January 2008. In March 2008, the Energetix Group board was further strengthened with theappointment of Dr. Henry Cialone as a non-executive director. Henry's worldclass experience, having led Battelle Memorial Institute's commercial energybusiness, served on the governing board of the US National Renewable EnergyLaboratory (NREL) and being non-executive director of a spin out company fromIdaho National Laboratory, brings Energetix access and understanding both ofadditional markets and new sources of intellectual property. At the same time asHenry's appointment, Bryan Gray stepped down from the board as a non-executivedirector. I would like to thank Bryan for his commitment and support to thecompany and I am pleased that he will continue to act as Genlec's representativeon the Micropower Council. During the year, the North West Regional Development Agency awarded Genlec a£0.2 million grant to develop the next generation Genlec product which willapply to combination boilers. These boilers produce hot water on demand ratherthan storing the hot water in a tank until required. To develop the Group's facilities we have taken a further lease on an additional8,000 square foot unit on the Capenhurst Technology Park. This unit will houseVPhase and Genlec. The Group delivered a robust financial performance in the year with income of£1.16 million (2006: £0.25 million) of which interest on cash balances provided£0.41 million (2006: £0.07 million) and the disposal of Energetix VoltageControl Limited provided £0.69 million of other income net of costs and productsales of £0.06 million. The expansion of activities, with 2007 as the first full year since the Groupfloated, has resulted in increased overheads before amortisation or depreciationof £2.65 million (2006: £1.01 million) and an increased charge for amortisationand depreciation of £0.40 million (2006: £0.21 million). The loss for the year was higher than 2006 at £1.85 million (2006: £1.02million) reflecting a full year of operation as a quoted company and also theincreased drive towards commercialisation of the Group's subsidiaries asoutlined at the time of our float in August 2006 and our further placing inAugust 2007. The basic adjusted loss per share increased from 2.86 pence to 3.75pence. Cash reserves remain very healthy at £12.78 million (2006: £4.45 million)and the Group's business model is fully funded. Also, during the year the Group completed the placing of 10 million ordinaryshares of 5 pence each at 120 pence per share raising a further £12 milliongross (£11.3 million net). Funds raised are being used to enable Genlec toengage with more potential partners, for Pnu Power to address the increasingnumber of leads from across the world and to progress newly identified marketsoutside uninterruptible power. In addition, the fund raising has strengthened the Group's balance sheetallowing the Directors to continue to research and source applicabletechnologies focused on the increasingly important sustainable alternativeenergy sector. It also assists when in negotiations with partners and suppliers. Investment in property, plant and equipment amounted to £0.19 million (2006:£0.08 million) as the Group invested in facilities for the expansion of activityand commercialisation of its subsidiaries. Investment in the Group's researchand development assets amounted to £1.02 million (2006: £0.57 million). At this stage of the Group's development the Board is not recommending adividend in respect of the year to 31 December 2007. The success of our business is driven by the quality and commitment of ourpeople and I would like to thank all the Group's employees for their efforts,hard work and commitment over the last year. I am confident that the coming yearwill be another successful one as the Group continues the commercialisation ofits subsidiaries. Alan AubreyChairman8 April 2008 Chief Executive's review The continuing and growing need to control energy costs, reduce environmentalemissions, and provide reliable quality power is enhancing the alreadyfavourable market conditions for Energetix products. This demand is evidenced by a number of factors, such as the heightenedawareness and debate amongst consumers of energy and environmental issues, theincreased level of legislation and incentives being introduced by governmentsand other agencies on a global basis, and the growing significance placed bycorporate entities on these factors in their branding and buying decisions. Energetix's strategy of focusing on robust, smart technologies with strongintellectual property is a key enabler in delivering these market needs in atimely fashion