REG - Ceres Power Holdings - Final results
24/03/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230324:nRSX0844Ua&default-theme=true
RNS Number : 0844U Ceres Power Holdings plc 24 March 2023
CWR.L
24 March 2023
Ceres Power Holdings plc
Final results for the year ended 31 December 2022
2022 investments lay strong foundations for future growth
Horsham, UK: Ceres Power Holdings plc ("Ceres", the "Company") (AIM: CWR.L), a
global leader in fuel cell and electrochemical technology, announces its
results for the year ended 31 December 2022.
Financial highlights
· Revenue of £22.1 million (2021: £30.8 million) in line with
previous guidance
· Gross profit of £13.1 million (2021: £19.0 million),
maintaining sector-leading gross margin at 59% (2021: 62%)
· Investment in the future(1) increased by 67% to £58.4 million (2021:
£34.9 million), in line with strategy to expand into electrolysis for green
hydrogen and deliver the next generation of fuel cell technology
· Strong cash and short-term investments position of £182.3 million
(2021: £249.6 million)
Strategic highlights
· First 100kW solid oxide electrolyser ("SOEC") module is on test
ahead of scaling into a 1MW demonstrator. Initial results are positive and
give confidence that this technology can deliver green hydrogen at
<40kWh/kg, around 25% more efficiently than incumbent lower temperature
technologies
· SOEC technology evaluation programme progressing well with Shell
for deployment later this year in India
· Ceres' fuel cell and electrolysis test facility, developed
with Horiba Mira at its site in the UK, is now open and supporting
technology and system development
· Continued expansion of Ceres' highly skilled workforce to 570
employees (2021: 489) with significant investment in commercial resource in
global locations with strong momentum and policy support for hydrogen and fuel
cells
Current trading and outlook
· Agreements signed for a collaboration on electrolysis with Bosch
and Linde Engineering to validate Ceres' technology, as a highly efficient
pathway to low-cost green hydrogen. Builds on Bosch's expertise in solid oxide
fuel cells ("SOFC") and Linde Engineering's capabilities in industrial process
engineering
· Weichai's SOFC power system using Ceres' technology has passed
the EU CE certification of the international authoritative testing
organisation, TÜV SÜD. Weichai estimates that when its products reach 1GW
of distributed power deployed, it has the potential to reduce carbon emissions
by around 2 million tonnes per year compared with grid electricity
· The structure of the China joint ventures has been agreed. We
now await the final agreement between Bosch and Weichai
· We continue to work towards a move up to the Premium Listing on
the Main Market of the London Stock Exchange
Phil Caldwell, Chief Executive Officer of Ceres, said:
"It has been another productive year at Ceres with our first electrolyser
modules on test, an exciting new partnership with Shell, and a collaboration
with Linde Engineering and Bosch for green hydrogen. We are making good
progress on power systems with existing partners Bosch and Doosan to scale
production.
"Investment in our business has ensured we are well-positioned to deliver on
our strategy; to support our partners to install manufacturing capacity at the
scale and pace needed to decarbonise our energy systems and enable a net zero
future."
1. Investment in the future comprises R&D costs, capitalised development
and capital expenditure.
Financial Summary 2022 2021
£'000 £'000
Total revenue, comprising: 22,130 30,776
Licence fees 7,711 16,646
Engineering services revenue 9,039 6,777
Provision of technology hardware 5,380 7,353
Gross margin %(1) 59% 62%
Adjusted EBITDA loss(2) - Power SOFC(3) (21,557) (4,492)
Adjusted EBITDA loss(2) - Hydrogen SOEC(3) (21,673) (12,183)
Adjusted EBITDA loss(2) - total Group (43,230) (16,675)
Operating loss (51,522) (23,430)
Net cash used in operating activities (51,522) (20,342)
Net cash and investments 182,320 249,584
1. 2021 gross margin restated (previously 66%) to reflect the classification
of the RDEC tax credit within other operating income rather than offsetting
cost of sales.
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.
3. Adjusted EBITDA by segment is reconciled to operating loss in Note 3.
Analyst presentation
Ceres Power Holdings plc will be hosting a live webcast for analysts and
investors on 24 March 2023 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 Tel: +44 (0)7932 023 283
Elizabeth Skerritt
Investec Bank PLC (NOMAD & Joint Broker) Tel: +44 (0)207 597 5970
James Rudd/ Patrick Robb/ Ben Griffiths
Berenberg (Joint Broker) Tel: +44 (0)203 207 7800
Ben Wright/ Mark Whitmore/ Ciaran Walsh
FTI Consulting (PR Adviser) Tel: +44 (0)203 727 1000
Dwight Burden/ Tom Reynolds Email: ceres_power@fticonsulting.com (mailto:Ceres_power@fticonsulting.com)
About Ceres Power
Ceres is a world-leading developer of electrochemical technologies: fuel cells
for power generation, electrolysis for the creation of green hydrogen and
energy storage. Its asset-light, licensing model has seen it establish
partnerships with some of the world's largest engineering and technology
companies, such as Weichai in China, Bosch in Germany, Miura in Japan, and
Doosan in Korea, to develop systems and products that address climate change
for power generation, transportation, industry, data centres and everyday
living. Ceres is listed on the AIM market of the London Stock Exchange
("LSE") (AIM: 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.
Chief Executive's Statement
It has been another productive year at Ceres with our first electrolyser
modules on test, an exciting new partnership with Shell, and a collaboration
with Linde Engineering and Bosch for green hydrogen. We are making good
progress on SOFC, with existing partners Bosch and Doosan scaling production,
and steps towards establishing our China JV. We have also opened a new test
centre with Horiba MIRA in the UK, achieved record cell production at our
pilot facility and grown the Ceres team to 570 colleagues.
These are just some highlights of another year of considerable progress,
despite the challenging macroeconomic backdrop. Through it all, we remain
wholeheartedly committed to the biggest challenge, to address the urgency for
climate action. The world is not on track to keep global warming at 1.5°C
above pre-industrial levels and we are already starting to see the devastating
effects of climate change around us, from cyclones and floods to droughts and
heatwaves.
We need to decarbonise our energy system, but we also need to provide energy
security, stable power prices and sustainable employment. There are not many
companies that have the opportunity to do something truly impactful on a
global scale - but I believe that Ceres is one such company. Not only does it
have unique clean energy technology that can play an important role in
hard-to-decarbonise parts of our energy system, but we sit at the tipping
point for our planet, which means the time to act is now.
It is no longer a question of credibility of technology, but credibility of
scale
At our reference manufacturing plant in the UK, we are now producing 2MW of
capacity, and by the middle of this decade we will have added 100 times that
capacity with Bosch and at least another 50MW with Doosan. By the time our
partners start planned series production, they will have invested more than
€500 million in scaling our solid oxide fuel cell ("SOFC") technology.
That same technology run in one direction is a highly efficient fuel cell for
power generation, run in reverse enables low-cost green hydrogen that provides
avital route to industrial decarbonisation of sectors such as steel,
fertilisers and future fuels. We have committed £100 million to the
development of its application in solid oxide electrolysis ("SOEC") and the
first 100kW electrolyser module is on test ahead of scaling into a 1MW
demonstrator. Initial results are positive and give confidence that this
technology can deliver green hydrogen at <40kWh/kg, around 25% more
efficiently than incumbent lower temperature technologies.
In March 2023, we signed a new agreement with Bosch and Linde Engineering, to
assess Ceres' technology for use in large scale industrial applications as a
pathway to low-cost green hydrogen. This is our second partnership
announcement, following the agreement with Shell to establish a 1MW technology
pilot of Ceres' SOEC system at its R&D centre in Bangalore, India. The
agreement builds on Bosch's existing expertise in our SOFC technology and
combines with Linde Engineering's world-leading capabilities in hydrogen
process technology and a global customer footprint in industrial facilities.
Our target is to enable the ecosystem of SOEC partners that can make Ceres'
technology even more competitive and prepare it for mass adoption at scale.
By the end of this decade, we aim to have multiple factories in place
producing multi gigawatts of fuel cell equivalent capacity globally. It is
just the start. This is a global challenge and if we want to have a real
impact on climate change, technology alone is not enough, we must work with
partners to scale globally and at pace.
Collaboration is key
The war in Ukraine has added energy security to the urgency for climate action
and in Europe we saw RePower EU's ambitious plans and strong financial
incentives to move away from the reliance on gas and support the deployment of
green hydrogen. In the US, the Inflation Reduction Act, signed into law last
summer saw a record $369 billion earmarked for energy and climate change
policy - in a year when disasters from drought in the West to hurricanes in
the East and a nationwide winter storm served as a stark reminder of climate
perils. There is simply no turning back to the world of cheap fossil-based
energy.
Hydrogen is now widely recognised by most companies and governments as key to
enabling the energy transition, at the very least for hard-to-decarbonise
industrial sectors that account for around a third of our energy system and
more than its share of global emissions. Our partners, Bosch, Doosan, Shell,
Weichai and others are among the most progressive companies, seeking and
adopting new clean energy technologies at scale and pace, and the good news is
that global competition can accelerate us towards achieving net zero. Where
previously we spoke about an energy trilemma - where clean, low cost and
security of supply were in tension - they now align, and clean energy will be
the most secure and affordable into the future.
In 2022, we celebrated our 21st birthday, bringing the entire team together
for the first time since before the pandemic. It provided an important pause
from the day-to-day challenges to reflect on the past, present and future
opportunities for the business and with nearly 500 people in one venue, it was
avery visual reminder that we are collaborating with teams of a similar size
across our partner organisations at Bosch, Doosan and Weichai.
