Flowgroup

http://flowgroup.uk.com/ TICKER: FLOW     EXCHANGE: L

Flowgroup is a pioneering energy products/services business, which we aims to transform the global boiler market. Its patented combined heat and power (CHP) micro boiler is half the price of comparable products, and enables households to save large sums on their fuel bills over the life of the appliance. It is also environmentally friendly and helps to smooth peak electricity demand for the National Grid.

LATEST REPORTS

 
Maximising shareholder value
Published: Feb 08 2017

In November Flowgroup kicked-off a strategic review of its mCHP boiler following the UK government’s shock decision to slash Feed-in-tariffs (FiT) - compounded by sterling’s devaluation vs the $/€, leading to a 17% increase in manufacturing costs.
The good news, however, is that this innovative product still has an attractive future ahead of it, especially in Europe where environmental subsidies and installation incentives tend to be more generous. Both Trillary of Italy and Gaz réseau distribution in France (GRDF) have already shown considerable interest – and today we understand Engie (EDF), one of the world’s biggest energy suppliers, is also keen. 
Favourable mCHP prospects in Europe
This is not small potatoes, either. For instance, the Cogeneration Observatory and Dissemination Europe predicted back in 2014, that mCHP devices could take 1/3rd of the estimated 8m pa European boiler market by 2030. Consequently, rather than prematurely selling or closing the division, the Board have chosen to progress field trials with its overseas partners across France, Germany, Italy and Belgium, with the aim of launching the boiler commercially in 2018. 
It is worth noting too that in the event of closure, there would be significant one-off charges - possibly in excess of £10m, albeit cash payments would likely be spread over >12 months to cover inventory/capex write-offs, Jabil exit fees and redundancies. The existing stock of 1,000 mCHP units will be deployed in these forthcoming pilots with the remainder ear-marked for the UK, in order to recoup production costs, reduce inventory and generate useful performance data. 
Disposal of Flow Energy being actively pursued
That said, the mCHP division will remain loss-making for the foreseeable future, and so requires ongoing support. Therefore, after receiving unsolicited approaches for Flow Energy (FE) from several interested buyers, the board has decided to explore the potential divestment of this division. 
It is impossible to accurately predict the ultimate sales proceeds, suffice to say that the directors believe any disposal would generate sufficient cash to fund the mCHP unit through to its commercial launch. Indeed, we suspect any transaction would be concluded at a level north of Flow’s current marketcap - and perhaps much higher - given we had previously valued FE at £250/customer (or £225, net of Shell warrants) based on historical deals of this type. 
In relation to timings, the auction should be finalised by the prelims in May – albeit, if not by then, the “the Directors will consider a number of [other] funding options, including selling a strategic stake in either FE, the mCHP business or through a placing”.
 
Strategic review of mCHP division continues
Published: Nov 16 2016

Flowgroup is a pioneering energy products/services business. Indeed with its compelling mix of competitive domestic tariffs, some of the world’s most exciting heating products and a growing connected home offer, we think it is at the vanguard of the transition towards digital power.
With many political distractions, it appears the Department for Business, Energy and Industrial Strategy (or BEIS, formerly DECC) has been duly affected and may not now reach a final verdict on its proposal to reduce the number of mCHP boiler installations that can benefit from Feed-in-Tariffs (FiTs) until early next year (from Q4’16 previously). Clearly any delay would be frustrating given the importance of these subsidies, and it has also led to an extension of the Board’s strategic review, with any decision on the mCHP business expected in due course. 
More encouragingly, today’s update  confirmed that Flow’s technology was both relevant for its domestic market and performed better than rivals in terms of switch-on time. More broadly in 2014, the Cogeneration Observatory and Dissemination Europe predicted that mCHP could take 1/3rd of the estimated 8m pa European boiler market by 2030.
That said, under a worst case scenario Flow may instead have to wind-down its entire mCHP interests, which could be “material”. As a result, the Board has prudently chosen to further curtail volumes, leading to a decline in our 2016 and 2017 forecasts to 80 (from 500) and 3,000 (from 10,000) units respectively. Nonetheless, we are encouraged to hear management will soon begin marketing the 800 devices that have already been manufactured. 
Elsewhere, Flow Energy continues to go from strength-to-strength, successfully differentiating itself in the UK power supply industry. In fact, at the interims the company reported it had increased its customer base by 155% from 100k on 1st January to 255k as at 1st September, with the latter set to deliver annualised revenues of circa £127m, equivalent to ARPUs of around £500 pa.
For our overall numbers, 2016 revenues, adjusted EBIT and closing net cash are now anticipated to come in slightly lower than previously envisaged, at £96.2m (vs £103.4m), -£24.4m (vs -£23.4m) and £5m (vs £5.7m) respectively. As such, our sum-of-the-parts valuation falls to 39p (from 42p) per share. Albeit this figure will need to be revisited again once the strategic review is finalised. 
 
