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VPhase PLC (IAF)

  Print      Mail a friend       Annual reports

Tuesday 23 March, 2010

VPhase PLC

Preliminary Results

RNS Number : 9862I
VPhase PLC
23 March 2010
 



 

 

 

Press Release

23 March 2010

 

 

VPhase plc

("VPhase" or "the Group")

 

Preliminary Results

For the year ended 31 December 2009

 

VPhase plc (AIM: VPHA), a leading provider of energy saving products for residential and small commercial properties, announces its Preliminary Results for the year ended 31 December 2009.

 

2009 Highlights:

 

Revenues of £124,000 from first commercial sales (2008: £nil)

Operating losses of £992,000 (2008: £853,000)
- higher than previous period due to increased sales and marketing activities

- significantly lower than the Group's expectations

Cash reserves at £1.67 million (2008: £3.20 million)

Board continues to exercise tight cost control

CE certification achieved, enabling sales to be made in the UK and mainland Europe

Commercial sales commenced, with units shipped to Scottish and Southern Energy, British Gas, electrical distributors and electricians plus direct to consumers

 

Initiated transition from development to commercial sales with associated supply chain, sales channel development and marketing activities

 

Post year end:

Commenced field trials with a Northwest-based  social housing provider

VPhase staff home trials show savings of £75 - £135 per annum (depending on the level of incoming voltage and load profile)*

Delay in SSE installations likely to defer CERT approval until quarter 2, 2010

*The small size of the sample means it may not be indicative of savings available across the whole of the UK housing stock

 

 

Adrian Hutchings, Chairman of VPhase, said: "2009 was the year when VPhase moved from a development company to a commercial business with turnover from sales. Following CE marking of our VX1 unit we have achieved initial revenue and further increased our direct and channel sales and marketing efforts.  We have also continued to keep our costs down by exercising strong cash management.  In 2010 we are focusing on growing sales and transitioning the Group into a product and service-led business."

 

- ENDS -

 

For further information:

 

VPhase plc


Lee Juby, Chief Executive Officer

Tel: +44 (0) 151 348 2139

Richard Smith, Chief Financial Officer

Tel: +44 (0) 151 348 2116


www.vphaseplc.com



Ambrian Partners Limited

Tel: +44 (0) 20 7634 4700

Andrew Craig/Ben Wright, NOMAD


Shaun Whyte, Corporate Broking

www.ambrian.com





Media Enquiries:


Abchurch Communications Limited

Tel: +44 (0) 20 7398 7710

Justin Heath / Monique Tsang / Quincy Allan



www.abchurch-group.com

 

 



Chairman's Statement

2009 was a good year for the Group during which we progressed from technology development to having a commercial product and delivering initial sales. 2010 is a significant year for the Group, where we have a further transition to become a product sales and services-led business. To achieve this we are currently putting in place the necessary people and processes.

 

The Group has continued to deliver tight cost controls during our development phase, ensuring that we have sufficient funds for the transition period we are now in, through to volume sales, sustainability and commercial growth. This accelerated commercial activity has resulted in an operating loss £0.14 million higher than last year, in line with the Board's expectations, to establish the basis for commercial sales in 2010. The Group finished the year with cash reserves of £1.7 million.

 

Whilst sales were modest at £0.12 million, due to the timing of product availability following CE certification and the establishment of a supply chain, the Group is putting in place the resources to grow sales.

 

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

 

In the UK, the government published a consultation document proposing to extend the Carbon Emissions Reduction Target ("CERT") to 2012 and introduced the Community Energy Savings Programme.  Whilst the Group's products present a compelling economic case to users in their own right, the CERT scheme has been instrumental in encouraging household emissions reduction and the adoption of energy-saving devices like VPhase. 

 

During the year we appointed Ambrian Partners as our Broker and Nomad.  This has consolidated our markets advisory from two firms to one, improving the coordination of our communications, and providing us with direct access to a specialist advisor in the cleantech sector.

