TIDMFLOW
RNS Number : 8726I
Flowgroup plc
05 September 2016
Flowgroup plc
("Flowgroup" or the "Company")
Half-year Report
Flowgroup plc (AIM: FLOW), which provides a range of innovative
energy technologies, energy supply and energy services announces
its unaudited Interim Results for the period ended 30 June
2016.
Financial
-- Total revenues up 104% to GBP41.8m (H1 2015: GBP20.5m)
-- Flow Energy revenue up 106% to GBP41.7m (H1 2015:
GBP20.3m)
-- Gross margin increased by 105% to GBP5.1m and maintained at 12.2%
-- Operating loss of GBP8.0m (H1 2015: GBP6.9m loss)
-- Headline cash of GBP14.3m of which GBP2.9m in energy trading
account (31 December 2015: GBP18.8m)
-- Cash at 1 September 2016 of GBP13.2m of which GBP1.6m in energy trading account
Operational
-- Energy business
o 120% increase in customer base to over 220,000 customer fuel
accounts on 30 June 2016 (1 January 2016: 100,000)
o Which? Recommended Provider for energy award in January
2016
o Appointed experienced customer services delivery director to
continue to improve already award-winning customer service
-- Smart boiler business
o First sales of Flow microCHP (electricity-generating boiler)
delivered in April 2016
o Agreement signed in April 2016 with Daikin for non-exclusive
provision of Hybrid heat pump and exclusive provision of Daikin
combination boiler
o DECC Consultation published in May 2016, proposing a
significant reduction in Feed-in Tariff support for microCHP,
putting at risk the economic delivery of the Flow microCHP boiler
in the UK
o Flow microCHP units successfully tested with Trillary in
Italy
o Processes in place to sell finance to our customers
Post period
-- Energy business
o Continued strong growth, increasing customer fuel account
numbers from 220,000 on 30 June 2016 to over 255,000 on 1 September
2016, representing over GBP127m of revenue on an annualised
basis
o We are now the only Which? Recommended Provider for energy
since August
o Launched energy sales in the home through our Brand Ambassador
network on 5 September 2016
o Good progress towards profitability and reducing cost to
serve, we believe that the underlying business will be profitable
in 2017
o New office space taken to accommodate additional staff to
support our customer growth
-- Smart boiler business
o Signed agreement with Intergas for the manufacture of Flow ECO
RF, from Intergas, the leading manufacturer in Holland, jointly
branded as Flow/Intergas
o Launched sales of Flow branded Intergas product range on 5
September 2016
o European partner testing of Flow microCHP completed
successfully with next steps being discussed
Tony Stiff, Group Chief Executive Officer of Flowgroup plc,
commented: "We continue to deliver our strategy of disrupting the
energy and heating markets with a compelling mix of competitive
home energy supply, some of the world's most exciting heating
products and a growing connected home offer. We have started to
sell and install our game-changing microCHP boiler, although we are
currently taking a cautious approach due to the imminent
announcement from Government on the future of the microCHP Feed-in
Tariff. As planned, and in line with our strategy, we have
supplemented our Flow microCHP boiler with other innovative heating
products from globally-recognised manufacturers and will commence
sales of one line in this range, the Flow ECO RF, provided by
Intergas, the Dutch market leader, on 5 September 2016. We will
commence sales of another product, the Daikin Hybrid this winter
and are expecting Daikin's range of Combi boilers to be available
during H1 2017.
"As we have always said, this is the future of energy - energy
businesses offering much more to their customers. Flow has
prudently and successfully expanded its product offering via
strategic alliances with large organisations. We are now in a
position to offer home energy, smart heating and smart home
products to the whole of the UK market and we also continue to
explore our international opportunities.
"Our energy business continues to outperform our expectations
and the underlying business is expected to become profitable in
2017. It acts both as a strong and stable source of revenue and a
pool of customers to whom we can market our growing product range.
We believe we can grow our energy business to 1m customer fuel
accounts within three years and then still further as market
conditions continue to favour suppliers with more competitive
pricing and better service.