These first steps towards deployment are vital, but they are not enough. We
also seek to grow new partnerships across the globe to enable greater adoption
through many more teams of people collaborating on Ceres' technology.
Strongest team in the global industry
Our partners come to us because of our technology, but they stay with us
because of our people. They are passionate and brilliant and above all
resilient, and they need to be because the science and the engineering
challenges they are solving every day are hard. We are also working constantly
to attract and retain the best people, ensuring they have training and
development opportunities, benefits and access to share in the success of the
Company. Many of our employees are also shareholders in Ceres - through Long
Term Incentive Plans or through our employee save-as-you-earn scheme.
It is an exciting time to be at Ceres. We have a strong purpose, a talented
team, and the opportunity to work alongside some of the most progressive
companies globally, driving investment and scaling clean technologies. Success
is in our hands, but we are not complacent, and we continue to focus on
executing our strategy:
· To enable our licence partners to succeed
Our partners are investing significant time and resources into manufacturing
Ceres' solid oxide technology, and we have expanded our engineering and
specialist teams to ensure these early adopters are supported and successful
in deploying new technology into new market opportunities.
· To build commercial scale
We create commercial scale by generating more demand through increasing
commercial partnerships and licences, growing applications and addressing new
markets. This year we have increased the Commercial teams' presence in several
global locations, reflecting the momentum in policy support for hydrogen and
fuel cell technologies.
· Maintain our technology leadership
As a licensing company it is imperative that we stay at the leading edge of
our technology - and that is why we continue to innovate, from the next
generation of our solid oxide technology, continued innovation of our IP for
both fuel cell and electrolyser systems, to digitalisation programmes and what
further technologies we may need to hit a net zero future.
Sustainability
The IEA estimates that to fulfil 2050 green hydrogen demand, the world is
going to need 3,585GW of electrolyser capacity, so it is little wonder that
the conversation is growing around the economic and life cycle impact of raw
materials in the electrolysis supply chain. High demand, long processing
times, limited supply and an undiversified supply chain have already called
into question the price and availability of metals and rare earths to support
the viability of large-scale electrolysis.
Ceres' electrolysis stack does not need to use precious metals. Its
construction comprises over 95% automotive grade steel by weight, the most
widely recycled material globally, and ceria-based materials within the active
elements of the fuel cell, which is abundant, cost-effective and has multiple
sources from multiple countries.
We understand that scaling technology comes with an environmental footprint,
and we have undertaken a life cycle assessment of our stack technology where
we quantify the potential climate impact of producing our cells, which you
can find on the Sustainability section of our website.
We recognise the importance of looking beyond carbon impact to consider the
circular economy for raw materials. As a next step we will undertake a full
evaluation of the end-of-life recyclability or reuse of our technology,
cradle-to-grave, and will seek to lead the industry for our technology,
embedding sustainability considerations into the very heart of our
development and the transfer of IP under licence to our partners.
Strategy and outlook
In March 2021, we set out a clear strategy on which we continue to execute.
Investment across the business enables us to build a sustainable competitive
advantage in highly differentiated solid oxide technology. We collaborate with
world-leading partners, and we have built one of the strongest teams in the
global industry for fuel cells and green hydrogen. All of this gives me
confidence that we will deliver on our ambition to develop and deploy clean
energy technology at the scale and pace needed to decarbonise our energy
systems, and in doing so make a tangible difference for ourselves, our
families and friends, and generations to come.
Phil Caldwell
Chief Executive Officer
Financial review
The Group reported revenue of £22.1 million in 2022, compared with £30.8
million in the prior year. Almost all of the Group's revenue in 2022 related
to the fuel cell business. As reported in November 2022, the signing of the
China JV contracts has been delayed to 2023 impacting the timing of the
associated licence fee revenue recognition. Gross margins reduced to 59%
(2021: 62%), reflecting the reduction in high-margin licence fee income
recognised in the year compared with 2021. As noted in our Interim Results,
the phasing of revenue in 2022 and early 2023 is highly sensitive to the
timing of signing new licence agreements.
Other income of £1.3 million (2021: £2.2 million) relates to grant income,
and now includes our RDEC tax credit as well as grant funding towards
projects.
The order book (contracted revenue bookings) reduced to £67.8 million as at
31 December 2022 from £78.7 million at 31 December 2021; with new order
bookings more than offset by the recognition of revenue primarily on existing
contracts with our partners Doosan and Bosch during the year. Going forwards,
the order book will continue to vary based on the timing of contracts won, and
revenue recognised from them.
Ceres Power - fuel cells
The SOFC part of the business recorded revenues of £22.0 million (2021:
£30.8 million) and a gross profit of £12.9 million (2021: £19.0 million),
with the reduction compared with the prior year reflecting the deferral of the
China JV and the expected recognition of associated upfront licence fee
revenue. The segment's Adjusted EBITDA loss increased to £21.6 million (2021:
£4.5 million). Investment in research and development ("R&D") for SOFC
increased by 48% to £29.1 million (2021: £19.7 million).
There will be continued investment in SOFC in 2023 to support future
expansion, and so the level of losses or future profitability of this part of
the business will continue to be highly influenced by the level of SOFC
licence fee revenue recognised in a given period, until royalty revenue
streams become material. Another notable investment is the development of our
second generation of fuel cell technology, which will offer improvements in
power density, durability and cost.
Ceres Hydrogen - electrolysis
We plan to invest £100 million in the development of our SOEC technology and
we are now two years along this journey and making good progress. Our SOEC
business recognised revenue for the first time in 2022, of £0.2 million
(2021: £nil), from a contract with a potential new partner in Asia to
evaluate the Group's SOEC technology. The SOEC business recorded an Adjusted
EBITDA loss of £21.7 million (2021: £12.2 million). This was primarily
driven by a 66% increase in R&D activities to £19.2 million (2021:
£11.6 million), particularly around the investment in our "first of a kind"
1MW demonstration unit for use in the contract with Shell. We made good
progress in the year with the first Electrolysis Cell Module ("ECM"), which
forms part of the demonstrator, now on test with encouraging early results
with respect to green hydrogen production efficiency.
Focused investment for the future
Throughout 2022, we continued to invest in both capabilities and people to
support our partners, deliver our technology roadmap and drive future growth.
Our employee base includes specialist expertise such as highly skilled
engineers; electrochemistry and materials scientists; and test and stack
technicians and remains our most valuable strategic resource. Total employees
increased to 570 by the end of 2022 compared to 489 at the end of the prior
year. Overall R&D costs increased by 54% to £48.3 million compared to
2021 of £31.3 million as planned with our expansion of both our SOFC business
and development of our SOEC business.
Capitalised development in the year, which currently only relates to ongoing
SOFC development, increased to £5.8 million compared to £4.6 million for
2021 and we hold net £13.3 million capitalised to date. Amortisation of this
to the income statement was consistent with the prior year, as expected,
at £1.0 million (2021: £1.0 million). Our investment in property, plant and
machinery increased to £13.3 million (2021: £7.4 million), and was
principally on manufacturing improvement, automation and capacity expansion,
as well as expanding our test infrastructure. This continued investment also
resulted in increased depreciation of £5.5 million in 2022 compared to 2021
of £4.2 million.
Going forward, we plan to continue to grow our test capability to support the
expected growth of our partners, and also enable additional market
opportunities including new SOFC applications such as marine and alternative
fuels, and SOEC development. We also intend to expand our manufacturing
capacity for prototypes and demonstrators for both SOFC and SOEC products.
Consequently, we expect our capital expenditure to continue to be at higher
levels in 2023.
Overall, this "investment in the future" (R&D costs, capitalised
development and capital expenditure) increased 67% to £58.4 million (2021:
£34.9 million). The £58.4 million comprises £40.2 million in R&D
(excluding depreciation, amortisation and share-based payments), £12.4
million in capital expenditure and £5.8 million in capitalised development.
As a result of these planned investments, consistent with the 2021 capital
raise and strategy to develop our electrolysis technology, the Group reported
an increased operating loss of £51.5 million in 2022, up from a loss of
£23.4 million in 2021.
In December 2022, Ceres concluded a deferral of the option agreement to
acquire the remaining shares of RFC Power Ltd ("RFC"), which is a "Long
Duration Energy Storage" R&D business with proprietary manganese flow
battery technology. This option is now exercisable in the period 1 January
2024 to 30 April 2024, having previously been exercisable between May 2022 and
November 2022. Simultaneously, Ceres invested a total of £2.0 million in RFC,
comprising £1.0 million funding capital as well as entering into a joint
development agreement to advance the progress of this promising technology.
Consequently, Ceres' holding of RFC increased to 24.2% from 8.4%, and our
investment in associates increased to £2.5 million (2021: £0.5 million).
Strong financial position: the foundation for continued development and growth
The Group ended the year with a strong liquidity position of £182.3 million
in cash and short-term investments (31 December 2021: £249.6 million)
reflecting the investment in the business as described above. Finance income
increased to £2.8 million (2021: £0.4 million) reflecting the improved rates
applied to the Group's floating rate deposits and higher rates available when
rolling over maturing fixed rate deposits.
Equity free cash outflow (defined and reconciled to net cash from operating
activities in the non-GAAP section at the end of this report) was £68.4
million (2021: £32.0 million), being driven by net cash used in operating
activities of £51.5 million (2021: £20.3 million), capital expenditure of
£12.4 million (2021: £7.4 million) and capitalised development of £5.8
million (2021: £4.6 million), with the balance from interest receipts and
exchange rate movements.