 

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

 

 

Adrian Hutchings

Executive Chairman

 

23 March 2010

 



Chief Executive's Review

I am pleased to present this review of progress over the last twelve months and I am confident that we are now in a position to drive forward the Group's continuing commercial growth. We are particularly pleased to see VPhase products being shipped to our customers as they save both energy and money by optimising the voltage supplied to their homes.

 

Whilst VPhase has achieved initial sales, we do recognise that it has taken longer than originally anticipated to have products available commercially due to the delay in achieving CE marking.  Now that VPhase is a certified product, we are putting in place the necessary measures to capitalise on the order pipeline that we've built over the past two years.  To deliver on our sales targets, we have established the associated supply chain and sales channels, and have increased our marketing activities

 

The strict management of our cost base and cash resources has allowed us to deliver an operating loss that, whilst higher than last year by £0.14 million due to the increased commercial activity, is still significantly lower than the Board's expectations. We end the year with £1.7 million cash in the bank, giving us comfort that our current plans can be delivered from our existing resources.

 

General market review

Continual concerns about the high costs of energy and the tightening of budgets across homes and businesses in the downturn have called for an ever greater need for cost-effective ways to conserve energy and reduce household bills.  In the UK, our home ground and launch market, the government has also recognised the need to support energy efficiency and conservation in the household sector, which is responsible for roughly one-quarter of the country's emissions.  Indeed, the UK government announced a raft of initiatives in 2009 to promote carbon reduction and smart energy management in the household sector. 

 

A key development has been the proposal to extend CERT to 2012. CERT obligates energy suppliers to deliver measures to limit carbon emissions from UK homes.  The current phase runs from 2008 to 2011 and covers carbon savings equivalent to the emissions from 700,000 homes per year.  In early 2009 the government further raised the CERT target by an additional 20%, and late in the year proposed to extend the scheme to December 2012 with a higher carbon reduction target. 

 

The Community Energy Savings Programme ("CESP") was introduced which further requires energy suppliers and generators to provide domestic energy efficiency measures via community schemes, with a particular focus on serving households in low-income areas.  

 

The government rolled out a programme late last year to install smart meters across all 26 million UK homes by 2020, as part of a roadmap towards a more efficient energy system.  VPhase believes that this will pave the way for the integration of smart energy management technologies such as the VPhase.  

 

More recently, the government has announced plans for eco home loans. These are designed to fund both the initial purchase of energy-efficient technologies, such as our VPhase units, and also to create an ongoing price differential between energy-efficient and inefficient homes.

 

Whilst government initiatives, in particular CERT, have been instrumental in driving the adoption of energy-saving technologies such as VPhase, the Group's position on such initiatives is clear. Whether provided through eco-loans or household efficiency programmes (such as CERT and smart metering), they are useful in focusing public opinion on energy conservation and carbon reduction.  We prefer, however, to focus on developing products that deliver a compelling economic case without artificial subsidies from current or future governments and to use such subsidies as an additional benefit to our customers. Our VPhase product, by saving household bills while offering a quick payback, offers a compelling proposition.

 

Operational Review

The Group has put in place a wide range of new processes and procedures to enable the consistent supply and delivery of quality products to our customers. I would like to thank the teams who, amongst other things, rapidly put in place the full range of systems and controls to enable the Company to start selling VPhase products, not only to our commercial customers but also direct to the general public through our website, www.vphase.com. The electronic sales procedures entailed putting in place all procedures to comply with the Distance Selling Regulations. The whole process was undertaken over a very short period of time and has been operating successfully for the past 6 months.

 

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

 

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

 

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

 

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

 

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

 

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

 

Case studies

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

 

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

 

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

 

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

 

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

 

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

·     17% on fridges and freezers

·     15% on lighting

·     10% on new energy saving light bulbs

·     30% on cordless phones

·     13% on hi-fi's.

