Preliminary Results

Energetix Group plc

("Energetix" or "the Group")

Preliminary Results

For the year ended 31 December 2010

Energetix Group plc (AIM:EGX), a company with two cost-effective products (Genlec and Pnu Power) to meet the growing demand for alternative and efficient energy, announces its Preliminary Results for the year ended 31 December 2010.

Highlights

Post Year End Highlights

Alan Aubrey, Non-Executive Chairman of Energetix, commented: "The Group has made a number of significant strategic steps during the period, and the Board is pleased with the progress made across all three businesses. The certification of Kingston and subsequent orders is already promising, and the trials in staff homes are progressing well. Our Pnu Power products also continue to gain momentum in the market, with discussions with a number of major customers likely to result in orders in the current year.

The legislative environment remains favourable to the Group's products, and following the placing in March 2011 the Group is well positioned to accelerate the commercial development of Genlec and Pnu Power."

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Chairman's Statement

The Company has continued to progress each business to a point where they can operate on an independent basis. The transition of VPhase to a standalone independently funded commercial venture was successfully completed during the year. VPhase is now treated as an associated undertaking of Energetix Group. The Group's remaining share of VPhase's market value as at 31 December 2010 was £7.3 million. We anticipate that this investment has the potential to grow as VPhase increases its commercial activities. This transition also played a significant part in Energetix Group being able to show a profit of £1.6 million for the financial year.

As outlined in my statement at the 30 June 2010 interims, progress in bringing new technology developments to commercialisation can be delayed by technical hurdles and take up of a product by large corporate customers can be a slow process. Post the year end, the Group raised £2.3 million net of expenses from the placing of 10,000,000 new shares. The Directors believe that these additional funds will enable the Group to complete the transition of our Pnu Power and Genlec businesses to commercial success.

Whilst the development of our Genlec microCHP product has taken longer than originally anticipated, we are pleased that we now have our first Kingston boilers operating in staff homes, and we are confident that the major technical hurdles have now been overcome. The development of the Genlec product is now predominantly complete with workshop testing demonstrating performance in excess of specification. Sales of demonstration and testing units have commenced. CE certification of the boiler has been obtained and initial units have been installed in employee homes. It is expected that CE certification of the power module will follow in the second quarter of 2011. Genlec will carry on field testing whilst continuing market engagement through multiple channel partners to continue commercial sales and establish a basis for growth from 2012.

We are continuing to work with the major potential customers we have for our Pnu Power product range, and believe that these relationships will deliver orders during the current year. In addition we are pleased that the Pnu Power range has been extended to include the DC100 product that can now meet the demand of the rapidly growing Green Data Centre market.

Alan J Aubrey

Non-Executive Chairman

22 March 2011

Chief Executive's Review

The Group has now predominately completed all technology development, with the CE certification of the Genlec power module the only outstanding technology risk. It is anticipated that this will be completed shortly. The Board is pleased with the successful transition of VPhase, and was delighted that we were able to attract Vanda Murray OBE as my replacement as Chairman of the VPhase board. I believe that the ability to attract someone with Vanda's experience and credentials speaks highly of the potential of the VPhase business. It also confirms our belief that it is important to match the right leadership skills with the right stage of commercialisation of each of our businesses. Vanda's highly successful background in sales and marketing, particularly in the building products sector, is an ideal fit with the needs of VPhase.

Genlec Review

The key strategic decision to develop a full microCHP appliance has enabled the Company to rapidly move from the prototype unveiled at our preliminary results presentation in March 2010 to CE approved units being tested in staff homes in January 2011. I would like to thank our Genlec team for their professional efforts and dedication in achieving this result. During the year we have also worked closely with a major white goods manufacturer who has supported us in the installation of a pilot production line in our facilities at Chester. We have also worked with this manufacturer in the production of the first series of units.

We have taken initial orders for Genlec's new appliance, trade named Kingston, from organisations in the UK, mainland Europe, and North America. We are in discussions with a wide range of companies for the development of commercial routes for the Kingston product as we believe that the greatest uptake of the product will be through multiple market routes.

A key design decision for the Kingston appliance was to develop the power module as a separate component. This decision has delivered several significant benefits in that the wall mounted unit can be installed in two parts, reducing the lift weight, allowing for the power module to be simply removed and replaced for maintenance, and meaning the boiler can be operated independently of the power module. This independent operation could even allow for "microCHP ready" boilers to be sold and power modules fitted at a later date.