Other significant movements in the balance sheet included inventories
increasing to £5.7 million (31 December 2021: £3.1 million) reflecting
increased activity at our manufacturing facility to meet anticipated demand
for our fuel cells and component parts to support our partners' development
and scale-up activities. We recognised net contract liabilities of £3.1
million which is a change in position against 31 December 2021, when we had
net contract assets of £3.0 million, with the movement reflecting timing
differences between recognising revenue and issuing invoices to customers.
Trade receivables increased to £11.8 million (2021: £2.6 million) primarily
reflecting a number of significant invoices raised in the last quarter of 2022
with two major customers. Of the £11.8 million due at 31 December 2022,
c.£10 million was received in the first two months of 2023.
About Ceres Power
Ceres is a world-leading developer of electrochemical technologies: fuel cells
for power generation, electrolysis for the creation of green hydrogen and
energy storage. Its asset-light, licensing model has seen it establish
partnerships with some of the world's largest engineering and technology
companies, such as Weichai in China, Bosch in Germany, Miura in Japan, and
Doosan in Korea, to develop systems and products that address climate change
for power generation, transportation, industry, data centres and everyday
living. Ceres is listed on the AIM market of the London Stock Exchange
("LSE") (AIM: 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.
Chief Executive's Statement
It has been another productive year at Ceres with our first electrolyser
modules on test, an exciting new partnership with Shell, and a collaboration
with Linde Engineering and Bosch for green hydrogen. We are making good
progress on SOFC, with existing partners Bosch and Doosan scaling production,
and steps towards establishing our China JV. We have also opened a new test
centre with Horiba MIRA in the UK, achieved record cell production at our
pilot facility and grown the Ceres team to 570 colleagues.
These are just some highlights of another year of considerable progress,
despite the challenging macroeconomic backdrop. Through it all, we remain
wholeheartedly committed to the biggest challenge, to address the urgency for
climate action. The world is not on track to keep global warming at 1.5°C
above pre-industrial levels and we are already starting to see the devastating
effects of climate change around us, from cyclones and floods to droughts and
heatwaves.
We need to decarbonise our energy system, but we also need to provide energy
security, stable power prices and sustainable employment. There are not many
companies that have the opportunity to do something truly impactful on a
global scale - but I believe that Ceres is one such company. Not only does it
have unique clean energy technology that can play an important role in
hard-to-decarbonise parts of our energy system, but we sit at the tipping
point for our planet, which means the time to act is now.
It is no longer a question of credibility of technology, but credibility of
scale
At our reference manufacturing plant in the UK, we are now producing 2MW of
capacity, and by the middle of this decade we will have added 100 times that
capacity with Bosch and at least another 50MW with Doosan. By the time our
partners start planned series production, they will have invested more than
€500 million in scaling our solid oxide fuel cell ("SOFC") technology.
That same technology run in one direction is a highly efficient fuel cell for
power generation, run in reverse enables low-cost green hydrogen that provides
a vital route to industrial decarbonisation of sectors such as steel,
fertilisers and future fuels. We have committed £100 million to the
development of its application in solid oxide electrolysis ("SOEC") and the
first 100kW electrolyser module is on test ahead of scaling into a 1MW
demonstrator. Initial results are positive and give confidence that this
technology can deliver green hydrogen at <40kWh/kg, around 25% more
efficiently than incumbent lower temperature technologies.
In March 2023, we signed a new agreement with Bosch and Linde Engineering, to
assess Ceres' technology for use in large scale industrial applications as a
pathway to low-cost green hydrogen. This is our second partnership
announcement, following the agreement with Shell to establish a 1MW technology
pilot of Ceres' SOEC system at its R&D centre in Bangalore, India. The
agreement builds on Bosch's existing expertise in our SOFC technology and
combines with Linde Engineering's world-leading capabilities in hydrogen
process technology and a global customer footprint in industrial facilities.
Our target is to enable the ecosystem of SOEC partners that can make Ceres'
technology even more competitive and prepare it for mass adoption at scale.
By the end of this decade, we aim to have multiple factories in place
producing multi gigawatts of fuel cell equivalent capacity globally. It is
just the start. This is a global challenge and if we want to have a real
impact on climate change, technology alone is not enough, we must work with
partners to scale globally and at pace.
Collaboration is key
The war in Ukraine has added energy security to the urgency for climate action
and in Europe we saw RePower EU's ambitious plans and strong financial
incentives to move away from the reliance on gas and support the deployment of
green hydrogen. In the US, the Inflation Reduction Act, signed into law last
summer saw a record $369 billion earmarked for energy and climate change
policy - in a year when disasters from drought in the West to hurricanes in
the East and a nationwide winter storm served as a stark reminder of climate
perils. There is simply no turning back to the world of cheap fossil-based
energy.
Hydrogen is now widely recognised by most companies and governments as key to
enabling the energy transition, at the very least for hard-to-decarbonise
industrial sectors that account for around a third of our energy system and
more than its share of global emissions. Our partners, Bosch, Doosan, Shell,
Weichai and others are among the most progressive companies, seeking and
adopting new clean energy technologies at scale and pace, and the good news is
that global competition can accelerate us towards achieving net zero. Where
previously we spoke about an energy trilemma - where clean, low cost and
security of supply were in tension - they now align, and clean energy will be
the most secure and affordable into the future.
In 2022, we celebrated our 21st birthday, bringing the entire team together
for the first time since before the pandemic. It provided an important pause
from the day-to-day challenges to reflect on the past, present and future
opportunities for the business and with nearly 500 people in one venue, it was
a very visual reminder that we are collaborating with teams of a similar size
across our partner organisations at Bosch, Doosan and Weichai.
These first steps towards deployment are vital, but they are not enough. We
also seek to grow new partnerships across the globe to enable greater adoption
through many more teams of people collaborating on Ceres' technology.
Strongest team in the global industry
Our partners come to us because of our technology, but they stay with us
because of our people. They are passionate and brilliant and above all
resilient, and they need to be because the science and the engineering
challenges they are solving every day are hard. We are also working constantly
to attract and retain the best people, ensuring they have training and
development opportunities, benefits and access to share in the success of the
Company. Many of our employees are also shareholders in Ceres - through Long
Term Incentive Plans or through our employee save-as-you-earn scheme.
It is an exciting time to be at Ceres. We have a strong purpose, a talented
team, and the opportunity to work alongside some of the most progressive
companies globally, driving investment and scaling clean technologies. Success
is in our hands, but we are not complacent, and we continue to focus on
executing our strategy:
· To enable our licence partners to succeed
Our partners are investing significant time and resources into manufacturing
Ceres' solid oxide technology, and we have expanded our engineering and
specialist teams to ensure these early adopters are supported and successful
in deploying new technology into new market opportunities.
· To build commercial scale
We create commercial scale by generating more demand through increasing
commercial partnerships and licences, growing applications and addressing new
markets. This year we have increased the Commercial teams' presence in several
global locations, reflecting the momentum in policy support for hydrogen and
fuel cell technologies.
· Maintain our technology leadership
As a licensing company it is imperative that we stay at the leading edge of
our technology - and that is why we continue to innovate, from the next
generation of our solid oxide technology, continued innovation of our IP for
both fuel cell and electrolyser systems, to digitalisation programmes and what
further technologies we may need to hit a net zero future.
Sustainability
The IEA estimates that to fulfil 2050 green hydrogen demand, the world is
going to need 3,585GW of electrolyser capacity, so it is little wonder that
the conversation is growing around the economic and life cycle impact of raw
materials in the electrolysis supply chain. High demand, long processing
times, limited supply and an undiversified supply chain have already called
into question the price and availability of metals and rare earths to support
the viability of large-scale electrolysis.
Ceres' electrolysis stack does not need to use precious metals. Its
construction comprises over 95% automotive grade steel by weight, the most
widely recycled material globally, and ceria-based materials within the active
elements of the fuel cell, which is abundant, cost-effective and has multiple
sources from multiple countries.
We understand that scaling technology comes with an environmental footprint,
and we have undertaken a life cycle assessment of our stack technology where
we quantify the potential climate impact of producing our cells, which you
can find on the Sustainability section of our website.
We recognise the importance of looking beyond carbon impact to consider the
circular economy for raw materials. As a next step we will undertake a full
evaluation of the end-of-life recyclability or reuse of our technology,
cradle-to-grave, and will seek to lead the industry for our technology,
embedding sustainability considerations into the very heart of our
development and the transfer of IP under licence to our partners.
Strategy and outlook
In March 2021, we set out a clear strategy on which we continue to execute.
Investment across the business enables us to build a sustainable competitive
advantage in highly differentiated solid oxide technology. We collaborate with
world-leading partners, and we have built one of the strongest teams in the
global industry for fuel cells and green hydrogen. All of this gives me
confidence that we will deliver on our ambition to develop and deploy clean
energy technology at the scale and pace needed to decarbonise our energy
systems, and in doing so make a tangible difference for ourselves, our
families and friends, and generations to come.
Phil Caldwell
Chief Executive Officer
Financial review
The Group reported revenue of £22.1 million in 2022, compared with £30.8
million in the prior year. Almost all of the Group's revenue in 2022 related
to the fuel cell business. As reported in November 2022, the signing of the
China JV contracts has been delayed to 2023 impacting the timing of the
associated licence fee revenue recognition. Gross margins reduced to 59%
(2021: 62%), reflecting the reduction in high-margin licence fee income
recognised in the year compared with 2021. As noted in our Interim Results,
the phasing of revenue in 2022 and early 2023 is highly sensitive to the
timing of signing new licence agreements.