 

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

 

People

We have delivered excellent performance with a team of eight people. In 2010, we plan to expand this team with the further recruitment of sales and marketing professionals.

 

Financial position and outlook

We finished the year with cash levels ahead of the directors' expectations and a business well placed to capitalise on growing sales during 2010.

 

Lee Juby

Chief Executive Officer

23 March 2010

 

 

 

Chief Financial Officer's Review

 

Key highlights

Revenue was £124,000 higher than 2008 through first product sales.

 

Operating results

 

Continuing operations

2009

£'000

2008

£'000

Revenue

124

Nil

Gross profit

28

Nil

Operating loss

(992)

(853)

Cash

1,677

3,203

 

Overheads

Overheads of £1,020,000 were incurred in the year (2008: £853,000), an increase of £167,000, mainly through the increased commercialisation activity carried out since achieving CE marking. Consistent with the stage of development of the business the majority of these costs relate to the employment of staff £341,000 (2008: £567,000).

 

Depreciation of fixed assets and Intangible amortisation

Depreciation of property, plant and equipment totalled £26,000 (2008: £5,000), reflecting the full year charge in capital expenditure incurred largely in 2008.

Amortisation of intangible assets increased during the year as the Group has transitioned from the development phase into the commercial phase and the intangible R&D asset that was generated is now being amortised over its useful life. This has resulted in an amortisation charge of £27,000 (2008: £Nil)

 

Finance income

Interest earned on money held on deposit totalled £11,000 (2008: £84,000). The reduced amount reflects the lower interest rates that have prevailed throughout 2009 as compared to 2008, the lower quantum of cash held and the Group's policy of giving priority to security, then liquidity and finally yield in its choice of where to invest surplus cash.

 

Loss before tax

The loss before tax of £981,000 (2008: £769,000) is greater than last year's reported loss due to the increased expenditure on commercial activities. This expenditure has laid the foundation for increased sales in 2010.

 

Tax

During the year, the Group received a tax credit of £5,000 (2008: £Nil) in relation to research and development expenditure in 2006/07. We are now preparing claims for 2008 and 2009 although, in accordance with the Group's accounting policies, no further amounts have been accrued for subsequent accounting periods as the amount expected to be recovered cannot be reliably measured.

 

Loss per share

The loss per share, basic and diluted, was 0.14 pence (2008: 0.11 pence) with the change reflecting the increased commercial activity during the year.

 

Investment in property plant and equipment

During the year £15,000 (2008: £76,000) was invested in property plant and equipment and is consistent with the Group's low requirement for capital investment.

 

Investment in intangible assets

The Group undertakes a significant amount of research and development to address opportunities in the alternative energy market. In 2009, the Group incurred research and development costs of £191,000 (2008: £246,000) of which £176,000 of development costs (2008: £222,000) has been capitalised under IAS 38 "Intangible Assets". Development expenditure of £15,000 has been recognised in the Income Statement as incurred following the commencement of mainstream sales. Intangible assets are set out in note 5.

 

Cash and cash equivalents

At 31 December 2009, the Group had cash and cash equivalent reserves of £1,677,000.

 

Rick Smith

Chief Financial Officer

23 March 2010

 



Group Income Statement

For the year ended 31 December 2009



Year ended 31 December


Note

2009


2008



£'000


£'000

Revenue


124


-

Cost of sales


96


-

Gross profit


28


-

Administrative expenses


(1,020)


(853)

Operating loss


(992)


(853)

Finance income


11


84

Loss before income tax


(981)


(769)

Income tax

2

5


-

Loss for the year


(976)


(769)






Loss for the year attributable to:





Non-controlling interest


(497)


(390)

Owners of the parent


(479)


(379)

 

 


(976)


(769)

Loss per ordinary share attributable to the equity holders of the Company during the year:






Total and continuing:





 - Basic and diluted

3

(0.14)p


(0.11)p






 

All revenue and costs originate from continuing activities.

