REG - Ceres Power Holdings - Half-year Report <Origin Href="QuoteRef">CWR.L</Origin>

Ceres Power HoldingsAnnouncement

08/03/2017 07:05

RNS Number : 7871Y
Ceres Power Holdings plc
08 March 2017
8 March 2017
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Ceres Power Holdings plc
Half-yearly results for the six months ended 31 December 2016
New partners, new markets and a growing international presence - INCLUDING FIRST PRODUCT LAUNCH PARTNER
Ceres Power Holdings plc ("Ceres Power", the "Company" or the "Group") (AIM: CWR.L), a world leading developer of low cost, next generation fuel cell technology, announces its half-yearly results for the six months ended 31 December 2016.
Highlights
 New commercial partners including first 'go-to-market' agreement:
oTwo new development agreements signed in the period, bringing total to four including with Honda, Nissan, Cummins and a further global OEM
oFirst 'go-to-market' agreement signed with global OEM to develop and launch highly efficient combined heat and power ("CHP") product for business markets
 Strong revenue and pipeline: Revenue and other operating income for first half year tripled to 1.5 million (FH1 2016: 0.5m). Aiming for full year to at least double. Order book of 4.8 million as at 31 December 2016 and 3 new evaluation agreements underway with potential future partners.
First significant US commercial success with global power leader Cummins & the US Department of Energy to develop an energy system for Data Centre and commercial scale applications
 New market opportunities enabled by rapid progress in SteelCell technology. The improvements in efficiency, robustness and power density have opened up new high growth power markets in commercial/business sectors
 Successful fundraise: 20m placing enables continued investment in business and technology
Financial Highlights:
Six months ended 31 December 2016 (unaudited)
Six months ended 31 December 2015 (unaudited)
'000
'000
Total revenue and other operating income, comprising:
1,551
453
Revenue 1
1,026
235
Other operating income
525
218
Operating loss
(6,242)
(6,235)
Equity free cash flow 2
(4,176)
(5,431)
Net cash and short term investments
22,174
12,753
1 2016 revenue includes the release of 0.4 million of deferred revenue in respect of contracted work completed for British Gas (2015: 0.1m)
2 Equity free cash outflow (EFCF) is the net change in cash and cash equivalents in the year (0.2 million) less net cash generated from financing activities (19.4 million) plus the movement in short term investments (-15.0 million)
Phil Caldwell, CEO of Ceres Power said:
"Ceres Power is on track for an excellent year, driven by new commercial partnerships, the rapid progress of our technology and our first 'go-to market' agreement bringing us closer to a first product launch. We said we would sign five partners by the end of 2017 and with four to date we are on track to do just that, plus we have three new evaluation agreements and a strong pipeline with a series of international prospective partners.
With a forward order book of 4.8 million and a successful fundraising secured, we are in a strong position to capitalise on significant market opportunities. As the world wrestles with the growing challenge of a decarbonising and decentralising energy system, our proven SteelCell technology, and our work with global power specialists, shows Ceres Power is capable of providing a cheaper, cleaner, distributed alternative to centralised power generation."
For further information please contact:
Ceres Power Holdings plc
Phil Caldwell, CEO
Richard Preston, CFO
Dan Caesar, Communications & Marketing Director
+44 (0)1403 273 463
Zeus Capital (Nominated Adviser and Broker)
Phil Walker/Andrew Jones
Hugh Kingsmill Moore
+44 (0) 20 3829 5000
Powerscourt
Peter Ogden/Andy Jones
+44 (0) 20 7250 1446
About Ceres Power
Ceres Power is a world leader in low cost, next generation fuel cell technology for use in distributed power products that reduce operating costs, lower CO2, SOx and NOx emissions, increase efficiency and improve energy security. The Ceres Power unique patented SteelCell technology generates power from widely available fuels at high efficiency and is manufactured using standard processing equipment and conventional materials such as steel, meaning that it can be mass produced at an affordable price for domestic and business use. Ceres Power offer its partners the opportunity to develop power systems and products using its unique SteelCelltechnology and know-how, combined with the opportunity to supply the SteelCell in volume through its manufacturing partners. For further information please visit: http://www.cerespower.com/
Chief Executive's statement
Ceres Power is well positioned to continue to execute its strategy as an enabling technology provider for the world's leading power systems companies. The SteelCell technology and the Company's expertise have a growing, global reputation and we are on target for an extremely successful year.