and in helping us to meet our fast to market objectives. Thisstrategy also enables our businesses to focus on our core strengths of productdevelopment and commercialisation whilst predominantly outsourcing the capitalintensive aspects of product assembly. I am delighted with the calibre of the people we have been able to attract tolead our subsidiary companies. Each of these subsidiaries has developed itsproducts based mainly on utilising mass produced components. This again supportsour fast to market approach, enables us to produce products that are alreadysome way down the cost curve, and provides a good understanding of the productlife that can be achieved. This pragmatic approach has enabled strong supplychain arrangements to be developed, in many cases with multi-sourcingopportunities to support competitive prices and reduce risk. Risk reduction has been a major element of the past year's achievements,technically, commercially and financially. Both Genlec and Pnu Power havedelivered products to partners and customers respectively, and have built on thetrials initiated at the start of the year. The signing of agreements by Genlec with two boiler companies, one of whom isthe leading brand in its country, and the agreement with E.ON where it isplanned that Genlec will become part of its well respected E.ON micro-generationportfolio, has given Genlec a good initial base for dual routes to market. PnuPower has received an excellent response to its first public demonstration atIntelec in Rome, achieving its first commercial sale and generating significantinterest from very large players in the telecommunications power field. The fund raising in August 2007, to enable the Group to accelerate thesebusinesses, has delivered a very strong balance sheet and given a high level ofconfidence both in delivery of our objectives and in examining futureopportunities for the Group. 2007 was a very exciting and successful year for Energetix; I look forward to2008 being as successful. We have set ourselves some challenging targets,however I am confident that the skill and dedication of the Energetix staff willenable us to continue our track record of delivering or exceeding ourobjectives. 2007 was a year focused on creating businesses from the technologyprojects developed within the Group. 2008 is the year that each of thesebusinesses will establish the building blocks that should enable them to delivergrowing revenues and contribution in 2009. Particular priorities are: • Genlec: - initial launch, with visibility on commercial sales, of the Genlec product with our boiler partners; - confirm the suitability of Genlec as part of the E.ON micro-generation portfolio; - increase the number of boiler and utility partners from the three current participants; and - select an assembly partner. • Pnu Power: - continue to create sales opportunities in the telecommunications backup power field; - develop and test a larger power system, up to 100kW of electrical output; and - growth in revenue. • VPhase: - complete development of the initial product; - appropriate testing to confirm performance and to meet safety standards; and - initiate early sales. I look forward to our teams achieving these goals and reporting back to you atthe time of our Interim Results the progress we have made in delivering them. A C Hutchings Chief Executive Officer 8 April 2008 Financial review The Group's financial performance in the year and the loss was in line withinternal projections and with our focus on strong cash management our year endcash balance at £12.78 million is better than expected. Our operating loss for the year was £3.05 million (2006: £1.22 million), which,as set out at the time of Admission and in our interim results published on 17September 2007, is in line with the Group's internal forecast to increase thelevel and speed of commercialisation activity, through the recruitment ofadditional staff and in particular the recruitment of senior management teamsfor Genlec and Pnu Power. Product sales income of £0.06 million (2006: £nil) was earned as the first PnuPower and Genlec units were sold. Clarity on the sales adoption process in eachof the business has improved in the year with the Eskom sale for Pnu Powerproviding a good example, where single units are taken for internal testing,followed by live testing and once successful small scale orders will be receivedleading to greater sales in subsequent years. For Genlec product sales, weexpect to see initially a small number units sold for in house partner testingfollowed by larger batch sizes as field trials are carried out and the productsare CE