 

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

 

 



Group Statement of Changes in Equity

For the year ended 31 December 2009



Attributable to equity holders of the Company

 

Share

capital

Share premium

Merger relief reserve

Capital redemption reserve

Retained earnings

Reverse acquisition reserve

Warrant reserve

Other reserves

Total

equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 January 2008

 

1,563

 

1,369

 

1,150

 

994

 

(784)

 

(3,682)

 

-

 

(27)

 

583

Share based payments

-

-

-

-

-

-

-

107

107

Proceeds from placing

175

3,325

-

-

-

-

-

-

3,500

Share issue expenses - cash

 

-

 

(195)

 

-

 

-

 

-

 

-

 

-

 

-

 

(195)

- warrants

-

(105)

-

-

-

-

105

-

-

Shares issued by legal parent in consideration for services

-

-

-

-

-

-

-

-

-

-    13 February 2008

3

17

-

-

-

-

-

(20)

-

-    12 June 2008

3

17

-

-

-

-

-

-

20

-    14 August 2008

3

17

-

-

-

-

-

-

20

-    8 October 2008

3

17

-

-

-

-

-

-

20

Other share based payments

-

-

-

-

-

-

-

20

20

Transactions with owners

1,750

4,462

1,150

994

(784)

(3,682)

105

80

4,075

Loss for the year and total comprehensive income

 

-

 

-

 

-

 

-

 

(769)

 

-

 

-

 

-

 

(769)

Balance at 31 December 2008

1,750

4,462

1,150

994

(1,553)

(3,682)

105

80

3,306

Share based payments

-

-

-

-

-

-

-

49

49

Shares issued by legal parent in consideration for services










 - 5 June 2009

1

24

-

-

-

-

-

-

25

Transactions with owners

 

1,751

 

4,486

 

1,150

 

994

 

(1,553)

 

(3,682)

 

105

 

129

 

3,380

Loss for the year and total comprehensive income

 

-

 

-

 

-

 

-

 

(976)

 

-

 

-

 

-

 

(976)

Balance at 31 December 2009

 

1,751

 

4,486

 

1,150

 

994

 

(2,529)

 

(3,682)

 

105

 

129

 

2,404

 

 

 

 

Group Statement of Financial Position

At 31 December 2009

 



As at 31 December


Note

2009


2008








£'000


£'000

ASSETS





Non-current assets





Intangible assets

4

371


222

Property, plant and equipment


61


72



432


294

Current assets





Inventories


375


-

Trade and other receivables


186


144

Cash and cash equivalents


1,677


3,203



2,238


3,347






Total Assets


2,670


3,641






LIABILITIES










Current liabilities





Trade and other payables


266


335

Total liabilities


266


335






EQUITY





Capital and reserves attributable to equity holders of the Company





Share capital


1,751


1,750

Share premium


4,486


4,462

Merger relief reserve


1,150


1,150

Capital redemption reserve


994


994

Retained earnings


(2,529)


(1,553)

Reverse acquisition reserve


(3,682)


(3,682)

Warrant reserve


105


105

Other reserves


129


80

Total shareholders' equity


2,404


3,306






Total equity


2,404


3,306






Total equity and liabilities


2,670


3,641

 

Group Statement of Cash Flows

For the year ended 31 December 2009



Year ended 31 December


Note

2009


2008



£


£

Cash flows from operating activities





Cash consumed by operations

5

(1,351)


(440)






Taxation





Tax received


5


-






Cash flows from investing activities





Expenditure on intangible fixed assets

4

(176)


(222)

Purchases of property, plant and equipment


(15)


(76)

Interest received


11


84



(180)


(214)

Cash flows from financing activities





Net proceeds from the issue of ordinary shares


-


3,305











Net (decrease)/increase in cash and cash equivalents


(1,526)


2,651






Cash and cash equivalents at the beginning of the year


3,203


552






Cash and cash equivalents at the end of the year


1,677


3,203  

 

Notes

1.    Basis of preparation

While the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards ("IFRS"), this announcement does not itself contain sufficient information to comply with IFRS.  The accounting policies used in preparation of this preliminary announcement have remained unchanged from those set out in the Group's 2008 annual report, apart from the adoption of IAS 1 Presentation of Financial Statements (Revised 2007), IFRS 7 Financial Instruments: Disclosures and IFRS 8 Operating Segments. They are also consistent with those in the full financial statements which have yet to be published.  The preliminary results for the year ended 31 December 2009 were approved by the board of directors on 23 March 2010.