During the year we recruited a manufacturing manager from the boiler industry who has undertaken a review of the anticipated volume cost of the Kingston appliance. I am pleased that this review indicates that we should be able to manufacturer Kingston appliances for a lower cost than we had originally estimated, and this further underpins our belief that Kingston will be the lowest cost microCHP appliance.

Pnu Power Review

Pnu Power has completed the development and certification of a range of products for the telecommunication, power network, and data centre markets; in particular Pnu Power achieved accreditation of its Quality Management System to ISO 9001:2008.

Since the end of the year, Pnu Power has announced that it has developed and demonstrated a high powered system designed specifically for the power and reliability critical data centre market.

The new product, named DC100, has been successfully demonstrated to a number of industry experts, consulting engineers and potential customers from the data centre market.

The investment in greener data centres is predicted to experience rapid growth over the next five years, increasing from $7.5 billion in global revenue to $41.4 billion by 2015, representing 28% of the total data centre market (source: Pike Research, August 2010). Analysis indicates that power and cooling infrastructure solutions will be the largest portion of the green data centre market opportunity, representing 46% of revenue over the next five years, providing strong economic and regulatory drivers for the development of battery free solutions like Pnu Power.

DC100's flexible backup time, high efficiency and low maintenance are key benefits of the design. Internal estimates suggest that a typical 2MW Data Centre could save more than £1.75 million of electricity over its 20 year life by installing the Pnu Power DC100 solution rather than a typical rotary system, and also reduce total CO2 emissions by over 90% over that period.

To date the Pnu Power product range has been sold in to the telecommunications and grid switching markets with systems in the 2kW to 20kW range.

The DC100 is a 100kW module and represents a significant step forward in power output. These modules can be linked together to create systems of up to 2MW of backup power with no material effect to performance. This new product uses the same robust technology as the smaller systems.

Pnu Power has been successful in achieving repeat trial sales in each of these markets; we now need to move out of the trial sales phase and in to full volume commercial sales. From our experience of this transition with VPhase, it is our intention to recruit the necessary senior sales and marketing leadership for Pnu Power to take the business forward. Part of the recent fund raise will be used to undertake this recruitment and transition.

Market and Policy Framework

On 1 April 2010, the Government's Feed in Tariff ("FiT") became law. Under the terms of the legislation, the Government spelt out how microgeneration products would benefit from financial incentives to grow the small scale, low carbon electricity generation sector in the UK. The FiT comprises of three financial benefits to the owner of the microgeneration device such as a Genlec's microCHP. The first benefit is the generation tariff which gives the device owner a quarterly payment based on the measured kWh of generation from the device; secondly the electricity generated can be used at no cost to the consumer, avoiding purchasing that amount across the meter and therefore reducing their energy bill. Finally any amount of electricity generated and not consumed in the house is exported and receives a small export tariff.

Energetix was actively involved in the dialogue and lobbying in advance of the publishing of the FiT by the Department of Energy and Climate Change, through its engagement with the Heating and Hotwater Industry Council and the Combined Heat and Power Association. This involvement continues as we monitor and seek to influence the developing regulatory and incentive landscape.

Since the new Coalition Government came to power in May 2010, it has conducted a comprehensive spending review, published in October 2010 by HM Treasury. In this major review of Government spending it stated that, "the efficiency of the Feed in Tariffs will be improved at the next formal review, rebalancing them in favour of more cost effective carbon abatement technologies". This review was announced in February 2011 and will take place during the course of 2011, with a fast track review of solar farms which were not anticipated by the Government and are a threat to a balanced incentive programme for microgeneration. The high tariff under the FiT given to solar PV reflects the estimated 40 to 50 year payback without the FiT for solar compared to 5 to 10 years for microCHP, although due to the inherent low cost of the Genlec technology the payback for our Kingston appliance could be as low as two years. This factor should bode well given the Treasury's drive towards supporting more cost effective solutions.

Energetix is also currently monitoring the development of the Green Deal, which will replace the energy efficiency obligations which power suppliers have under Carbon Emissions Reduction Target (CERT), to be introduced in 2012. The principle is that bill payers will be able to get energy efficiency improvements without having to pay upfront cash, with capital supplied to the bill payer through the product supplier, with the loan attached to the property and paid off through energy savings. Energetix is again involved through its industry associations in understanding how this opportunity will play out in the industry.

Following the significant progress made in 2010 and the recent successful fundraising, the Group is well positioned to capitalise upon the many opportunities that lie ahead in 2011.

