TIDMFLOW
RNS Number : 0177C
Flowgroup plc
23 June 2016
Flowgroup plc
("Flowgroup" or the "Group" or "Company")
AGM Statement
Flowgroup plc (AIM: FLOW), which provides a range of innovative
energy technologies, energy supply and energy services, will hold
its Annual General Meeting today at 10am at South Kiln Felaw
Maltings, 42 Felaw Street, Ipswich, IP2 8SQ.
Following the formal proceedings of the meeting the Chief
Executive, Tony Stiff, will issue the following statement:
Flowgroup is focused on building strength and creating value
across the Group. We will continue to grow our energy business,
Flow Energy; continue to install electricity-generating Flow
boilers while lobbying for a continuance of the current Feed-in
Tariff regime; and establish and grow our smart boiler business,
delivering our central Energy for Life strategy.
Energy update
Flow Energy has grown very rapidly since the start of the year,
from 100,000 customer fuel accounts on 1 January 2016 to over
214,000 customer fuel accounts either on supply or being processed
through the switching cycle by 23 June 2016, with annualised
revenues of over GBP106m. This is an impressive achievement and the
Group believes it can continue to deliver accelerated growth as the
Big Six suppliers continue to lose customers. The market share
enjoyed by the Big Six was 98% in 2013 but has now fallen to 84%.
We believe it has further to fall as challenger suppliers like Flow
attract customers with a combination of competitive pricing and
good customer service.
With good customer service as a key differentiator in a
competitive market, we are pleased that Flow Energy continues to
prove its customer service credentials. While other suppliers have
struggled to keep service levels up during periods of rapid growth,
Flow Energy was awarded Which? Recommended Provider status for
energy in January 2016, and in June 2016 took second place in the
Citizens Advice Energy Supplier Performance League table, the only
challenger supplier ever to appear in the top six. We will continue
to invest in our customer service team to maintain our high levels
of service. We have grown overall employee numbers in Ipswich to
209 and have taken additional space in our existing offices in
preparation for the planned and continuing growth.
We believe that the reputation we have built for excellent
customer service combined with the wholesale energy agreement we
have in place with Shell and our experienced management team, will
enable us to deliver a large energy supply business over the coming
years, providing a range of important value-enhancing benefits to
the Group, including increased revenue and brand awareness. We
believe that we are one of the first of a new generation of energy
businesses looking to maximise the opportunity presented by a
domestic energy supply market experiencing a fundamental period of
change as it moves from an old supplier model focused on the margin
available from retailing gas and electricity to one focused on
providing a broad range of complementary products and services for
the home.
mCHP update
Following the announcement of our first commercial installs in
April of this year, we have continued to install Flow mCHP boilers
in new customer homes. Our initial installation target for the end
of June was 100 units and our current number of installed units
stands at 20. We have taken a prudently cautious approach to
offering finance in the home and have allowed more time to ensure
that our internal compliance with the FCA processes for selling
finance in the home is as rigorously implemented as possible. These
processes will be in place shortly to allow finance to be offered
at the point of sale in the home. Being able to offer finance is a
key component of our 'boiler that pays for itself' strategy and it
is crucial that the process is compliant, to protect the future
value of the business. Once our finance offer is in place, we will
accelerate our installation programme, targeting the significant
sales pipeline we currently have. We have over 10,000 potential
customers in our sales pipeline, generated by traffic to our
website, with over 2,100 potential customers moved forward to home
survey stage. Our Flow Brand Ambassadors have access to our full
marketing resource that they can use to promote the Flow boiler in
their local areas and generate their own leads. Flow will
supplement this activity with its own broad marketing campaigns to
engage and attract customers. The Flow boilers that we have
installed are performing well and installations went smoothly. We
have designed installation procedures using the extensive
experience we gained from our pilot programme. Our Flow Brand
Ambassadors, who installed all 20 new boilers, have reported that
installation is straightforward and that they have experienced no
issues.
We continue to develop our strategy for the Flow boiler in
Europe. As part of this strategy, production units have been sent
to Trillary in Italy and to our previously-announced European
client for testing. We are also in discussions with a potential
German partner. We believe that the European market, where customer
incentives for the adoption of microCHP technology are higher than
in the UK, represents significant opportunity for the Flow
boiler.
Partner update
We continue to work closely with all our partners to develop our
business. It remains a testament to our business that our partners
are all large global players with long histories of success in our
key markets.