Spearheading the shift into digital power
Published: Sep 05 2016

Flowgroup is a pioneering energy products/services business with a compelling mix of competitive domestic tariffs, some of the world's most exciting heating products and a growing connected home offer.
We think the answer to the UK's energy infrastructure challenges lies in 'smart grid' solutions - combining the latest advanced digital technology with domestic micro generation, renewables (eg solar, wind, tidal) and large-scale storage systems. At the vanguard of this transition towards digital power is Flowgroup, who today announced with their interims another landmark agreement, this time with industry giant Intergas, to supply its state-of-the-art smart boilers into Britain.
This deal comes hot on the heels of two similarly significant contracts signed with Daikin Europe ($18bn sales) in April for the provision of their cutting-edge Combination and System boilers, which are set to start shipping in Q4'16 and H1'17. Together,  we think that these partnerships with 2 blue-chip, industry heavyweights represent further concrete evidence of the increasing quality, scale, reputation and importance of Flow's services within the UK energy sector.
Flow Energy (FE) is going through a huge growth spurt too - expanding its customer base by 120% in H1'16 from 100k on 1st January to 220k by the end of June, and again up to 255k on 1st September, with the latter set to deliver annualised revenues of c. £127m, equivalent to ARPUs of c. £500 pa.
In terms of mCHP boilers, there has been no change in the regulatory environment since May's shock proposal by the Department of Energy and Climate Change (DECC) to limit the amount of installations that can benefit from Feed-in-Tariffs (FiTs). Nonetheless, because of this uncertainty, and on top of the BREXIT-induced devaluation of sterling that has pushed up imported component prices by >10%, the board have sensibly decided to slow down volumes, with just 37 mCHP boilers fitted so far since soft-launch in April.
With regards to valuation, our sum-of-the-parts price target has been held at 42p per share - offering significant potential upside compared to current levels. Naturally we appreciate that this will need to be revisited once the DECC findings are published.
 
114% jump in power customers in 1st half
Published: Jun 23 2016

Flowgroup is a pioneering energy products/services business, which we think could transform the global boiler market. Its patented combined heat and power micro (mCHP) boiler is half the price of comparable products, and enables households to save literally £000s on their fuel bills over the life of the appliance. It is also environmentally friendly and helps smooth peak electricity demand for the National Grid. The boilers are to be sold via both 3rd party installers and the firm's own in-house energy services arm.
Today, finding companies that deliver rapid organic growth is becoming increasingly difficult for investors. Yet Flowgroup  this morning said it had experienced a demand surge in its domestic power supply business, with account numbers up 114% in the first 6 months alone to 214k (vs 100k Jan) - equivalent to annualised sales of £106m (vs £43m in 2015). 
This progress has come from offering competitive tariffs tied to award winning customer service. A successful strategy that has taken share from the Big Six providers, and who now in aggregate possess 84% of the market, down from 98% in 2013. Going forward, we think this customer migration will continue, with Flow predicted to become "profitable in 2018" based on 650k energy supply accounts. 
We also see substantial upside too from its partnership with Daikin, where we understand Flow could (not unrealistically) be selling between 100k-200k "smart hybrid" boilers annually in the medium to long term. Once again by leveraging its extensive "Brand Ambassador" network, as well as diversifying risk by further broadening its existing product/service portfolio.
For micro CHP boilers, the consultation period is scheduled to end on 7th July, with a final adjudication due sometime in the autumn. That said, even in the event of a negative decision, we believe the Board would still have plenty of options open to it.
We make no change to either our projections or 42p/share price target, and anticipate that net cash (post the £2m interest-free Battelle loan) will close H1'16 at ~£12m. Our sum-of-the-parts valuation is predicated on a 1.5x 2017 revenue multiple for the mCHP division and a valuation of £250 per fuel account. Conservatively, this assumes nothing for either the Daiken relationship and/or other attractive partner deals that may be signed in due course.
 
