REG - Ceres Power Holdings - Final results for the year ended 31 December 2023
15/04/2024 07:00
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RNS Number : 5303K Ceres Power Holdings plc 15 April 2024
CWR.L
15 April 2024
Ceres Power Holdings plc
Final results for the year ended 31 December 2023
Focus on accelerating the pace of development and commercialisation
Horsham, UK: Ceres Power Holdings plc ("Ceres", the "Company") (CWR.L), a
leading developer of clean energy technology, announces its results for the
year ended 31 December 2023.
Financial highlights
· Revenue of £22.3 million (2022: £19.8 million(1))
· Gross profit of £13.6 million (2022: £10.7 million(1)),
maintaining sector-leading gross margin at 61% (2022: 54%(1))
· Research and development investment increased by 11% to £54.0
million (2022: £48.5 million(1)), consistent with strategy to drive
innovation and commercial acceleration in electrolysers
· Strong cash and short-term investments position of £140.0
million (2022: £182.3 million) with reduced cash outflow of £42.4 million
(2022: £67.3 million) through disciplined working capital and cash management
Strategic highlights
· Bosch's 'power units' based on Ceres' technology received
European funding of ~€160 million to support series ramp up and mass
production
· Doosan's 50MW stack factory in South Korea has completed factory
acceptance testing and machine installation with commissioning on schedule for
2024
· Second generation stack design has passed critical design review,
offering improvements in performance and cost to licence partners
· The electrolysis programme is progressing well. The
megawatt-scale electrolyser demonstrator successfully completed testing
in Germany and has arrived at partner Shell's R&D centre in Bangalore,
India
· Graduation to the Main Market of the London Stock Exchange in
June 2023
Current trading and outlook
· Signed significant new fuel cell and electrolysis license with
Delta Electronics in January 2024, which includes staged revenues of £43
million to Ceres through technology transfer and licensing, of which
approximately half is expected to be recognised as revenue in 2024. Initial
production by Delta is expected to start by the end of 2026
· We have confidence at this early stage of the year to
approximately double revenues in 2024 from existing partnerships, compared to
2023
Phil Caldwell, Chief Executive Officer of Ceres, said:
"After a challenging 2023, Ceres is already on track for a strong year in
2024, underpinned by a significant new licence deal with Delta, our first to
include SOEC. This is further validation of our strategy to accelerate
investment into SOEC our green hydrogen technology and adds to our series of
world class partnerships as we continue to scale our business globally."
Ends
As indicated on 14 March 2024, the Company was informed by its auditors BDO
that they required more time to complete this year's audit. The process is now
complete and a number of prior period corrections were identified, the main
ones relating to the historical timing and treatment of revenue recognition
and foreign exchange impact for long term contracts, the dilapidation
provision and capitalisation of relevant costs.
The total impact of all items is a decrease in net assets of £3.6 million in
2022, with the majority being explained by a reduction of revenue of £1.7
million in 2021 and £2.3 million in 2022. These decreases in revenue are
offset by increases in revenue of £0.3 million in 2023 and £3.3 million
increase in the opening order backlog for 2024. Please see note 1 of the
Financial Statements for further detail.
Financial Summary 2022
2023 Restated(1)
£'000 £'000
Total revenue(1), comprising: 22,324 19,788
Licence fees 6,378 5,369
Engineering services revenue 10,220 9,039
Provision of technology hardware 5,726 5,380
Gross profit 13,554 10,709
Gross margin % 61% 54%
Adjusted EBITDA loss(2) (50,297) (45,686)
Operating loss(1) (59,401) (54,013)
Net cash used in operating activities (33,899) (50,832)
Net cash and investments 139,956 182,320
1. The restatement to 2022 is described in Note 1
2. Adjusted EBITDA loss is an Alternative Performance Measure, as defined and
reconciled to operating loss in the non-GAAP section at the end of this
report.
Analyst presentation
Ceres Power Holdings plc will be hosting a live webcast for analysts and
investors on 15 April 2024 at 09.30 GMT. To register your interest in
participating, please go to:
https://www.investormeetcompany.com/ceres-power-holdings-plc/register-investor
(https://www.investormeetcompany.com/ceres-power-holdings-plc/register-investor)
.
For further information visit www.ceres.tech (http://www.ceres.tech) or
contact:
Ceres Power Holdings plc
Elizabeth Skerritt/ Merryl Black Tel: +44 (0)7932 023 283/ +44 (0)7770 853 463
FTI Consulting (PR Adviser) Tel: +44 (0)203 727 1000
Ben Brewerton/ Dwight Burden Email: ceres_power@fticonsulting.com (mailto:Ceres_power@fticonsulting.com)
About Ceres
Ceres is a leading developer of clean energy technology: electrolysis for the
creation of green hydrogen and fuel cells for power generation. Its
asset-light, licensing model has seen it establish partnerships with some of
the world's largest companies, such as Bosch, Doosan, Delta and
Weichai. Ceres' solid oxide technology supports greater electrification of
our energy systems and produces green hydrogen at high-efficiencies as a
route to decarbonise emissions-intensive industries such as steelmaking,
ammonia and future fuels. Ceres is listed on the London Stock
Exchange ("LSE") (LSE: CWR) and is classified by the LSE Green Economy Mark,
which recognises listed companies that derive more than 50% of their activity
from the green economy. Read more on our website www.ceres.tech
(http://www.ceres.tech) or follow us on LinkedIn
(https://www.linkedin.com/company/ceres-power/) .
Chief Executive's Statement
This past year was tough economically, and particularly for the clean energy
and hydrogen industries. The Hydrogen Council's December update pointed to
"headwinds that have caused a slower development of the global hydrogen
industry than had previously been expected". Against the backdrop of increased
energy prices and high inflation, many companies delayed investment decisions
and share prices were significantly impacted. Ceres was not immune from this
wider trend.
We have positioned ourselves to emerge stronger from the recent downturn in
the industry. Amidst project delays, regulatory uncertainty and higher
financing costs, Ceres has made careful decisions about where to deploy
capital and resources, and where to invest for growth based upon where the
biggest opportunities present themselves for the future of our business in an
evolving global market. In 2021 we made the strategic decision to invest in
solid oxide electrolyser cell ("SOEC") technology to access the market for
green hydrogen and significantly increase the addressable market for our
technology in addition to fuel cells. This has been the right decision for
Ceres' long-term strategy, as evidenced by the recent signing of our first
SOEC licence partner, and the challenge now is to accelerate our SOEC
development while also delivering on our existing solid oxide fuel cell
("SOFC") business.
Progress with fuel cells and existing licensee partners
We have built our business with a focus on our fuel cell technology and on our
existing licence partners. In 2023 together with our partner Doosan we
completed the factory acceptance testing of all equipment for the highly
automated factory at Saemangeum in South Korea. Commissioning is on track to
complete in the second half of 2024, and we expect first production of SOFC
systems and royalties to Ceres to follow in 2025.
Our partnership with Bosch remains strong and we have developed the next
generation stack technology to support scale up of their facility in Bamberg,
Germany. Major equipment is being installed in 2024 with support from
significant European grant funding of approximately €160 million. However,
timelines for products to market have not been supported by the geopolitical
backdrop in Europe with sentiment moving away from reliance on gas and high
energy prices impacting the economic case. We expect production will be slower
to coincide with Bosch's product launch which is still undergoing development
and validation of our second generation stack technology in the field in 2024.
Our relationship with Weichai remains strong and they are developing 75kW
stationary power units based on the Ceres technology targeting the distributed
power market. The planned three-way China joint venture ("JV") has not been
concluded in 2023 despite the relationship between Bosch, Weichai and Ceres
remaining positive. It is now our belief that the proposed JV is unlikely to
be completed in its current form. However, we are evaluating other options
with Weichai to address the Chinese market and we will provide an update on
our progress at the appropriate time.
Green hydrogen strategy
Over our 20 years of operation, we have made several key strategic transitions
as the market has evolved, going from a domestic heat and power product
company to a licensing business for power systems and now with the addition of
SOEC providing electrolyser technology for green hydrogen production.
License opportunities for SOFC have given us a great foundation, and the
market for green hydrogen produced by electrolysis is a high growth market
that is predicted to be significantly larger over time. New licensee partners
are now likely to come from the markets for green hydrogen where we are seeing
robust future demand for our technology. Therefore, we are accelerating the
pace of development and commercialisation of SOEC, whilst ensuring we maintain
our leading position in SOFC markets.
Reflecting strong interest in our technology for green hydrogen production, we
were pleased to start the new year by signing our first licence partner for
both green hydrogen and power generation with Delta Electronics in Taiwan, a
global leader in power electronics supplying the information and communication
technology industry and operating manufacturing sites globally. The agreement
includes revenue of £43 million to Ceres through technology transfer,
development licence fees and engineering services, of which approximately half
is expected to be recognised as revenue in 2024. There is potential for
additional revenue from the sale of Ceres development stacks to Delta and the
agreement also includes future royalty payments to Ceres on future commercial
production and sale to end customers by Delta. Technology introduction and
factory construction will start from 2024 and the initial production by Delta
is expected to start by the end of 2026.
We anticipate that licensing revenues from new partners will offset near-term
delays in fuel cell royalties and we have confidence at this early stage of
the year to approximately double revenues in 2024, compared to 2023, based on
existing contracts. In addition to top line growth through near-term licence
revenues, we are also managing our cash, directing more of our investment to
growing our SOEC business alongside SOFC. Through the licensing model, these
in turn translate into longer-term recurring revenues with royalties from
electrolyser manufacturing representing additional upside to royalties from
our SOFC business.
Market opportunity
We see China, Europe, South Korea and the wider Asian markets being among the
largest markets for power generation - areas for which we have good coverage
with our existing SOFC licensees and further complemented by the addition of
Delta.
Across the global market, we believe that green hydrogen production from SOEC
will play an essential role in industrial decarbonisation in order to meet net
zero. Hard-to-abate industries such as green steel and ammonia will be the
first to develop followed by synthetic fuels. Ceres' SOEC technology offers
distinct advantages of efficiency when coupled with industrial processes where
it can utilise waste heat, and so naturally couples with the exothermic
Haber-Bosch process used globally to produce ammonia as well as the
heat-intensive requirements for steel production.
Many of the top ammonia and steel regions - India, Australia, Europe, the
Middle East and North America amongst them - have announced green hydrogen
strategies, and several have gone further to publish derivative strategies for
ammonia and steel. In fact, green steel is a product that in the coming years
will go a significant way to delivering a low carbon Ceres stack. In a world
where traceability is becoming ever more important, soon all products will be
measured on their "carbon footprint" and we believe Ceres' technology, which
is made from common steel and material sets, will have a significant
competitive advantage over technologies which utilise hard to source rare
earths and more expensive materials.
What is clear is that the future demand for electrolysis for green hydrogen
exceeds supply, stimulating new entrants into the market who need access to
the best technology and can scale manufacturing through global supply chains.
This ideally positions Ceres for growth as the only company offering access to
world-leading solid oxide technology under licence. Ceres has moved to place
commercial representatives in the US, Asia, Europe and India over the past 18
months, and we will continue to build commercial strength and credibility and
consider presence in other markets with the aim to sign new licence partners
that will convert longer term into a significant share of the SOEC market for
green hydrogen.
Foundation of research and innovation
Ceres has a culture that is founded on science, engineering and individuals
who are highly talented and passionate about the Company's purpose - to
deliver clean energy for a clean world. We would not be the business we are
today without the foundation of research and innovation generated over many
years by our industry-leading team.
Technology alone is not enough and our success depends on our ability to be
responsive to the changing market and to mature from being a technology-led
organisation to one laser focused on commercialisation through global
partnerships with some of the world's leading manufacturing companies. Hence,
we are building on the foundations of our SOFC business and the experience
gained in maturing and scaling our technology, targeting new partners and
moving at pace to capture the market.