Our engineering and design teams are working closely with the
Jabil team on our cost reduction programme and to continue to
refine and enhance the design of the Flow boiler to increase its
electricity generation capability.
After signing two agreements with Daikin for the provision of
additional ground-breaking heating solutions to supplement the Flow
boiler in April 2016, the development of our expanded smart boiler
business is progressing well. The first sales of the Daikin Hybrid
product are planned for Q3 2016 in time for the seasonal increase
in boiler sales. Adding the Daikin products to our portfolio allows
us to target the whole of the residential gas fired market and
gives us the opportunity to grow our smart boiler business much
more quickly. Daikin is a world leader in heating and cooling
technology and their products perfectly complement our own
game-changing mCHP technology.
Our Flow Brand Ambassador network continues to grow as we
recruit more experienced and high quality heating engineers to sell
and install Flow's heating product range in the home. Our entire
national network of Flow Brand Ambassadors is in the process of
being provided with Flow BiT (the Flow Business Integration Tool).
This gives our Brand Ambassadors the ability to provide a seamless
customer experience through one electronic platform from home
survey through to boiler sale, install and more. Importantly, it
gives our Brand Ambassadors the ability to sell energy in the home,
providing more value for customers and opening a new face-to-face
acquisition channel for Flow Energy.
We continue to work closely with Fifthplay to develop our
connected home offer. Fifthplay has recently launched a range of
home sensors which we will add to our existing range and we will
work to enhance our offer in conjunction with Fifthplay on an
ongoing basis
Energy for Life
With the continuing success of Flow Energy, the launch of the
Flow boiler, the development of our Brand Ambassador network, our
recent deal with Daikin to provide further innovative heating
products and the launch of our connected home product range, we can
now deliver our Energy for Life strategy. The core concept of our
Energy for Life strategy is our ability to deliver value to
customers across the energy space on an enduring basis, increasing
both revenue and brand loyalty from those customers and maximising
their value to the Group. With a wider range of heating products
via our deal with Daikin to supplement the Flow boiler, we can now
offer a heating solution to the whole of the residential market,
bundling those solutions with home energy supply and connected home
products where appropriate. The ability to provide such a
comprehensive offer is what sets Flowgroup apart from the vast
majority of its competitors in its core markets and we believe it
is something that could drive significant shareholder value.
mCHP Feed-in Tariff consultation
Following the publication by the Department of Energy and
Climate Change (DECC) of a consultation on proposed changes to the
Feed-in Tariff (FiT), we have met with officials from DECC and are
currently in the process of making further representations to them,
while also lobbying government both in Westminster and Edinburgh
during the current consultation period. Along with seven other
industry stakeholders, we will be issuing an industry statement in
favour of maintaining the current structure of the mCHP FiT. We
believe that the argument in favour of retention of the 30,000 unit
cap is strong and we will continue to make our case to relevant
parties.
Outlook
Our strategy remains the same - to disrupt the energy and
heating markets by offering high quality, competitively priced
products and services on an enduring basis, delivering customer
value across the energy space in innovative ways. We are targeting
significant growth in Flow Energy in 2016/17, and will continue to
develop our mCHP business both in the UK and abroad, alongside
establishing our smart boiler business in the UK. We will continue
to monitor the Feed-in Tariff consultation and will consider a
broad range of strategies for our mCHP product as part of our smart
boiler business in light of the possible outcomes of the DECC
consultation. While we are still a relatively small company whose
plans can be unexpectedly affected by outside events, we also
believe we are a business with significant potential to drive value
for our shareholders.
The cash position within the Group remains strong, and is
forecast to be GBP14.0M gross at the half year, of which around
GBP3.0M will be ring-fenced to satisfy the agreed Shell covenants.
We expect to deliver results in line with Analyst expectations for
year ending 2016.
Flowgroup plc www.flowgroup.uk.com
Tony Stiff, Group Chief Executive Tel: +44 (0)20 3137
Officer 4525
Nigel Canham, Chief Financial
Officer
Cenkos Securities plc (NOMAD Tel: +44 (0)20 7397
and Broker) 8900
Stephen Keys / Christopher
Golden (Corporate Finance)
Julian Morse (Sales)
Walbrook PR Ltd (Media Tel: +44 (0)20 7933 8780
Relations) or flowgroup@walbrookpr.com
Paul McManus Mob: +44 (0)7980 541
893
Nick Rome Mob: +44 (0)7748 325
236
This information is provided by RNS
The company news service from the London Stock Exchange
END
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