365.L Regulatory News (365)

VPhase plc

("VPhase" or "the Group")

Consolidated Interim Financial Statements

for the six months ended 30 June 2011

VPhase plc (AIM:VPHA), a leading developer of energy saving products for residential and commercial properties, today reports its Interim Results for the six months ended 30 June 2011.

Highlights

Vanda Murray OBE, Non-executive Chairman of VPhase, commented: "VPhase is now gaining traction across a range of market sectors, and it is encouraging that the Company has secured a strong pipeline of contracts, tenders and good prospects of significant sales. The Board remains confident of continued progress in the medium-term as further orders are confirmed."

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Chief Executive's Statement

The first six months of 2011 have proved challenging with sales growth being slower than anticipated. However, the Group has now built a growing order book and has a significant pipeline of contract opportunities. Our strategy of focussing our resources on the key sectors of utility companies, social housing groups and large partners who can help accelerate the adoption of VPhase, has been fundamental in driving this demand.

In the utility sector, our key messages of enabling a reduction of up to 12% in electricity bills in a climate of ever increasing energy costs to the homeowner, the ability to combine VPhase with other complementary products, plus the availability of government CERT (Carbon Emissions Reduction Target) funding has assisted the Group's development.

VPhase's social housing sector strategy is also starting to deliver significant benefits for the Group, resulting in a number of major product specifications and contract wins, including:

·; An important four-year agreement with Procurement for Housing whose members have 3.2 million homes under management. This has significant potential for VPhase over the next four years

·; Stockport Homes' SHINE programme will include a VPhase with all 1,200 Solar PV installs

·; Great Places Housing Group has specified that all of their future rewires and new build properties will have a VPhase unit installed

·; We continue to be successful in winning tenders for the VPhase unit and are actively converting these to orders.

These examples, along with the Group's other activities in this sector, are expected to deliver significant sales volumes for VPhase in the medium-term.

Work continues with our key partners such as Carillion Energy Services and GE. The agreement between GE and Best Buy to promote energy efficiency continues to develop with both parties working closely on a proposed roll-out of VPhase.

This has the potential to be one of the most significant opportunities for VPhase and the Group is currently finalising the detail of the partnership with a view to sales commencing mid-2012.

Other Opportunities

The Group continues to pursue its strategy of working with other partners to promote the sale of VPhase units when other work on the home is being undertaken and this is generating significant interest in our product.

We are in talks with a number of organisations, including infrastructure companies, independent electricians and those businesses offering Solar PV and other renewable energy products to homeowners.

In addition, Tesco will now offer VPhase on its Home Energy Efficiency website, following an agreement between VPhase and Enact Energy, who has an exclusive contract to provide products and services to the Tesco Home Efficiency service.

The Board believes that these opportunities will be increasingly important to the Group in the future.

UK Government's Green Agenda

The economics of fitting a VPhase unit have become more attractive due to the significant increase in electricity costs, which have risen by as much as 23% in the last twelve months.

We believe that the product is an ideal fit with the Government's green agenda. Following our recent CERT accreditation, we are lobbying the Department for Energy and Climate Change (DECC) about the benefits of voltage optimisation.

In addition, work continues with DECC and BRE to secure a Standard Assessment Point ("SAP") point for the product. Once gained, this will accelerate the adoption of VPhase in the new build and facilities management sectors.

People

In the period, we have strengthened the team with three key appointments: Head of sales, Head of Supply Chain and Head of Technical. We have also strengthened the Board with the appointment of Duncan Sedgwick as a Non-Executive Director; Duncan also chairs the Remuneration Committee.

Financials

Turnover of £201,000 (2010: £121,000) was achieved in the first six months of the year. Product sales were £156,000 (2010: £72,000), an increase of 217% and non-product sales were £45,000 (2010: £49,000). This is behind expectations as the establishment of our key customer agreements has taken longer to achieve than anticipated. However, we have built an order book and pipeline of contracts, tenders and good prospects of significant sales which we expect will lead to increased sales in the second half of 2011 and through into 2012 and 2013.