Other income of £1.3 million (2021: £2.2 million) relates to grant income,
and now includes our RDEC tax credit as well as grant funding towards
projects.
The order book (contracted revenue bookings) reduced to £67.8 million as at
31 December 2022 from £78.7 million at 31 December 2021; with new order
bookings more than offset by the recognition of revenue primarily on existing
contracts with our partners Doosan and Bosch during the year. Going forwards,
the order book will continue to vary based on the timing of contracts won, and
revenue recognised from them.
Ceres Power - fuel cells
The SOFC part of the business recorded revenues of £22.0 million (2021:
£30.8 million) and a gross profit of £12.9 million (2021: £19.0 million),
with the reduction compared with the prior year reflecting the deferral of the
China JV and the expected recognition of associated upfront licence fee
revenue. The segment's Adjusted EBITDA loss increased to £21.6 million (2021:
£4.5 million). Investment in research and development ("R&D") for SOFC
increased by 48% to £29.1 million (2021: £19.7 million).
There will be continued investment in SOFC in 2023 to support future
expansion, and so the level of losses or future profitability of this part of
the business will continue to be highly influenced by the level of SOFC
licence fee revenue recognised in a given period, until royalty revenue
streams become material. Another notable investment is the development of our
second generation of fuel cell technology, which will offer improvements in
power density, durability and cost.
Ceres Hydrogen - electrolysis
We plan to invest £100 million in the development of our SOEC technology and
we are now two years along this journey and making good progress. Our SOEC
business recognised revenue for the first time in 2022, of £0.2 million
(2021: £nil), from a contract with a potential new partner in Asia to
evaluate the Group's SOEC technology. The SOEC business recorded an Adjusted
EBITDA loss of £21.7 million (2021: £12.2 million). This was primarily
driven by a 66% increase in R&D activities to £19.2 million (2021:
£11.6 million), particularly around the investment in our "first of a kind"
1MW demonstration unit for use in the contract with Shell. We made good
progress in the year with the first Electrolysis Cell Module ("ECM"), which
forms part of the demonstrator, now on test with encouraging early results
with respect to green hydrogen production efficiency.
Focused investment for the future
Throughout 2022, we continued to invest in both capabilities and people to
support our partners, deliver our technology roadmap and drive future growth.
Our employee base includes specialist expertise such as highly skilled
engineers; electrochemistry and materials scientists; and test and stack
technicians and remains our most valuable strategic resource. Total employees
increased to 570 by the end of 2022 compared to 489 at the end of the prior
year. Overall R&D costs increased by 54% to £48.3 million compared to
2021 of £31.3 million as planned with our expansion of both our SOFC business
and development of our SOEC business.
Capitalised development in the year, which currently only relates to ongoing
SOFC development, increased to £5.8 million compared to £4.6 million for
2021 and we hold net £13.3 million capitalised to date. Amortisation of this
to the income statement was consistent with the prior year, as expected,
at £1.0 million (2021: £1.0 million). Our investment in property, plant and
machinery increased to £13.3 million (2021: £7.4 million), and was
principally on manufacturing improvement, automation and capacity expansion,
as well as expanding our test infrastructure. This continued investment also
resulted in increased depreciation of £5.5 million in 2022 compared to 2021
of £4.2 million.
Going forward, we plan to continue to grow our test capability to support the
expected growth of our partners, and also enable additional market
opportunities including new SOFC applications such as marine and alternative
fuels, and SOEC development. We also intend to expand our manufacturing
capacity for prototypes and demonstrators for both SOFC and SOEC products.
Consequently, we expect our capital expenditure to continue to be at higher
levels in 2023.
Overall, this "investment in the future" (R&D costs, capitalised
development and capital expenditure) increased 67% to £58.4 million (2021:
£34.9 million). The £58.4 million comprises £40.2 million in R&D
(excluding depreciation, amortisation and share-based payments), £12.4
million in capital expenditure and £5.8 million in capitalised development.
As a result of these planned investments, consistent with the 2021 capital
raise and strategy to develop our electrolysis technology, the Group reported
an increased operating loss of £51.5 million in 2022, up from a loss of
£23.4 million in 2021.
In December 2022, Ceres concluded a deferral of the option agreement to
acquire the remaining shares of RFC Power Ltd ("RFC"), which is a "Long
Duration Energy Storage" R&D business with proprietary manganese flow
battery technology. This option is now exercisable in the period 1 January
2024 to 30 April 2024, having previously been exercisable between May 2022 and
November 2022. Simultaneously, Ceres invested a total of £2.0 million in RFC,
comprising £1.0 million funding capital as well as entering into a joint
development agreement to advance the progress of this promising technology.
Consequently, Ceres' holding of RFC increased to 24.2% from 8.4%, and our
investment in associates increased to £2.5 million (2021: £0.5 million).
Strong financial position: the foundation for continued development and growth
The Group ended the year with a strong liquidity position of £182.3 million
in cash and short-term investments (31 December 2021: £249.6 million)
reflecting the investment in the business as described above. Finance income
increased to £2.8 million (2021: £0.4 million) reflecting the improved rates
applied to the Group's floating rate deposits and higher rates available when
rolling over maturing fixed rate deposits.
Equity free cash outflow (defined and reconciled to net cash from operating
activities in the non-GAAP section at the end of this report) was £68.4
million (2021: £32.0 million), being driven by net cash used in operating
activities of £51.5 million (2021: £20.3 million), capital expenditure of
£12.4 million (2021: £7.4 million) and capitalised development of £5.8
million (2021: £4.6 million), with the balance from interest receipts and
exchange rate movements.
Other significant movements in the balance sheet included inventories
increasing to £5.7 million (31 December 2021: £3.1 million) reflecting
increased activity at our manufacturing facility to meet anticipated demand
for our fuel cells and component parts to support our partners' development
and scale-up activities. We recognised net contract liabilities of £3.1
million which is a change in position against 31 December 2021, when we had
net contract assets of £3.0 million, with the movement reflecting timing
differences between recognising revenue and issuing invoices to customers.
Trade receivables increased to £11.8 million (2021: £2.6 million) primarily
reflecting a number of significant invoices raised in the last quarter of 2022
with two major customers. Of the £11.8 million due at 31 December 2022,
c.£10 million was received in the first two months of 2023.
About Ceres Power
Ceres is a world-leading developer of electrochemical technologies: fuel cells
for power generation, electrolysis for the creation of green hydrogen and
energy storage. Its asset-light, licensing model has seen it establish
partnerships with some of the world's largest engineering and technology
companies, such as Weichai in China, Bosch in Germany, Miura in Japan, and
Doosan in Korea, to develop systems and products that address climate change
for power generation, transportation, industry, data centres and everyday
living. Ceres is listed on the AIM market of the London Stock Exchange
("LSE") (AIM: 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.
Chief Executive's Statement
It has been another productive year at Ceres with our first electrolyser
modules on test, an exciting new partnership with Shell, and a collaboration
with Linde Engineering and Bosch for green hydrogen. We are making good
progress on SOFC, with existing partners Bosch and Doosan scaling production,
and steps towards establishing our China JV. We have also opened a new test
centre with Horiba MIRA in the UK, achieved record cell production at our
pilot facility and grown the Ceres team to 570 colleagues.
These are just some highlights of another year of considerable progress,
despite the challenging macroeconomic backdrop. Through it all, we remain
wholeheartedly committed to the biggest challenge, to address the urgency for
climate action. The world is not on track to keep global warming at 1.5°C
above pre-industrial levels and we are already starting to see the devastating
effects of climate change around us, from cyclones and floods to droughts and
heatwaves.
We need to decarbonise our energy system, but we also need to provide energy
security, stable power prices and sustainable employment. There are not many
companies that have the opportunity to do something truly impactful on a
global scale - but I believe that Ceres is one such company. Not only does it
have unique clean energy technology that can play an important role in
hard-to-decarbonise parts of our energy system, but we sit at the tipping
point for our planet, which means the time to act is now.
It is no longer a question of credibility of technology, but credibility of
scale
At our reference manufacturing plant in the UK, we are now producing 2MW of
capacity, and by the middle of this decade we will have added 100 times that
capacity with Bosch and at least another 50MW with Doosan. By the time our
partners start planned series production, they will have invested more than
€500 million in scaling our solid oxide fuel cell ("SOFC") technology.
That same technology run in one direction is a highly efficient fuel cell for
power generation, run in reverse enables low-cost green hydrogen that provides
a vital route to industrial decarbonisation of sectors such as steel,
fertilisers and future fuels. We have committed £100 million to the
development of its application in solid oxide electrolysis ("SOEC") and the
first 100kW electrolyser module is on test ahead of scaling into a 1MW
demonstrator. Initial results are positive and give confidence that this
technology can deliver green hydrogen at <40kWh/kg, around 25% more
efficiently than incumbent lower temperature technologies.
In March 2023, we signed a new agreement with Bosch and Linde Engineering, to
assess Ceres' technology for use in large scale industrial applications as a
pathway to low-cost green hydrogen. This is our second partnership
announcement, following the agreement with Shell to establish a 1MW technology
pilot of Ceres' SOEC system at its R&D centre in Bangalore, India. The
agreement builds on Bosch's existing expertise in our SOFC technology and
combines with Linde Engineering's world-leading capabilities in hydrogen
process technology and a global customer footprint in industrial facilities.