The market opportunity - enabling a decarbonised and decentralised energy system
 Climate change and the need for clean air, reinforced by the Paris COP21 agreement and leading global corporates, is maintaining the momentum towards cleaner distributed power generation
 The inexorable growth of the Electric Vehicle and Data Centre sectors will increase the demand for electricity and, coupled with increasing wind and solar generation, will destabilise the centralised power generation model
 Advancements in Ceres Power's SteelCell technology have opened up sector opportunities beyond Residential to include the fast-growing Data Centre, Electric Vehicle and Business sectors
 SteelCell is a significantly superior alternative to conventional gas and diesel engines as it produces close to zero SOx and NOx emissions at a higher efficiency
We are working towards a vision of embedding our cutting-edge SteelCell technology into world-leading products within the Home, Business, Data Centre and Electric Vehicle markets. Ceres Power has traditionally been focussed on micro-CHP in the Residential market, however significant progress has enabled SteelCell to rapidly establish itself as a leader in markets where higher power output is required, significantly expanding the business opportunity.
The majority of our customer demand is now for larger power systems than our residential scale product offering, and to proportionately address these high value markets, we have started developing larger cells and stacks.
With a strong start to 2017, the Company is ready to capitalise commercially by securing more key partners, as well as progressing our existing relationships.
Commercial Progress
 First 'go-to-market' agreement signed to develop and launch a highly efficient Combined Heat and Power product to target the business sector
 First significant US success with agreement to develop a power system for data centres and commercial scale applications
 Field trials progressing well as part of the EU-funded ene.field programme
In the Autumn, Ceres Power announced its key development role in a recently selected US Department of Energy programme which was awarded to global power leader, Cummins Inc. Together, Ceres Power and Cummins will work closely to develop a power system targeting high electrical efficiency of 60% and scalable to meet multiple distributed power applications. The initial target application will be the fast-growing Data Centre market, this power system will be applicable to other commercial scale uses.
Before the end of 2016, Ceres Power announced a joint development licence agreement to develop and launch a multi-kW CHP product its SteelCell technology with a leading global OEM. This is Ceres Power's fourth partnership signed and most notably its first 'go-to-market' agreement with the explicit intention of developing and launching a product to the business sector on an ambitious schedule. This is a highly significant step.
Furthermore, field trials, as part of the EU-funded ene.field programme in UK homes, demonstrate the growing maturity of this technology and underpin the reputation of the SteelCell with our OEM customers.
As a result of this commercial progress, our order book has increased to 4.8m as of 31 December 2016.
Rapid technological progress highlights Ceres Power expertise
With a well-established R&D roadmap, real progress with the performance of the technology continues to be made. The most recent milestone saw the latest iteration of the SteelCell platform (version 4) released to customers on time and budget, reinforcing the Company's reputation for successfully executing against its technology timelines.
Higher power density and fast start-up timescales have been proven, making the SteelCell increasingly commercially attractive in a growing number of markets. The technology is well-suited as a range extender for the Electric Vehicle market and the net electrical efficiencies now being delivered see Ceres Power developing solutions for the Data Centre market.
The core technology is increasingly applicable to customers that require a higher power output and we are now increasing cell size and optimising stack design to meet their requirements.
Adding operational capability to position ourselves for commercialization
We have seen a significant increase in customer demand for the SteelCelltechnology over the past 6 months, particularly for high power applications. This increased demand for our existing SteelCelltechnology combined with the development of larger cells and stacks for new applications has led to the need for further investment in our manufacturing and test capability.
In the near term, additional demand is being met by increasing manufacturing capacity in Horsham through the addition of a 3rd shift pattern along with bringing through improvements to key process steps. Beyond this, we are beginning to explore a number of options for further manufacturing scale-up. 
Financial progress
As highlighted above, the multiple customer programmes won in the past 12 months are driving our revenues forward. Compared to the same period last year, we have tripled revenue and other operating income to 1.5 million. We expect this uplift to continue into the full year, where we aim to at least double our revenue and other operating income.It is encouraging that this is being achieved across a growing portfolio of customer programmes.
Our equity free cash outflow of 4.2 million in the period was less than the prior period (5.4m), mostly due to the Group receiving its R&D tax credit of 2.2m in full (prior period received 0.8m, part of the R&D tax credit, in the period). Even though we are investing in people and in making the technology more suitable for customers that require a higher power output, as we highlighted in last year's annual report, we expect both our operating loss and our equity free cash outflow for the full year to decrease from the prior year.
We were very pleased with our 20m fundraise in the period, especially given the uncertain economic conditions in the last 6 months. At 31 December 2016, the Group had cash and cash equivalents of over 22 million and this financial strength, at a key stage for the Company as we negotiate long term partnerships with a number of the world's leading companies, gives us the runway to further embed our SteelCell in customer development and 'go-to-market' programmes.
Outlook
Our vision is to embed our cutting-edge SteelCell technology into world-leading products within the Home, Business, Data Centre and Electric Vehicle markets.
