Voltage optimisation product developer VPhase plans to adapt its strategy after what management describes as slower than anticipated progress. The Alternative Investment Market-quoted business plans to form partnerships with electricity suppliers, which would offer the VPhase product to their customers, although no firm deals have yet been agreed.
VPhase has seen changes to its board, with former Blick boss Vanda Murray taking over as chairman and finance director. Rick Smith has replaced Lee Juby as chief executive.
According to VPhase, consumers should not have to pay more than £250 plus VAT (value-added tax) to buy its device, which is currently sold through electrical distributors. Installation by an electrician is an additional cost.
The payback for investment in the voltage control product is expected to be less than five years – based on electricity savings. That could be considered a long time to wait to recover the cost of a relatively expensive piece of equipment. However, the use of the product in an edition of DIY SOS (a BBC home renovation show) has helped to bring it to the attention of the public. VPhase is also using channels such as social media to help get its product known.
In the six months to June 2010, VPhase doubled its revenues to £121,000 but still lost £727,000. The loss of £412,000 in the first half of 2009 was flattered by the capitalisation of development costs. Sales in September are running at three times the average monthly rate for the first half – suggesting revenues of around £60,000 for the month, which is not enough to get VPhase anywhere close to breakeven.
There was a cash outflow of £737,000 in H1 2010, leaving VPhase with £940,000 in the bank. Smith admits that there has been little change in the rate of cash outflow, indicating that the remaining cash is unlikely to last for long.
According to VPhase’s management, there is no immediate intention to raise additional funds, but it is difficult to see the firm breaking even before the cash runs out. Debt finance may be an option but a share placing seems more likely – sooner rather than later.
Market: AIM
Symbol: VPHA
Price: 2.13p
12 month high/low: 6p/1.9p
Market cap: £14.9m
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