marked. This will be followed by additional volumes as the productroll-out commences. There was no consultancy in 2007 (2006: £0.07 million) asthe Group is focused on the commercialisation of its own subsidiaries and thegeneration of revenue by product sales in these businesses. Our loss before tax for the year was £1.85 million (2006: £1.02 million loss),an increase over last year in line with the Group's plans outlined at the timeof our admission to AIM in August 2006 and our further placing in August 2007. On 3 September 2007, the Group sold 25% of Energetix Voltage Control Limited toOra Capital partners and certain Ora Capital employees for £0.6 million byissuing new shares in Energetix Voltage Control Limited. At the time of thedisposal the subsidiary had net liabilities of £0.06 million. This has resultedin a gain disclosed in the accounts of £0.43 million being the Group's share ofthe cash consideration after adjusting for minority interests. On 25 September2007, the Group reversed Energetix Voltage Control Limited into VPhase plc(formerly Flightstore Group plc) which placed a value on the shares issued of£2.4 million of which £1.6 million related to the Group's equity stake. This wassettled by VPhase plc issuing 343,855,008 new ordinary shares of 0.25 pence tothe Group representing 55.1% of VPhase plc's total issued share capital. Thishas resulted in a further gain disclosed in the accounts of £0.25 million andboth transactions have resulted in a minority interest in the Group of £0.26million as set out in note 5.2. Subsequent to the sale, VPhase plc was admittedto trading on the AIM market of the London Stock Exchange and the Group has madea further unrealised gain of £12.15 million on its holding (based on a VPhaseplc share price of 4 pence as at 31 December 2007). In accordance with IFRS, nobenefit from this unrealised gain has been taken to these financial statements. Interest income from money held on bank accounts and short term depositstotalled £0.41 million (2006: £0.07 million). Cash utilised by the business during the year on operating activities was £2.44million (2006: £0.80 million) and on investing activities £0.17 million (2006:£0.58 million). The placing generated a net £11.29 million (2006: £5.60 million)and long term liabilities were reduced by £0.35 million (2006: £nil). Theresultant cash inflow during the year was £8.33 million (2006: £4.23 million). Cash has been managed so that funds not immediately required by the businesshave been held on the money market or on deposit with UK banks in line with ourstrategy of maximising interest earnings whilst maintaining sufficient funds foroperating requirements. The Board has not recommended a dividend given the stage of development of theGroup and no dividends were paid during the year. During the year, the fees of our joint broker have been settled by the issue of45,454 new ordinary shares of 5 pence each and the Group has a commitment toissue a further 45,454 shares for services provided up until 22 March 2008.Accordingly, these share based payments have been recognised in the incomestatement. In addition, our subsidiary VPhase plc has entered into a commitment to pay feesto our joint broker for services provided from 25 September 2007 to 24 September2008 by the issue of 4,992,961 new ordinary shares of 0.25 pence each. As at 31December 2007, no shares had been issued and a further 4,992,961 shares are tobe issued. No other share based payments have been made to other third parties. In addition, 303,707 share options were granted in the year to senior employeesof the Group's subsidiaries. Subsequent to the year end, the Group has had confirmation from HM Revenue andCustoms that the disposal of a business by Energetix (Europe) Limited in 2004had been correctly treated and that substantial shareholder exemption did apply.This concludes the dispute referred to in previous years and reduces anyliability for tax on this transaction to £nil. R H SmithChief Financial Officer8 April 2008 Group Income Statementfor the year ended 31 December 2007 Year ended 31 December Note 2007 2006 £'000 £'000 Revenue 55 67Cost of sales (24) (46)Gross profit 31 21Administrative expenses (3,045) (1,220)Operating loss (3,014) (1,199)Finance income 488 68Other gains 685 110Loss before income tax (1,841) (1,021)Income tax expense (6) -Loss for the year (1,847) (1,021) Attributable toEquity holders of the Company (1,842) (1,021)Minority interest (5) - (1,847) (1,021) Loss per share attributable to the equity holders of the Company during the year: Total and continuing - Basic and diluted 3 (3.74)p (2.86)p All revenue and costs originate