Our target is to enable the ecosystem of SOEC partners that can make Ceres'
technology even more competitive and prepare it for mass adoption at scale.
By the end of this decade, we aim to have multiple factories in place
producing multi gigawatts of fuel cell equivalent capacity globally. It is
just the start. This is a global challenge and if we want to have a real
impact on climate change, technology alone is not enough, we must work with
partners to scale globally and at pace.
Collaboration is key
The war in Ukraine has added energy security to the urgency for climate action
and in Europe we saw RePower EU's ambitious plans and strong financial
incentives to move away from the reliance on gas and support the deployment of
green hydrogen. In the US, the Inflation Reduction Act, signed into law last
summer saw a record $369 billion earmarked for energy and climate change
policy - in a year when disasters from drought in the West to hurricanes in
the East and a nationwide winter storm served as a stark reminder of climate
perils. There is simply no turning back to the world of cheap fossil-based
energy.
Hydrogen is now widely recognised by most companies and governments as key to
enabling the energy transition, at the very least for hard-to-decarbonise
industrial sectors that account for around a third of our energy system and
more than its share of global emissions. Our partners, Bosch, Doosan, Shell,
Weichai and others are among the most progressive companies, seeking and
adopting new clean energy technologies at scale and pace, and the good news is
that global competition can accelerate us towards achieving net zero. Where
previously we spoke about an energy trilemma - where clean, low cost and
security of supply were in tension - they now align, and clean energy will be
the most secure and affordable into the future.
In 2022, we celebrated our 21st birthday, bringing the entire team together
for the first time since before the pandemic. It provided an important pause
from the day-to-day challenges to reflect on the past, present and future
opportunities for the business and with nearly 500 people in one venue, it was
a very visual reminder that we are collaborating with teams of a similar size
across our partner organisations at Bosch, Doosan and Weichai.
These first steps towards deployment are vital, but they are not enough. We
also seek to grow new partnerships across the globe to enable greater adoption
through many more teams of people collaborating on Ceres' technology.
Strongest team in the global industry
Our partners come to us because of our technology, but they stay with us
because of our people. They are passionate and brilliant and above all
resilient, and they need to be because the science and the engineering
challenges they are solving every day are hard. We are also working constantly
to attract and retain the best people, ensuring they have training and
development opportunities, benefits and access to share in the success of the
Company. Many of our employees are also shareholders in Ceres - through Long
Term Incentive Plans or through our employee save-as-you-earn scheme.
It is an exciting time to be at Ceres. We have a strong purpose, a talented
team, and the opportunity to work alongside some of the most progressive
companies globally, driving investment and scaling clean technologies. Success
is in our hands, but we are not complacent, and we continue to focus on
executing our strategy:
· To enable our licence partners to succeed
Our partners are investing significant time and resources into manufacturing
Ceres' solid oxide technology, and we have expanded our engineering and
specialist teams to ensure these early adopters are supported and successful
in deploying new technology into new market opportunities.
· To build commercial scale
We create commercial scale by generating more demand through increasing
commercial partnerships and licences, growing applications and addressing new
markets. This year we have increased the Commercial teams' presence in several
global locations, reflecting the momentum in policy support for hydrogen and
fuel cell technologies.
· Maintain our technology leadership
As a licensing company it is imperative that we stay at the leading edge of
our technology - and that is why we continue to innovate, from the next
generation of our solid oxide technology, continued innovation of our IP for
both fuel cell and electrolyser systems, to digitalisation programmes and what
further technologies we may need to hit a net zero future.
Sustainability
The IEA estimates that to fulfil 2050 green hydrogen demand, the world is
going to need 3,585GW of electrolyser capacity, so it is little wonder that
the conversation is growing around the economic and life cycle impact of raw
materials in the electrolysis supply chain. High demand, long processing
times, limited supply and an undiversified supply chain have already called
into question the price and availability of metals and rare earths to support
the viability of large-scale electrolysis.
Ceres' electrolysis stack does not need to use precious metals. Its
construction comprises over 95% automotive grade steel by weight, the most
widely recycled material globally, and ceria-based materials within the active
elements of the fuel cell, which is abundant, cost-effective and has multiple
sources from multiple countries.
We understand that scaling technology comes with an environmental footprint,
and we have undertaken a life cycle assessment of our stack technology where
we quantify the potential climate impact of producing our cells, which you
can find on the Sustainability section of our website.
We recognise the importance of looking beyond carbon impact to consider the
circular economy for raw materials. As a next step we will undertake a full
evaluation of the end-of-life recyclability or reuse of our technology,
cradle-to-grave, and will seek to lead the industry for our technology,
embedding sustainability considerations into the very heart of our
development and the transfer of IP under licence to our partners.
Strategy and outlook
In March 2021, we set out a clear strategy on which we continue to execute.
Investment across the business enables us to build a sustainable competitive
advantage in highly differentiated solid oxide technology. We collaborate with
world-leading partners, and we have built one of the strongest teams in the
global industry for fuel cells and green hydrogen. All of this gives me
confidence that we will deliver on our ambition to develop and deploy clean
energy technology at the scale and pace needed to decarbonise our energy
systems, and in doing so make a tangible difference for ourselves, our
families and friends, and generations to come.
Phil Caldwell
Chief Executive Officer
Financial review
The Group reported revenue of £22.1 million in 2022, compared with £30.8
million in the prior year. Almost all of the Group's revenue in 2022 related
to the fuel cell business. As reported in November 2022, the signing of the
China JV contracts has been delayed to 2023 impacting the timing of the
associated licence fee revenue recognition. Gross margins reduced to 59%
(2021: 62%), reflecting the reduction in high-margin licence fee income
recognised in the year compared with 2021. As noted in our Interim Results,
the phasing of revenue in 2022 and early 2023 is highly sensitive to the
timing of signing new licence agreements.
Other income of £1.3 million (2021: £2.2 million) relates to grant income,
and now includes our RDEC tax credit as well as grant funding towards
projects.
The order book (contracted revenue bookings) reduced to £67.8 million as at
31 December 2022 from £78.7 million at 31 December 2021; with new order
bookings more than offset by the recognition of revenue primarily on existing
contracts with our partners Doosan and Bosch during the year. Going forwards,
the order book will continue to vary based on the timing of contracts won, and
revenue recognised from them.
Ceres Power - fuel cells
The SOFC part of the business recorded revenues of £22.0 million (2021:
£30.8 million) and a gross profit of £12.9 million (2021: £19.0 million),
with the reduction compared with the prior year reflecting the deferral of the
China JV and the expected recognition of associated upfront licence fee
revenue. The segment's Adjusted EBITDA loss increased to £21.6 million (2021:
£4.5 million). Investment in research and development ("R&D") for SOFC
increased by 48% to £29.1 million (2021: £19.7 million).
There will be continued investment in SOFC in 2023 to support future
expansion, and so the level of losses or future profitability of this part of
the business will continue to be highly influenced by the level of SOFC
licence fee revenue recognised in a given period, until royalty revenue
streams become material. Another notable investment is the development of our
second generation of fuel cell technology, which will offer improvements in
power density, durability and cost.
Ceres Hydrogen - electrolysis
We plan to invest £100 million in the development of our SOEC technology and
we are now two years along this journey and making good progress. Our SOEC
business recognised revenue for the first time in 2022, of £0.2 million
(2021: £nil), from a contract with a potential new partner in Asia to
evaluate the Group's SOEC technology. The SOEC business recorded an Adjusted
EBITDA loss of £21.7 million (2021: £12.2 million). This was primarily
driven by a 66% increase in R&D activities to £19.2 million (2021:
£11.6 million), particularly around the investment in our "first of a kind"
1MW demonstration unit for use in the contract with Shell. We made good
progress in the year with the first Electrolysis Cell Module ("ECM"), which
forms part of the demonstrator, now on test with encouraging early results
with respect to green hydrogen production efficiency.
Focused investment for the future
Throughout 2022, we continued to invest in both capabilities and people to
support our partners, deliver our technology roadmap and drive future growth.
Our employee base includes specialist expertise such as highly skilled
engineers; electrochemistry and materials scientists; and test and stack
technicians and remains our most valuable strategic resource. Total employees
increased to 570 by the end of 2022 compared to 489 at the end of the prior
year. Overall R&D costs increased by 54% to £48.3 million compared to
2021 of £31.3 million as planned with our expansion of both our SOFC business
and development of our SOEC business.
Capitalised development in the year, which currently only relates to ongoing
SOFC development, increased to £5.8 million compared to £4.6 million for
2021 and we hold net £13.3 million capitalised to date. Amortisation of this
to the income statement was consistent with the prior year, as expected,
at £1.0 million (2021: £1.0 million). Our investment in property, plant and
machinery increased to £13.3 million (2021: £7.4 million), and was
principally on manufacturing improvement, automation and capacity expansion,
as well as expanding our test infrastructure. This continued investment also
resulted in increased depreciation of £5.5 million in 2022 compared to 2021
of £4.2 million.
Going forward, we plan to continue to grow our test capability to support the
expected growth of our partners, and also enable additional market
opportunities including new SOFC applications such as marine and alternative
fuels, and SOEC development. We also intend to expand our manufacturing
capacity for prototypes and demonstrators for both SOFC and SOEC products.
Consequently, we expect our capital expenditure to continue to be at higher
levels in 2023.
