REG - AFC Energy Plc - Trading Update

AFC EnergyAnnouncement

04/11/2024 07:00

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RNS Number : 7851K  AFC Energy Plc  04 November 2024

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4 November 2024

 

 

AFC Energy PLC

("AFC", "AFC Energy" or the "Company")

 

Year-End Trading Update

 

AFC Energy PLC, a leading provider of hydrogen power and ammonia cracking
solutions, is pleased to announce a trading update for the financial year
ended 31 October 2024.

 

Highlights

 

Strong financial performance

·     Revenue of approximately £4.0 million (unaudited) recognised for
FY24, slightly above market expectations, driven primarily by sales of
hydrogen fuelled power generators to Speedy Hire Services (SHS) for lease to
customers of Speedy Hire plc (Speedy).

 

·     As at 31 October 2024, the Company held unaudited cash and cash
equivalents of £15.4 million and unaudited trade receivables less trade
payables of £2.5 million.

 

Improved manufacturing capability

·     Manufacturing capability modernised and scaled up to support the
production of an initial fleet of hydrogen powered generators for the joint
venture with Speedy.

 

Growing demand for clean energy solutions - TAMGO

·     First sale under the TAMGO Distribution Agreement of a hydrogen
fuelled power generator plus battery energy storage system (BESS) into the
MENA region.

 

Launch of Hyamtec Division for Ammonia Cracker technology

·     Accelerated development activity in ammonia cracking, a critical
technology for localised hydrogen production that holds immense potential in
industrial decarbonisation, and brought this within a new division; Hyamtec.

 

Gary Bullard, Chief Executive Officer of AFC Energy, commented:

 

"2024 has been a landmark year for AFC Energy. Our performance reflects the
solid progress we have made in expanding our reach and capabilities. The
recent expansion of our manufacturing capacity has enabled us to meet growing
demand, including the delivery of an initial fleet of generators for our joint
venture with Speedy Hire. This achievement, alongside advancements in our
ammonia cracking technology within the new Hyamtec Division, underscores our
commitment to driving decarbonisation across diverse industries.

 

"Our hydrogen solutions have resonated strongly within key sectors,
particularly construction, where clients are increasingly prioritising
sustainable alternatives to diesel. As we look forward, we are focused on
further scaling production, optimising operational efficiency, and
strengthening strategic partnerships to accelerate growth. With our
innovation-led approach, I am confident that AFC is well-positioned to lead in
the transition to a clean energy future."

 

Financial Performance

 

Revenue (unaudited)

 

The Company recognised unaudited revenue of approximately £4.0 million for
FY24, driven primarily by sales of hydrogen fuelled power generators to Speedy
Hire Services (SHS) for lease to customers of Speedy. Future sales to SHS
will be based on the rate of take-up by lease customers, along with the
customer feedback and use data being gathered as part of each deployment.

 

Also included within revenue is the first sale under the, previously
announced, TAMGO Distribution Agreement of a hydrogen power generator plus
battery energy storage system (BESS).

 

The generator and BESS mobilised to ACCIONA earlier this year is currently
earning lease revenue on a six-month pre-purchase trial ending in FY25. It is
performing well and on trial completion ACCIONA has the option to extend or
purchase, at which point the related sales revenue would be recognised.

 

Cash and net receivables (unaudited)

 

During FY24, the Company raised £15.8 million (before expenses) by way of an
institutional placing, a retail REX offering and purchases by several
directors. At 31st October 2024, the Company held unaudited cash and cash
equivalents of £15.4 million and unaudited trade receivables less trade
payables of £2.5 million.

 

The year end unaudited cash balance includes the receipt of £2.7 million in
respect of the FY23 R&D tax credit claimed by the Company.  This balance
received is £0.6 million greater than that carried in the FY23 balance sheet
as the Company qualified for an enhanced recovery rate under recent
legislation as an R&D intensive medium sized company.

 

As expected, the unaudited cash burn for overheads equated to approximately
£1.3 million per month.  A programme of FY25 cost savings, including reduced
R&D spending, is expected to reduce this to approximately £1.2 million
per month.

 

Operational Performance

 

Fuel Cell Division: Key Developments

 

The Fuel Cell Division continues to be the main driver of AFC's growth, with
significant progress made in scaling the manufacturing of air-cooled
generators for deployment across the construction and energy sectors. These
generators use hydrogen as a fuel and are used to generate electricity for
off-grid applications as a zero-emission alternative to traditional diesel
generators.