from continuing activities. Group statement of changes in shareholders' equityfor the year ended 31 December 2007 Attributable to equity holders of the Company Share Retained Reverse Total Minority Share premium Earnings Acquisition Warrant Other shareholders' interest Total capital Reserve Reserve Reserves equity equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 As previouslyreported inEnergetix (Europe) Limited as at 1January 2006 - 179 2,708 - - - 2,887 (26) 2,861 Total recognisedloss for the year - - (1,021) - - - (1,021) - (1,021) Share based payments - - - - - 44 44 - 44 Provision againstminority interest - - - - - - - 26 26 Share issuesShares issued bylegal subsidiarybefore reverseacquisition- 8 August 2006 loan note conversion - 500 - - - - 500 - 500 Reallocation of reserves on reverseacquisition 1,500 (679) - (821) - - - - - Share Issues bylegal parent afterreverse acquisitionProceeds from EISPlacing - 15 August2006 125 875 - - - - 1,000 - 1,000 Proceeds fromGeneral Placing - 16August 2006 625 4,375 - - - - 5,000 - 5,000 Share issue expenses - (403) - - - - (403) - (403) Warrants issued - (256) - - 256 - - - - Balance at 31December 2006 2,250 4,591 1,687 (821) 256 44 8,007 - 8,007 Total recognisedloss for the year - - (1,842) - - - (1,842) (5) (1,847)Partial disposal ofEnergetix VoltageControl Limited - - - - - - - 256 256(Note 5) Share based payments - - - - - 68 68 - 68Other Share basedpayments - - - - - 32 32 - 32Proceeds fromplacing 500 11,500 - - - - 12,000 - 12,000- 1 August 2007Shares issued - 21 August 2007 1 11 - - - - 12 - 12- 8 October 2007 1 11 - - - - 12 - 12Share issue expenses - (737) - - - - (737) - (737) Balance at 31 2,752 15,376 (155) (821) 256 144 17,552 251 17,803December 2007 Total recognised income and expense recognised directly to equity amounts to£Nil (2006: £Nil). Reverse acquisition reserve As disclosed in note 1, the reverse acquisition reserve relates to the reverseacquisition between Energetix (Europe) Limited and Energetix Group plc on 8August 2006. Warrant reserve On 15 August 2006, the Company granted 1,350,000 warrants to its Broker andNominated Advisor in relation to the prior year flotation. The fair value ofwarrants is calculated using the Black-Scholes model at the time of grant and ischarged to the share premium account. Other reserves Other reserves comprise of share based payments for the cost of options granted£112,000 (2006: £44,000). In addition, it includes £32,000 (2006: £nil) forother share based payments issued to the joint brokers. Minority interest As at 31 December 2006, Energetix Laser Technologies Limited, a non trading 60%owned subsidiary of Energetix (Europe) Limited, had net liabilities resulting ina debit minority interest. However, the Directors have made a provision againstthis balance on the basis that it is potentially irrecoverable and hence thereis no balance attributable to minority interests in the Group Balance Sheet. In addition, a minority interest arose from the partial disposal of EnergetixVoltage Control Limited to VPhase plc note 5. Group Balance Sheetat 31 December 2007 As at 31 December Note 2007 2006 £'000 £'000ASSETSNon-current assetsGoodwill 311 -Other intangible assets 4 7,144 6,457Property, plant and equipment 205 77 7,660 6,534Current assetsInventories 58 -Trade and other receivables 360 128Corporation tax receivable - 6Cash and cash equivalents 12,778 4,445 13,196 4,579 Total Assets 20,856 11,113 LIABILITIESNon-current liabilitiesFinancial liability - borrowings 2,245 2,559 2,245 2,559Current liabilitiesFinancial liability - borrowings 89 200Trade and other payables 719 347 808 547 Total liabilities 3,053 3,106 EQUITYCapital and reserves attributable to equity holders ofthe CompanyShare capital 2,752 2,250Share premium 15,376 4,591Retained earnings (155) 1,687Reverse acquisition reserve (821) (821)Warrant reserve 256 256Other reserves 144 44Total shareholders' equity 17,552 8,007Minority interest 251 -Total equity 17,803 8,007 Total equity and liabilities 20,856 11,113 Group Cash Flow Statementfor the year ended 31 December 2007 Year ended 31 December Note 2007 2006 £'000 £'000Cash flows from operating activitiesCash consumed by operations 6 (2,437) (797) Cash flows from investing activitiesExpenditure on intangible assets (1,020) (565)Purchases of property, plant and equipment (190) (78)Proceeds from part disposal of business 630 -Interest received 413 68 (167) (575)Cash flows from financing activitiesNet proceeds from the issue of ordinary shares 11,287 5,598Repayment of financial liabilities (350) - 10,937 5,598 Net increase in cash and cash equivalents 8,333 4,226 