Overall, this "investment in the future" (R&D costs, capitalised
development and capital expenditure) increased 67% to £58.4 million (2021:
£34.9 million). The £58.4 million comprises £40.2 million in R&D
(excluding depreciation, amortisation and share-based payments), £12.4
million in capital expenditure and £5.8 million in capitalised development.
As a result of these planned investments, consistent with the 2021 capital
raise and strategy to develop our electrolysis technology, the Group reported
an increased operating loss of £51.5 million in 2022, up from a loss of
£23.4 million in 2021.
In December 2022, Ceres concluded a deferral of the option agreement to
acquire the remaining shares of RFC Power Ltd ("RFC"), which is a "Long
Duration Energy Storage" R&D business with proprietary manganese flow
battery technology. This option is now exercisable in the period 1 January
2024 to 30 April 2024, having previously been exercisable between May 2022 and
November 2022. Simultaneously, Ceres invested a total of £2.0 million in RFC,
comprising £1.0 million funding capital as well as entering into a joint
development agreement to advance the progress of this promising technology.
Consequently, Ceres' holding of RFC increased to 24.2% from 8.4%, and our
investment in associates increased to £2.5 million (2021: £0.5 million).
Strong financial position: the foundation for continued development and growth
The Group ended the year with a strong liquidity position of £182.3 million
in cash and short-term investments (31 December 2021: £249.6 million)
reflecting the investment in the business as described above. Finance income
increased to £2.8 million (2021: £0.4 million) reflecting the improved rates
applied to the Group's floating rate deposits and higher rates available when
rolling over maturing fixed rate deposits.
Equity free cash outflow (defined and reconciled to net cash from operating
activities in the non-GAAP section at the end of this report) was £68.4
million (2021: £32.0 million), being driven by net cash used in operating
activities of £51.5 million (2021: £20.3 million), capital expenditure of
£12.4 million (2021: £7.4 million) and capitalised development of £5.8
million (2021: £4.6 million), with the balance from interest receipts and
exchange rate movements.
Other significant movements in the balance sheet included inventories
increasing to £5.7 million (31 December 2021: £3.1 million) reflecting
increased activity at our manufacturing facility to meet anticipated demand
for our fuel cells and component parts to support our partners' development
and scale-up activities. We recognised net contract liabilities of £3.1
million which is a change in position against 31 December 2021, when we had
net contract assets of £3.0 million, with the movement reflecting timing
differences between recognising revenue and issuing invoices to customers.
Trade receivables increased to £11.8 million (2021: £2.6 million) primarily
reflecting a number of significant invoices raised in the last quarter of 2022
with two major customers. Of the £11.8 million due at 31 December 2022,
c.£10 million was received in the first two months of 2023.
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2022
2022 2021
Restated(1)
Note £'000 £'000
Revenue 2 22,130 30,776
Cost of sales (9,079) (11,731)
Gross profit 13,051 19,045
Other operating income(2) 1,332 2,228
Operating costs 4 (65,905) (44,703)
Operating loss (51,522) (23,430)
Finance income 5 2,830 438
Finance expense 5 (304) (380)
Loss before taxation (48,996) (23,372)
Taxation credit 6 3,872 2,280
Loss for the financial period and total comprehensive loss (45,124) (21,092)
Loss per £0.10 ordinary share expressed in pence per share:
Basic and diluted loss per share 7 (23.58)p (11.36)p
The accompanying notes are an integral part of these consolidated financial
statements.
(1) The 2021 taxation credit has been restated to increase the credit by
£310,000 following the adjustment of prior year R&D tax credit claims and
a related tax provision reported in 2021. The 2021 results have further been
re-presented to reflect the re-classification of the Group's RDEC tax credit
of £1,304,000. This was previously disclosed within cost of sales but is now
presented within other operating income to align to the change in presentation
applied to the Group's 2022 results. See Note 1 for details.
(2) Other operating income comprises grant income and the Group's RDEC tax
credit.
( )
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2022
31 Dec 2022 31 Dec 2021 31 Dec 2020
Restated(1) Restated(1)
Note £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 8 25,964 18,141 14,979
Right-of-use assets 9 2,647 2,438 3,971
Intangible assets 10 13,278 8,478 4,909
Long-term investments 14 ꟷ 5,000 8,000
Investment in associate 2,460 500 ꟷ
Other receivables 12 741 741 741
Total non-current assets 45,090 35,298 32,600
Current assets
Inventories 11 5,714 3,145 2,107
Contract assets 2 3,309 7,331 864
Other current assets 13 957 1,133 1,002
Derivative financial instruments 17 54 1,073 59
Current tax receivable 7,396 1,615 1,208
Trade and other receivables 12 17,153 5,813 6,208
Short-term investments 14 119,011 93,129 69,231
Cash and cash equivalents 14 63,309 151,455 32,955
Total current assets 216,903 264,694 113,634
Liabilities
Current liabilities
Trade and other payables 15 (4,933) (2,783) (9,112)
Contract liabilities 2 (6,387) (4,290) (7,505)
Other current liabilities 16 (7,286) (5,818) (2,675)
Derivative financial instruments ꟷ ꟷ (43)
Lease liabilities 18 (610) (754) (823)
Provisions 19 (929) (1,579) (612)
Total current liabilities (20,145) (15,224) (20,770)
Net current assets 196,758 249,470 92,864
Non-current liabilities
Lease liabilities 18 (2,514) (2,285) (3,622)
Provisions 19 (1,933) (1,828) (1,610)
Total non-current liabilities (4,447) (4,113) (5,232)
Net assets 237,401 280,655 120,232
Equity attributable to the owners of the parent
Share capital 20 19,209 19,073 17,217
Share premium 405,463 404,726 227,682
Capital redemption reserve 3,449 3,449 3,449
Merger reserve 7,463 7,463 7,463
Accumulated losses (198,183) (154,056) (135,579)
Total equity 237,401 280,655 120,232
(1) 2020 and 2021 trade and other receivables and current tax receivable
have been restated to reflect an adjustment to prior year R&D tax claims
as set out in Note 1.
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2022
Note 2022 2021
£'000 £'000
Cash flows from operating activities
Loss before taxation (48,996) (23,372)
Adjustments for:
Finance income (2,830) (438)
Finance expense 304 380
Depreciation of property, plant and equipment 5,486 4,215
Depreciation of right-of-use assets 620 541
Amortisation of intangible assets 1,032 1,004
Net foreign exchange gains (690) (563)
Net change in fair value of financial instruments 1,020 (1,057)
Share-based payments charge 997 2,615
Operating cash flows before movements in working capital (43,057) (16,675)
(Increase)/decrease in trade and other receivables (12,693) 22
Increase in inventories (2,569) (1,038)
Increase in trade and other payables 2,655 2,832
Decrease/(increase) in contract assets 4,022 (6,467)
Increase/(decrease) in contract liabilities 1,137 (3,215)
(Decrease)/increase in provisions (637) 1,121
Net cash used in operations (51,142) (23,420)
Taxation (paid)/received (380) 3,078
Net cash used in operating activities (51,522) (20,342)
Investing activities
Investment in associate (1,000) ꟷ
Purchase of property, plant and equipment (12,347) (7,377)
Capitalised development expenditure (5,832) (4,573)
Repayment of long-term investments 5,000 3,000
Acquisition of short-term investments (99,618) (62,898)
Repayment of short-term investments 74,950 39,000
Finance income received 1,443 438
Net cash used in investing activities (37,404) (32,410)
Financing activities
Proceeds from issuance of ordinary shares 873 181,472
Net expenses from issuance of ordinary shares ꟷ (2,572)
Cash paid on behalf of employees on the sale of share options ꟷ (7,490)
Repayment of lease liabilities (744) (405)
Interest paid (212) (316)
Net cash (used by)/generated from financing activities (83) 170,689
Net (decrease)/increase in cash and cash equivalents (89,009) 117,937
Exchange gains on cash and cash equivalents 863 563
Cash and cash equivalents at beginning of year 151,455 32,955
Cash and cash equivalents at end of year 14 63,309 151,455
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022
Share capital Share premium Capital redemption reserve Merger reserve Accumulated losses Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 - Restated(1) 17,217 227,682 3,449 7,463 (135,579) 120,232
Comprehensive income
Loss for the financial year(1) ꟷ ꟷ ꟷ ꟷ (21,092) (21,092)
Total comprehensive loss (21,092) (21,092)
Transactions with owners
Issue of shares, net of costs 1,856 177,044 ꟷ ꟷ ꟷ 178,900
Share-based payments charge ꟷ ꟷ ꟷ ꟷ 2,615 2,615
Total transactions with owners 1,856 177,044 ꟷ ꟷ 2,615 181,515
At 31 December 2021 - Restated(1) 19,073 404,726 3,449 7,463 (154,056) 280,655
Comprehensive income
Loss for the financial year ꟷ ꟷ ꟷ ꟷ (45,124) (45,124)
Total comprehensive loss ꟷ ꟷ ꟷ ꟷ (45,124) (45,124)
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 19,209 405,463 3,449 7,463 (198,183) 237,401
(1) 2020 and 2021 results have been restated to reflect an adjustment to prior
year R&D tax claims as set out in Note 1.
Notes to the financial statements for the year ended 31 December 2022
1. Basis of preparation
The financial information presented in this preliminary 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
preliminary announcement are unchanged from those used in the company's
statutory financial statements for the year ended 31 December 2022. 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 announcement 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 2022 which have been
approved by the Board of Directors, and the comparative figures for the year
ended 31 December 2021 are based on the financial statements for that year.