The leadership team committed itself to signing five global engineering companies as customers in joint development agreements by the end of 2017 and being in two launch programmes with OEM partners by the end of 2018. With four joint development agreements and one launch programme already signed, Ceres Power is ahead of its stated schedule. We expect to secure further commercial partners in due course and to make further progress with our existing partners.
We anticipate that the commercial progress we are making will further drive revenues in the second half of FY 2016/17 and into FY 2017/18.
Ceres Power has a committed, experienced team and we would like to offer our thanks for their continued efforts which we believe will translate into even greater commercial progress over the next 12 months.
Philip Caldwell
Chief Executive Officer
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
For the six months ended 31 December 2016
Six months ended 31 December
2015 (Unaudited)
Year ended 30 June 
2016
(Audited) 
Six months ended 31 December
2016
(Unaudited)
Note
'000
'000
'000
Revenue
1,026
235
1,113
Cost of sales
(406)
(123)
(336)
Gross profit
620
112
777
Other operating income
525
218
555
Operating costs 
2
(7,387)
(6,565)
(14,026)
Operating loss
(6,242)
(6,235)
(12,694)
Finance income
30
49
77
Loss before taxation
(6,212)
(6,186)
(12,617)
Taxation credit
1,044
698
2,157
Loss for the financial period / year and total comprehensive loss
(5,168)
(5,488)
(10,460)
Losses per 0.01 ordinary share expressed in pence per share:
Basic and diluted loss per share
3
(0.63)p
(0.71)p
(1.35)p
All activities relate to the Group's continuing operations and the loss for the financial year is fully attributable to the owners of the parent.
The accompanying notes are an integral part of these consolidated financial statements. 
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2016
31 December 2016 (Unaudited)
30 June 2016
(Audited) 
31 December 2015 (Unaudited)
Note
'000
'000
'000
Assets
Non-current assets
Property, plant and equipment
2,053
2,559
2,309
Total non-current assets
2,053
2,559
2,309
Current assets
Trade and other receivables
2,071
755
1,109
Derivative financial instrument
14
-
28
Current tax receivable
825
1,378
1,997
Short-term investments
6
16,000
7,000
1,000
Cash and cash equivalents
6
6,174
5,753
5,947
Total current assets
25,084
14,886
10,081
Liabilities
Current liabilities
Trade and other payables
(2,217)
(2,663)
(2,121)
Derivative financial instrument
(110)
-
(7)
Provisions for other liabilities and charges
-
(77)
(78)
Total current liabilities
(2,327)
(2,740)
(2,206)
Net current assets
22,757
12,146
7,875
Non-current liabilities
Accruals and deferred income
-
(58)
(31)
Provisions for other liabilities and charges
(806)
(865)
(866)
Total non-current liabilities
(806)
(923)
(897)
Net assets
24,004
13,782
9,287
Equity
Share capital
4
10,080
7,725
7,779
Share premium account
107,222
90,120
90,120
Capital redemption reserve
3,449
3,449
3,449
Other reserve
7,463
7,463
7,463
Accumulated losses
(104,210)
(94,975)
(99,524)
Total equity
24,004
13,782
9,287
The accompanying notes are an integral part of these consolidated financial statements. 
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 December 2016
Six months ended 31 December 2015 (Unaudited)
Six months ended 31 December 2016 (Unaudited)
Year ended 30 June 2016
(Audited)
Note
'000
'000
'000
Cash flows from operating activities
Cash used in operations
5
(6,082)
(5,310)
(11,773)
Taxation received
2,216
839
1,679
Net cash used in operating activities
(3,866)
(4,471)
(10,094)
Cash flows from investing activities
Purchase of property, plant and equipment
(333)
(1,013)
(1,302)
Movement in short-term investments
(15,000)
(1,000)
5,000
Finance income received
30
49
77
Net cash (used in) / generated from investing activities
(15,303)
(1,964)
3,775
Cash flows from financing activities
Proceeds from issuance of ordinary shares
20,038
-
54
Net expenses from of issuance of ordinary shares
(635)
-
-
Net cash generated from financing activities
19,403
-
54
Net increase / (decrease) in cash and cash equivalents
234
(6,435)
(6,265)
Exchange (losses) / gains on cash and cash equivalents
(7)
4
28
227
(6,431)
(6,237)
Cash and cash equivalents at beginning of period
5,947
12,184
12,184
Cash and cash equivalents at end of period
6,174
5,753
5,947
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2016
Share capital
Share premium account
Capital redemption reserve
Other reserve
Accumulated losses
Total
'000
'000
'000
'000
'000
'000
At 1 July 2015
7,725
90,120
3,449
7,463
(90,076)
18,681
Comprehensive income
Loss for the financial year
-
-
-
-
(5,488)
(5,488)
Total comprehensive loss
-
-
-
-
(5,488)
(5,488)
Transactions with owners
Issue of shares, net of costs
-
-
-
-
-
-
Share-based payments charge
-
-
-
-
589
589
Total transactions with owners
-
-
-
-
589
589
At 31 December 2015
7,725
90,120
3,449
7,463
(94,975)
13,782
Comprehensive income
Loss for the financial year
-
-
-
-
(4,972)
(4,972)
Total comprehensive loss
-
-
-
-
(4,972)
(4,972)
Transactions with owners
Issue of shares, net of costs
54
-
-
-
-
54
Share-based payments charge
-
-
-
-
423
423
Total transactions with owners
54
-
-
-
423
477
At 30 June 2016
7,779
90,120
3,449
7,463
(99,524)
9,287
Comprehensive income
Loss for the financial year
-
-
-
-
(5,168)
(5,168)
Total comprehensive loss
-
-
-
-
(5,168)
(5,168)
Transactions with owners
Issue of shares, net of costs
2,301
17,102
-
-
-
19,403
Share-based payments charge
-
-
-
-
482
482
Total transactions with owners
2,301
17,102
-
-
482
19,885
At 31 December 2016
10,080
107,222
3,449
7,463
(104,210)
24,004
The accompanying notes are an integral part of these consolidated financial statements.