"In May 2016, the then Department of Energy and Climate Change
(DECC), published a consultation document which included a review
of the support for the microCHP Feed-in Tariff scheme. The
Government's final decision on the ongoing structure and scope of
the microCHP Feed-in Tariff is expected in Q4 2016 and is clearly
important for our business. Without continuing Feed-in Tariff
support at the previously guaranteed level, we will have to
carefully review the feasibility and economic business model of our
microCHP business. This would be extremely disappointing and, we
believe, a stain on the Government's record of supporting
early-stage energy efficient technology. However, with or without
our microCHP technology platform, our strategy remains the same -
to disrupt the heating market with cutting-edge products delivered
in innovative bundles via our Brand Ambassador network. So far this
year we have delivered our strategic goal of creating a range of
innovative products to offer to our customers.
"We believe that we have a unique customer proposition and can
redefine what an energy company means for customers, and what can
be delivered to customers. Our customer numbers are up, our brand
awareness is increasing and we continue to attract the interest of
major global players who want to do business with Flow. We believe
we have put ourselves in the best possible position to deliver a
successful business even in the face of potential change."
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
Flowgroup plc www.flowgroup.uk.com
Tony Stiff, Group Chief Executive Officer Tel: +44 (0)20 3137
4525
Nigel Canham, Chief Financial Officer
Cenkos Securities plc (NOMAD and Broker) Tel: +44 (0)20 7397
8900
Stephen Keys (Corporate Finance)
Julian Morse (Sales)
Walbrook PR Ltd Tel: +44 (0)20 7933 8780 or flowgroup@walbrookpr.com
Paul McManus Mob: +44 (0)7980 541
893
Nick Rome Mob: +44 (0)7748 325
236
Chief Executive Officer's review
Over the last year, we have consistently laid out our business
strategy. Believing that the energy market is experiencing possibly
its greatest period of change as millions of customers desert the
Big Six energy suppliers, and that a stagnant heating market is
ripe for disruption, we have positioned our business to deliver
something that we consider to be unique - a large scale energy
business delivering both competitive prices and award-winning
customer service, coupled with an extensive heating business based
on the Flow microCHP and supplemented with globally-sourced,
ground-breaking products delivered directly to an installation
network, bypassing the traditional merchant route. Our goal is for
each of these businesses to be profitable in its own right.
Our energy customer base has grown significantly over the last
six months. The majority of customers whose contracts have expired
have chosen to renew with us, a testament to the quality of the
customer service we provide. We are proud that these retention
levels are higher than our expectations.
Our Brand Ambassador network, when provided with the unique,
market-leading products we can offer, will be able to deliver very
significant sales - and our direct supply approach, cutting out the
wholesalers, increases our margin on every smart boiler sale.
However, as we have always said, it is when combined into our
Energy for Life concept that our energy and heating business will
deliver the most value. We believe that our energy customer base
represents a readymade market for our heating products. On the
other side of the equation, our ability to save customers money on
their home energy as part of a bundled energy and product deal
facilitates boiler sales. This cross-sell and cross-support means
each customer has the potential to be much more valuable to us and
much more loyal. It is here that the maximum value of our business
lies, overall increasing the average revenue per customer.
Flow Energy
We have grown our energy customer base from 100,000 customer
fuel accounts at the start of the year to over 255,000 fuel
accounts either on supply or being processed through the switching
cycle as of 1 September 2016, which represents over GBP127m of
revenue on an annualised basis. We have grown rapidly while
maintaining high levels of service, something other suppliers have
struggled with. We have also experienced low levels of churn with
the large majority of customers staying with Flow when their fixed
rate deals end. Our cost to serve is below our internal budget and
we believe the underlying business of Flow Energy will be
profitable in 2017 and continue to be cash generative.
We intend to continue our strong growth and have a medium term
target of 1m customer fuel accounts but believe that market
conditions are such that this target could be conservative.
We currently rely heavily on price comparison sites to deliver
customers to us on a commission basis, as do most energy suppliers.
While our reputation for excellent customer service and growing
brand awareness mean we do not have to be the cheapest on the
market to attract high volumes of new customers through this
channel, the price comparison sites are still a very competitive
environment. The holy grail of the energy industry is to attract
customers directly, at low cost, and preferably customers who are
not active switchers and therefore will potentially be more loyal.