Deep expertise in solid oxide technology has allowed us to prosecute an
ambitious programme for hydrogen over the past 24 months, strengthening our
conviction that SOEC offers distinct advantages of efficiency and cost, with
potential to reduce capital and operational project costs to produce green
hydrogen by 25%. Our first megawatt-scale electrolyser demonstrator has
arrived at our partner Shell's R&D centre in Bangalore, India, where in
collaboration with Shell, we will validate the performance, cost and
operational functionality of the technology. Our technology team is now
focused on developing the next SOEC product concept for a 4-5MW modularised
system, which is supporting further commercial discussions and will facilitate
the deployment of larger installations essential to meet the scale challenge
for the decarbonisation of industry.
The year ahead
Green hydrogen will not be a silver bullet, but it does have an important role
to play in the decarbonisation of industry, where it can deliver obvious and
economic advantages. Advancements in electrolyser technology, manufacturing
economies of scale, design improvements and further reduction in renewable
power costs will all make electrolytic hydrogen more viable.
Despite current disruptions in Europe, we believe that natural gas will have a
sustained role to play in the decarbonisation of the global energy system, as
China and Asia more broadly transition away from dependence on coal. We have
strong power partners through Doosan, Weichai and now Delta in the region and
when it comes to manufacturing at scale, the Asian economies excel.
We've made a strong start to 2024 with revenues for the year expected to be
approximately double that of 2023. We are well positioned for growth with new
partnerships as a result of our investment into SOEC for electrolysis. Our
SOFC partners are continuing to scale manufacturing and build global supply
chains which can service both our SOFC and SOEC markets.
At Ceres we continue to focus on the levers within our control: careful
capital allocation, investment in valuable skills and building strong and
sustainable partnerships that have ambition to play a meaningful role in our
future energy system. I look forward to providing further updates on our
progress over the course of the year and as ever, we thank you for your
support.
Phil Caldwell
Chief Executive Officer
Financial Review
Revenue
The Group reported revenue of £22.3 million in 2023, compared with £19.8
million(1) in the prior year. Most of the revenue was from existing partners
Bosch and Doosan through ongoing development activities as we support them
with factory build and prepare for commercial launch. Revenue is a combination
of development licence revenue, engineering services and the provision of
technology hardware. £21.5 million of the revenue in 2023 relates to SOFC
(2022: £19.6 million(1)). Our SOEC business segment recognised revenue in the
year of £0.8 million (2022: £0.2 million), the majority of which is licence
revenue from signing a collaboration with Bosch and Linde announced in March
2023 to validate our electrolysis technology. Revenue from the Shell test
evaluation partnership will commence once the demonstrator is commissioned at
Shell's facility in Bangalore, India in 2024.
Gross margin
Gross profit of £13.6 million in the year (2022: £10.7 million(1)) increased
when compared to the prior year due to the impact of high margin licence
reallocations from the restatements impacting 2022. There was a similar level
of revenue and revenue mix in terms of the proportion of engineering services
and hardware. Consequently, gross margins of 61% also improved compared to
prior year (2022: 54%(1)). These margins remain much higher than industry
norms due to the licensing nature of Ceres' business model.
Other operating income
Other operating income increased significantly in the year to £3.7 million
(2022: £1.3 million), which reflects the level of R&D Expenditure Credits
("RDEC") claimed in the year compared to the prior year. As of 2023 all Ceres'
R&D tax relief is in the form of RDEC as Ceres no longer qualifies for SME
R&D tax credit schemes. In 2022, SME R&D tax credit was recognised
within the taxation credit.
Operating costs
Operating costs increased to £76.6 million (2022: £66.1 million(1)) as Ceres
increased investment in core technology to drive future growth, including the
second generation of stack and a significant investment in the megawatt-scale
electrolyser. The largest category of spend is R&D, which increased to
£54.0 million (2022: £48.5 million(1)). The average number of persons
employed by the Group in the year increased to 590 (2022: 536). Now that we
have critical mass of engineers, scientists, electrochemists and other
technical employees, we don't anticipate headcount increases in 2024.
Finance income and expense
Finance income increased significantly to £7.1 million (2022: £2.8 million),
which reflects improved interest rates on our bank deposits and short-term
investments in money market funds in a higher interest rate environment. We
maintain a stringent treasury policy to balance appropriate market returns
with the security of funds including only high investment grade, and
diversification of, financial institutions. Finance expense increased to £1.3
million (2022: £0.3 million) mostly due to a foreign exchange losses of £0.8
million on currencies held in non-sterling denominations (2022: gain of £0.2
million).
Taxation (charge)/credit
Taxation charge in 2023 of £0.4 million reflects payment of withholding taxes
from overseas earnings. This compares to a taxation credit of £3.9 million in
2022, which represents SME R&D tax credits, as described in the other
operating income section above.
Loss for the financial year
The Group posted a loss of £54.0 million (2022: £47.6 million(1)) for the
year, which reflects the increase in operating costs and no taxation credit in
2023, partly offset by higher other operating income and interest income
compared to 2022.
Adjusted EBITDA
Adjusted EBITDA loss for 2023 increased to £50.3 million (2022: £45.7
million(1)). Adjusted EBITDA is a non-statutory measure and is detailed in the
Alternative Performance Measures section in this review. The increased loss is
primarily due to the increased operating costs explained above.
Reconciliation between operating loss and adjusted EBITDA
Management believes that presenting Adjusted EBITDA loss allows for a more
direct comparison of the Group's performance against its peers and provides a
better understanding of the underlying trading performance of the Group by
excluding non-recurring, irregular and one-off costs. The Group currently
defines Adjusted EBITDA loss as the operating loss for the year excluding
depreciation and amortisation charges, share-based payment charges, unrealised
losses on forward contracts and exchange gains/losses.
Total capital investments
Total capital investments comprises capital expenditure (property, plant and
equipment) and capitalised development (intangible assets). In 2023, total
capital investments declined to £14.7 million (2022: £18.2 million) due to a
combination of reducing investment requirements for our Manufacturing
Innovation Centre in Redhill, a deferral of some test capacity expansion from
2023 to 2024, and a prioritisation of spend as we emphasised cash discipline
during the year.
Working capital movements
During 2023 working capital decreased by £10.0 million (2022: increase of
£3.0m(1,2)), which had a favourable impact to reduce the cash outflow in
2023. The two largest components of this was the reduction of Trade and other
receivables by £7.3 million, including significant invoice payments from
partners in January 2023, and a £2.9 million reduction in inventories during
the year that partly reflects the consumption of first generation stacks, and
an increased focus matching our pilot plant production levels to partner
demand. The net movement of contract assets and contract liabilities was a
decrease in net liabilities of £1.1 million.
Cash outflow
Cash outflow (change in cash, cash equivalents and short-term investments) was
£42.4 million (2022: £67.3 million). This improvement, despite the increase
in the Adjusted EBITDA loss, has driven by the reduction in working capital,
reduced capital investments and, to a lesser extent, increased finance income.
Cash, cash equivalents and short-term investments
The Group ends the financial year in a strong position with £140.0 million in
cash, cash equivalents and short-term investments (2022: £182.3 million) to
support future investment as we drive revenue growth, manage costs and
expenditure in a disciplined way, and track towards profit and cashflow
break‑even.
Outlook
We end 2023 with a strong financial position and continue to invest across the
business to build a sustainable competitive advantage in highly differentiated
solid oxide technology. As we move into 2024, we expect revenues to
approximately double compared to 2023, based on current contracts with
existing partners and licensees including Bosch, Doosan, Weichai, Delta,
Shell, Linde and others. Signing additional licence contracts in the year
represents potential upside to this outlook, and although the timing of these
incremental opportunities is uncertain, we are well-placed for future growth
from both existing and new partnership prospects.
About Ceres
Ceres is a leading developer of clean energy technology: electrolysis for the
creation of green hydrogen and fuel cells for power generation. Its
asset-light, licensing model has seen it establish partnerships with some of
the world's largest companies, such as Bosch, Doosan, Delta and
Weichai. Ceres' solid oxide technology supports greater electrification of
our energy systems and produces green hydrogen at high-efficiencies as a
route to decarbonise emissions-intensive industries such as steelmaking,
ammonia and future fuels. Ceres is listed on the London Stock
Exchange ("LSE") (LSE: CWR) and is classified by the LSE Green Economy Mark,
which recognises listed companies that derive more than 50% of their activity
from the green economy. Read more on our website www.ceres.tech
(http://www.ceres.tech) or follow us on LinkedIn
(https://www.linkedin.com/company/ceres-power/) .
Chief Executive's Statement
This past year was tough economically, and particularly for the clean energy
and hydrogen industries. The Hydrogen Council's December update pointed to
"headwinds that have caused a slower development of the global hydrogen
industry than had previously been expected". Against the backdrop of increased
energy prices and high inflation, many companies delayed investment decisions
and share prices were significantly impacted. Ceres was not immune from this
wider trend.
We have positioned ourselves to emerge stronger from the recent downturn in
the industry. Amidst project delays, regulatory uncertainty and higher
financing costs, Ceres has made careful decisions about where to deploy
capital and resources, and where to invest for growth based upon where the
biggest opportunities present themselves for the future of our business in an
evolving global market. In 2021 we made the strategic decision to invest in
solid oxide electrolyser cell ("SOEC") technology to access the market for
green hydrogen and significantly increase the addressable market for our
technology in addition to fuel cells. This has been the right decision for
Ceres' long-term strategy, as evidenced by the recent signing of our first
SOEC licence partner, and the challenge now is to accelerate our SOEC
development while also delivering on our existing solid oxide fuel cell
("SOFC") business.
Progress with fuel cells and existing licensee partners
We have built our business with a focus on our fuel cell technology and on our
existing licence partners. In 2023 together with our partner Doosan we
completed the factory acceptance testing of all equipment for the highly
automated factory at Saemangeum in South Korea. Commissioning is on track to
complete in the second half of 2024, and we expect first production of SOFC
systems and royalties to Ceres to follow in 2025.
Our partnership with Bosch remains strong and we have developed the next
generation stack technology to support scale up of their facility in Bamberg,
Germany. Major equipment is being installed in 2024 with support from
significant European grant funding of approximately €160 million. However,
timelines for products to market have not been supported by the geopolitical
backdrop in Europe with sentiment moving away from reliance on gas and high
energy prices impacting the economic case. We expect production will be slower
to coincide with Bosch's product launch which is still undergoing development
and validation of our second generation stack technology in the field in 2024.
Our relationship with Weichai remains strong and they are developing 75kW
stationary power units based on the Ceres technology targeting the distributed
power market. The planned three-way China joint venture ("JV") has not been
concluded in 2023 despite the relationship between Bosch, Weichai and Ceres
remaining positive. It is now our belief that the proposed JV is unlikely to
be completed in its current form. However, we are evaluating other options
with Weichai to address the Chinese market and we will provide an update on
our progress at the appropriate time.
Green hydrogen strategy
Over our 20 years of operation, we have made several key strategic transitions
as the market has evolved, going from a domestic heat and power product
company to a licensing business for power systems and now with the addition of
SOEC providing electrolyser technology for green hydrogen production.
License opportunities for SOFC have given us a great foundation, and the
market for green hydrogen produced by electrolysis is a high growth market
that is predicted to be significantly larger over time. New licensee partners
are now likely to come from the markets for green hydrogen where we are seeing
robust future demand for our technology. Therefore, we are accelerating the
pace of development and commercialisation of SOEC, whilst ensuring we maintain
our leading position in SOFC markets.
Reflecting strong interest in our technology for green hydrogen production, we
were pleased to start the new year by signing our first licence partner for
both green hydrogen and power generation with Delta Electronics in Taiwan, a
global leader in power electronics supplying the information and communication
technology industry and operating manufacturing sites globally. The agreement
includes revenue of £43 million to Ceres through technology transfer,
development licence fees and engineering services, of which approximately half
is expected to be recognised as revenue in 2024. There is potential for
additional revenue from the sale of Ceres development stacks to Delta and the
agreement also includes future royalty payments to Ceres on future commercial
production and sale to end customers by Delta. Technology introduction and
factory construction will start from 2024 and the initial production by Delta
is expected to start by the end of 2026.
We anticipate that licensing revenues from new partners will offset near-term
delays in fuel cell royalties and we have confidence at this early stage of
the year to approximately double revenues in 2024, compared to 2023, based on
existing contracts. In addition to top line growth through near-term licence
revenues, we are also managing our cash, directing more of our investment to
growing our SOEC business alongside SOFC. Through the licensing model, these
in turn translate into longer-term recurring revenues with royalties from
electrolyser manufacturing representing additional upside to royalties from
our SOFC business.