Over-reaction to proposed reduction in FiTs
Published: May 31 2016

Flowgroup is a pioneering energy products/services business, which we think could transform the global boiler market. Its patented combined heat and power micro (mCHP) boiler is half the price of comparable products, and enables households to save literally £'000s on their fuel bills over the life of the appliance.
Any sharp fall in shares can offer good opportunities for risk-tolerant investors prepared to take advantage of an over-reaction. We believe this is the situation for Flowgroup after it was forced last Friday to issue an impromptu statement saying that the Department of Energy and Climate Change (DECC) had suddenly proposed to cut the number of UK mCHP boiler installations which can benefit from Feed-in-Tariffs (FiTs) from 30,000 to 1,560 units in 2017, 1,560 in 2018 and 390 for 2019. 
Although clearly "disappointing" news, we think that - thanks to Flow's overseas expansion plans and successful diversification into domestic Energy Supply and 'smart' heating products (eg Daikin partnership) - any fallout from this potentially negative move will be, at worst, manageable.
In fact, at the prelims last month, the Board quietly mentioned that it was hopeful of selling some of its revolutionary 'electricity generating' mCHP boilers in Italy towards the end of this year - a full 12 months ahead of our forecasts. The Italian market is Europe's 3rd largest, representing >600k units pa, offering attractive incentives for low carbon heating systems, covering up to 65% of the cost of each device.
Flow's home energy business continues to go from strength to strength, with currently >200k customers registered or being processed. So we make no change to either our projections or 42p/share price target - with the latter based on a 1.5x 2017 revenue multiple for the mCHP division, a valuation of £250 per fuel account and anticipated Dec'16 net cash of £5.9m. Furthermore, this prudently ascribes zero value for the rest of the group - thus potentially offering further upside from the Daiken relationship and other attractive deals that may be signed in due course.
 
The Energy supply business is flying
Published: Apr 29 2016

Flowgroup is a pioneering energy products/services business, which we think could transform the global boiler market. Its patented combined heat and power micro (mCHP) boiler is half the price of comparable products, and enables households to save literally £000s on their fuel bills over the life of the appliance. It is also environmentally friendly and helps smooth peak electricity demand for the National Grid.
This morning we learnt that many clients leaving the 'big 6' energy providers are ending up at Flow Energy (FE), who on-boarded a net 70k in Q1'16, plus another 10k in April. Thus lifting its total customer base to 180k (+80%) from 100k 4 months' ago - helped by enhanced brand awareness, customer service commendations from the likes of 'Which magazine', and the release of attractive consumer packages.
Given this jump is net additions, we now believe the division will close 2016 and 2017 on 275k (vs 200k before) and 400k (vs 300k) accounts respectively. Furthermore, despite incurring acquisition costs of circa £25/client on much higher volumes, the group's net cash balance (vs £16.6m in Dec'15) is still forecast to exit Dec'16 at £7m (or £9.2m gross).
Today the company unveiled its overarching concept, called "Energy for Life". The idea aims for Flow to become one of the UK's leading 'one-stop-shops' for next generation energy products/services, including bundled supply, microgeneration, smart heating and connected home solutions. As a consequence, Flowgroup has just agreed terms with Daikin Europe NV for the provision of two additional cutting-edge heating products.
In terms of valuation, we have reduced our assessment of the boiler opportunity (1.5x 2017 sales) from 28p to 21p diluted share. Yet, overall, thanks of the uplift in FE, our combined sum-of-the-parts price target still nudges up a penny to 42p / share.
 
Major milestones hit, plus possible VAT boost
Published: Apr 03 2016

Flowgroup is a pioneering energy products/services business, which we think could transform the global boiler market. Its patented combined heat and power micro (mCHP) boiler is half the price of comparable products, and enables households to save literally £000s on their fuel bills over the life of the appliance. It is also environmentally friendly and helps smooth peak electricity demand for the National Grid. 
Encouragingly, its "ground breaking" mCHP (micro combined heat and power) boiler has just received MCS accreditation (Microgeneration Certification Scheme). Meaning that it can now be installed in UK households with the knowledge that the low carbon electricity it produces will qualify for government subsidies, known as Feed-in-Tariffs.
Better still, it appears the EU might be about to back-track on its (perhaps hasty) decision last June to increase VAT on domestic renewable energy products from 5% to 20%. Under pressure from UK politicians, it seems the Commission may soon reverse its ruling in favour of retaining the existing 5% rate. If correct, then we believe this could provide a major fillip to the adoption and profitability of Flow's energy saving and environmentally friendly product.
The company's power supply business has also made great strides in Q1, increasing its customer base from 100K as at the end of 2015, to 170k as of today. This comes on the back of the division's mutually beneficial supply deal with Shell in December, customer service commendations from 'Which magazine' in January, and the release of competitive tariffs on the back of lower wholesale prices. 
Despite these very encouraging developments, we have prudently held our 2016 forecasts and 41p/share price target for now, but hope to upgrade based on a more favourable outlook at the prelims due on 29th April.
NB the management will discuss results and outlook at a webinar on 4th May at 1.15pm: Click here to register