 

The financial information set out in this preliminary announcement does not constitute the Group's financial statement for the years ended 31 December 2009 and 2008.  The financial information for the year ended 31 December 2008 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies.  The auditors reported on those accounts; their report was unqualified and did not contain a statement under s237(2) or (3) of the Companies Act 1985.  The statutory accounts for the year ended 31 December 2009 will be delivered to the Registrar of Companies following the Company's annual general meeting

Going concern

 

The Group, together with its ultimate parent company, has sufficient financial resources to continue to operate for the foreseeable future and with the commencement of sales in 2009 the Group has moved from the development phase to revenue and cash generation. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

 

The Group's forecasts and projections, which have been prepared for the period to 31 December 2012 and taking account of reasonably possible changes in performance, show that the Group should be able to operate within the level of its current cash resources.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.

Accordingly, they continue to adopt the going concern basis in preparing the Group Financial Statements.

 

Critical accounting estimates and judgments

 

The preparation of the Group Financial Statements in conformity with IFRS as adopted by the European Union requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies.

 

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the present circumstances.

 

The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Group Financial Statements are disclosed below.

 

Critical accounting estimates

Research and development activities

 

Management have reviewed the Group's research and development activities and have made estimates and judgments on the amount of development expenditure it is appropriate to capitalise.

 

Impairment of intangible assets

 

Determining whether intangible assets are impaired requires an estimation of future cash flows expected to arise 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.

 

Discount rate on intangibles

 

Management have exercised judgment in selecting the appropriate discount rate for application against intangible assets, in particular in relation to the exclusion of market returns between 2008 and 2009 due to economic conditions, and have selected 8.80% to represent the best estimate of the current cost of capital for the Group.

 

Share based incentive arrangements and warrants

 

Share based incentive arrangements are provided to management and certain employees. These are valued at the date of grant using the Black-Scholes option pricing model and management have to exercise judgment over the likely exercise period, interest rate and share price volatility. Management uses various sources of information including its own share price performance, or where there is insufficient history the performance of comparable listed entities, experience from the historical exercise of options and published data on bank base rates.

 

During the year the Group has issued shares to its former broker for services rendered up to June 2009. These share based payments have been valued at their fair value as they are received, using the Black-Scholes option pricing model, and are charged to the Income Statement with a corresponding credit to equity. The Group appointed Ambrian Partners Limited as broker and nominated adviser from July 2009 and associated fees will be settled in cash. 

 

In 2008, the Group issued warrants to its then broker as part of agreed placing costs. These warrants have been valued at the fair value of the services received based upon the Black-Scholes option pricing model and are charged against the share premium account.

 

Taxation

 

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

 

 

 

Critical accounting judgments

Amortisation of development assets

Development costs capitalised, which form part of the Group's intangible assets, are amortised on a straight line basis over 60 months starting from the point that those products resulting from the development activity commence mainstream sales. Mainstream sales commenced in September 2009 and consequently, amortisation of these development costs began from this date.

 

2.    Income tax


2009


2008


             £'000


             £'000

Current tax




Prior year adjustment

5


-

 

The prior year adjustment originates from a tax credit received in cash arising from research and development activities during the financial years ended 31 December 2006 and 2007.

 

Unrelieved tax losses relating to the current trade of £2,003,000 (2008: £993,000) remain available to offset against future taxable trading profits. No deferred tax asset has been recognised in respect of the losses, as recoverability is uncertain.