Market opportunity
We see China, Europe, South Korea and the wider Asian markets being among the
largest markets for power generation - areas for which we have good coverage
with our existing SOFC licensees and further complemented by the addition of
Delta.
Across the global market, we believe that green hydrogen production from SOEC
will play an essential role in industrial decarbonisation in order to meet net
zero. Hard-to-abate industries such as green steel and ammonia will be the
first to develop followed by synthetic fuels. Ceres' SOEC technology offers
distinct advantages of efficiency when coupled with industrial processes where
it can utilise waste heat, and so naturally couples with the exothermic
Haber-Bosch process used globally to produce ammonia as well as the
heat-intensive requirements for steel production.
Many of the top ammonia and steel regions - India, Australia, Europe, the
Middle East and North America amongst them - have announced green hydrogen
strategies, and several have gone further to publish derivative strategies for
ammonia and steel. In fact, green steel is a product that in the coming years
will go a significant way to delivering a low carbon Ceres stack. In a world
where traceability is becoming ever more important, soon all products will be
measured on their "carbon footprint" and we believe Ceres' technology, which
is made from common steel and material sets, will have a significant
competitive advantage over technologies which utilise hard to source rare
earths and more expensive materials.
What is clear is that the future demand for electrolysis for green hydrogen
exceeds supply, stimulating new entrants into the market who need access to
the best technology and can scale manufacturing through global supply chains.
This ideally positions Ceres for growth as the only company offering access to
world-leading solid oxide technology under licence. Ceres has moved to place
commercial representatives in the US, Asia, Europe and India over the past 18
months, and we will continue to build commercial strength and credibility and
consider presence in other markets with the aim to sign new licence partners
that will convert longer term into a significant share of the SOEC market for
green hydrogen.
Foundation of research and innovation
Ceres has a culture that is founded on science, engineering and individuals
who are highly talented and passionate about the Company's purpose - to
deliver clean energy for a clean world. We would not be the business we are
today without the foundation of research and innovation generated over many
years by our industry-leading team.
Technology alone is not enough and our success depends on our ability to be
responsive to the changing market and to mature from being a technology-led
organisation to one laser focused on commercialisation through global
partnerships with some of the world's leading manufacturing companies. Hence,
we are building on the foundations of our SOFC business and the experience
gained in maturing and scaling our technology, targeting new partners and
moving at pace to capture the market.
Deep expertise in solid oxide technology has allowed us to prosecute an
ambitious programme for hydrogen over the past 24 months, strengthening our
conviction that SOEC offers distinct advantages of efficiency and cost, with
potential to reduce capital and operational project costs to produce green
hydrogen by 25%. Our first megawatt-scale electrolyser demonstrator has
arrived at our partner Shell's R&D centre in Bangalore, India, where in
collaboration with Shell, we will validate the performance, cost and
operational functionality of the technology. Our technology team is now
focused on developing the next SOEC product concept for a 4-5MW modularised
system, which is supporting further commercial discussions and will facilitate
the deployment of larger installations essential to meet the scale challenge
for the decarbonisation of industry.
The year ahead
Green hydrogen will not be a silver bullet, but it does have an important role
to play in the decarbonisation of industry, where it can deliver obvious and
economic advantages. Advancements in electrolyser technology, manufacturing
economies of scale, design improvements and further reduction in renewable
power costs will all make electrolytic hydrogen more viable.
Despite current disruptions in Europe, we believe that natural gas will have a
sustained role to play in the decarbonisation of the global energy system, as
China and Asia more broadly transition away from dependence on coal. We have
strong power partners through Doosan, Weichai and now Delta in the region and
when it comes to manufacturing at scale, the Asian economies excel.
We've made a strong start to 2024 with revenues for the year expected to be
approximately double that of 2023. We are well positioned for growth with new
partnerships as a result of our investment into SOEC for electrolysis. Our
SOFC partners are continuing to scale manufacturing and build global supply
chains which can service both our SOFC and SOEC markets.
At Ceres we continue to focus on the levers within our control: careful
capital allocation, investment in valuable skills and building strong and
sustainable partnerships that have ambition to play a meaningful role in our
future energy system. I look forward to providing further updates on our
progress over the course of the year and as ever, we thank you for your
support.
Phil Caldwell
Chief Executive Officer
Financial Review
Revenue
The Group reported revenue of £22.3 million in 2023, compared with £19.8
million(1) in the prior year. Most of the revenue was from existing partners
Bosch and Doosan through ongoing development activities as we support them
with factory build and prepare for commercial launch. Revenue is a combination
of development licence revenue, engineering services and the provision of
technology hardware. £21.5 million of the revenue in 2023 relates to SOFC
(2022: £19.6 million(1)). Our SOEC business segment recognised revenue in the
year of £0.8 million (2022: £0.2 million), the majority of which is licence
revenue from signing a collaboration with Bosch and Linde announced in March
2023 to validate our electrolysis technology. Revenue from the Shell test
evaluation partnership will commence once the demonstrator is commissioned at
Shell's facility in Bangalore, India in 2024.
Gross margin
Gross profit of £13.6 million in the year (2022: £10.7 million(1)) increased
when compared to the prior year due to the impact of high margin licence
reallocations from the restatements impacting 2022. There was a similar level
of revenue and revenue mix in terms of the proportion of engineering services
and hardware. Consequently, gross margins of 61% also improved compared to
prior year (2022: 54%(1)). These margins remain much higher than industry
norms due to the licensing nature of Ceres' business model.
Other operating income
Other operating income increased significantly in the year to £3.7 million
(2022: £1.3 million), which reflects the level of R&D Expenditure Credits
("RDEC") claimed in the year compared to the prior year. As of 2023 all Ceres'
R&D tax relief is in the form of RDEC as Ceres no longer qualifies for SME
R&D tax credit schemes. In 2022, SME R&D tax credit was recognised
within the taxation credit.
Operating costs
Operating costs increased to £76.6 million (2022: £66.1 million(1)) as Ceres
increased investment in core technology to drive future growth, including the
second generation of stack and a significant investment in the megawatt-scale
electrolyser. The largest category of spend is R&D, which increased to
£54.0 million (2022: £48.5 million(1)). The average number of persons
employed by the Group in the year increased to 590 (2022: 536). Now that we
have critical mass of engineers, scientists, electrochemists and other
technical employees, we don't anticipate headcount increases in 2024.
Finance income and expense
Finance income increased significantly to £7.1 million (2022: £2.8 million),
which reflects improved interest rates on our bank deposits and short-term
investments in money market funds in a higher interest rate environment. We
maintain a stringent treasury policy to balance appropriate market returns
with the security of funds including only high investment grade, and
diversification of, financial institutions. Finance expense increased to £1.3
million (2022: £0.3 million) mostly due to a foreign exchange losses of £0.8
million on currencies held in non-sterling denominations (2022: gain of £0.2
million).
Taxation (charge)/credit
Taxation charge in 2023 of £0.4 million reflects payment of withholding taxes
from overseas earnings. This compares to a taxation credit of £3.9 million in
2022, which represents SME R&D tax credits, as described in the other
operating income section above.
Loss for the financial year
The Group posted a loss of £54.0 million (2022: £47.6 million(1)) for the
year, which reflects the increase in operating costs and no taxation credit in
2023, partly offset by higher other operating income and interest income
compared to 2022.
Adjusted EBITDA
Adjusted EBITDA loss for 2023 increased to £50.3 million (2022: £45.7
million(1)). Adjusted EBITDA is a non-statutory measure and is detailed in the
Alternative Performance Measures section in this review. The increased loss is
primarily due to the increased operating costs explained above.
Reconciliation between operating loss and adjusted EBITDA
Management believes that presenting Adjusted EBITDA loss allows for a more
direct comparison of the Group's performance against its peers and provides a
better understanding of the underlying trading performance of the Group by
excluding non-recurring, irregular and one-off costs. The Group currently
defines Adjusted EBITDA loss as the operating loss for the year excluding
depreciation and amortisation charges, share-based payment charges, unrealised
losses on forward contracts and exchange gains/losses.
Total capital investments
Total capital investments comprises capital expenditure (property, plant and
equipment) and capitalised development (intangible assets). In 2023, total
capital investments declined to £14.7 million (2022: £18.2 million) due to a
combination of reducing investment requirements for our Manufacturing
Innovation Centre in Redhill, a deferral of some test capacity expansion from
2023 to 2024, and a prioritisation of spend as we emphasised cash discipline
during the year.
Working capital movements
During 2023 working capital decreased by £10.0 million (2022: increase of
£3.0m(1,2)), which had a favourable impact to reduce the cash outflow in
2023. The two largest components of this was the reduction of Trade and other
receivables by £7.3 million, including significant invoice payments from
partners in January 2023, and a £2.9 million reduction in inventories during
the year that partly reflects the consumption of first generation stacks, and
an increased focus matching our pilot plant production levels to partner
demand. The net movement of contract assets and contract liabilities was a
decrease in net liabilities of £1.1 million.
Cash outflow
Cash outflow (change in cash, cash equivalents and short-term investments) was
£42.4 million (2022: £67.3 million). This improvement, despite the increase
in the Adjusted EBITDA loss, has driven by the reduction in working capital,
reduced capital investments and, to a lesser extent, increased finance income.
Cash, cash equivalents and short-term investments
The Group ends the financial year in a strong position with £140.0 million in
cash, cash equivalents and short-term investments (2022: £182.3 million) to
support future investment as we drive revenue growth, manage costs and
expenditure in a disciplined way, and track towards profit and cashflow
break‑even.
Outlook
We end 2023 with a strong financial position and continue to invest across the
business to build a sustainable competitive advantage in highly differentiated
solid oxide technology. As we move into 2024, we expect revenues to
approximately double compared to 2023, based on current contracts with
existing partners and licensees including Bosch, Doosan, Weichai, Delta,
Shell, Linde and others. Signing additional licence contracts in the year
represents potential upside to this outlook, and although the timing of these
incremental opportunities is uncertain, we are well-placed for future growth
from both existing and new partnership prospects.
Analyst presentation
Ceres Power Holdings plc will be hosting a live webcast for analysts and
investors on 15 April 2024 at 09.30 GMT. To register your interest in
participating, please go to:
https://www.investormeetcompany.com/ceres-power-holdings-plc/register-investor
(https://www.investormeetcompany.com/ceres-power-holdings-plc/register-investor)
.
For further information visit www.ceres.tech (http://www.ceres.tech) or
contact:
Ceres Power Holdings plc
Elizabeth Skerritt/ Merryl Black Tel: +44 (0)7932 023 283/ +44 (0)7770 853 463
FTI Consulting (PR Adviser) Tel: +44 (0)203 727 1000
Ben Brewerton/ Dwight Burden Email: ceres_power@fticonsulting.com (mailto:Ceres_power@fticonsulting.com)
About Ceres
Ceres is a leading developer of clean energy technology: electrolysis for the
creation of green hydrogen and fuel cells for power generation. Its
asset-light, licensing model has seen it establish partnerships with some of
the world's largest companies, such as Bosch, Doosan, Delta and
Weichai. Ceres' solid oxide technology supports greater electrification of
our energy systems and produces green hydrogen at high-efficiencies as a
route to decarbonise emissions-intensive industries such as steelmaking,
ammonia and future fuels. Ceres is listed on the London Stock
Exchange ("LSE") (LSE: CWR) and is classified by the LSE Green Economy Mark,
which recognises listed companies that derive more than 50% of their activity
from the green economy. Read more on our website www.ceres.tech
(http://www.ceres.tech) or follow us on LinkedIn
(https://www.linkedin.com/company/ceres-power/) .
Chief Executive's Statement
This past year was tough economically, and particularly for the clean energy
and hydrogen industries. The Hydrogen Council's December update pointed to
"headwinds that have caused a slower development of the global hydrogen
industry than had previously been expected". Against the backdrop of increased
energy prices and high inflation, many companies delayed investment decisions
and share prices were significantly impacted. Ceres was not immune from this
wider trend.