This has traditionally been very hard to achieve as traditional
marketing by energy companies does not seem able to reach the
millions of households who have never switched supplier. However,
we believe that our national network of Flow Brand Ambassadors, who
may be visiting hundreds of thousands of customer homes each year
to recommend our heating range, could create an entirely new and
extremely cost effective route to market for energy sales.
All Flow Brand Ambassadors will be trained to provide an energy
quote to a customer in their home using Flow BiT, our online home
survey and quotation tool. They will be able to offer energy as
part of a bundled deal with a heating product or as a standalone
proposition. Since the Brand Ambassador is trusted by the customer
and has been invited into their home on the basis that they will
give sound advice, we believe that conversion rates for energy
sales will be high. An advert telling a customer that they could
save money by switching home energy, is much less compelling than a
trusted trade professional in that customer's home explaining
exactly how much money could be saved, how easy it is to switch and
how switching home energy could help them pay for the cutting-edge
boiler they are also recommending. We believe that our commission
costs for energy customers will reduce when acquired through this
channel.
Smart heating
We have consistently stated that we believe the UK heating
market is ripe for disruption due to low levels of innovation and a
traditional 'manufacturer - merchant - installer - customer' model.
The Flow microCHP boiler is one innovative product that we believe
has the potential to deliver this disruption. Over the last year we
have made it clear that we believe there are others, and that
securing additional and complementary ground-breaking heating
products from carefully-selected partners is a key part of our
strategy.
In April we signed two agreements with Daikin, a world leader in
heating and cooling technology, for the provision of additional
heating products. We then signed an additional agreement in August
with Intergas for the provision of a boiler range that is the
market leader in the Dutch market. Both agreements give Flow access
to products that fit exactly with our strategic focus on innovation
and disruption, and help to expand our portfolio of heating
solutions.
The two Daikin agreements include provision of an innovative and
comprehensive range of mass market Combination and System boilers
under the Flow brand and the Daikin Altherma Hybrid heat pump
range. The Hybrid will launch in Q4 2016 while the launch of the
Combination and System range is expected in H1 2017.
The agreement with Intergas gives us a Flow branded version of
their flagship product, the connected version of their award
winning, Intergas Compact HRE. This product won Product of the Year
in this year's prestigious H&V News awards. Intergas are the
market leaders in Holland, having moved from around 12% market
share in 2000 to around 35% in 2015, taking sales from established
players like Vaillant and the Bosch Group. This is a clear example
of what can be achieved by a traditional product with outstanding
technology features and efficiency. The Flow ECO RF, which is how
it will be branded, is a highly efficient boiler and can reduce
heating costs by up to 15% compared to other condensing boilers. It
incorporates a heat exchanger that, the Directors understand, has
not had a single instance of mechanical failure in over 20 years.
The Flow ECO RF comprises only 12 components, meaning there is much
less to go wrong, and comes with internet connectivity built in,
allowing customers to control their central heating remotely and
installers to run remote diagnostics reducing the need for service
calls and improving customer service. The Directors believe that
this is the only connected boiler that provides performance data
direct to installers. It can also provide automatic weather
compensation via a direct link to local weather stations, reducing
energy costs still further.
This is an extremely impressive product that we believe could
drive significant sales in the UK market when allied with the Flow
brand and marketed as part of our innovative bundled packages.
Sales of the Flow ECO RF launched on 5 September 2016.
Cutting-edge products like these are one part of the disruptive
equation. The other elements are our Flow Brand Ambassador (FBA)
network and the interplay between our heating and energy
businesses.
Flow Brand Ambassador network
The members of our FBA network have been chosen because they
believe in the importance of delivering innovation, and via
innovation, value to our customers. We have a fully national
network with trained installers covering every mainland postcode,
ready to deliver sales of Flow's product range. Every FBA has
access to Flow BiT, our digital platform for home survey,
installation quotation and energy sales. This is a solution that
has the potential to revolutionise the way our FBAs operate. We
believe that it perfectly complements our advanced heating range
and provides an optimised customer experience that will play a key
role in generating sales.