During the year the Group re-classified the presentation of the RDEC tax
credit within the consolidated statement of profit and loss. The RDEC tax
credit was previously presented within cost of sales, however in order to
better align with our peers and to achieve consistent presentation with other
items that we apply government grant accounting to, the Group now presents the
RDEC tax credit within other operating income. Prior year comparatives have
been re-classified accordingly. The impact of this change was to increase the
current year's cost of sales and other operating income by £1.1m (2021:
£1.3m).
The 2021 and 2020 results have been restated to reflect an adjustment to
R&D tax credit claims for certain costs which were inadvertently claimed
in 2019 and 2020 under the Small and Medium-sized Enterprise (SME) R&D tax
credit schemes, whereas they should have been claimed at a lower claim rate
under the RDEC scheme.
As a result, the 2021 taxation credit has been increased by £0.3m to remove a
provision that was recognised in 2021 against future tax credits that should
have been recognised in 2019 and 2020. The 2021 net loss has therefore reduced
from £21.4m to £21.1m. The opening statement of financial position as at 1
January 2021 has also been presented, restated by a net £1.3m decrease to
current assets reflecting a £1.9m decrease in current tax receivable under
the SME tax scheme and a £0.6m increase in other receivables under the RDEC
tax scheme. The 2021 other receivables increased by £0.9m and the current tax
receivable decreased by £1.9m giving rise to a net decrease in net assets of
£1.0m.
The financial statements for 2021 have been delivered to the Registrar of
Companies and the 2022 financial statements will be delivered after the Annual
General Meeting on 18 May 2023. 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 AIM
Rules.
Going Concern
The Group has reported a loss after tax for the year ended 31 December 2022 of
£45.1m (31 December 2021: £21.1m) and net cash used in operating activities
of £51.5m (31 December 2021: £20.3m). At 31 December 2022, the Group held
cash and cash equivalents and investments of £182.3m (31 December 2021:
£249.6m). The directors have prepared annual budgets and cash flow
projections that extend 15 months from the date of approval of this report.
The increased cash used in the year is in line with the Group's strategy to
invest in the development of our electrolysis and fuel cell technology to
support future revenue streams. Future projections include management's
expectations of the further cash outflows associated with the Group's
investment in R&D projects and expansion of manufacturing and testing
capacity, together with contracted and anticipated customer contracts and the
planned investment in the China collaboration with Bosch and Weichai. The
projections were stress tested by applying different scenarios including the
loss of significant future revenue and continued adverse macroeconomic
factors. In each case the projections demonstrated that the Group would 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 financial statements.
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
2022 2021
£'000 £'000
Europe 8,460 7,676
Asia 13,253 22,748
North America 394 109
Rest of World 23 243
22,130 30,776
For the year ended 31 December 2022, 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% and 36% of the
Group's total revenue recognised in the period (31 December 2021: three major
customers that accounted for approximately 59%, 25% and 11% of the Group's
total revenue recognised for that year).
Major product/service lines
2022 2021
£'000 £'000
Engineering services 9,039 6,777
Provision of technology hardware 5,380 7,353
Licenses 7,711 16,646
22,130 30,776
Timing of transfer of goods and services
2022 2021
£'000 £'000
Products and services transferred at a point in time 4,760 15,326
Products and services transferred over time 17,370 15,450
22,130 30,776
Amounts transferred at a point in time during the prior periods included the
recognition of significant license income in the first half of 2021 related to
a major contract.
The contract-related assets and liabilities are as follows:
31 December 2022 31 December 2021
£'000 £'000
Trade receivables 12 11,825 2,612
Contract assets - accrued income 3,309 7,010
Contract assets - deferred costs ꟷ 321
Total contract assets 3,309 7,331
Contract liabilities - deferred income (6,387) (4,290)
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 continues to
separately reflect results down to adjusted EBITDA level from its Power (SOFC)
and Hydrogen (SOEC) divisions.
Power - SOFC Hydrogen - SOEC Consolidated
Year ended 31 December 2022 £'000 £'000 £'000
Revenue (external) 21,950 180 22,130
Cost of sales (9,070) (9) (9,079)
Gross profit 12,880 171 13,051
Other operating income 1,332 ꟷ 1,332
Operating costs (excluding adjusting items) (35,769) (21,844) (57,613)
Adjusted EBITDA(1) (21,557) (21,673) (43,230)
Adjusting items:
Depreciation & amortisation (7,138)
Share-based payment charge (997)
Unrealised foreign exchange losses 863
Fair value adjustment (1,020)
Operating loss (51,522)
Finance income 2,830
Finance expense (304)
Loss before taxation (48,996)
Taxation credit 3,872
Loss for the financial year (45,124)
Power - SOFC Hydrogen - SOEC Consolidated
Year ended 31 December 2021 - Restated(2) £'000 £'000 £'000
Revenue (external) 30,776 ꟷ 30,776
Cost of sales (11,731) ꟷ (11,731)
Gross profit 19,045 ꟷ 19,045
Other operating income 2,228 ꟷ 2,228
Operating costs (excluding adjusting items) (25,765) (12,183) (37,948)
Adjusted EBITDA(1) (4,492) (12,183) (16,675)
Adjusting items:
Depreciation & amortisation (5,760)
Share-based payment charge (2,615)
Unrealised foreign exchange losses 563
Fair value adjustment 1,057
Operating loss (23,430)
Finance income 438
Finance expense (380)
Loss before taxation (23,372)
Taxation credit(2) 2,280
Loss for the financial year (21,092)
(1)Adjusted EBITDA is an alternative performance measure, as defined at the
end of this report.
(2) The 2021 taxation credit has been restated to remove a provision of £0.3m
that was recognised in 2021 against future tax credits, that should have been
recognised in 2019 and 2020. Further, the 2021 RDEC tax credit of £1.3m has
been re-presented to disclose the credit within other operating income rather
than within cost of sales. Note 1 sets out the relevant details.
4. Operating costs
Operating costs can be analysed as follows:
2022 2021
£'000 £'000
Research and development costs 48,348 31,290
Administrative expenses 15,165 11,245
Commercial 2,392 2,168
65,905 44,703
5. Finance income and expenses
2022 2021
£'000 £'000
Interest received 2,657 438
Foreign exchange gain on cash, cash equivalents and short-term deposits 173 ꟷ
Finance income 2,830 438
Interest on lease liability (212) (316)
Unwinding of discount on provisions (87) (64)
Other finance costs (5) ꟷ
Interest expense (304) (380)
6. Taxation
No corporation tax liability has arisen during the period (31 December 2021:
£nil) due to the losses incurred. A tax credit has arisen as a result of the
tax losses being surrendered in respect of research and development
expenditure.
2022 2021
Restated(1)
£'000 £'000
UK corporation tax (4,470) (2,917)
Foreign tax suffered 828 973
Adjustment in respect of prior periods (230) (336)
(3,872) (2,280)
(1) The 2021 taxation credit has been restated to remove a provision
recognised in 2021 against future R&D tax credits that should have been
recognised in 2019 and 2020. The restatement has increased the adjustment in
respect of prior periods by £310,000, from a credit of £26,000 to a credit
of £336,000.
7. Loss per share
2022 2021
Restated(1)
£'000 £'000
Loss for the financial year attributable to shareholders (45,124) (21,092)
Weighted average number of shares in issue 191,385,618 185,689,432
Loss per £0.10 ordinary share (basic and diluted) (23.58)p (11.36)p
(1) The 2021 loss for the year has been restated to remove a provision
recognised in 2021 against future R&D tax credits that should have been
recognised in 2019 and 2020. The loss has been decreased by £310,000 compared
with the amount previously reported. Details are set out in Note 1.
8. Property, plant and equipment
Leasehold improvements Assets under construction
£'000 Plant and machinery Computer equipment Fixtures and fittings £'000 Motor
£'000
£'000
£'000 vehicles Total
£'000 £'000
Cost
At 1 January 2021 5,883 21,409 2,061 314 756 12 30,435
Additions 1,529 3,521 502 34 1,791 ꟷ 7,377
Transfers ꟷ 572 ꟷ ꟷ (572) ꟷ ꟷ
At 31 December 2021 7,412 25,502 2,563 348 1,975 12 37,812
Additions 1,111 5,147 203 ꟷ 6,848 ꟷ 13,309
Transfers 71 893 ꟷ ꟷ (964) ꟷ ꟷ
Disposal (1,621) (6,669) (831) (72) ꟷ ꟷ (9,193)
At 31 December 2022 6,973 24,873 1,935 276 7,859 12 41,928
Accumulated depreciation
At 1 January 2021 2,712 11,196 1,398 149 ꟷ 1 15,456
Charge for the year 646 3,089 392 83 ꟷ 5 4,215
At 31 December 2021 3,358 14,285 1,790 232 ꟷ 6 19,671
Charge for the year 936 4,030 444 73 ꟷ 3 5,486
Depreciation on disposals (1,621) (6,669) (831) (72) ꟷ ꟷ (9,193)
At 31 December 2022 2,673 11,646 1,403 233 ꟷ 9 15,964
Net book value
At 31 December 2022 4,300 13,227 532 43 7,859 3 25,964
At 31 December 2021 4,054 11,217 773 116 1,975 6 18,141
'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 2021 4,729 18 4,747
Additions ꟷ 43 43
Adjustment to lease term (1,035) ꟷ (1,035)
Disposals ꟷ (18) (18)
At 31 December 2021 3,694 43 3,737
Adjustment of lease term 829 ꟷ 829
At 31 December 2022 4,523 43 4,566
Accumulated depreciation
At 1 January 2021 766 10 776
Charge for the year 523 18 541
Disposals ꟷ (18) (18)
At 31 December 2021 1,289 10 1,299
Charge for the year 606 14 620
At 31 December 2022 1,895 24 1,919
Net book value
At 31 December 2022 2,628 19 2,647
At 31 December 2021 2,405 33 2,438
During the year, the Group signed an extension to a property lease and revised
the expected term of that least accordingly. An adjustment of £0.8m was
recognised to increase the right-of-use asset, with a corresponding adjustment
to the lease liability. During the prior year, the Group revised the expected
term on one of its property leases, recognising an adjustment of £1.0m to
reduce the right-of-use asset, with a corresponding adjustment to the lease
liability.