We have positioned ourselves to emerge stronger from the recent downturn in
the industry. Amidst project delays, regulatory uncertainty and higher
financing costs, Ceres has made careful decisions about where to deploy
capital and resources, and where to invest for growth based upon where the
biggest opportunities present themselves for the future of our business in an
evolving global market. In 2021 we made the strategic decision to invest in
solid oxide electrolyser cell ("SOEC") technology to access the market for
green hydrogen and significantly increase the addressable market for our
technology in addition to fuel cells. This has been the right decision for
Ceres' long-term strategy, as evidenced by the recent signing of our first
SOEC licence partner, and the challenge now is to accelerate our SOEC
development while also delivering on our existing solid oxide fuel cell
("SOFC") business.
Progress with fuel cells and existing licensee partners
We have built our business with a focus on our fuel cell technology and on our
existing licence partners. In 2023 together with our partner Doosan we
completed the factory acceptance testing of all equipment for the highly
automated factory at Saemangeum in South Korea. Commissioning is on track to
complete in the second half of 2024, and we expect first production of SOFC
systems and royalties to Ceres to follow in 2025.
Our partnership with Bosch remains strong and we have developed the next
generation stack technology to support scale up of their facility in Bamberg,
Germany. Major equipment is being installed in 2024 with support from
significant European grant funding of approximately €160 million. However,
timelines for products to market have not been supported by the geopolitical
backdrop in Europe with sentiment moving away from reliance on gas and high
energy prices impacting the economic case. We expect production will be slower
to coincide with Bosch's product launch which is still undergoing development
and validation of our second generation stack technology in the field in 2024.
Our relationship with Weichai remains strong and they are developing 75kW
stationary power units based on the Ceres technology targeting the distributed
power market. The planned three-way China joint venture ("JV") has not been
concluded in 2023 despite the relationship between Bosch, Weichai and Ceres
remaining positive. It is now our belief that the proposed JV is unlikely to
be completed in its current form. However, we are evaluating other options
with Weichai to address the Chinese market and we will provide an update on
our progress at the appropriate time.
Green hydrogen strategy
Over our 20 years of operation, we have made several key strategic transitions
as the market has evolved, going from a domestic heat and power product
company to a licensing business for power systems and now with the addition of
SOEC providing electrolyser technology for green hydrogen production.
License opportunities for SOFC have given us a great foundation, and the
market for green hydrogen produced by electrolysis is a high growth market
that is predicted to be significantly larger over time. New licensee partners
are now likely to come from the markets for green hydrogen where we are seeing
robust future demand for our technology. Therefore, we are accelerating the
pace of development and commercialisation of SOEC, whilst ensuring we maintain
our leading position in SOFC markets.
Reflecting strong interest in our technology for green hydrogen production, we
were pleased to start the new year by signing our first licence partner for
both green hydrogen and power generation with Delta Electronics in Taiwan, a
global leader in power electronics supplying the information and communication
technology industry and operating manufacturing sites globally. The agreement
includes revenue of £43 million to Ceres through technology transfer,
development licence fees and engineering services, of which approximately half
is expected to be recognised as revenue in 2024. There is potential for
additional revenue from the sale of Ceres development stacks to Delta and the
agreement also includes future royalty payments to Ceres on future commercial
production and sale to end customers by Delta. Technology introduction and
factory construction will start from 2024 and the initial production by Delta
is expected to start by the end of 2026.
We anticipate that licensing revenues from new partners will offset near-term
delays in fuel cell royalties and we have confidence at this early stage of
the year to approximately double revenues in 2024, compared to 2023, based on
existing contracts. In addition to top line growth through near-term licence
revenues, we are also managing our cash, directing more of our investment to
growing our SOEC business alongside SOFC. Through the licensing model, these
in turn translate into longer-term recurring revenues with royalties from
electrolyser manufacturing representing additional upside to royalties from
our SOFC business.
Market opportunity
We see China, Europe, South Korea and the wider Asian markets being among the
largest markets for power generation - areas for which we have good coverage
with our existing SOFC licensees and further complemented by the addition of
Delta.
Across the global market, we believe that green hydrogen production from SOEC
will play an essential role in industrial decarbonisation in order to meet net
zero. Hard-to-abate industries such as green steel and ammonia will be the
first to develop followed by synthetic fuels. Ceres' SOEC technology offers
distinct advantages of efficiency when coupled with industrial processes where
it can utilise waste heat, and so naturally couples with the exothermic
Haber-Bosch process used globally to produce ammonia as well as the
heat-intensive requirements for steel production.
Many of the top ammonia and steel regions - India, Australia, Europe, the
Middle East and North America amongst them - have announced green hydrogen
strategies, and several have gone further to publish derivative strategies for
ammonia and steel. In fact, green steel is a product that in the coming years
will go a significant way to delivering a low carbon Ceres stack. In a world
where traceability is becoming ever more important, soon all products will be
measured on their "carbon footprint" and we believe Ceres' technology, which
is made from common steel and material sets, will have a significant
competitive advantage over technologies which utilise hard to source rare
earths and more expensive materials.
What is clear is that the future demand for electrolysis for green hydrogen
exceeds supply, stimulating new entrants into the market who need access to
the best technology and can scale manufacturing through global supply chains.
This ideally positions Ceres for growth as the only company offering access to
world-leading solid oxide technology under licence. Ceres has moved to place
commercial representatives in the US, Asia, Europe and India over the past 18
months, and we will continue to build commercial strength and credibility and
consider presence in other markets with the aim to sign new licence partners
that will convert longer term into a significant share of the SOEC market for
green hydrogen.
Foundation of research and innovation
Ceres has a culture that is founded on science, engineering and individuals
who are highly talented and passionate about the Company's purpose - to
deliver clean energy for a clean world. We would not be the business we are
today without the foundation of research and innovation generated over many
years by our industry-leading team.
Technology alone is not enough and our success depends on our ability to be
responsive to the changing market and to mature from being a technology-led
organisation to one laser focused on commercialisation through global
partnerships with some of the world's leading manufacturing companies. Hence,
we are building on the foundations of our SOFC business and the experience
gained in maturing and scaling our technology, targeting new partners and
moving at pace to capture the market.
Deep expertise in solid oxide technology has allowed us to prosecute an
ambitious programme for hydrogen over the past 24 months, strengthening our
conviction that SOEC offers distinct advantages of efficiency and cost, with
potential to reduce capital and operational project costs to produce green
hydrogen by 25%. Our first megawatt-scale electrolyser demonstrator has
arrived at our partner Shell's R&D centre in Bangalore, India, where in
collaboration with Shell, we will validate the performance, cost and
operational functionality of the technology. Our technology team is now
focused on developing the next SOEC product concept for a 4-5MW modularised
system, which is supporting further commercial discussions and will facilitate
the deployment of larger installations essential to meet the scale challenge
for the decarbonisation of industry.
The year ahead
Green hydrogen will not be a silver bullet, but it does have an important role
to play in the decarbonisation of industry, where it can deliver obvious and
economic advantages. Advancements in electrolyser technology, manufacturing
economies of scale, design improvements and further reduction in renewable
power costs will all make electrolytic hydrogen more viable.
Despite current disruptions in Europe, we believe that natural gas will have a
sustained role to play in the decarbonisation of the global energy system, as
China and Asia more broadly transition away from dependence on coal. We have
strong power partners through Doosan, Weichai and now Delta in the region and
when it comes to manufacturing at scale, the Asian economies excel.
We've made a strong start to 2024 with revenues for the year expected to be
approximately double that of 2023. We are well positioned for growth with new
partnerships as a result of our investment into SOEC for electrolysis. Our
SOFC partners are continuing to scale manufacturing and build global supply
chains which can service both our SOFC and SOEC markets.
At Ceres we continue to focus on the levers within our control: careful
capital allocation, investment in valuable skills and building strong and
sustainable partnerships that have ambition to play a meaningful role in our
future energy system. I look forward to providing further updates on our
progress over the course of the year and as ever, we thank you for your
support.
Phil Caldwell
Chief Executive Officer
Financial Review
Revenue
The Group reported revenue of £22.3 million in 2023, compared with £19.8
million(1) in the prior year. Most of the revenue was from existing partners
Bosch and Doosan through ongoing development activities as we support them
with factory build and prepare for commercial launch. Revenue is a combination
of development licence revenue, engineering services and the provision of
technology hardware. £21.5 million of the revenue in 2023 relates to SOFC
(2022: £19.6 million(1)). Our SOEC business segment recognised revenue in the
year of £0.8 million (2022: £0.2 million), the majority of which is licence
revenue from signing a collaboration with Bosch and Linde announced in March
2023 to validate our electrolysis technology. Revenue from the Shell test
evaluation partnership will commence once the demonstrator is commissioned at
Shell's facility in Bangalore, India in 2024.
Gross margin
Gross profit of £13.6 million in the year (2022: £10.7 million(1)) increased
when compared to the prior year due to the impact of high margin licence
reallocations from the restatements impacting 2022. There was a similar level
of revenue and revenue mix in terms of the proportion of engineering services
and hardware. Consequently, gross margins of 61% also improved compared to
prior year (2022: 54%(1)). These margins remain much higher than industry
norms due to the licensing nature of Ceres' business model.
Other operating income
Other operating income increased significantly in the year to £3.7 million
(2022: £1.3 million), which reflects the level of R&D Expenditure Credits
("RDEC") claimed in the year compared to the prior year. As of 2023 all Ceres'
R&D tax relief is in the form of RDEC as Ceres no longer qualifies for SME
R&D tax credit schemes. In 2022, SME R&D tax credit was recognised
within the taxation credit.
Operating costs
Operating costs increased to £76.6 million (2022: £66.1 million(1)) as Ceres
increased investment in core technology to drive future growth, including the
second generation of stack and a significant investment in the megawatt-scale
electrolyser. The largest category of spend is R&D, which increased to
£54.0 million (2022: £48.5 million(1)). The average number of persons
employed by the Group in the year increased to 590 (2022: 536). Now that we
have critical mass of engineers, scientists, electrochemists and other
technical employees, we don't anticipate headcount increases in 2024.
Finance income and expense
Finance income increased significantly to £7.1 million (2022: £2.8 million),
which reflects improved interest rates on our bank deposits and short-term
investments in money market funds in a higher interest rate environment. We
maintain a stringent treasury policy to balance appropriate market returns
with the security of funds including only high investment grade, and
diversification of, financial institutions. Finance expense increased to £1.3
million (2022: £0.3 million) mostly due to a foreign exchange losses of £0.8
million on currencies held in non-sterling denominations (2022: gain of £0.2
million).
Taxation (charge)/credit
Taxation charge in 2023 of £0.4 million reflects payment of withholding taxes
from overseas earnings. This compares to a taxation credit of £3.9 million in
2022, which represents SME R&D tax credits, as described in the other
operating income section above.
Loss for the financial year
The Group posted a loss of £54.0 million (2022: £47.6 million(1)) for the
year, which reflects the increase in operating costs and no taxation credit in
2023, partly offset by higher other operating income and interest income
compared to 2022.
Adjusted EBITDA
Adjusted EBITDA loss for 2023 increased to £50.3 million (2022: £45.7
million(1)). Adjusted EBITDA is a non-statutory measure and is detailed in the
Alternative Performance Measures section in this review. The increased loss is
primarily due to the increased operating costs explained above.
Reconciliation between operating loss and adjusted EBITDA
Management believes that presenting Adjusted EBITDA loss allows for a more
direct comparison of the Group's performance against its peers and provides a
better understanding of the underlying trading performance of the Group by
excluding non-recurring, irregular and one-off costs. The Group currently
defines Adjusted EBITDA loss as the operating loss for the year excluding
depreciation and amortisation charges, share-based payment charges, unrealised
losses on forward contracts and exchange gains/losses.
Total capital investments
Total capital investments comprises capital expenditure (property, plant and
equipment) and capitalised development (intangible assets). In 2023, total
capital investments declined to £14.7 million (2022: £18.2 million) due to a
combination of reducing investment requirements for our Manufacturing
Innovation Centre in Redhill, a deferral of some test capacity expansion from
2023 to 2024, and a prioritisation of spend as we emphasised cash discipline
during the year.