Energy as an enabler
The members of our FBA network are excited by both our heating
product range and our energy business. They believe, as we do, that
the provision of competitive home energy to a customer can play a
key role in making a boiler sale - as well as being a standalone
proposition that delivers value to the customer and opens a new
revenue stream for them. Since the majority of customers remain on
uncompetitive energy tariffs, each FBA often has an opportunity to
potentially save a customer hundreds of pounds a year on their
energy bills by switching them over to Flow. This is the perfect
way to start a relationship that will be built on value. When added
to the savings the customer will make by replacing their existing
boiler with a much more efficient one from Flow, the total cost
savings a customer could make on their energy by installing a
boiler from Flow's range and switching home energy to Flow at the
same time could exceed the cost of the boiler and installation.
MicroCHP update
DECC's consultation into a potential recalibration of the
microCHP Feed-in Tariff scheme came as a surprise to the entire
industry. The scheme had previously been considered to be
guaranteed to continue at the same level and DECC themselves had
made an announcement to this effect in August 2015.
Naturally, during the consultation period we have made extensive
representations to DECC and our broad base of contacts in
Government, both directly and in concert with other organisations
and groups. We believe we have made the strongest possible case for
the continuation of the scheme as it now stands. We believe that
microCHP has a central role to play in the decentralised,
cost-effective, low carbon energy future that Government has
consistently stated they are working towards and therefore any
amendment to the Feed-in Tariff regime that would be to the
detriment of the continuing development of this crucial technology
would be a retrograde step. Additionally, following the BREXIT vote
on 23 June 2016, the currency markets have moved unfavourably to a
new level, increasing the manufactured cost of our Flow
microCHP.
Due to these possible risks to our UK microCHP business we
initiated a strategic review of this part of the business and have
been planning for several eventualities.
We have now delivered on our much-repeated strategy to expand
our product range. We consider the microCHP Flow boiler to be a
game-changing product, although our business model relies on the
schemes in place to support new energy technologies - in this case,
the Feed-in Tariff scheme. Of course, there is risk inherent in
relying to any degree on external financial support, however
necessary. Therefore, we have pursued, and delivered on, a strategy
of securing other ground-breaking heating products from other
market-leading manufacturers. While the primary aim of this
strategy was to offer customer choice and to provide a solution to
the whole of the market more quickly as we continued to develop our
core microCHP technology platform, this strategy also builds
resilience into our business. The proposed Feed-in Tariff regime
changes potentially remove support from our business worth up to
GBP50m. If those changes are implemented, we will need to determine
the feasibility of our microCHP technology platform and will seek
to minimise costs of any strategic change. However, we would expect
that our smart boiler business would continue and build
successfully with the broader range of heating products we now
have.
Since the proposed changes in the Feed-in Tariff regime would
affect the viability of our microCHP technology platform, we have
slowed installations down over the last few months while we await
DECC's decision, with 37 units now installed and 328 units
manufactured after solving minor design and production issues.
Accelerating installations of Flow microCHP boilers now could
potentially leave us with extremely high service costs for the
units we have installed if we were not to continue with volume
manufacture and installation due to the withdrawal of Feed-in
Tariff support. We will, of course, update the market further when
the Government's decision is published, with a more detailed
analysis of the situation and our options.
Connected home
While our connected home product range is available to
consumers, we are currently focused on understanding consumer need
and gaining experience in this rapidly emerging space. Our initial
partner, Fifthplay, is expanding its product range over the next
few months, which will allow us to offer a more comprehensive
range. However, we are also in discussion with other major players
in the smart controls and connected home markets to ensure that our
connected offer is both fully integrated into our heating product
strategy and that it remains at the forefront of advances in this
technology.
Market commentary
We believe that the energy market continues to hold significant
opportunity for players like Flow who have prudently invested both
in price and service. The share of the residential energy market
enjoyed by the Big Six fell from 98% in 2013 to just under 85% in
April 2016. We have seen big customer gains in this period, as have
other challenger suppliers. However, it is worth noting that, on
several measures, there is now clear differentiation emerging
between not just the Big Six and challenger suppliers, but
challenger suppliers themselves. We are now the only Which?