 

Considerable effort has been put into building out our first pilot
manufacturing line. Despite early challenges, we have achieved our production
and quality targets for the year. Overcoming the initial challenges drove us
to make faster progress in diversifying and expanding our supplier base,
implementing more agile and cost-effective methods for production, and
establishing outsource manufacturing partnerships for key components and
assemblies.  Specifically, we made significant progress with our
manufacturing partner Illuming in the production of our fuel-cell stacks and
have begun the first stage of our outsourced manufacturing partnership with
Zollner, with the production of key electrical and mechanical assemblies for
our generators.

 

Speedy Hydrogen Solutions ('SHS') - our JV with Speedy Hire plc ('Speedy')

 

SHS has been a major area of focus over the past several months and as well as
the successful production of the initial fleet of generators, we have secured
access to specialist equipment like customised Battery Energy Storage Systems
(BESS) through our partnership with Speedy ancillary equipment, and reliable
hydrogen fuel supply.

 

Reception by customers has been very positive and we have worked closely with
the Speedy teams, site management personnel, bid leads, and health and safety
teams to deliver fully managed solutions into real-world applications and to
deliver the levels of service that customers expect from Speedy.

 

We have developed a robust commercial pipeline of opportunities, largely with
premier construction and infrastructure companies. While the initial
deployment of generators has been into trial or training environments to build
experience and the full value proposition, we are now progressing to live use
applications with several leading construction companies.

 

Our hydrogen generators have a unique profile in terms of efficiency and
output. In many applications, a 30kW hydrogen generator can replace a 100kW
diesel generator. Combining our generators with an intelligent BESS and other
renewable sources can offer hybrid power systems that improve fuel efficiency
and eliminate carbon emissions, which is crucial for the sectors and customers
we target and support.

 

Early client engagement has indicated that there could be increased
opportunity through expanding the role of SHS to address broader customer
needs using hybrid power systems. We also have received customer interest in
having both rental and purchase options, as well as possible "try and buy"
approaches. We have agreed with Speedy to investigate expanding the role of
SHS to address these and other opportunities.

 

Other Fuel Cell activity

 

Our first generator deployment into a live site, managed directly by the
customer, was into Acciona in Spain. We have been getting practical
operational feedback, refining the use of the BESS and helping improve our
software capability, supporting the roll-out with SHS. Our generators also
provide us with real-time telemetry allowing us to ensure optimum performance.

 

We recognised our first generator sale into the Middle East with our exclusive
distributor in the region, TAMGO, which marks an important step forward in a
market that we see as offering substantial opportunity over the coming years.
We are actively engaging and supporting TAMGO in building a strong commercial
pipeline within the MENA region which includes the submission of tenders for
various opportunities within the region to deploy zero-emission hybrid systems
comprising our generators, BESS, and solar arrays.

 

As part of our broader efforts to support the UK's decarbonisation goals, AFC
has also been awarded funding through the Red Diesel Replacement (RDR)
project. We are developing both a new air-cooled and large liquid-cooled
(200kW) generator which are on target to be deployed into two quarries in 1Q
2025.

 

Especially in the UK, access to a reliable and cost-effective supply of
hydrogen together with effective delivery mechanisms is critical. We continue
to make good progress with hydrogen providers and distributors. We have also
made our own investments, including in our own on-site ammonia cracker
facility which can produce up to 400kg of fuel-cell grade hydrogen a day, and
in two NanoSun Transportable Hydrogen Storage Systems which can each hold
435kg of hydrogen fuel (sufficient to power one of our generators for over a
month in live operation).

 

Hyamtec Division

 

The Hyamtec Division, which leads our efforts in ammonia cracking and hydrogen
generation, is a critical part of AFC's strategic roadmap for growth. 50% of
global emissions come from the hard to abate heavy industrial sectors where
hydrogen is an obvious alternative to existing fossil fuels. However,
transporting vast quantities of hydrogen to most industrial sites is
impractical without a network of pipelines. The alternatives, such as
electrolytic hydrogen generation on-site are often impractical as they require
significant electrical power which the current grid is not scaled for, nor
would such electricity necessarily be produced from renewable sources.

 

Our approach will allow an alternative where these companies could deliver
ammonia to site and locally create their own hydrogen in a cost-effective way,
with little energy required. In the medium term, we see this approach
significantly reducing emissions and potentially being as cost-effective as
fossil-fuel alternatives. Ammonia is one of the most widely used, commoditised
and available industrial chemicals, already well-understood by these
companies, and easy to transport to sites in the quantities needed.