Working capital movements
During 2023 working capital decreased by £10.0 million (2022: increase of
£3.0m(1,2)), which had a favourable impact to reduce the cash outflow in
2023. The two largest components of this was the reduction of Trade and other
receivables by £7.3 million, including significant invoice payments from
partners in January 2023, and a £2.9 million reduction in inventories during
the year that partly reflects the consumption of first generation stacks, and
an increased focus matching our pilot plant production levels to partner
demand. The net movement of contract assets and contract liabilities was a
decrease in net liabilities of £1.1 million.
Cash outflow
Cash outflow (change in cash, cash equivalents and short-term investments) was
£42.4 million (2022: £67.3 million). This improvement, despite the increase
in the Adjusted EBITDA loss, has driven by the reduction in working capital,
reduced capital investments and, to a lesser extent, increased finance income.
Cash, cash equivalents and short-term investments
The Group ends the financial year in a strong position with £140.0 million in
cash, cash equivalents and short-term investments (2022: £182.3 million) to
support future investment as we drive revenue growth, manage costs and
expenditure in a disciplined way, and track towards profit and cashflow
break‑even.
Outlook
We end 2023 with a strong financial position and continue to invest across the
business to build a sustainable competitive advantage in highly differentiated
solid oxide technology. As we move into 2024, we expect revenues to
approximately double compared to 2023, based on current contracts with
existing partners and licensees including Bosch, Doosan, Weichai, Delta,
Shell, Linde and others. Signing additional licence contracts in the year
represents potential upside to this outlook, and although the timing of these
incremental opportunities is uncertain, we are well-placed for future growth
from both existing and new partnership prospects.
About Ceres
Ceres is a leading developer of clean energy technology: electrolysis for the
creation of green hydrogen and fuel cells for power generation. Its
asset-light, licensing model has seen it establish partnerships with some of
the world's largest companies, such as Bosch, Doosan, Delta and
Weichai. Ceres' solid oxide technology supports greater electrification of
our energy systems and produces green hydrogen at high-efficiencies as a
route to decarbonise emissions-intensive industries such as steelmaking,
ammonia and future fuels. Ceres is listed on the London Stock
Exchange ("LSE") (LSE: CWR) and is classified by the LSE Green Economy Mark,
which recognises listed companies that derive more than 50% of their activity
from the green economy. Read more on our website www.ceres.tech
(http://www.ceres.tech) or follow us on LinkedIn
(https://www.linkedin.com/company/ceres-power/) .
Chief Executive's Statement
This past year was tough economically, and particularly for the clean energy
and hydrogen industries. The Hydrogen Council's December update pointed to
"headwinds that have caused a slower development of the global hydrogen
industry than had previously been expected". Against the backdrop of increased
energy prices and high inflation, many companies delayed investment decisions
and share prices were significantly impacted. Ceres was not immune from this
wider trend.
We have positioned ourselves to emerge stronger from the recent downturn in
the industry. Amidst project delays, regulatory uncertainty and higher
financing costs, Ceres has made careful decisions about where to deploy
capital and resources, and where to invest for growth based upon where the
biggest opportunities present themselves for the future of our business in an
evolving global market. In 2021 we made the strategic decision to invest in
solid oxide electrolyser cell ("SOEC") technology to access the market for
green hydrogen and significantly increase the addressable market for our
technology in addition to fuel cells. This has been the right decision for
Ceres' long-term strategy, as evidenced by the recent signing of our first
SOEC licence partner, and the challenge now is to accelerate our SOEC
development while also delivering on our existing solid oxide fuel cell
("SOFC") business.
Progress with fuel cells and existing licensee partners
We have built our business with a focus on our fuel cell technology and on our
existing licence partners. In 2023 together with our partner Doosan we
completed the factory acceptance testing of all equipment for the highly
automated factory at Saemangeum in South Korea. Commissioning is on track to
complete in the second half of 2024, and we expect first production of SOFC
systems and royalties to Ceres to follow in 2025.
Our partnership with Bosch remains strong and we have developed the next
generation stack technology to support scale up of their facility in Bamberg,
Germany. Major equipment is being installed in 2024 with support from
significant European grant funding of approximately €160 million. However,
timelines for products to market have not been supported by the geopolitical
backdrop in Europe with sentiment moving away from reliance on gas and high
energy prices impacting the economic case. We expect production will be slower
to coincide with Bosch's product launch which is still undergoing development
and validation of our second generation stack technology in the field in 2024.
Our relationship with Weichai remains strong and they are developing 75kW
stationary power units based on the Ceres technology targeting the distributed
power market. The planned three-way China joint venture ("JV") has not been
concluded in 2023 despite the relationship between Bosch, Weichai and Ceres
remaining positive. It is now our belief that the proposed JV is unlikely to
be completed in its current form. However, we are evaluating other options
with Weichai to address the Chinese market and we will provide an update on
our progress at the appropriate time.
Green hydrogen strategy
Over our 20 years of operation, we have made several key strategic transitions
as the market has evolved, going from a domestic heat and power product
company to a licensing business for power systems and now with the addition of
SOEC providing electrolyser technology for green hydrogen production.
License opportunities for SOFC have given us a great foundation, and the
market for green hydrogen produced by electrolysis is a high growth market
that is predicted to be significantly larger over time. New licensee partners
are now likely to come from the markets for green hydrogen where we are seeing
robust future demand for our technology. Therefore, we are accelerating the
pace of development and commercialisation of SOEC, whilst ensuring we maintain
our leading position in SOFC markets.
Reflecting strong interest in our technology for green hydrogen production, we
were pleased to start the new year by signing our first licence partner for
both green hydrogen and power generation with Delta Electronics in Taiwan, a
global leader in power electronics supplying the information and communication
technology industry and operating manufacturing sites globally. The agreement
includes revenue of £43 million to Ceres through technology transfer,
development licence fees and engineering services, of which approximately half
is expected to be recognised as revenue in 2024. There is potential for
additional revenue from the sale of Ceres development stacks to Delta and the
agreement also includes future royalty payments to Ceres on future commercial
production and sale to end customers by Delta. Technology introduction and
factory construction will start from 2024 and the initial production by Delta
is expected to start by the end of 2026.
We anticipate that licensing revenues from new partners will offset near-term
delays in fuel cell royalties and we have confidence at this early stage of
the year to approximately double revenues in 2024, compared to 2023, based on
existing contracts. In addition to top line growth through near-term licence
revenues, we are also managing our cash, directing more of our investment to
growing our SOEC business alongside SOFC. Through the licensing model, these
in turn translate into longer-term recurring revenues with royalties from
electrolyser manufacturing representing additional upside to royalties from
our SOFC business.
Market opportunity
We see China, Europe, South Korea and the wider Asian markets being among the
largest markets for power generation - areas for which we have good coverage
with our existing SOFC licensees and further complemented by the addition of
Delta.
Across the global market, we believe that green hydrogen production from SOEC
will play an essential role in industrial decarbonisation in order to meet net
zero. Hard-to-abate industries such as green steel and ammonia will be the
first to develop followed by synthetic fuels. Ceres' SOEC technology offers
distinct advantages of efficiency when coupled with industrial processes where
it can utilise waste heat, and so naturally couples with the exothermic
Haber-Bosch process used globally to produce ammonia as well as the
heat-intensive requirements for steel production.
Many of the top ammonia and steel regions - India, Australia, Europe, the
Middle East and North America amongst them - have announced green hydrogen
strategies, and several have gone further to publish derivative strategies for
ammonia and steel. In fact, green steel is a product that in the coming years
will go a significant way to delivering a low carbon Ceres stack. In a world
where traceability is becoming ever more important, soon all products will be
measured on their "carbon footprint" and we believe Ceres' technology, which
is made from common steel and material sets, will have a significant
competitive advantage over technologies which utilise hard to source rare
earths and more expensive materials.
What is clear is that the future demand for electrolysis for green hydrogen
exceeds supply, stimulating new entrants into the market who need access to
the best technology and can scale manufacturing through global supply chains.
This ideally positions Ceres for growth as the only company offering access to
world-leading solid oxide technology under licence. Ceres has moved to place
commercial representatives in the US, Asia, Europe and India over the past 18
months, and we will continue to build commercial strength and credibility and
consider presence in other markets with the aim to sign new licence partners
that will convert longer term into a significant share of the SOEC market for
green hydrogen.
Foundation of research and innovation
Ceres has a culture that is founded on science, engineering and individuals
who are highly talented and passionate about the Company's purpose - to
deliver clean energy for a clean world. We would not be the business we are
today without the foundation of research and innovation generated over many
years by our industry-leading team.
Technology alone is not enough and our success depends on our ability to be
responsive to the changing market and to mature from being a technology-led
organisation to one laser focused on commercialisation through global
partnerships with some of the world's leading manufacturing companies. Hence,
we are building on the foundations of our SOFC business and the experience
gained in maturing and scaling our technology, targeting new partners and
moving at pace to capture the market.
Deep expertise in solid oxide technology has allowed us to prosecute an
ambitious programme for hydrogen over the past 24 months, strengthening our
conviction that SOEC offers distinct advantages of efficiency and cost, with
potential to reduce capital and operational project costs to produce green
hydrogen by 25%. Our first megawatt-scale electrolyser demonstrator has
arrived at our partner Shell's R&D centre in Bangalore, India, where in
collaboration with Shell, we will validate the performance, cost and
operational functionality of the technology. Our technology team is now
focused on developing the next SOEC product concept for a 4-5MW modularised
system, which is supporting further commercial discussions and will facilitate
the deployment of larger installations essential to meet the scale challenge
for the decarbonisation of industry.
The year ahead
Green hydrogen will not be a silver bullet, but it does have an important role
to play in the decarbonisation of industry, where it can deliver obvious and
economic advantages. Advancements in electrolyser technology, manufacturing
economies of scale, design improvements and further reduction in renewable
power costs will all make electrolytic hydrogen more viable.
Despite current disruptions in Europe, we believe that natural gas will have a
sustained role to play in the decarbonisation of the global energy system, as
China and Asia more broadly transition away from dependence on coal. We have
strong power partners through Doosan, Weichai and now Delta in the region and
when it comes to manufacturing at scale, the Asian economies excel.
We've made a strong start to 2024 with revenues for the year expected to be
approximately double that of 2023. We are well positioned for growth with new
partnerships as a result of our investment into SOEC for electrolysis. Our
SOFC partners are continuing to scale manufacturing and build global supply
chains which can service both our SOFC and SOEC markets.
At Ceres we continue to focus on the levers within our control: careful
capital allocation, investment in valuable skills and building strong and
sustainable partnerships that have ambition to play a meaningful role in our
future energy system. I look forward to providing further updates on our
progress over the course of the year and as ever, we thank you for your
support.
Phil Caldwell
Chief Executive Officer
Financial Review
Revenue
The Group reported revenue of £22.3 million in 2023, compared with £19.8
million(1) in the prior year. Most of the revenue was from existing partners
Bosch and Doosan through ongoing development activities as we support them
with factory build and prepare for commercial launch. Revenue is a combination
of development licence revenue, engineering services and the provision of
technology hardware. £21.5 million of the revenue in 2023 relates to SOFC
(2022: £19.6 million(1)). Our SOEC business segment recognised revenue in the
year of £0.8 million (2022: £0.2 million), the majority of which is licence
revenue from signing a collaboration with Bosch and Linde announced in March
2023 to validate our electrolysis technology. Revenue from the Shell test
evaluation partnership will commence once the demonstrator is commissioned at
Shell's facility in Bangalore, India in 2024.
Gross margin
Gross profit of £13.6 million in the year (2022: £10.7 million(1)) increased
when compared to the prior year due to the impact of high margin licence
reallocations from the restatements impacting 2022. There was a similar level
of revenue and revenue mix in terms of the proportion of engineering services
and hardware. Consequently, gross margins of 61% also improved compared to
prior year (2022: 54%(1)). These margins remain much higher than industry
norms due to the licensing nature of Ceres' business model.