Gross margins have improved in the period to 48% (2010: 31%), although a large element of this was the Shell Springboard award of £30,000. Even without this, the Group's gross margins increased to 39%.

Increases in administrative expenses to £1,180,000 (2010: £766,000) reflect the increased headcount and greater marketing expenditure.

Cash utilisation in the period was £187,000 per month (2010: £123,000 per month) as we invest in growing the demand for the Group's product.

In preparation for the increased sales volume, we have invested in long lead time components. This has resulted in an increase in inventory but is critical to enable the Group to meet the growing future demand.

Work continues in the development of product line extensions from our core technology to meet customer needs. The Group continues to innovate, and future products will start to be released in 2012.

Outlook

Considerable progress has been achieved in the period, as is demonstrated by our order book and a significant pipeline of contract opportunities. We remain confident of continued progress in the medium-term and, building on the momentum generated for this year, we are committed to growing the pipeline and converting the order book into revenues.

Rick Smith

Chief Executive Officer20 September 2011

Unaudited consolidated income statement

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

All revenue and costs originate from continuing activities.

The notes are an integral part of these unaudited Consolidated Interim Financial Statements.

Unaudited consolidated statement of financial position

The notes are an integral part of these unaudited Consolidated Interim Financial Statements.

Unaudited consolidated statement of changes in equity

Unaudited consolidated statement of changes in equity (continued)

Unaudited consolidated statement of cash flows

Cash flows from operating activities

These notes are an integral part of these unaudited Consolidated Interim Financial Statements.

Notes to the Consolidated Interim Financial Statements

1 Nature of operations and general information

VPhase plc ("the Company") and its subsidiaries (together "the Group") develop products that provide energy efficiency solutions to certain identified problems in the energy market.

VPhase plc is incorporated in England and Wales. The address of the registered office is Castlefield House, Liverpool Road, Castlefield, Manchester, M3 4SB. The Group trades through a number of subsidiaries, whose place of business is Capenhurst Technology Park, Capenhurst, Chester, CH1 6EH. VPhase plc's shares are listed on the AIM Market of the London Stock Exchange.

VPhase plc's Consolidated Interim Financial Statements are presented in pounds sterling (£), which is also the functional currency of the parent company.

2 Basis of preparation

These Consolidated Interim Financial Statements are for the six months ended 30 June 2011. 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 consolidated financial statements of the Group for the year ended 31 December 2010.

The financial information set out in these Financial Statements does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The consolidated statement of financial position as at 31 December 2010 and the consolidated income statement, consolidated statement of cash flows, consolidated statement of changes in equity and associated notes for the year then ended have been extracted from the Group's Financial Statements as at 31 December 2010. Those Financial Statements have received an unqualified report from the auditors and have been delivered to the Registrar of Companies. The 2010 statutory accounts contained no statement under section 498(2) or section 498(3) of the Companies Act 2006.

The Consolidated Interim Financial Statements for the period ended 30 June 2011 have not been audited or reviewed in accordance with International Standard on Review Engagement 2410 issued by the Auditing Practices Board.

The Consolidated Interim Financial Statements have been approved by the Board of Directors on 20 September 2011.

These financial statements have been prepared under the historical cost convention.

The Directors recognise that the customer adoption process of the Group's products has taken longer than anticipated and the Directors have tightly managed the Group's cash resources to reflect this position.

In addition, the Group is in a position to generate income from the contractual negotiations currently in progress with major utilities from the orders being received in the Social Housing sector and from its activities with GE. Given this and, if required, the availability of alternative funding opportunities through, for example, loans under the Enterprise Finance Guarantee scheme or additional placings, 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's Consolidated Interim Financial Statements.

These Consolidated 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 2010.

3 Segment analysis

The business of the Group comprises one segment, energy efficiency, and as such no segmental information is provided. The Group operates entirely within the United Kingdom.

4 Loss per ordinary share

The calculation of the basic 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.

Reconciliations of the loss and weighted average number of shares used in the calculations are set out below:

The share options and warrants in issue are anti-dilutive in respect of the basic loss per share calculation and have therefore been excluded in the above calculations.

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