Adrian Hutchings

Chief Executive Officer

22 March 2011

Finance Review

Business review

Key highlights

Commercial sales continued generating turnover of £26,000 from continuing operations (2009 restated: £131,000).

Operating losses from continuing operations increased to £3,216,000 (2009 restated: £3,017,000) reflecting increased commercial activity within the Group.

Continued tight financial control resulting in cash reserves of £1,379,000 at the year end (2009: £5,657,000).

Operating results

*2009 cash reserves balance has not been restated.

Revenue

Revenue from continuing operations was £105,000 lower than 2009 at £26,000 (2009 restated: £131,000). This reduction is due to lower income from both Energetix (Pnu) Power Limited and Energetix Genlec Limited. The order book for Kingston subsequent to the year end has increased to c.£100,000.

Overheads

Overheads after capitalisation of intangible expenditure (excluding depreciation and amortisation) of £2,315,000 were incurred in the year (2009 restated: £2,277,000), an increase of £38,000. Following the disposal of VPhase plc, Energetix Group plc recognises its share of the former subsidiary's loss and this amounted to £166,000 (2009: £Nil).

Depreciation of fixed assets and intangible amortisation

Depreciation of property, plant and equipment from continuing operations totalled £141,000 (2009: £181,000) on continuing operations.

Amortisation of intangible assets from continuing operations increased during the year as Pnu Power charged a full year of amortisation that began in 2009. This has resulted in an increase in the amortisation charge of £163,000 to £727,000 (2009 restated: £564,000).

Disposal of subsidiary

During the year, the Chairman and Chief Executive of VPhase plc each subscribed for new ordinary shares in VPhase plc which resulted in a deemed gain to Energetix Group plc of £19,000. In addition, the Group also recognised a further deemed gain following the placing in VPhase plc amounting to £5,971,000 giving a total gain on deemed disposals of £5,990,000. Following the deemed disposals in VPhase plc, the Group retains 42.86% of the issued share capital of VPhase plc which is now considered an associated undertaking.

Finance costs/income

Interest earned on money held on deposit for continuing operations totalled £19,000 (2009 restated: £34,000). The fair value adjustment of long term borrowings attributable to interest rate risk has resulted in a charge of £148,000 during the period (2009: £48,000 charge).

Loss before tax

The loss before tax from continuing operations of £3,511,000 (2009 restated: £3,013,000) has increased from last year's reported loss largely due to the reduced contribution from sales, increased amortisation and recognition of the loss in the associated undertaking.

Tax

During the year, the Group received a tax credit of £458,000 (2009 restated: £130,000) in relation to research and development expenditure in 2008. We are now preparing claims for 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, from continuing operations was 5.54 pence (2009 restated: 5.23 pence).

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

Profit for the year of £1,627,000 (2009: £3,847,000 loss) is stated after taking account of £667,000 (2009: £497,000) of losses in VPhase plc which are not attributable to equity holders of Energetix Group plc. Profit attributable to equity holders of Energetix Group plc amounts to £2,294,000 (2009: £3,350,000 loss).

Investment in property plant and equipment

During the year £42,000 (2009 restated: £61,000) was invested in property plant and equipment for continuing operations 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 2010 amounted to £1,070,000 (2009 restated: £1,217,000). This investment is the internally generated product development costs capitalised in accordance with IAS 38. Further details are contained in note 4.

Cash and cash equivalents

At 31 December 2010, the Group had cash and cash equivalent reserves of £1,379,000. On 14 March 2011, the Group raised a further £2,300,000 net of expenses following the placing of 10,000,000 new ordinary shares of 5 pence each at 25 pence per share.

Richard H Smith

Chief Financial Officer

22 March 2011

Group Income Statement

For the year ended 31 December 2010

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

Group Statement of Changes in Equity

For the year ended 31 December 2010

Group Financial Statement of Position

As at 31 December 2010

Group Statement of Cash flows

For the year ended 31 December 2010

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 2009 annual report. They are also consistent with those in the full financial statements which have yet to be published. The preliminary results for the year ended 31 December 2010 were approved by the board of directors on 22 March 2011.

The financial information set out in this preliminary announcement does not constitute the Group's financial statement for the years ended 31 December 2010 and 2009. The financial information for the year ended 31 December 2009 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s498(2) or s498(3) of the Companies Act 2006. The statutory accounts for the year ended 31 December 2010 will be delivered to the Registrar of Companies following the Company's annual general meeting.