ARCHIVE

2016
Shares primed for possible break-out in 2016
Published: Jan 05 2016

Flowgroup had an excellent end to 2015. As well as the crucial deal, announced on 9th December with Shell, in which Shell will provide Flow's energy supply division with wholesale gas/electricity on extended credit terms for the next 5 years (with an option for a further 3 dependent on volumes), today's "Flow Energy update", also contains positive news. In the announcement, Flowgroup said that "(As previously announced on 28 September 2015 in the Company's interim results for the six months ended 30 June 2015), the Company was targeting 100,000 energy customer accounts by the end of 2015. The Company is pleased to announce that this target was exceeded". The company also announced closing net cash of £18.8m, well ahead of expectations, boosted by the signing of the wholesale energy agreement announced with Shell. 
The firm's revolutionary new mCHP boiler was successfully launched on 4th January with customers now being able to place orders, subject to survey, through the Flow Energy website at www.flowenergy.uk.com. More details concerning customer demand will be provided at the prelims in April.
It is clear that in recent months the momentum is accelerating in the business. With the higher cash figure released today, we nudge up our price target from 40p to 41p/share. At the current share price of 16p, there is 150%+ potential upside to this price target. 
2015
All systems go for revolutionary new boiler
Published: Dec 13 2015

Flowgroup is a pioneering energy products/services business, which we think could transform the global boiler market.
In an historic shift towards a low-carbon future, Saturday's COP21 climate change agreement in Paris was hailed by US President Barack Obama as "the best chance we have to save the planet".
Almost perfectly on cue, Flowgroup this morning announced that its "game-changing", environmentally friendly and energy saving mCHP boiler that generates low carbon electricity, would be launched on 4th January 2016 with first installations scheduled for March.
The excellent news today is that Flow's and Jabil's (manufacturing partner with 8.1% stake) R&D staff/engineers have successfully managed to redesign the device, such that there is a "clear path" to reducing the price of the unit by around £400-£500/unit without compromising quality or performance.  
Customers would effectively only pay for installation, receiving a fixed reduction in their power bills over five years that exceeds the cost of the device - provided of course they switch energy supply to Flow. What's more, the associated home energy tariff would be "one of the most competitive on the market," thus stimulating greater demand.
We make no change to our projections  or 40p/share price target - but stress that as more major milestones (like today's, together with last week's landmark supply agreement with Shell) are completed, then Flow's business model will become increasingly more attractive to households, potential partners and of course investors. 
Landmark contract with Shell
Published: Dec 09 2015

Flowgroup is a pioneering energy products/services business, which we think could transform the global boiler market and whose offering is increasingly attracting the attention of major world class industry partners.
12 months ago, US heavyweight Jabil (8.1% shareholder in Flowgroup) agreed to manufacture up to 500,000 of the firm's revolutionary mCHP boilers; while separately two tier-1 overseas utilities (1 in Europe plus NRG Energy in North America) will soon begin testing these reconfigured devices.
Today, Shell Energy Europe was added this prestigious partner list. Under a mutually beneficial deal, Shell will provide Flow's energy supply division (FEL) with wholesale gas/electricity on extended credit terms for the next 5 years (with an option for a further 3 dependent on volumes).
Very encouraging news since: it should immediately release around £7m of restricted cash;  it will enable FEL to expand its customer base aggressively; and many of these households could eventually become buyers of the group's boilers and/or other innovative products.
We have nudged up our December closing net funds position (re: better than expected cash management) to £14m (vs £13m), offset by lower forecast 2016 boiler volumes of 10,000 (vs 15,000) based on a smoother ramp after commercial launch in Q1'16. Taken together, this strengthens the balance sheet, but does marginally increase next year's PBL to -£21.3m from -£19.6m.
In our view, FEL on its own is worth in the region of £25m. Hence, when added to the boiler division (0.7x 2017 revenues) and the £14m cash pile, this delivers an unchanged combined sum-of-the-parts price target for the group of 40p / diluted share. 
Energy supply sales soar 27%
Published: Sep 28 2015