Cash and cash equivalents at the beginning of the year 4,445 219 Cash and cash equivalents at the end of the year 12,778 4,445 Notes 1. Basis of preparation The preliminary results for the year ended 31 December 2007 have been extractedfrom the audited accounts which have not yet been delivered to the Registrar ofCompanies. The financial information set out in this announcement does notconstitute statutory accounts for the year ended 31 December 2007 or 31 December2006. The financial information for the year ended 31 December 2007 wasunqualified and did not contain a statement under section 237 of the CompaniesAct 1985. The statutory accounts for the year ended 31 December 2006 have beendelivered to the Registrar and were prepared in accordance with IFRS as adoptedby the EU, while the statutory accounts for the year ended 31 December 2007 willbe delivered to the Registrar following the Company's Annual General Meeting. The preliminary results has been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) as adopted by the European Union. Critical accounting estimates and judgements The preparation of Financial Statements in conformity with IFRS as adopted bythe European Union requires the use of certain critical accounting estimates. Italso requires management to exercise its judgement in the process of applyingthe Group's accounting policies. The areas involving a higher degree ofjudgement or complexity, or areas where assumptions and estimates aresignificant to the preliminary results are disclosed below. Estimates and judgements are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that arebelieved to be reasonable under the present circumstances. Research and development activities Management have reviewed the Group's research and development activities andhave made estimates and judgements on the amount of development expenditure itis appropriate to capitalise. Discount rate on future deferred receivables and liabilities Management have exercised judgement in selecting the appropriate discount ratefor application against future deferred receivables and liabilities and haveselected 7.50% (2006: 6.75%) to represent the best estimate of the current costof debt to the Group. Admission and placing costs Management have reviewed the expenditure related to the admission of EnergetixGroup plc and VPhase plc's re-admission and Energetix Group plc's placing on AIMand, where appropriate, made judgements as to how much of the expenditurerelated to the placing of existing shares, and should therefore be charged tothe Income Statement, and how much related to the placing of new shares, andshould therefore be charged against share premium. Impairment of intangible assets Management have conducted an impairment review of intangible assets and have tomake judgements as to the likelihood of them generating future cash flow, overthe period those cash flows will be received and what costs are attributableagainst them. The recoverable amount is determined using the value in usecalculation. The use of this method requires the estimation of future cash flowsand the selection of a suitable discount rate in order to calculate the presentvalue of these cash flows. In support of the assumptions used, management uses avariety of sources including third party published reports and knowledge fromdiscussions with partners and potential partners in both the supply anddistribution channels. Share based incentive arrangements Share based incentive arrangements are provided to management and certainemployees. These are valued at the date of grant using the Black-Scholes optionpricing model and management have to exercise judgement over the likely exerciseperiod, interest rate and share price volatility. Management uses varioussources of information including its own share price performance, or where thereis insufficient history the performance of comparable listed entities,experience from the historical exercise of options and published data on bankbase rates. In addition, during the year the Group has issued shares to its joint broker forannual services rendered up to March 2008 and has entered into a commitment topay fees to its joint broker for services provided to Vphase plc, a subsidiaryundertaking, up to 24 September 2008. These share based payments have beenvalued at their fair value as they are received and are charged to the incomestatement with a corresponding credit to equity. Part Disposal of Energetix Voltage Control Limited Management consider the "parent company concept" to be the most appropriatebasis of consolidation. Under this method where a disposal of a subsidiaryoccurs and the