Recommended Provider for energy and one high profile challenger
supplier is currently under investigation by Ofgem for potential
breaches of its licence conditions around the level of service they
are providing. Some smaller suppliers without long-term hedging
strategies or significant financial resources may come under
pressure in a market with rising prices. We believe that
differentiation between energy companies around the fundamentals of
price and service will continue to increase, to the potential
benefit of Flow, and that this differentiation will be further
accentuated by our integrated, multi-product strategy. Our own
hedging strategy is long-term and robust, due to our trading
relationship with Shell. All this combines to leave Flow,
potentially, as a standout business in what is often seen as a
crowded marketplace.
The UK heating market has seen little change since our last
update and, we believe, remains ripe for disruption. The continuing
migration of consumer activity to the online space ensures that
customers are more engaged with and more aware of the businesses
they buy from than ever before. Our innovative, disruptive approach
and product range, we believe, speak much more clearly to the
inhabitants of a digital world than our competitors do and we
believe that our bundled deals and customer-centric approach have
the potential to allow us to rapidly gain market share.
Flow Battery
Flow Battery revenue has been lower than anticipated and the
business has been loss-making. In order to concentrate our
resources on the development of our Energy for Life strategy we
have reduced the cost base of the Flow Battery business and are in
the process of reviewing options for this business that might
further allow capital and other resources to be redeployed in other
key areas of the business.
Outlook
Our energy business goes from strength to strength and we
believe that the energy market represents a continually growing
opportunity. We are very pleased to announce the commencement of
sales of our Flow Eco RF boiler, in partnership with Intergas, with
the launch of the Daikin Altherma Hybrid heat pump as part of a
non-exclusive UK arrangement soon after. While a decision by the
Government to change the microCHP Feed-in Tariff would, of course,
affect our business, we have sought to build resilience into our
model via the agreements we have signed with other boiler
manufacturers. Any change to the microCHP Feed-in Tariff would be
to the detriment of the development of our core technology platform
but would not affect our ability to deliver a multi-faceted,
disruptive and innovative business in a newly-expanded energy
space. We look forward to updating the market on the Government's
decision, on our energy and boiler sales, and on our plans for
continuing growth in the near future.
Tony Stiff
Group Chief Executive Officer
5 September 2016
Unaudited Group Income Statement
Unaudited Unaudited Audited
6 months to 6 months to Year to 31 December 2015
30 June 2016 30 June 2015
Note GBP'000 GBP'000 GBP'000
------------------------------------- --------------- ------------- ------------- -------------------------
Revenue 3 41,841 20,534 40,394
Cost of sales (36,732) (18,036) (36,936)
------------------------------------- --------------- ------------- ------------- -------------------------
Gross profit 5,109 2,498 3,458
Administrative expenses (13,107) (9,442) (20,538)
------------------------------------- --------------- ------------- ------------- -------------------------
Operating loss 3 (7,998) (6,944) (17,080)
Net finance costs (46) (47) (36)
Loss before income tax (8,044) (6,991) (17,116)
Income tax - - 1,831
------------------------------------- --------------- ------------- ------------- -------------------------
Loss for the financial period / year (8,044) (6,991) (15,285)
------------------------------------- --------------- ------------- ------------- -------------------------
Attributable to:
Equity holders of the Company (8,044) (6,991) (15,285)
------------------------------------- --------------- ------------- ------------- -------------------------
Basic and diluted loss per share 4 2.53p 2.71p 5.31p
------------------------------------- --------------- ------------- ------------- -------------------------
The Group has no items of other comprehensive income in any
period above and consequently no statement of other comprehensive
income has been presented.
The notes are an integral part of these Unaudited Group Interim
Financial Statements.