Other operating income
Other operating income increased significantly in the year to £3.7 million
(2022: £1.3 million), which reflects the level of R&D Expenditure Credits
("RDEC") claimed in the year compared to the prior year. As of 2023 all Ceres'
R&D tax relief is in the form of RDEC as Ceres no longer qualifies for SME
R&D tax credit schemes. In 2022, SME R&D tax credit was recognised
within the taxation credit.
Operating costs
Operating costs increased to £76.6 million (2022: £66.1 million(1)) as Ceres
increased investment in core technology to drive future growth, including the
second generation of stack and a significant investment in the megawatt-scale
electrolyser. The largest category of spend is R&D, which increased to
£54.0 million (2022: £48.5 million(1)). The average number of persons
employed by the Group in the year increased to 590 (2022: 536). Now that we
have critical mass of engineers, scientists, electrochemists and other
technical employees, we don't anticipate headcount increases in 2024.
Finance income and expense
Finance income increased significantly to £7.1 million (2022: £2.8 million),
which reflects improved interest rates on our bank deposits and short-term
investments in money market funds in a higher interest rate environment. We
maintain a stringent treasury policy to balance appropriate market returns
with the security of funds including only high investment grade, and
diversification of, financial institutions. Finance expense increased to £1.3
million (2022: £0.3 million) mostly due to a foreign exchange losses of £0.8
million on currencies held in non-sterling denominations (2022: gain of £0.2
million).
Taxation (charge)/credit
Taxation charge in 2023 of £0.4 million reflects payment of withholding taxes
from overseas earnings. This compares to a taxation credit of £3.9 million in
2022, which represents SME R&D tax credits, as described in the other
operating income section above.
Loss for the financial year
The Group posted a loss of £54.0 million (2022: £47.6 million(1)) for the
year, which reflects the increase in operating costs and no taxation credit in
2023, partly offset by higher other operating income and interest income
compared to 2022.
Adjusted EBITDA
Adjusted EBITDA loss for 2023 increased to £50.3 million (2022: £45.7
million(1)). Adjusted EBITDA is a non-statutory measure and is detailed in the
Alternative Performance Measures section in this review. The increased loss is
primarily due to the increased operating costs explained above.
Reconciliation between operating loss and adjusted EBITDA
Management believes that presenting Adjusted EBITDA loss allows for a more
direct comparison of the Group's performance against its peers and provides a
better understanding of the underlying trading performance of the Group by
excluding non-recurring, irregular and one-off costs. The Group currently
defines Adjusted EBITDA loss as the operating loss for the year excluding
depreciation and amortisation charges, share-based payment charges, unrealised
losses on forward contracts and exchange gains/losses.
Total capital investments
Total capital investments comprises capital expenditure (property, plant and
equipment) and capitalised development (intangible assets). In 2023, total
capital investments declined to £14.7 million (2022: £18.2 million) due to a
combination of reducing investment requirements for our Manufacturing
Innovation Centre in Redhill, a deferral of some test capacity expansion from
2023 to 2024, and a prioritisation of spend as we emphasised cash discipline
during the year.
Working capital movements
During 2023 working capital decreased by £10.0 million (2022: increase of
£3.0m(1,2)), which had a favourable impact to reduce the cash outflow in
2023. The two largest components of this was the reduction of Trade and other
receivables by £7.3 million, including significant invoice payments from
partners in January 2023, and a £2.9 million reduction in inventories during
the year that partly reflects the consumption of first generation stacks, and
an increased focus matching our pilot plant production levels to partner
demand. The net movement of contract assets and contract liabilities was a
decrease in net liabilities of £1.1 million.
Cash outflow
Cash outflow (change in cash, cash equivalents and short-term investments) was
£42.4 million (2022: £67.3 million). This improvement, despite the increase
in the Adjusted EBITDA loss, has driven by the reduction in working capital,
reduced capital investments and, to a lesser extent, increased finance income.
Cash, cash equivalents and short-term investments
The Group ends the financial year in a strong position with £140.0 million in
cash, cash equivalents and short-term investments (2022: £182.3 million) to
support future investment as we drive revenue growth, manage costs and
expenditure in a disciplined way, and track towards profit and cashflow
break‑even.
Outlook
We end 2023 with a strong financial position and continue to invest across the
business to build a sustainable competitive advantage in highly differentiated
solid oxide technology. As we move into 2024, we expect revenues to
approximately double compared to 2023, based on current contracts with
existing partners and licensees including Bosch, Doosan, Weichai, Delta,
Shell, Linde and others. Signing additional licence contracts in the year
represents potential upside to this outlook, and although the timing of these
incremental opportunities is uncertain, we are well-placed for future growth
from both existing and new partnership prospects.
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2023
31 December 2023 31 December 2022
Restated(1)
Note £'000 £'000
Revenue(1) 2 22,324 19,788
Cost of sales (8,770) (9,079)
Gross profit 13,554 10,709
Other operating income(2) 3,665 1,332
Operating costs(1) 4 (76,620) (66,054)
Operating loss (59,401) (54,013)
Finance income 5 7,079 2,830
Finance expense 5 (1,287) (304)
Loss before taxation (53,609) (51,487)
Taxation (charge)/credit 6 (399) 3,872
Loss for the financial period and total comprehensive loss (54,008) (47,615)
Loss per £0.10 ordinary share expressed in pence per share:
Basic and diluted loss per share 7 (28.03)p (24.88)p
The accompanying notes are an integral part of these consolidated financial
statements.
(1) The restatement to 2022 is described in Note 1.
(2) Other operating income relates to grant income and the Group's RDEC tax
credit.
( )
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2023
31 December 2023 31 December 2022 31 December 2021
Restated(1) Restated(1)
Note £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 8 25,882 26,387 18,613
Right-of-use assets 9 2,141 2,647 2,438
Intangible assets 10 19,054 13,278 8,478
Long-term investments ꟷ ꟷ 5,000
Investment in associate 2,350 2,460 500
Other receivables 12 741 741 741
Total non-current assets 50,168 45,513 35,770
Current assets
Inventories 11 2,825 5,714 3,145
Contract assets(1) 2 1,575 400 5,343
Other current assets 13 1,193 957 1,133
Derivative financial instruments 17 8 54 1,073
Current tax receivable 771 7,396 1,615
Trade and other receivables 12 9,876 17,153 5,813
Short-term investments(1) 14 90,249 110,536 93,129
Cash and cash equivalents(1) 14 49,707 71,784 151,455
Total current assets 156,204 213,994 262,706
Liabilities
Current liabilities
Trade and other payables 15 (4,983) (4,933) (2,783)
Contract liabilities(1) 2 (7,469) (7,363) (3,917)
Other current liabilities(1) 16 (6,301) (6,275) (5,047)
Derivative financial instruments 17 (99) ꟷ ꟷ
Lease liabilities 18 (694) (610) (754)
Provisions 19 (647) (929) (1,579)
Total current liabilities (20,193) (20,110) (14,080)
Net current assets 136,011 193,884 248,626
Non-current liabilities
Lease liabilities 18 (1,902) (2,514) (2,285)
Other non-current liabilities(1) 16 (1,360) (1,011) (771)
Provisions 19 (2,282) (2,105) (1,828)
Total non-current liabilities (5,544) (5,630) (4,884)
Net assets 180,635 233,767 279,512
Equity attributable to the owners of the parent
Share capital 20 19,297 19,209 19,073
Share premium 406,184 405,463 404,726
Capital redemption reserve 3,449 3,449 3,449
Merger reserve 7,463 7,463 7,463
Accumulated losses(1) (255,758) (201,817) (155,199)
Total equity 180,635 233,767 279,512
The accompanying notes are an integral part of these consolidated financial
statements.
(1) The restatements to 2022 and 2021 are described in Note 1.
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2023
Note
31 December 2023 31 December 2022
Restated(1)
£'000 £'000
Cash flows from operating activities
Loss before taxation(1) (53,609) (51,487)
Adjustments for:
Finance income (7,079) (2,830)
Finance expense 1,287 304
Depreciation of property, plant and equipment(1) 7,461 5,592
Depreciation of right-of-use assets 641 620
Amortisation of intangible assets 1,024 1,032
Net foreign exchange gains(1) (232) (690)
Net change in fair value of financial instruments 143 1,020
Share-based payments charge 67 997
Operating cash flows before movements in working capital (50,297) (45,442)
Decrease/(increase) in trade and other receivables(1,2) 6,356 (11,165)
Decrease/(increase) in inventories 2,889 (2,569)
Increase in trade and other payables(2) 1,847 3,345
(Increase)/decrease in contract assets(1) (1,175) 4,943
Increase in contract liabilities(1) 106 2,487
Decrease in provisions(1) (536) (522)
Net cash used in operations (40,810) (48,923)
Taxation received/(paid)(2) 6,911 (1,909)
Net cash used in operating activities (33,899) (50,832)
Investing activities
Investment in associate ꟷ (1,000)
Proceeds received on disposal of property, plant and equipment 225 ꟷ
Purchase of property, plant and equipment(1) (7,922) (12,347)
Capitalised development expenditure (6,800) (5,832)
Repayment of long-term investments ꟷ 5,000
Decrease/(increase) in short-term investments(1) 21,168 (16,193)
Finance income received 5,616 1,443
Net cash used in investing activities 12,287 (28,929)
Financing activities
Proceeds from issuance of ordinary shares 809 873
Repayment of lease liabilities (658) (744)
Interest paid (393) (212)
Net cash generated from/(used by) financing activities (242) (83)
Net decrease in cash and cash equivalents (21,854) (79,844)
Exchange (losses)/gains on cash and cash equivalents(2) (223) 173
Cash and cash equivalents at beginning of period 71,784 151,455
Cash and cash equivalents at end of period(1) 14 49,707 71,784
The accompanying notes are an integral part of these consolidated financial
statements.
(1) The restatement to 2022 is described in Note 1.
(2) 2022 taxation paid has been restated to increase the taxation paid from
£380,000 by £1,529,000 to correct the amount disclosed as tax paid, the
corresponding adjustment is to reduce the increase in trade and other
receivables and other current assets. The exchange gains on cash and cash
equivalents in 2022 has been corrected by reducing the previously reported
amounts by £690,000 with the corresponding adjustment being made to increase
the movement in trade and other payables, and hence net cash used in operating
activities has increased by the same amount.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023
Share Share Capital redemption reserve Merger Accumulated losses Total
capital premium reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 - Previously stated 19,073 404,726 3,449 7,463 (154,056) 280,655
Restatement(1) ꟷ ꟷ ꟷ ꟷ (1,143) (1,143)
At 1 January 2022 - Restated 19,073 404,726 3,449 7,463 (155,199) 279,512
Comprehensive income
Loss for the financial year - Restated(1) ꟷ ꟷ ꟷ ꟷ (47,615) (47,615)
Total comprehensive loss - Restated(1) ꟷ ꟷ ꟷ ꟷ (47,615) (47,615)
Transactions with owners
Issue of shares, net of costs 136 737 ꟷ ꟷ ꟷ 873
Share-based payments charge ꟷ ꟷ ꟷ ꟷ 997 997
Total transactions with owners 136 737 ꟷ ꟷ 997 1,870
At 31 December 2022 - Restated(1) 19,209 405,463 3,449 7,463 (201,817) 233,767
Comprehensive income
Loss for the financial period ꟷ ꟷ ꟷ ꟷ (54,008) (54,008)
Total comprehensive loss ꟷ ꟷ ꟷ ꟷ (54,008) (54,008)
Transactions with owners
Issue of shares 88 721 ꟷ ꟷ ꟷ 809
Share-based payments charge ꟷ ꟷ ꟷ ꟷ 67 67
Total transactions with owners 88 721 ꟷ ꟷ 67 876
At 31 December 2023 19,297 406,184 3,449 7,463 (255,758) 180,635
The accompanying notes are an integral part of these consolidated financial
statements.
( )(1) The restatement to 2021 and 2022 is described in Note 1.
1. Basis of preparation
The financial information presented in this final results announcement has
been prepared in accordance with the recognition and measurement requirements
of UK adopted international accounting standards ("IFRS") as issued by the
International Accounting Standards Board ("IASB"). The principal accounting
policies adopted in the preparation of the financial information in this
announcement are unchanged from those used in the company's statutory
financial statements for the year ended 31 December 2023. Whilst the financial
information included in this announcement has been computed in accordance with
the recognition and measurement requirements of IFRS, this announcement does
not itself contain sufficient disclosures to comply with IFRS.