relevant entity remains a subsidiary, the minority interest willincrease by the carrying amount of the net identifiable assets that are nowattributable to the minority interest due to the decrease in the Group'sinterest. Accordingly, any gain or loss is recognised as the difference betweenthe proceeds of the disposal and the portion of the carrying amount of the netassets that have been disposed of, including goodwill, see note 5. Thisaccounting policy differs from the "entity concept", whereby any gain or lossrecognised on the sale of the subsidiary would be reported within equity. Inaddition, minority interest would not be deducted in arriving at the profit orloss for the financial year and would be shown as equity in accordance with IAS1. Taxation Management have not provided for deferred tax in relation to unrelieved taxlosses as the recoverability is currently uncertain. The Group accounting policies used in the preliminary results are consistentwith those applied in its most recent annual financial statements other thanwhere noted below: Adoption of new accounting standards In the current year, the Group has adopted IFRS 7 Financial Instruments:Disclosures which is effective for annual reporting periods beginning on orafter 1 January 2007. The impact of the adoption of IFRS 7 has been to expand the disclosures providedin these financial statements regarding the Group's financial instruments andmanagement of capital. Four interpretations issued by the International Financial ReportingInterpretations Committee are effective for the current period. These are IFRIC7 Applying the Restatement Approach under IAS 29, Financial Reporting inHyperinflationary Economies; IFRIC 8 Scope of IFRS 2; IFRIC 9 Reassessment ofEmbedded Derivatives; and IFRIC 10 Interim Financial Reporting and Impairment.The adoption of these interpretations has not led to any changes in the Group'saccounting policies. Early adoption of new accounting standards The Group has adopted IFRIC 11 IFRS 2 Group and treasury share transactions. Theadoption of this interpretation has resulted in the fair value charge foroptions given to subsidiary employees being added to the Company's investment inthose subsidiaries and the resulting cost charged to the subsidiaries incomestatement. 2. Segmental information At 31 December 2007, the Group is organised into three main segments: • products for distributed generation and load shifting, these are the micro CHP products from Genlec; • products for power quality and reliability, these comprise of the compressed air battery products of Pnu Power; and • products for energy efficiency, these comprise the voltage control device of VPhase. The segment results for the year ended 31 December 2007 are as follows: Distributed Power quality Energy Unallocated Group generation and and efficiency load shifting reliability £'000 £'000 £'000 £'000 £'000 Segment revenue 47 8 - - 55Operating loss (1,160) (757) (191) (906) (3,014)Finance income 25 - 3 460 488Other income - - 685 - 685 (Loss)/profit before income tax (1,135) (757) 497 (446) (1,841)Income tax expense - - - (6) (6)Loss for the year (1,135) (757) 497 (452) (1,847) Depreciation andamortisation expense (338) (35) - (22) (395) Non cash movements (174) 26 (6) 221 67 The segment results for the year ended 31 December 2006 are as follows: Distributed Power quality Energy Unallocated Group generation and and efficiency load shifting reliability £'000 £'000 £'000 £'000 £'000 Segment revenue 67 - - - 67Operating loss (214) (12) (26) (947) (1,199) Finance income - - - 68 68Other gains - - - 110 110 Loss before income tax (214) (12) (26) (769) (1,021)Income tax expense - - - - -Loss for the year (214) (12) (26) (769) (1,021) Depreciation and amortisationexpense (205) (7) - (2) (214) Non cash movements 213 45 13 (153) 118 The segment assets and liabilities at 31 December 2007 and capital expenditurefor the year then ended are as follows: Distributed Power quality Energy Unallocated Group generation and and efficiency load shifting reliability £'000 £'000 £'000 £'000 £'000 Assets 6,306 1,273 953 12,324 20,856Liabilities (2,164) (99) (87) (703) (3,053)Capital expenditure - Tangible 38 73 7 72 190 - Intangible 535 485 - - 1,020 The segment assets and liabilities at 31 December 2006 and capital expenditurefor the year then ended are as follows: Distributed Power quality Energy Unallocated Group generation and and efficiency load shifting reliability £'000 £'000 £'000 £'000 £'000 Assets 5,877 610 1 4,625 11,113Liabilities (2,559) (67) (13) (467) (3,106)Capital expenditure - Tangible 2 64 1 11 78 - Intangible 6,060 292 - - 6,352 Revenue