Unaudited Group Statement of Financial Position
Unaudited as at 30 June Unaudited as at 30 June Audited as at 31 December
2016 2015 2015
Note GBP'000 GBP'000 GBP'000
--------------------------- ---- -------------------------- --------------------------- --------------------------
Assets
Non-current assets
Intangible assets 5 19,738 18,249 19,227
Property, plant and
equipment 581 555 381
--------------------------- ---- --------------------------
20,319 18,804 19,608
Current assets
Inventories 1,268 457 473
Trade and other receivables 15,308 8,453 7,369
Current tax receivable 1,075 - 1,075
Cash and cash equivalents 11,389 23,689 18,844
--------------------------- ---- -------------------------- --------------------------- --------------------------
29,040 32,599 27,761
--------------------------- ---- -------------------------- --------------------------- --------------------------
Total assets 49,359 51,403 47,369
--------------------------- ---- -------------------------- --------------------------- --------------------------
Liabilities
Non-current liabilities
Borrowings 2,004 1,191 1,982
Current liabilities
Trade and other payables 25,765 12,396 16,198
Borrowings 200 1,024 200
--------------------------- ---- -------------------------- --------------------------- --------------------------
25,965 13,420 16,398
--------------------------- ---- -------------------------- --------------------------- --------------------------
Total liabilities 27,969 14,611 18,380
--------------------------- ---- -------------------------- --------------------------- --------------------------
Equity
Capital and reserves
attributable to equity
holders of the Company
Share capital 15,876 15,876 15,876
Share premium account 59,238 59,238 59,238
Accumulated losses (56,034) (39,696) (47,990)
Reverse acquisition reserve (821) (821) (821)
Other reserves 3,131 2,195 2,686
--------------------------- ---- -------------------------- --------------------------- --------------------------
Total shareholders' equity 21,390 36,792 28,989
--------------------------- ---- -------------------------- --------------------------- --------------------------
Total equity and
liabilities 49,359 51,403 47,369
--------------------------- ---- -------------------------- --------------------------- --------------------------
The notes are an integral part of these Unaudited Group Interim
Financial Statements.
Unaudited Group Statement of Changes in Equity
Share Reverse Total
Share premium Accumulated acquisition Other shareholders'
capital account losses reserve reserves equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- --------- ------------ ------------- ---------- ---------------
Balance at 1 January
2015 11,975 41,850 (32,705) (821) 1,722 22,021
Proceeds from shares
issued 3,901 18,339 - - - 22,240
Share issue costs - (951) - - - (951)
Share based payments - - - - 473 473
------------------------ --------- ---------
Transactions with
owners 3,901 17,388 - - 473 21,762
Loss for the financial
period - - (6,991) - - (6,991)
------------------------ --------- --------- ------------ ------------- ---------- ---------------
Balance at 30 June
2015 15,876 59,238 (39,696) (821) 2,195 36,792
Share based payments - - - - 491 491
------------------------ --------- --------- ------------ ------------- ---------- ---------------
Transactions with
owners - - - - 491 491
Loss for the financial
period - - (8,294) - - (8,294)
------------------------ --------- --------- ------------ ------------- ---------- ---------------
Balance at 31 December
2015 15,876 59,238 (47,990) (821) 2,686 28,989
Share based payments - - - - 445 445
------------------------ --------- --------- ------------ ------------- ---------- ---------------
Transactions with
owners - - - - 445 445
Loss for the financial
period - - (8,044) - - (8,044)
------------------------ --------- --------- ------------ ------------- ---------- ---------------
Balance at 30 June
2016 15,876 59,238 (56,034) (821) 3,131 21,390
------------------------ --------- --------- ------------ ------------- ---------- ---------------
The notes are an integral part of these Unaudited Group Interim
Financial Statements.