The financial information contained in this final results statement does not
constitute statutory financial statements as defined by in Section 434 of the
Companies Act 2006. The financial information has been extracted from the
financial statements for the year ended 31 December 2023 which have been
approved by the Board of Directors, and the comparative figures for the year
ended 31 December 2022 are based on the financial statements for that year.
The financial statements for 2022 have been delivered to the Registrar of
Companies and the 2023 financial statements will be delivered after the Annual
General Meeting on 16 May 2024. The Auditor has reported on both sets of
accounts without qualification, did not draw attention to any matters by way
of emphasis without qualifying their report, and did not contain a statement
under Section 498(2) or 498(3) of the Companies Act 2006. The Directors
confirm that, to the best of their knowledge, this condensed set of
consolidated financial statements has been prepared in accordance with the LSE
Rules.
Going Concern
The Group has reported a loss after tax the year ended 31 December 2023 of
£54.0m (31 December 2022 of £47.6m(1)) and net cash used in operating
activities of £33.9m (31 December 2022: £50.8m). At 31 December 2023, the
Group held cash and cash equivalents and investments of £140.0m (31 December
2022: £182.3m). The directors have prepared annual budgets and cash flow
projections that extend 12 months from the date of approval of this report.
The decreased operating cash used in the year is a result of favourable
movements in working capital, including significant debtor receipts at the
beginning of the year and a reduction in inventory held. Future projections
include management's expectations of the further investment in R&D
projects, new product development and capital investment as the Group sustains
its competitive advantage in licensing fuel cell and electrolysis
technologies. Future cash inflows reflects management's expectations of
revenue from existing and new licensee partners in both the power and green
hydrogen markets.
The projections were stress tested by applying different scenarios in line
with the Group's viability scenarios including a slower intake of future
licensee partners leading to a loss of significant future revenue and a
resulting cost mitigation. The China joint venture with Weichai and Bosch has
now been removed from future projections. In each case the projections
demonstrated that the Group is expected to have sufficient cash reserves to
meet its liabilities as they fall due and to continue as a going concern. For
the above reasons, the Directors continue to adopt the going concern basis in
preparing the consolidated financial statements.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, management is required
to make judgements, estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources.
In preparing the consolidated financial statements, the areas where judgement
has been exercised remain consistent with those applied to the annual report
and accounts for the year ended 31 December 2022.
Prior period adjustments
The directors have identified a number of prior period adjustments in the
period:
Revenue
Revenue in 2021 and 2022 has been restated to correct the historical timing
and foreign exchange impact of revenue recognition for legacy licences, and to
appropriately offset contract balances relating to the same identified
contracts. At 31 December 2021, the result of these adjustments on the
consolidated statement of financial position was to reduce contract assets by
£2.0m and reduce contract liabilities by £0.4m with a corresponding
reduction in net assets of £1.6m. At 31 December 2022, the result of these
adjustments on the consolidated statement of financial position was to reduce
contract assets by £2.9m, increase contract liabilities by £1.0m and reduce
net assets and increase in accumulated losses by £3.9m. In respect of the
consolidated statement of profit and loss and other comprehensive income with
a corresponding reduction in net assets and increase in accumulated losses of
£3.9m, the adjustments reduced revenue by £2.3m, reduced operating costs by
£0.1m and increased the loss before tax by £2.3m. There was no overall
impact on cash flows from operating activities or recognised tax as a result
of these adjustments.
Property, plant and equipment and non-current provisions
The movements in dilapidation provisions relating to items capitalised within
property, plant and equipment, were not previously capitalised but were
incorrectly expensed to the income statement. Furthermore, the 2022
dilapidation provision did not correctly reflect property, plant and equipment
additions in the prior period. At 31 December 2021, the result of the
adjustments on the consolidated statement of financial position was to
increase property, plant and equipment by £0.5m with a corresponding increase
in net assets and reduction in accumulated losses. At 31 December 2022, the
result of these adjustments on the consolidated statement of financial
position was to increase property plant and equipment by £0.5m, increase
non-current provisions by £0.2m with a corresponding increase in net assets
and reduction in accumulated losses of £0.3m. In respect of the consolidated
statement of profit and loss and other comprehensive income, the adjustments
increased operating costs and losses by £0.2m. There was no overall impact on
the net cash used in operating activities or other cash flows, or recognised
tax as a result of these adjustments.
Cash and cash equivalents and short-term investments
2022 short term investments incorrectly included cash balances with a value of
£8.5m. At 31 December 2022 the result of the adjustments on the consolidated
statement of financial position was to increase cash and cash equivalents by
this amount with a corresponding reduction to short-term investments. There
was no impact on net assets or recognised tax as a result of this adjustment.
In respect of the consolidated statement of cash flows, the adjustment reduced
the net cash used in investing activities and the net decrease in cash and
cash equivalents by the same amount.
Other current and non-current liabilities
Other current liabilities in 2021 and 2022 incorrectly included deferred
income to be realised in more than one year. At 31 December 2022, the result
of the adjustments on the consolidated statement of financial position was to
increase other non-current liabilities by £1.0m with a corresponding
reduction in other current liabilities. At 31 December 2021, the result of the
adjustments on the consolidated statement of financial position was to
increase other non-current liabilities by £0.8m with a corresponding
reduction in other current liabilities. There was no impact on net assets,
recognised tax or the consolidated statement of cash flows as a result of
these adjustments.
Further prior period adjustments were required to the disclosure of cash flows
in the consolidated cash flow statement and the classification of assets under
construction in note 8. These adjustments have been detailed in the respective
statement or note.
New standards and amendments applicable for the reporting period
The Group has adopted all standards, interpretations amended or newly issued
by the IASB that were effective in the period. Their adoption has not had any
material effect on the consolidated financial statements.
2. Revenue
The Group's revenue is disaggregated by geographical market, major
product/service lines, and timing of revenue recognition:
Geographical market
31 December 2023 31 December 2022
Restated(1)
£'000 £'000
Europe(2) 12,394 7,980
Asia(2) 9,589 11,391
North America 341 394
Rest of World ꟷ 23
22,324 19,788
For the year ended 31 December 2023, the Group has identified two major
customers (defined as customers that individually contributed more than 10% of
the Group's total revenue) that accounted for approximately 51% (SOFC and
SOEC) and 39% (all SOFC) of the Group's total revenue recognised in the period
(31 December 2022: two major customers that accounted for approximately 48%
and 38% of the Group's total revenue recognised for that year).
Major product/service lines
31 December 2023 31 December 2022
Restated(1)
£'000 £'000
Engineering services 10,220 9,039
Provision of technology hardware 5,726 5,380
Licence fees(2) 6,378 5,369
22,324 19,788
Timing of transfer of goods and services
31 December 2023 31 December 2022
Restated(1)
£'000 £'000
Products and services transferred at a point in time 6,544 4,760
Products and services transferred over time 15,780 15,028
22,324 19,788
The contract-related assets and liabilities are as follows:
31 December 2023 31 December 2022 31 December 2021
Restated(1) Restated(1)
£'000 £'000 £'000
Trade receivables 12 3,422 11,825 2,612
Contract assets - accrued income 1,575 400 5,343
Total contract related assets 4,997 12,225 7,955
Contract liabilities - deferred income (7,469) (7,363) (3,917)
(1) The restatement to 2022 is described in Note 1.
(2) The adjustments as described in Note 1 have impacted 2022 licences revenue
in both Europe and Asia.
3. Segmental analysis
In accordance with IFRS 8 the method applied to identify reporting segments is
based on internal management reporting information that is regularly reviewed
by the chief operating decision maker, which the Group considers to be the
Executive team. The Group's internal segmental reporting has changed and now
only separately presents results down to gross profit level from its Power
(SOFC) and Hydrogen (SOEC) divisions where previously presented to adjusted
EBITDA.
Power - SOFC Hydrogen - SOEC Consolidated
31 December 2023 £'000 £'000 £'000
Revenue (external) 21,567 757 22,324
Cost of sales (8,346) (424) (8,770)
Gross profit 13,221 333 13,554
Power - SOFC Hydrogen - SOEC Consolidated
31 December 2022 - Restated(1) £'000 £'000 £'000
Revenue (external) 19,608 180 19,788
Cost of sales (9,070) (9) (9,079)
Gross profit 10,538 171 10,709
(1) The restatement to 2022 is described in Note 1.
4. Operating costs
Operating costs can be analysed as follows:
31 December 2023 31 December 2022
Restated(1)
£'000 £'000
Research and development costs 54,034 48,546
Administrative expenses 17,681 15,116
Commercial 4,905 2,392
76,620 66,054
(1) The restatement to 2022 is described in Note 1.
5. Finance income and expenses
31 December 2023 31 December 2022
£'000 £'000
Interest income on cash, cash equivalents and investments 7,079 2,657
Foreign exchange gain on cash, cash equivalents and short-term deposits ꟷ 173
Finance income 7,079 2,830
Interest paid (99) ꟷ
Interest on lease liability (248) (212)
Unwinding of discount on provisions (89) (87)
Other finance costs (46) (5)
Foreign exchange loss on cash, cash equivalents and short-term deposits (805) ꟷ
Interest expense (1,287) (304)
6. Taxation
No corporation tax liability has arisen during the period (31 December 2022:
£nil) due to the losses incurred. A tax charge has arisen as a result of
foreign withholding taxes suffered and an overprovisions of R&D tax credit
for 2022 under the SME R&D regime. The SME R&D tax credit regime is no
longer accessible to the Group. The RDEC regime continues to be accessible and
has been recognised within other operating income.
31 December 2023 31 December 2022
£'000 £'000
UK corporation tax ꟷ (4,470)
Foreign tax suffered 334 828
Adjustment in respect of prior periods 65 (230)
399 (3,872)
7. Loss per share
31 December 2023 31 December 2022
Restated(1)
£'000 £'000
Loss for the financial period attributable to shareholders (54,008) (47,615)
Weighted average number of shares in issue 192,651,782 191,385,618
Loss per £0.10 ordinary share (basic and diluted) (28.03)p (24.88)p
(1) The restatement to 2022 is described in Note 1.
8. Property, plant and equipment
Leasehold improvements Assets under construction
£'000 Plant and machinery Computer equipment Fixtures and fittings £'000
£'000
£'000
£'000 Total
£'000
Cost
At 1 January 2022 - Previously stated 7,412 25,514 2,563 348 1,975 37,812
Brought forward restatement(1) 151 518 ꟷ ꟷ ꟷ 669
At 1 January 2022 - Restated 7,563 26,020 2,563 348 1,975 38,481
Additions 1,121 5,194 203 ꟷ 6,848 13,366
Transfers 71 1,672 ꟷ ꟷ (1,743) ꟷ
Disposal (1,621) (6,669) (831) (72) ꟷ (9,193)
At 31 December 2022 7,134 26,229 1,935 276 7,080 42,654
Additions 1,318 3,647 164 115 1,937 7,181
Transfers 511 2,009 ꟷ ꟷ (2,520) ꟷ
Disposals (150) (568) (57) ꟷ (68) (843)
At 31 December 2023 8,813 31,317 2,042 391 6,429 48,992
Accumulated depreciation
At 1 January 2022 - Previously stated 3,358 14,291 1,790 232 ꟷ 19,671
Brought forward restatement(1) 37 160 ꟷ ꟷ ꟷ 197
At 1 January 2022 - Restated 3,395 14,451 1,790 232 ꟷ 19,868
Charge for the year 956 4,119 444 73 ꟷ 5,592
Depreciation on disposals (1,621) (6,669) (831) (72) ꟷ (9,193)
At 31 December 2022 2,730 11,901 1,403 233 ꟷ 16,267
Charge for the year 1,264 5,783 379 35 ꟷ 7,461
Depreciation on disposals (150) (411) (57) ꟷ ꟷ (618)
At 31 December 2023 3,844 17,273 1,725 268 ꟷ 23,110
Net book value
At 31 December 2023 4,969 14,044 317 123 6,429 25,882
At 31 December 2022 - Restated 4,404 14,328 532 43 7,080 26,387
At 31 December 2021 - Restated 4,168 11,581 773 116 1,975 18,613
(1) The adjustment in respect of 2022 and 2021 is described in Note 1.