and loss before income tax are attributable to the principal activity ofthe Group. All revenue and costs originate from continuing operations. Revenue can be summarised as follows: Year ended 31 December 2007 2006 £'000 £'000 Consultancy services - 67Sale of distributed generation and load shifting products 47 -Sale of power quality and reliability products 8 - 55 67 Geographic analysis of revenue: Year ended 31 December 2007 2006 £'000 £'000 UK 39 67Europe 8 -Rest of world 8 - 55 67 3. Loss per share The loss per share is based on the loss of £1,841,000 (2006: loss of £1,021,000)and 49,177,833 (2006: 35,718,812) ordinary shares of 5p each, being the weightedaverage number of shares in issue during the period. The weighted average numberof ordinary shares for the period ended 31 December 2006 assumes that the29,998,580 ordinary shares issued in relation to the reverse acquisition ofEnergetix Group plc existed for the entire period. Energetix Group plc shareshave been included since 8 August 2006, the date of the reverse acquisition, andall shares have been included in the computation based on the weighted averagenumber of days since issue. Year ended 31 December 2007 2006 Loss attributable to equity holders of the Group (£'000) (1,841) (1,021) Weighted average number of ordinary shares in issue 49,177,833 35,718,812 Basic & diluted loss per share (pence) (3.74) (2.86) The share options and warrants in issue are anti-dilutive in respect of thebasic loss per share calculation and have therefore not been included. 4. Intangible Assets Micro CHP Compressed air battery Intellectual Research and Total Research and property development asset development asset Total £'000 £'000 £'000 £'000 £'000Year ended 31 December 2006Cost - - - 310 310Additions 5,787 273 6,060 292 6,352Amortisation (205) - (205) - (205)Closing net book value 5,582 273 5,855 602 6,457 Year ended 31 December 2007 Opening net book value 5,582 273 5,855 602 6,457Additions - 535 535 485 1,020Amortisation (333) - (333) - (333) Closing net book value 5,249 808 6,057 1,087 7,144 At 31 December 2007Cost 5,787 808 6,595 1,087 7,682 Accumulated amortisation (538) - (538) - (538)Net book value 5,249 808 6,057 1,087 7,144 2007 2006 Additions may be analysed as follows: £'000 £'000 Non cash items - 5,787Research and development capitalised during the year 1,020 565 1,020 6,352 Intangibles include internally generated product development costs capitalisedin accordance with IAS 38. The Group currently has internally generated intangible assets from developmentof its mCHP module and compressed air battery. All other development work hasbeen written off as incurred as the criteria for recognition as an asset are notmet. On 16 April 2004, the Group disposed of its 60 per cent investment in EnergetixMicropower Limited to a third party for an initial consideration of £1,031,400on completion of the transaction, deferred consideration of £4,200,000, of which£900,000 was due as at 16 April 2006, and contingent consideration of £600,000(based upon the sale of 60,000 units by the acquirer). The deferredconsideration was discounted at 6.75 per cent from the date of disposal to theanticipated settlement date. Initially the discount was recorded as financingcosts of £846,000. On 16 April 2006, a third party indicated that they would not be paying theGroup the deferred consideration for Energetix Micropower Limited that wasoriginally sold in April 2004. The terms of the original Sale and PurchaseAgreement contained clauses that anticipated this eventuality and accordinglyresulted in the return of the intellectual property into a new subsidiary of theGroup (Energyboost Limited (now Energetix Genlec Limited)) formed for thepurpose. The agreement also made provision for the original partner to EnergetixMicropower Limited to participate in the new subsidiary with their original 40%equity holding. The Group agreed that its original partner in this venture received a £3,000,000preference debt in the new subsidiary in lieu of any entitlement to equity. Thepreference debt has been discounted at 6.75% from the date of assuming untilanticipated settlement date. This preference debt will be paid out of the futureearnings of the new subsidiary. In accordance with IAS 38 the intellectual property has been capitalised at thediscounted value of the deferred consideration foregone plus the value of debtassumed by the Company. £'000 Current receivable foregone as at 16 April 2006 900Discounted value of deferred consideration foregone 2,378Discounted value of preference debt given for 40% of the equity 2,509Value of intellectual property included in intangible assets 5,787 The remaining amortisation period of the intellectual property is 16 years. 