Flowgroup is a pioneering energy products/services business, with the potential to transform the global boiler market. Its patented combined heat and power (CHP) micro boiler is half the price of comparable products, and enables households to save substantial amounts on their fuel bills over the life of the appliance.
H1'15 turnover and adjusted operating loss came in at £20.5m (+28%) and £6.9m respectively, with net cash closing at a healthy £21.5m. The Energy Supply arm was the standout performer growing its user base from 66k in December to 77k as at the end of June - along with reporting sales up +27% to £20.3m. This trend is likely to accelerate in H2, as we anticipate a landmark "collateral free and extended credit agreement" will be signed shortly with a "major global energy trading" organisation - that will allow Flow to rapidly expand its user base. 
We believe that the ruling by European Court of Justice (on the 4th June) to potentially lift VAT on domestic energy-saving devices from 5% to 20%, will, in due course, be viewed as nothing more than a timing issue - effectively pushing volume sales of the boilers 6 months to the right. To us it does not impact the longer term fundamentals, where the Board today reiterated that this "game-changing" device could ultimately lead to unit shipments of 1m pa.
In our opinion, Flow's shares are materially undervalued, and offer significant potential upside, especially once volume production of micro-CHP boilers begins, and/or the number of energy customers moves into six figures.  Conservatively, we have pencilled in shipments of 15,000 units for 2016 (see full note), which including installation fees is set to deliver revenues of £63.4m. 
With regards to valuation we estimate the boiler technology is worth at least 1.5x forward sales - or 29p per diluted share - giving a combined sum-of-the-parts share price target of 40p for the group as a whole. 
Shock EU ruling to reduce boiler volumes
Published: Jun 16 2015

Flowgroup is a pioneering energy products/services business, with the potential to transform the global boiler market. Its patented combined heat and power (CHP) micro boiler is half the price of comparable products, and enables households to save substantial amounts on their fuel bills over the life of the appliance.
Today the Board reported that volumes of its revolutionary micro 'combined heat and power' (mCHP) boiler are likely to be materially affected over the next 12 months by a recent shock ruling from the European Court of Justice (ECJ) on 4th June.
Here the ECJ determined that the UK's reduced VAT rate of 5% for the supply and installation of energy-saving products was "in breach of EU laws". Meaning that at the forthcoming budget on 8th July, the Treasury is set to hike VAT on loft insulation, solar panels and importantly Flow's boilers from 5% to 20%. 
In turn increasing the latter's ASP by circa £500/unit and temporarily delaying the launch of the company's crucial 'boiler that pays for itself model. Although the ECJ's decision is unlikely to be reversed anytime soon, there is a chance the UK government might be able to soften the blow to the industry.
That said, one needs to plan for the worst, and management have prudently announced an acceleration of its cost reduction programme, involving further product design changes. Much of the hard-work should be completed by Q4'15, hence allowing the 'free boiler' promotion to be re-launched later in the important winter selling season.
In the short term volumes will inevitably be hit. Here 2015 and 2016 boiler sales are now expected to come in at 500 (from 15,000) and 20,000 (from 35,000) units respectively. Consequently our 2015 revenue and EBITA projections have been reduced to £45.7m (vs £104m) and -£20.2m (vs -£10.4m) albeit we still envisage the business to be very much back on track by 2017. 
Indeed, looking longer term once the cost-down programs have been implemented, there still appears significant upside for patient investors - with our new 48p/share price target (previously 100p) being triple current levels.
2015 to be a 'watershed' year
Published: May 26 2015

Flowgroup is a pioneering energy products/services business. Its patented combined heat and power (CHP) micro boiler is half the price of comparable products, and enables households to save literally £'000s on their fuel bills over the life of the appliance.
Last week the company finalised a £21m placing and £1.2m open offer (1 for 34) at 28.5p/share in order to accelerate the growth of its "game-changing" technology. We think this move makes absolute sense, since Flow' boiler has the potential to transform the global boiler market. 
This view is seemingly shared by Jabil (NYSE: JBL) - a global contract manufacturer with 2014 turnover of $15.8bn - who have agreed to produce 500k boilers, and stumped up £7.4m in the placing for an 8.1% stake. 
In terms of today's 2014 results, Flow achieved revenues and EBIT of £33.4m and -£10.0m respectively (nearly all Energy related), which was slightly better than our projections, with December net cash closing at £6.2m (or £8.4m gross). Looking ahead, due to CE certification being received slightly later than planned, our 2015 and 2016 forecasts have been trimmed to 15k (from 20k) and 35k (from 45k) units respectively.
Using a DCF valuation, a 15% discount rate and a 9x EBITA multiple for the terminal value, we reiterate our target price of 100p per share. Moreover the cost of capital should decline as the business matures and new cheaper lending facilities are brought on stream. 
Free mini power station for your home
Published: Mar 10 2015