Unaudited Group Statement of Cash Flows
Unaudited Audited
Unaudited 6 months to 6 months to Year to
30 June 2016 30 June 2015 31 December 2015
Note GBP'000 GBP'000 GBP'000
------------------------------------------------------- ---- --------------------- ------------- -----------------
Cash flows from operating activities
Cash consumed by operations 6 (6,108) (4,534) (8,084)
Cash flows from investing activities
Expenditure on intangible assets (966) (1,306) (2,582)
Purchase of property, plant and equipment (388) (126) (160)
Interest received 7 9 24
------------------------------------------------------- ---- --------------------- ------------- -----------------
Net cash used in investing activities (1,347) (1,423) (2,718)
Cash flows from financing activities
Net proceeds from the issue of ordinary shares - 21,289 21,289
------------------------------------------------------- ---- --------------------- ------------- -----------------
Net cash generated from financing activities - 21,289 21,289
Net (decrease) / increase in cash and cash equivalents (7,455) 15,332 10,487
Cash and cash equivalents at beginning of period 18,844 8,357 8,357
------------------------------------------------------- ---- --------------------- ------------- -----------------
Cash and cash equivalents at end of period 11,389 23,689 18,844
------------------------------------------------------- ---- --------------------- ------------- -----------------
The notes are an integral part of these Unaudited Group Interim
Financial Statements.
Notes to the Unaudited Group Interim Financial Statements
1 Nature of operations and general information
Flowgroup plc ("the Company") and its subsidiaries (together
"the Group") deliver alternative and efficient energy products and
supply home energy. Our businesses are:
-- Flow Products - smart energy solutions and microCHP energy
generation
-- Flow Energy - energy supply and services
-- Flow Battery - compressed air back-up for the protection
of essential systems
Flowgroup plc is the Group's ultimate parent company and is
incorporated in England and Wales. The address of the registered
office is Castlefield House, Liverpool Road, Castlefield,
Manchester M3 4SB. The Group's principal place of business is North
Kiln, Felaw Maltings, 46 Felaw Street, Ipswich, IP2 8PN. Flowgroup
plc's shares are quoted on the AIM Market of the London Stock
Exchange.
Flowgroup plc's Unaudited Group Interim Financial Statements are
presented in pounds sterling (GBP).
2 Basis of preparation and accounting policies
These Unaudited Group Interim Financial Statements are for the
six months ended 30 June 2016. They have not been prepared in
accordance with IAS 34, Interim Financial Reporting. They do not
include all of the information required for full annual financial
statements, and should be read in conjunction with the Group
Financial Statements for the year ended 31 December 2015.
The financial information set out in these Unaudited Group
Interim Financial Statements does not constitute statutory accounts
as defined in Section 434 of the Companies Act 2006. The Group
Statement of Financial Position as at 31 December 2015 and the
Group Income Statement, Group Statement of Changes in Equity, Group
Statement of Cash Flows and associated notes for the year then
ended have been extracted from the Group's Financial Statements as
at 31 December 2015 which have been delivered to the Registrar of
Companies. The auditors' report on these Financial Statements was
unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under section 498(2) or section
498(3) of the Companies Act 2006.
The Unaudited Group Interim Financial Statements for the six
months ended 30 June 2016 have not been audited or reviewed in
accordance with International Standard on Review Engagements 2410
issued by the Auditing Practices Board.
The Unaudited Group Interim Financial Statements have been
prepared under the historical cost convention, except that they
have been modified to include the revaluation of certain
liabilities at fair value through profit and loss.
These Unaudited Group Interim Financial Statements have been
prepared in accordance with the accounting policies adopted in the
last annual financial statements for the year to 31 December 2015
which have been applied consistently throughout the Group.
Flow Energy has entered a period of growth and accordingly
customer acquisition costs are charged against the profit and loss
account relative to customer retention rates and the expected
economic life of the underlying customer contracts.
Under the terms of the energy purchase arrangements entered into
during December 2015, Shell Energy Europe Limited holds a warrant
entitling them to 10% of the increase in Flow Energy's enterprise
value arising from inception of the agreement to exercise of the
warrant. This is being accounted for as a cash settled share based
payment with the expected final value being charged to profit and
loss account as the benefit is derived over the life of the
agreement.
2 Basis of preparation and accounting policies (continued)
The Unaudited Group Interim Financial Statements have been
approved by the Board of Directors on 2 September 2016.
Going concern
The directors have produced business forecasts which indicate
that the Group has sufficient resources to operate for at least
twelve months from the date of approving the Unaudited Group
Interim Financial Statements.
Accordingly, the Directors continue to adopt the going concern
basis in preparing the Unaudited Group Interim Financial
Statements.