 

3.    Loss per ordinary share

The loss per ordinary share is based on the loss of £976,000 (2008: loss of £769,000) and 700,351,607 (2008: 670,317,974) ordinary shares of 0.25 pence each, being the weighted average number of shares in issue during the year. All shares have been included in the computation based on the weighted average number of days since issuance.

 


2009


2008









Loss attributable to equity holders of the Company (£'000)

(976)


(769)





Weighted average number of ordinary shares in issue

700,351,607


670,317,974





Basic and diluted loss per share (pence)

(0.14)


(0.11)

 

The share options and warrants in issue are anti-dilutive in respect of the basic loss per share calculation and have therefore not been included.

 

 

 

 

 

 

 

 

 

4.    Intangible assets


£'000

Year ended 31 December 2008


Opening net book value

-

Additions

222

Amortisation charge

-

Closing net book value

222



Year ended 31 December 2009


Opening net book value

222

Additions

176

Amortisation charge

(27)

Closing net book value

371



At 31 December 2009


Cost or valuation

398

Accumulated amortisation

(27)

Closing net book value

371



At 31 December 2008


Cost or valuation

222

Accumulated amortisation

-

Closing net book value

222

 

All additions during the year arise from internal development

 


The Group commenced amortisation of the intangible asset in September 2009 as management considered mainstream sales to have begun. The asset will be written off over 60 months as the Directors believe that this is a prudent approach given continuing changes in market dynamics despite the project having a 20 year life.

Impairment review

In accordance with IAS 36, the Group has undertaken an impairment review by cash generating unit. The Group determines that there exists one cash generating unit and that its cost of capital is:

Technology

Cost of capital %

Total intangible carrying value £

Smart Voltage Management unit

8.80%

  370,905

                                                 

Following a review of the business, the Directors do not believe that the carrying value of the intangible asset in VPhase is impaired and, hence, no charge has been made.

 

 

Key assumptions

In determining value in use, forecasts have been prepared for the five years following the Balance Sheet date. These forecasts were constructed with:

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

•           prudent extrapolations of the above.

Revenues were computed using:

•           signed commercial agreements;

•           memoranda of understanding with commercial partners; and

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

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

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

The sales growth rate used beyond the forecast period is 15% per annum. Management asserts that such a growth rate is appropriate as the VPhase products are the only products that are presently available to service the domestic energy efficiency market in this way. Consequently, once customer adoption begins in earnest, a growth rate significantly in excess of UK GDP is to be expected.

Cost of capital

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

The components of this calculation were determined as follows:

Risk-free rate: lower range of UK Gilts as provided by the website of the Debt Management Office website (http://www.dmo.gov.uk/). Market-return rate: taken as the annual return on the 'Electronics and Electrical Equipment' sector within AIM for each year from 2 January 2004 to 31 December 2007. Returns for the 12 months to 31 December 2008 and 2009 have been excluded from the analysis as management do not believe the returns generated in these years are representative of the return demanded by investors. Beta: taken from MoneyAM (http://www.moneyam.com).

Effect of reasonably possible changes

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

5.    Cash consumed by operations



2009


2008



£'000


£'000






Loss before income tax


(981)


(769)

Adjustments for:





 - Depreciation


26


5

 - Amortisation


27


-

 - Other income


(11)


(84)

 - Share based payments


49


107

 - Other share based payments


25


80

Changes in working capital:





 - Increase in inventories


(375)


-

 - Increase in trade and other receivables


(42)


(82)

 - (Decrease)/increase in trade and other payables


(69)


303

Cash consumed by operations


(1,351)


(440)






6.    Availability of financial statements

 

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

 

7.    Annual General Meeting

The Annual General Meeting will be held at 11am on 20 May 2010 at the Company's trading address, Unit 1 Capenhurst Technology Park, Capenhurst, Chester, CH1 6EH.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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