5. Disposal and acquisition of a business During the financial year, the Group partly disposed of its energy efficiencybusiness Energetix Voltage Control Limited to VPhase plc. The transactionchronology is outlined below: • On 3 September 2007, the Group sold 25% of Energetix Voltage Control Limited to Ora Capital Partners and certain Ora Capital employees for £600,000 ("Partial disposal (1)"). Net liabilities of Energetix Voltage Control Limited as at 3 September 2007 amounted to £59,000. The Group continued to hold 68.76% of the subsidiary's share capital and Energetix (Nominees) Limited held 6.24% on behalf of management and staff. • On 25 September 2007, the Group reversed Energetix Voltage Control Limited into VPhase plc (formerly Flightstore Group plc). Consequently, VPhase plc became Energetix Voltage Control Limited's immediate parent undertaking and the Group retained a holding of 60.1% in Energetix Voltage Control Limited (Energetix (Nominees) Limited holding 5% of VPhase plc ordinary share capital and Energetix Group plc holding 55.1%). The Group received 375,097,506 new shares of 0.25 pence each in VPhase plc at 0.51 pence per share. Consequently upon the transaction on the 25 September 2007, the Group acquired cash in VPhase plc (formerly Flightstore Group plc) amounting to £30,000, in addition the Group partially disposed of Energetix Voltage Control Limited. The minority shareholders in VPhase plc obtained a 45% share of the cash acquired in the company and on the same date acquired an additional 13.76% in the net assets of Energetix Voltage Control Limited amounting to £74,000 ("Partial disposal (2)"). 5.1 Partial disposal 1 2007 Group Minority Total Interest £'000 £'000 £'000 Fair value consideration received 413 187 600Share of net liabilities disposed of 18 (18) - 431 169 600 5.2 Partial disposal 2 and acquisition of VPhase plc On 25 September 2007, partial disposal 2 of Energetix Voltage Control Limitedwas a reversal of the subsidiary into VPhase plc. As a result VPhase plc becameEnergetix Voltage Control Limited's immediate parent undertaking and the Groupgained a 60.1% holding in VPhase plc (Energetix (Nominees) Limited holding 5%and the Group holding 55.1%). The deemed disposal gain and minority interestarising on the transaction is set out below: 2007 Group Minority Total Interest £'000 £'000 £'000 Fair value consideration received 328 - 328Share of net assets disposed of (74) 74 - 254 74 328Gain recorded by the Group Partial disposal 1 and 2 685 The total deemed gain of both disposals is £685,000. In addition, there is goodwill arising on the acquisition of 55.1% of VPhase plcas set out in the table below: 2007 Group Minority Interest £'000 £'000 Fair value of business given in consideration 328 -Less share of net assets acquired 17 13 Goodwill arising on transaction 311 13 The total minority interest arising from all transactions amounts to £256,000. The relevant shareholding of Energetix Voltage Control Limited and post reversalVPhase plc is outlined below: As at 1 January As at 5 May Partial Partial 2007 2007 Disposal 1 Disposal 2Held by Energetix (Nominees) Limited - 8.32% 6.24% 5.00%Acquired by Ora Capital - - 25.00% 20.00%VPhase plc shareholders - - - 19.90%Total Minority Interest - 8.32% 31.24% 44.90%Energetix Group plc 100.00% 91.68% 68.76% 55.10% 6. Cash consumed by operations 2007 2006 £'000 £'000 Loss after income tax (1,847) (1,021)Adjustments for: - Depreciation 62 9 - Amortisation 333 205 - Finance income (413) (68) - Other income (75) - - Other gains on loan conversion - (110)- Other gains on part disposal of Energetix Voltage Control Limited (note 5) (685) - - Share based payments 68 44 - Other share based payments 32 - - Income tax charge 6 - - Provision against minority interests - 26Changes in working capital: - Increase in inventories (58) - - Increase in trade and other receivables (232) (101) - Increase in trade and other payables 372 219Cash consumed by operations (2,437) (797) 7. Availability of financial statements Copies of the full statutory accounts will be available from the registeredoffice at Steam Packet House, 76 Cross Street, Manchester, M2 4JU from 25 April2008 and will also be available from the Group's website atwww.energtixgroup.com. 8. Annual General Meeting The Annual General Meeting will be held at 10am on 21 May 2008 at the Company'sregistered office, Steam Packet House, 76 Cross Street, Manchester, M2 4JU. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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