Flowgroup plc AGM Statement (5799R)
30 June 2015 - 4:00PM
UK Regulatory
TIDMFLOW
RNS Number : 5799R
Flowgroup plc
30 June 2015
Flowgroup PLC
("Flowgroup" or the "Company")
AGM Statement
Flowgroup plc (AIM: FLOW), which develops and commercialises
alternative and efficient energy products for the global market,
will hold its Annual General Meeting today at 10am at Castlefield
House, Liverpool Road, Castlefield, Manchester, M3 4SB.
Following the formal proceedings of the meeting the Chief
Executive, Tony Stiff, will issue the following statement:
I am pleased to announce that, prior to this AGM, we have
completed the first installations of the Flow boiler. We aim to
install a limited number of boilers over the summer months into
pilot and new customer homes. However, as you will all be aware we
made the decision to reduce our overall installation targets for
this year in the light of the European Court of Justice ruling
which raises the prospect of an increase in VAT on the Flow boiler
and its installation from 5% to 20%. Consequently, the start of our
volume installation campaign has been delayed until later this
year.
This delay in no way impacts on the validity of our
ground-breaking technology nor does it impact our long-term
business model. We still aim to capture a significant part of the
UK heating market over the coming years, the development of our
combination boiler remains on schedule for the fourth quarter of
2016, and we continue to work with major partners to explore the
potential of launching our technology in the US and mainland
Europe. Most importantly we remain well funded to deliver on all of
these and to bring the business to cash generation and
profitability using our current resources.
I acknowledge that the EU judgement was unforeseen, not only by
us, but also by UK Government and industry alike. Whilst the
Government has yet to clarify its position, we understand that it
remains committed to providing incentives to encourage the adoption
of products like the Flow boiler. Our Chairman, Clare Spottiswoode,
will use her extensive connections to lobby for a more beneficial
enduring solution, pushing for direct subsidies as a replacement
for the previously lower rate of VAT.
We felt it was crucial to maintain the viability of our unique
'boiler that pays for itself' model as we believe this will prove
to be a very attractive consumer offering. Given that this ruling
could potentially add significant cost to an installed Flow boiler
for our UK customers, we have taken the decision to reduce the
number of boilers manufactured this year and concentrate on
accelerating our cost reduction programme. Our plan is to execute
this cost reduction jointly, alongside Jabil, our manufacturing
partner, and to re-launch our boiler offering in Q4 this year, to
ensure that customers remain unaffected by any potential rise in
VAT.
We are working very closely with our manufacturing partner Jabil
and this current situation has encouraged an even closer
collaboration, demonstrating more clearly the value of a strategic
partnership with an experienced global manufacturing company, with
the scale of its resources. Jabil has extensive experience in
driving cost reductions and will be bringing its engineering,
design and manufacturing expertise to bear on this project. Jabil
is committed to the Flow boiler project and its interests are
aligned to the future success of Flowgroup. Not only has it
increased the exclusivity threshold on the manufacture of Flow
boilers from 390,000 to 500,000, but also took an 8.14% equity
stake through its Dutch subsidiary in Flowgroup in the recent
fundraise.
As I mentioned earlier it's important to note that our long term
plans remain unaffected and we still plan to expand overseas as
rapidly as possible. It's worth highlighting that the potential
increase in VAT only applies in the UK and that in the European
market subsidies are often provided directly. Key European markets
therefore remain attractive. As you will know, Flowgroup has
entered into agreements for testing projects with a major global
utility for the European market, and with NRG Energy for the US
market. Both of these retain the potential to be converted into
significant commercial agreements following successful
conclusion.
We remain confident that we have sufficient resources to fund
the business through the re-launch and to the point when we are
profitable and generating cash. We are confident that we can
achieve this goal by the end of 2016 and at the close of business
on Friday 26 June 2015, we had cash on hand of GBP23.5m. The funds
raised in May 2015 were to accelerate the development of the
combination Flow boiler for a commercial launch in Q4 2016. Nothing
has changed this plan and as mentioned already we remain on target
to deliver according to this timetable.
I am delighted to say that Flow Energy has consistently exceeded
our expectations since its launch in 2013. We issued a new
competitive growth tariff in April of this year and have seen our
customer base grow steadily since. We currently have approximately
77,000 gas and electricity customer accounts and this equates to an
annualised revenue figure of GBP40m.
As I mentioned in our Final Results statement we believe that
there is an opportunity to considerably accelerate our customer
uptake in Flow Energy over the next three years and that in order
to do this we would need to put in place the kind of collateral
arrangements that would allow us to deliver that growth under a
less cash-intensive model. We are currently in negotiations with a
well-known global supplier around this requirement. In the current
market, a successful energy supply company has the potential to be
of significant value and to provide a platform for ongoing growth
in energy and additional growth in product supply.
Nothing has changed our over-arching ambition for Flowgroup, and
our unique technology, to become a major force in the heating and
energy markets around the world. The recent reaction in the share
price has been very disappointing and I have increased my own
shareholding as I believe the current share price significantly
undervalues the potential of our business, particularly given that
our ability to deliver our long term strategy for growth remains
unchanged.
On behalf of the Board I thank you for your continued support
and we will continue to develop Flowgroup into a major new player
in the energy supply and energy generation market.
For further information, please contact:
Flowgroup plc www.flowgroup.uk.com
Tony Stiff, Group Chief Executive Officer Tel: +44 (0)20 3137 4525
Nigel Canham, Chief Financial Officer
Investec Bank plc (NOMAD, joint Financial Tel: +44 (0)20 7597 4000
Adviser and joint Broker)
Christopher Baird / Daniel Adams / Ben Williams
Cenkos Securities plc (joint Financial Adviser Tel: +44 (0)20 7397 8900
and joint Broker)
Stephen Keys / Christopher Golden (Corporate
Finance)
Julian Morse (Sales)
Walbrook PR Ltd Tel: +44 (0)20 7933 8780 or flowgroup@walbrookpr.com
Paul McManus (Media Relations) Mob: +44 (0)7980 541
893
This information is provided by RNS
The company news service from the London Stock Exchange
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