Flowgroup is a pioneering energy products/services business, which we think is set to transform the global boiler market.
This bright future was evidenced by today's comprehensive and upbeat pre-close trading update: 2014 revenues came in at c. £33.2m (including £200k for Battery), or 140% up on 2013 and slightly higher than our forecast of £32.7m; encouragingly there was a substantial decrease in cash-burn from £5.9m in H1 to only £3.9m in H2'14. 
We have pencilled in 20,000 units for 2015, split 5k:15k for H1:H2, with the company adding that since the soft launch on 26th Jan, the "sales and marketing campaign is progressing to plan." 
As such, with regards to valuation we retain our 100p/share target price, which prudently excludes any upside from overseas expansion. 
Recent price fall looks an opportunity
Published: Jan 29 2015

Flowgroup is a pioneering energy products/services business, which we think is set to transform the global boiler market. Its patented combined heat and power (CHP) micro boiler is much cheaper than comparable products, and enables households to save literally £000s on their fuel bills over the life of the appliance. It is also environmentally friendly and helps to smooth peak electricity demand for the National Grid. 
The circa 25% decline in Flowgroup's (Flow) shares in the past fortnight is hard to explain. Especially as yesterday the company said publicly it was "not aware of any reason" for the price movement.
In fact the news-flow has been positive of late. The launch of the central heating and power (CHP) boiler went accordingly to plan this week, and the company is 'pleased with the market response'. Additionally, in a show of confidence last week, the new CFO Nigel Canham, purchased 68,400 shares at 43p each. 
The substantial financial, supply chain and infrastructure commitment by global industry player Jabil is a sign that Flow's CHP boilers are not only going to be a commercial success, but also hopefully a major money-spinner for investors. We make no changes to our forecasts or 100p/share target price, 
Flowgroup - ED Investor Forum 21 January 2015
Published: Jan 22 2015

Tony Stiff, Chief Executive Officer, discusses the huge potential and upcoming launch of the flow boiler.
2014
Jabil commits to 500,000 new boilers
Published: Nov 23 2014

Flowgroup is a pioneering energy products/services business, which we think is set to transform the global boiler market. 
As another significant endorsement of Flowgroup's (Flow) technology, Jabil (a $4bn market cap contract manufacturer) said this morning that it had agreed to produce 500,000 (up from 390,000 previously) of Flow's patented electricity generating boilers.
Both groups have also agreed to collaborate on the whole pipeline of future microCHP products. With Jabil also extending a £2.5m loan facility by 12 months for Flow (undrawn at the moment) to 31st December 2015, as well as improving the credit terms (vs prior interest rate of 9.5%).
We make no changes to our forecasts or 100p/share target price, but see significant upside from this closer strategic partnership. 
Saving families thousands of £s on fuel bills
Published: Nov 18 2014

Flowgroup is a pioneering energy products/services business, which we think is set to transform the global boiler market.
Its patented combined heat and power (CHP) micro boiler is half the price of comparable products, and enables households to save major sums on their fuel bills over the life of the appliance. It is also environmentally friendly and helps to smooth peak electricity demand for the National Grid. A key milestone was reached yesterday when the first appliance rolled off the production line.
From a competitive perspective, the device sells for less than half the price of comparable products, and has already received over 10,000 customer enquiries. Average unit costs are expected to fall to £1,500 by 2017, thanks to economies of scale and further design refinements.
Their simple proposition is why would anyone want to pay c. £1,200 on a conventional boiler, when they could instead buy one for only a few hundred £s more, and cut their fuel bills by thousands over the appliance's life?
In light of Flow's capital-lite model and use of external consumer finance, we think that the company has sufficient cash resources (£11.5m gross on 29th Sept'15) to see it through to profitability. 
Our fair value price of 100p/share has been derived from a DCF analysis using a 15% discount rate and compares to a 42p close yesterday. It also conservatively excludes any upside from overseas expansion.
2007
Poised to take advantage of growing market
Published: Oct 30 2007

Fully funded with £11.3m raised in August 2007

VPhase - first successful spin out completed

Pnu Power suitability for telecom use demonstrated by Eskom order

Genlec completes successful field trails; market ready H2 2008