Going concern

Following the placing on 14 March 2011, 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 2013 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 and have selected 10.0% (2009: 11.6%) 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 for options with non-market vesting conditions and the simulation model for options with market vesting conditions attached. Where arrangements have both conditions, management apply judgement to the likelihood of each condition. 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.

In August 2010, the Group established the Energetix Save as You Earn (SAYE) scheme open to all employees. In September 2010, the Group established individual Company Share Ownership Plans (CSOPs) for a number of senior employees.

Taxation

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

Critical accounting judgments

Control over VPhase plc

At 31 December 2009, the Group held 49.09% of the ordinary share capital of VPhase plc and consolidated the results of the subsidiary on the basis that it controlled the financial and operating polices of VPhase plc through Board members. In addition, the Group retained control over 53.3% 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.

In July 2010, Adrian Hutchings, the Chief Executive Officer of Energetix Group plc, resigned as Executive Chairman of VPhase plc. Following the placing in October 2010, the Group's direct holding in VPhase plc fell to 42.86% and, at the same time, Energetix Group plc lost control of the voting rights over the shares held in an Employee Benefit Trust. Consequently, from the end of October 2010, Energetix Group plc was no longer deemed to control VPhase plc. At this point, VPhase plc was no longer considered a subsidiary of the Group but an associated company and has been accounted for in accordance with IAS 28.

Disposal of VPhase plc

Following the deemed disposal in VPhase plc, the Group retains 42.86% of the issued share capital of VPhase plc and is no longer considered to control it. Consequently, VPhase plc is no longer considered a Subsidiary but an associated company as the Group can demonstrate significant influence over the operational and financial policies of the entity by virtue of its shareholding. Accordingly, the comparatives of the income statement and cash flow have been restated as discontinued activities.

Previous deemed disposals (which did not result in a loss of control) have been accounted for under the 'Parent Company concept' as management deemed this to be the most appropriate basis of consolidation. Under this method where a part disposal of a subsidiary occurs and the relevant entity remains a subsidiary, the non-controlling interest will increase by the carrying amount of the net identifiable assets that are now attributable to the non-controlling 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, non-controlling 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.

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, consequently, amortisation of these development costs began from these respective dates.

2. Income tax

The prior year adjustment originates from a tax credit received in cash arising from research and development activities during the financial year ending 31 December 2008 undertaken in Energetix Genlec Limited £293,000 (2009: £78,000) and Energetix (Pnu) Power Limited £165,000 (2009: £52,000).

Unrelieved tax losses of £15,936,000 (2009: £12,995,000) remain available to offset against future trading profits. No deferred tax asset has been recognised in respect of the losses as recoverability is uncertain.

3. Earnings and loss per ordinary share

The earnings per ordinary share is based on the profit of £1,627,000 (2009 restated: loss of £3,847,000) and 55,155,008 (2009: 55,138,105) ordinary shares of 5 pence each, being the weighted average number of shares in issue during the year. The diluted earnings include the effects of all potentially dilutive ordinary shares, which increases the average number of shares to 56,214,267 (2009: n/a).

All shares have been included in the computation based on the weighted average number of days since issuance.

4. Other intangible assets

All additions during the year arise from internal development. £90,000 of the above amortisation relates to discontinued operations (2009: £27,000).

5. Disposal of VPhase plc

On 7 July 2010, VPhase plc, an AIM listed former subsidiary, issued 1,680,672 new ordinary shares to its Chairman and Chief Executive Officer at 2.38 pence per share. On 28 October 2010, VPhase plc placed 100,000,000 new ordinary shares at 2.00 pence per share. Energetix Group plc subscribed for no shares reducing its interest in VPhase plc from 49.09% to 42.86% and, consequently, VPhase plc is no longer treated as a subsidiary but an associated undertaking.

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

Deemed disposal

7 July 2010

Deemed disposal

Placing of 100,000,000 shares 28 October 2010

Following the deemed disposal in VPhase plc, the Group held 42.86% of the ordinary share capital of VPhase plc.

Total gains are therefore summarised as follows:

6. Borrowings

7. Cash consumed by operations

8. Availability of financial statements

Copies of the full statutory financial statements will be available from the registered office from 20 May 2011 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 12 Noon on 20 May 2011 at the Company's registered office Castlefield House, Castlefield, Liverpool Road, Manchester, M3 4SB.

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