3 Segmental results
The segment results are as follows:
Unaudited Audited
Unaudited 6 months Year to
6 months to to 31 December
30 June 2016 30 June 2015 2015
GBP'000 GBP'000 GBP'000
------------------------------- --------------- -------------- -------------
Revenue
Flow Products 87 - -
Flow Battery 14 259 315
Flow Energy 41,740 20,275 40,079
41,841 20,534 40,394
-------------- -------------- -------------
Operating Loss
Flow Products 5,715 4,357 10,005
Flow Battery 8 335 679
Flow Energy 522 764 4,126
-------------- -------------- -------------
6,245 5,456 14,810
Unallocated costs 2,443 2,737 4,647
Capitalisation of development
costs (690) (1,249) (2,377)
-------------- -------------- -------------
7,998 6,944 17,080
-------------------------------- -------------- -------------- -------------
4 Loss per ordinary share
The calculation of the loss per ordinary share is based on the
earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the period.
The calculation of diluted earnings per share is based on the
basic earnings per share, adjusted to allow for the issue of shares
and the post-tax effect of dividends and/or interest, on the
assumed conversion of all dilutive options and other dilutive
potential ordinary shares. As the diluted loss per share is less
than the basic loss per share the share option awards are
considered anti dilutive and have been ignored.
Unaudited Audited
Unaudited 6 months Year to 31
6 months to to December
30 June 2016 30 June 2015 2015
------------------------------- -------------- -------------- --------------
Loss for the period (GBP'000) (8,044) (6,991) (15,285)
Weighted average number
of ordinary shares in issue 317,529,078 258,031,560 288,024,829
Basic and diluted loss
per share (pence) (2.53) (2.71) (5.31)
------------------------------- -------------- -------------- --------------
5 Intangible assets
MicroCHP
Intellectual development Other intangible
property asset assets Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------- ------------- ------------- ----------------- --------
Net book value
at 1 January
2016 2,561 16,247 419 19,227
Additions - 690 276 966
Amortisation (168) (140) (147) (455)
------------------ ------------- ------------- ----------------- --------
Net book value
at 30 June
2016 2,393 16,797 548 19,738
------------------ ------------- ------------- ----------------- --------
Net book value
at
1 January 2015 2,897 13,870 501 17,268
Additions - 1,249 57 1,306
Amortisation (168) - (157) (325)
------------------ ------------- ------------- ----------------- --------
Net book value
at
30 June 2015 2,729 15,119 401 18,249
------------------ ------------- ------------- ----------------- --------
Net book value
at
1 January 2015 2,897 13,870 501 17,268
Additions - 2,377 205 2,582
Amortisation (336) - (287) (623)
------------------ ------------- ------------- ----------------- --------
Net book value
at 31 December
2015 2,561 16,247 419 19,227
------------------ ------------- ------------- ----------------- --------
Intangibles include internally generated product development
costs capitalised in accordance with IAS 38 and purchased
intellectual property held at cost less amortisation following the
disposal of Energetix Micropower Limited. Other intangible assets
relate to purchased software.
6 Cash consumed by operations
Unaudited Unaudited
6 months to 6 months to Audited
30 June 2016 30 June 2015 Year to 31 December 2015
GBP'000 GBP'000 GBP'000
-------------------------------------------- ------------- ------------- -------------------------
Cash flows
Loss before income tax (8,044) (6,991) (17,116)
Adjustments for:
Depreciation 188 195 403
Amortisation 455 325 623
Finance Income (7) (9) (24)
Finance costs 22 56 23
Share based payments 445 473 964
Tax received - 416 1,172
Increase in inventories (795) (297) (313)
Increase in trade and other receivables (7,939) (1,138) (54)
Increase in trade and other payables 9,567 2,436 6,238
-------------------------------------------- ------------- ------------- -------------------------
Total cash consumed by operations (6,108) (4,534) (8,084)
-------------------------------------------- ------------- ------------- -------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EASNAEDNKEFF
(END) Dow Jones Newswires
September 05, 2016 02:00 ET (06:00 GMT)
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