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 2021 411 4,424 ꟷ 295 5,130
Additions ꟷ 3,983 252 338 4,573
At 31 December 2021 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
Accumulated amortisation
At 1 January 2021 82 139 ꟷ ꟷ 221
Charge for the year 82 899 23 ꟷ 1,004
At 31 December 2021 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
Net book value
At 31 December 2022 165 11,961 377 775 13,278
At 31 December 2021 247 7,369 229 633 8,478
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 2022 31 December 2021
£'000 £'000
Raw materials 1,566 1,299
Work in progress 1,477 969
Finished goods 2,671 877
Total inventory 5,714 3,145
Inventories have increased in line with the continued improvement in
manufacturing capacity and to ensure the Group can satisfy existing and
anticipated customer demand for technology hardware.
During the year ended 31 December 2022, inventories of £5.0m (12 months ended
31 December 2021: £5.9m) were recognised as an expense and were included
within Cost of Sales. In addition, as at 31 December 2022, a provision of
£0.7m (2021: £nil) was recognised following the downgrading of a number of
stacks that failed our initial quality control testing. These stacks
potentially have a more limited life than expected and have therefore been
provided against to reflect their lower net realisable value.
12. Trade and other receivables
31 December 2022 31 December 2021
Restated(1)
Current: £'000 £'000
Trade receivables 11,825 2,612
Other receivables 5,328 3,201
17,153 5,813
Non-current:
Other receivables 741 741
(1) 2021 other receivables have been restated to reflect the adjustment of
prior year R&D tax claims, as set out in Note 1. The R&D tax claim
receivable has been increased by £948,000 accordingly.
The Group's trade receivables balance at 31 December 2022 is significantly
higher than at 31 December 2021 primarily reflecting a number of significant
invoices raised in the last quarter of 2022 with two major customers. Of the
£11.8m due at 31 December 2022, c.£10m was received in the first two months
of 2023. Included within other current receivables is the research and
development tax credit of £1,350,000 (31 December 2021: £1,304,000).
13. Other current assets
31 December 2022 31 December 2021
£'000 £'000
Prepayments 869 673
Accrued interest ꟷ 322
Accrued grant income 88 138
957 1,133
14. Net cash and cash equivalents, short-term and long-term investments
31 December 2022 31 December 2021
£'000 £'000
Cash at bank and in hand 7,837 4,957
Money market funds 55,472 146,498
Cash and cash equivalents 63,309 151,455
Short-term investments(1) 119,011 93,129
Long-term investments ꟷ 5,000
Cash and cash equivalents and investments 182,320 249,584
( )
(1) Short-term investments comprise bank deposits with a maturity greater than
3 months but less than 12 months.
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 2022 31 December 2021
Current: £'000 £'000
Trade payables 4,795 2,425
Other payables 138 358
4,933 2,783
16. Other current liabilities
31 December 2022 31 December 2021
£'000 £'000
Accruals 6,515 4,803
Deferred grant income 771 1,015
7,286 5,818
17. Derivative financial instruments
31 December 2022 31 December 2021
£'000 £'000
Financial assets measured at fair value through profit or loss
Forward exchange contracts 26 321
Non-deliverable forward contracts 28 752
Total derivative assets 54 1,073
In 2020, the Group entered into a non-deliverable forward (NDF) to hedge its
exposure to Korean Won (KRW) with respect to a major customer contract. The
Group also had forward exchange contracts in place to hedge expected
transactions in EUR and CAD. All derivative financial instruments are measured
using techniques consistent with level 2 of the fair value hierarchy.
18. Lease liabilities
31 December 2022 31 December 2021
£'000 £'000
At 1 January 3,039 4,445
New finance leases recognised ꟷ 41
Lease payments (956) (721)
Interest expense 212 316
Adjustment to lease term 829 (1,042)
At 31 December 3,124 3,039
Current 610 754
Non-current 2,514 2,285
At 31 December 3,124 3,039
19. Provisions and contingent liabilities
Property Dilapidations Total
Warranties Contract Losses
£'000 £'000 £'000 £'000
At 1 January 2021 1,610 418 194 2,222
Movements in the Consolidated Statement of Profit and Loss:
Amounts used ꟷ (404) (175) (579)
Unwinding of discount 64 ꟷ ꟷ 64
Increase in provision 154 1,239 307 1,700
At 31 December 2021 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 18 329 ꟷ 347
At 31 December 2022 1,933 875 54 2,862
Current ꟷ 875 54 929
Non-current 1,933 ꟷ ꟷ 1,933
At 31 December 2022 1,933 875 54 2,862
Current ꟷ 1,253 326 1,579
Non-current 1,828 ꟷ ꟷ 1,828
At 31 December 2021 1,828 1,253 326 3,407
During the year, following the conclusion of certain contracts utilising our
fuel cell stacks, and based on a further year's data around stack failure and
degradation rates, £0.7m of the existing warranty provision was released to
the consolidated statement of profit or loss. Of this amount, approximately
£0.3m was re-classified as a contingent liability as the likelihood of the
stacks failing or of the Group paying out on any potential subsequent stack
failures for certain stacks that may still be run by customers is no longer
considered to be probable, but is considered to be more than remote.
20. Share capital
2022 2021
Number of £0.10 £'000 Number of £0.10 £'000
Ordinary
Ordinary
shares
shares
Allotted and fully paid
At 1 January 190,729,638 19,073 172,171,527 17,217
Allotted £0.10 Ordinary shares on exercise of employee share options 1,357,137 136 1,490,531 149
Allotted £0.10 Ordinary shares on cash placing (see below) ꟷ ꟷ 17,067,580 1,707
At 31 December 192,086,775 19,209 190,729,638 19,073
On 17 March 2021 the Group announced a fundraise that would allot 17,067,580
new ordinary shares of £0.10 each in the Company, for a total gross cash
consideration of £180,916,340. In conjunction with the placing, 12,967,629
shares were allotted on 17 March 2021 which included Bosch and certain
Directors of the Company subscribing for 3,649,150 and 24,376 shares
respectively. On 19 May 2021 Weichai subscribed for and were allotted the
remaining 4,099,951 shares.
During the year ended 31 December 2022, 1,357,137 ordinary £0.10 shares were
allotted for cash consideration of £866,717 on the exercise of employee share
options (31 December 2021: 1,490,531 ordinary £0.10 shares were allotted for
cash consideration of £705,636).
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. Capital commitments
Capital expenditure that has been contracted for but has not been provided for
in the financial statements amounts to £8,679,000 as at 31 December 2022 (31
December 2021: £8,086,000), in respect of the acquisition of property, plant
and equipment, primarily related to the Group's planned test stand expansion.
22. Related party transactions
As at 31 December 2022 and as at 31 December 2021, the Group's related parties
were its Directors and RFC Power Ltd.
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.
During the year ended 31 December 2021 one Director exercised and retained
8,491 share options under the Company's employee share save scheme. There were
no other transactions between the Company and the Directors.
Transactions between the Group and RFC Power Ltd, being an associated entity
of the Group, comprised engineering consultancy services provided by the Group
to RFC Power for the value of £0.4m (31 December 2021: £0.1m) in return for
equity share capital.
Non-GAAP Alternative Performance Measures (unaudited)
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.
2022 2021
£'000 £'000
Operating loss (51,522) (23,430)
Depreciation and amortisation 7,138 5,760
Share-based payment charges 997 2,615
Unrealised losses/(gains) on forward contracts 1,020 (1,057)
Exchange gains (863) (563)
Adjusted EBITDA (43,230) (16,675)
Reconciliation between net cash from operating activities and equity-free cash
flow
The Group defines equity-free cash flow as net cash from operating activities
plus capital expenditure and adjusted for interest payments and receipts and
exchange rate movements. The table below reconciles net cash from operating
activities to equity-free cash flow for each period.
2022 2021
£'000 £'000
Net cash used in operating activities (51,522) (20,342)
Capital expenditure (total) (18,179) (11,950)
Interest and lease receipts/(payments) (net) 487 (283)
Exchange rate movements 863 563
Equity-free cash flow (68,351) (32,012)
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FFFFLVTIVFIVRecent news on Ceres Power Holdings
See all newsREG - Ceres Power Holdings - Total Voting Rights
AnnouncementREG - Ceres Power Holdings - Notice of AGM & Publication of Annual Report
AnnouncementREG - Ceres Power Holdings - Notification of major holdings
AnnouncementREG - Ceres Power Holdings - Final results for the year ended 31 December 2023
AnnouncementREG - Ceres Power Holdings - Updated timing of Full Year Results
Announcement