(2) The transfer from assets under construction to plant and machinery in the
2022 property, plant and equipment note was understated by £779,000. The note
has been re-presented to reflect this correction.
'Assets under construction' represents the cost of purchasing, constructing
and installing property, plant and equipment ahead of their productive use.
The category is temporary, pending completion of the assets and their transfer
to the appropriate and permanent category of property, plant and equipment. As
such, no depreciation is charged on assets under construction.
Assets under construction consist entirely of plant and machinery that will be
used in the manufacturing, development and testing of fuel cells.
9. Right of use assets
Land and Buildings Computer equipment Total
£'000 £'000 £'000
Cost
At 1 January 2022 3,694 43 3,737
Adjustment to lease term 829 ꟷ 829
At 31 December 2022 4,523 43 4,566
Additions 168 ꟷ 168
Adjustment to lease term (33) ꟷ (33)
At 31 December 2023 4,658 43 4,701
Accumulated depreciation
At 1 January 2022 1,289 10 1,299
Charge for the year 606 14 620
At 31 December 2022 1,895 24 1,919
Charge for the year 627 14 641
At 31 December 2023 2,522 38 2,560
Net book value
At 31 December 2023 2,136 5 2,141
At 31 December 2022 2,628 19 2,647
The lease liabilities are detailed in Note 18.
10. Intangible assets
Internal developments in relation to manufacturing site Customer and internal development programmes Patent costs
£'000
£'000 £'000 Total
£'000
Perpetual
software licences
£'000
Cost
At 1 January 2022 411 8,407 252 633 9,703
Additions ꟷ 5,340 273 219 5,832
At 31 December 2022 411 13,747 525 852 15,535
Additions ꟷ 6,443 ꟷ 357 6,800
At 31 December 2023 411 20,190 525 1,209 22,335
Accumulated amortisation
At 1 January 2022 164 1,038 23 ꟷ 1,225
Charge for the year 82 748 125 77 1,032
At 31 December 2022 246 1,786 148 77 2,257
Charge for the year 82 728 137 77 1,024
At 31 December 2023 328 2,514 285 154 3,281
Net book value
At 31 December 2023 83 17,676 240 1,055 19,054
At 31 December 2022 165 11,961 377 775 13,278
The customer and internal development intangible primarily relates to the
design, development and configuration of the Company's core fuel cell and
system technology. Amortisation of capitalised development commences once the
development is complete and is available for use.
11. Inventories
31 December 2023 31 December 2022
£'000 £'000
Raw materials 1,648 1,566
Work in progress 787 1,477
Finished goods 390 2,671
Total inventory 2,825 5,714
Inventories have reduced which reflects the stacks shipped to customers and
the use of stacks for internal R&D projects, particularly the SOEC
demonstrator.
12. Trade and other receivables
31 December 2023 31 December 2022
Current: £'000 £'000
Trade receivables 3,422 11,825
VAT receivable 2,273 1,853
RDEC receivable 4,008 3,032
Other receivables 172 443
9,876 17,153
Non-current:
Other receivables 741 741
13. Other current assets
31 December 2023 31 December 2022
£'000 £'000
Prepayments 1,193 869
Accrued grant income ꟷ 88
1,193 957
14. Net cash and cash equivalents, short-term and long-term investments
31 December 2023 31 December 2022
Restated(1)
£'000 £'000
Cash at bank and in hand 7,063 16,312
Money market funds 42,644 55,472
Cash and cash equivalents 49,707 71,784
Short-term investments 90,249 110,536
Cash and cash equivalents and investments 139,956 182,320
( )
(1) The restatement to 2022 is described in Note 1.
( )
The Group typically places surplus funds into pooled money market funds with
same day access and bank deposits with durations of up to 24 months. The
Group's treasury policy restricts investments in short-term sterling money
market funds to those which carry short-term credit ratings of at least two of
AAAm (Standard & Poor's), Aaa-mf (Moody's) and AAAmmf (Fitch) and deposits
with banks with minimum long-term rating of A-/A3/A and short-term rating of
A-2/P-2/F-1 for banks which the UK Government holds less than 10% ordinary
equity.
15. Trade and other payables
31 December 2023 31 December 2022
Current: £'000 £'000
Trade payables 3,624 4,795
Other payables 1,359 138
4,983 4,933
16. Other current liabilities
31 December 2023 31 December 2022 31 December 2021
Restated(1) Restated(1)
£'000 £'000 £'000
Current:
Accruals 5,933 6,032 4,803
Deferred income(1) 368 243 244
6,301 6,275 5,047
Non-current:
Deferred income(1) 1,360 1,011 771
(1) The restatement to 2022 and 2021 is described in Note 1.
17. Derivative financial instruments
Fair value Carrying amount Fair value Carrying amount Fair value
hierarchy 31 December 2023 31 December 2023 31 December 2022 31 December 2022
£'000 £'000 £'000 £'000
Financial assets measured at fair value through profit or loss
Forward exchange contracts Level 2 1 1 26 26
Currency swap contract Level 2 7 7 ꟷ ꟷ
Non-deliverable forward contracts Level 2 ꟷ ꟷ 28 28
Total derivative assets 8 8 54 54
Financial liabilities measured at fair value through profit or loss
Forward exchange contracts (99) (99) ꟷ ꟷ
Total derivative liabilities (99) (99) ꟷ ꟷ
18. Lease liabilities
31 December 2023 31 December 2022
£'000 £'000
At the start of the period 3,124 3,039
New finance leases recognised 66 ꟷ
Lease payments (906) (956)
Interest expense 248 212
Adjustment to lease term 64 829
At the end of the period 2,596 3,124
Current 694 610
Non-current 1,902 2,514
Total at the end of the period 2,596 3,124
19. Provisions
Property Dilapidations Total
Warranties Contract Losses
£'000 £'000 £'000 £'000
At 1 January 2022 1,828 1,253 326 3,407
Movements in the Consolidated Statement of Profit and Loss:
Amounts used ꟷ ꟷ (137) (137)
Unused amounts reversed ꟷ (707) (135) (842)
Unwinding of discount 87 ꟷ ꟷ 87
Increase in provision(1) 190 329 ꟷ 519
At 31 December 2022 2,105 875 54 3,034
Movements in the Consolidated Statement of Profit and Loss:
Unused amounts reversed ꟷ (553) (10) (563)
Unwinding of discount 89 ꟷ ꟷ 89
Change in provision 88 281 ꟷ 369
At 31 December 2023 2,282 603 44 2,929
Current ꟷ 603 44 647
Non-current 2,282 ꟷ ꟷ 2,282
At 31 December 2023 2,282 603 44 2,929
Current ꟷ 875 54 929
Non-current 2,105 ꟷ ꟷ 2,105
At 31 December 2022 2,105 875 54 3,034
(1) The restatement to 2022 is described in Note 1.
Following further progress on contracts and no new warranty issues identified
in the period, £0.6m of the warranty provision was released to the
Consolidated Statement of Profit or Loss. As at 31 December 2023 the Group has
recorded a contingent liability of approximately £0.1m (31 December 2022:
£0.3m) to reflect the lower possibility of the Group paying out on any
potential failures for certain additional stacks that may still be running
where the contracts have concluded.
20. Share capital
31 December 2023 31 December 2022
Number of £0.10 £'000 Number of £0.10
Ordinary
Ordinary
shares
shares £'000
Allotted and fully paid
At 1 January 192,086,775 19,209 190,729,638 19,073
Allotted £0.10 Ordinary shares on exercise of employee share options 881,321 88 1,357,137 136
At 31 December 2023 / 31 December 2022 192,968,096 19,297 192,086,775 19,209
During the year ended 31 December 2023, 881,321 ordinary £0.10 shares were
allotted for cash consideration of £799,684 on the exercise of employee share
options (31 December 2022: 1,357,137 ordinary £0.10 shares were allotted for
cash consideration of £866,717).
Reserves
The Consolidated Statement of Financial Position includes a merger reserve and
a capital redemption reserve. The merger reserve represents a reserve arising
on consolidation using book value accounting for the acquisition of Ceres
Power Limited at 1 July 2004. The reserve represents the difference between
the book value and the nominal value of the shares issued by the Company to
acquire Ceres Power Limited. The capital redemption reserve was created in the
year ended 30 June 2014 when 86,215,662 deferred ordinary shares of £0.04
each were cancelled.
21. Events after the balance sheet date
Since the end of the year, Ceres announced its first joint SOEC and SOFC
licence agreement with Delta Electronics. The agreement includes revenue of
£43m to Ceres through technology transfer, development licence fees, and
engineering services.
Whilst we continue to maintain strong relationships with both Bosch and
Weichai, it is now our belief that the proposed JV is unlikely to be completed
in its current form.
In February 2024, we made a strategic decision to discontinue our option to
acquire the remaining shares of RFC Power ("RFC"), the pioneering flow battery
company, in which Ceres retains a 24.2% stake. We continue to support RFC's
development through technology and engineering services, leveraging the
complementary nature of our expertise in electrochemistry and systems. This
decision is aligned with our strategy to concentrate on our core business
areas of fuel cell and electrolysis innovation. We will also continue to
support RFC to engage with potential financial and strategic partners to best
position it to achieve future growth and success in the energy storage market.
22. Capital commitments
Capital expenditure that has been contracted for but has not been provided for
in the financial statements amounts to £5,671,000 as at 31 December 2023 (31
December 2022: £8,679,000), in respect of the acquisition of property, plant
and equipment.
23. Related party transactions
As at 31 December 2023 and as at 31 December 2022, the Group's related parties
were its Directors and RFC Power Limited.
During the year the following Directors exercised share options:
Date of exercise Director Type of options Total number of options exercised Weighted average Total gain on exercise Number of shares retained
exercise price
30 March 2023 Phil Caldwell LTIP 200,000 £3.463 £672,600 200,000
04 May 2023 Phil Caldwell Sharesave 4,610 £1.952 £6,602 4,610
07 July 2023 Mark Selby 2004 ESS 2,063 £2.825 £4,066 2,063
12 July 2023 Michelle Traynor Sharesave 1,844 £1.952 £2,003 1,844
10 August 2023 Clarissa de Jager Sharesave 7,377 £1.952 £10,284 7,377
03 October 2023 Phil Caldwell 2004 ESS 11,859 £3.204 £27,869 11,859
During the year ended 31 December 2023 two Directors sold 141,313 2004
Employee Shareholder Status (ESS) shares in Ceres Power Intermediate Holdings
Ltd and received 92,864 Ceres Power Holdings plc shares in consideration in
addition to the linked ESS options as set out in the table above.
During the year ended 31 December 2022, one Director exercised and retained
7,109 share options under the Company's employee share save scheme and one
Director exercised and sold 14,218 share options under the Company's employee
share save scheme. There were no other transactions between the Company and
the Directors during the year ended 31 December 2022.
Transactions between the Group and RFC Power Limited, being an associated
entity of the Group, comprised engineering consultancy services provided by
the Group to RFC Power Limited for the value of £0.6m (31 December 2022:
£0.4m).
Reconciliation between operating loss and Adjusted EBITDA
Management believes that presenting Adjusted EBITDA loss allows for a more
direct comparison of the Group's performance against its peers and provides a
better understanding of the underlying performance of the Group by excluding
non-recurring, irregular and one-off costs. The Group currently defines
Adjusted EBITDA loss as the operating loss for the period excluding
depreciation and amortisation charges, share-based payment charges, unrealised
losses on forward contracts and exchange gains/losses.
31 December 2023 31 December 2022
£'000 Restated(1)
£'000
Operating loss(1) (59,401) (54,013)
Depreciation and amortisation 9,126 7,244
Share-based payment charges 67 997
Unrealised losses on forward contracts 143 1,020
Exchange gains (232) (934)
Adjusted EBITDA (50,297) (45,686)
(1) The restatement to 2022 is described in Note 1.
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