 

Thanks to the support of the UKRI Government grant we have been making
significant headway to demonstrate a version of our ammonia cracker technology
integrated with a lightly modified internal combustion engine. We now also see
immediate applicability of this technology in powering multi-megawatt engines
such as those in distributed power generation, marine and mining. The same
cracker technology can also produce high grade hydrogen where required
on-site, for example to fuel a complete zero-emission large construction site.
Here the hydrogen produced could fuel hydrogen combustion engines (as in large
diggers), and be used for heating, lighting and for powering hydrogen
generators such as AFC provides, for local electrical power and charging
vehicles.

 

This year, the Hyamtec team has made significant progress in bringing our site
demonstration cracker unit to market. This unit, scheduled for first
commercial deployments in Q4 2024, is smaller than the large-scale systems we
aim to deploy in the future, but it offers an efficient and cost-effective
solution for initial trials.

 

We are building a strong network of partners keen to engage in early trial
activity which we will use to refine the proposition and support our continued
development during the coming year. We expect to see several such deployments
and initial revenue generated by this activity in the next financial year.

 

Outlook

 

Looking ahead, AFC Energy's strategic focus for FY25 will centre on building
demand and scaling up production of our hydrogen-powered generators, through
deepening relationships with key partners like Speedy Hire and TAMGO, and
through investigating opportunities to accelerate production capability.

 

We believe Hyamtec represents significant but unrecognised value to our
shareholders, and we have a clear programme to develop and demonstrate our
world-leading capability through partners and early-adopters.

 

We are pleased that the new UK Government has progressed several funding and
policy measures that are favourable to our corporate objectives. These include
the creation of the National Wealth Fund, capitalised with £27.8 billion,
especially with green hydrogen, ports and green steel making up three of its
five priority areas. The new Industrial Strategy Green Paper confirms
that Advanced Manufacturing and Clean Energy Industries are to be among 8
sectors identified with "highest growth potential". The Government has also
progressed £22 billion in funding for the carbon capture schemes in the north
of England, and the Budget re-committed funding for the 11 HAR1 green hydrogen
production projects.

 

As previously announced, we are pleased that John Wilson will take on the role
of CEO on 6 January 2025.

 

Investor Presentation

 

The Company  will provide a live presentation via Investor Meet Company at
2.00pm on Thursday 7 November, 2024. The presentation will be open to all
existing and potential shareholders and will include a Q&A session.

 

Investors can sign up to Investor Meet Company for free and add to meet AFC
Energy via:

 

https://www.investormeetcompany.com/afc-energy-plc/register-investor
(https://www.investormeetcompany.com/afc-energy-plc/register-investor)

 

Investors who already follow AFC Energy on the Investor Meet Company platform
will automatically be invited.

 

For further information, please contact:

 

 AFC Energy plc                                                 +44 (0) 14 8327 6726

 Gary Bullard (Chief Executive Officer)                         investors@afcenergy.com (mailto:investors@afcenergy.com)

 Peter Dixon-Clarke (Chief Financial Officer)

 Peel Hunt LLP - Nominated Adviser and Joint Broker             +44 (0) 207 418 8900

 Richard Crichton / Georgia Langoulant / Brian Hanratty
 Zeus - Joint Broker                                            +44 (0) 203 829 5000

 David Foreman / James Hornigold (Investment Banking)

 Dominic King (Corporate Broking) / Rupert Woolfenden (Sales)

 RBC Capital Markets - Joint Broker                             +44 (0) 20 7653 4000

 Matthew Coakes / Teri Su

 Eduardo Famini / Jack Wood

 FTI Consulting - Financial PR Advisors                         +44 (0) 203 727 1000

 Ben Brewerton / Chris Laing / Evie Taylor                      afcenergy@fticonsulting.com (mailto:afcenergy@fticonsulting.com)

 

About AFC Energy

 

AFC Energy plc is a leading provider of hydrogen energy solutions, to provide
clean electricity for on and off grid power applications. The Company's fuel
cell technology is now deployable as electric vehicle chargers, off-grid
decentralised power systems for construction and temporary power with emerging
opportunities across maritime, data centres and rail as part of a portfolio
approach to the decarbonisation of society's growing electrification needs.

 

The Company's proprietary ammonia cracking technology further highlights
emerging opportunities across the distributed hydrogen production market with
a focus on hydrogen's role in supporting industries facing challenges in
decarbonisation, such as mining, cement and heavy engineering.

 

 

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