Notes to the financial statements for the six months ended 31 December 2016
1. Basis of preparation
This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
The consolidated financial statements of the Group are prepared on a going concern basis, in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, the IFRS Interpretations Committee (IFRS-IC) interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared on a historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments and financial instruments classified as fair value through the profit or loss.
The financial information contained in this interim announcement is unaudited and does not constitute statutory financial statements as defined by in Section 434 of the Companies Act 2006. The financial statements for the year ended 30 June 2016, on which the auditors gave an unqualified audit opinion, have been filed with the Registrar of Companies.
The accounting policies adopted are consistent with those of the financial statements for the year ended 30 June 2016, as described in those financial statements.
After having made appropriate enquiries and in light of the placing which raised 19.4 million net of expenses in October 2016, the Directors have a reasonable expectation that the Group and Company have adequate resources to progress their established strategy for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing these financial statements.
2. Operating costs
Operating costs are split as follows:
Six months ended 31 December 2016 (Unaudited)
Six months ended 31 December 2015 (Unaudited)
Year ended 30 June 2016
(Audited)
'000
'000
'000
Research and development costs
5,434
4,905
10,588
Administrative expenses
2,059
1,660
3,714
7,493
6,565
14,302
Reversal of provision relating to onerous lease and property dilapidations
(106)
-
(276)
7,387
6,565
14,026
3. Loss per share
Six months ended 31 December 2015 (Unaudited)
Year ended 30 June 2016
(Audited)
Six months ended 31 December 2016 (Unaudited)
'000
'000
'000
Loss for the financial period attributable to shareholders
(5,168)
(5,488)
(10,460)
Weighted average number of shares in issue
824,447,210
772,537,841
773,999,046
Loss per 0.01 ordinary share (basic & diluted)
(0.63)p
(0.71)p
(1.35)p
4. Share capital
Ceres Power Holdings plc has called-up share capital totalling 1,008,040,924 0.01 ordinary shares as at 31 December 2016 (777,857,841 ordinary shares of 0.01 each at 30 June 2016).
During the period 228,603,083 ordinary shares of 0.01 each were issued through a placing on AIM for cash consideration of 20 million. In addition, 1,580,000 ordinary shares of 0.01 each were issued on the exercise of employee share options.
5. Cash used in operations
Six months ended 31 December 2016 (Unaudited)
Six months ended 31 December 2015 (Unaudited)
Year ended 30 June 2016
(Audited)
'000
'000
'000
Loss before taxation
(6,212)
(6,186)
(12,617)
Adjustments for:
Other finance income
(30)
(49)
(77)
Depreciation of property, plant and equipment
589
534
1,178
Share-based payments
482
589
1,012
Net foreign exchange gains/(losses)
7
-
(49)
Operating cash flows before movements in working capital
(5,164)
(5,112)
(10,553)
(Increase)/decrease in trade and other receivables
(948)
227
(134)
Increase/(decrease) in trade and other payables
168
(112)
(775)
Decrease in provisions
(138)
(313)
(311)
Increase in working capital
(918)
(198)
(1,220)
Cash used in operations
(6,082)
(5,310)
(11,773)
6. Net cash, short-term investments and financial assets
Six months ended 31 December 2016
(Unaudited)
Six months ended 31 December 2015
(Unaudited)
Year ended 
30 June 2016
(Audited)
'000
'000
'000
Cash at bank and in hand
3,716
1,577
805
Money market funds
2,458
4,176
5,142
Cash and cash equivalents
6,174
5,753
5,947
Short-term investments (bank deposits > 3 months)
16,000
7,000
1,000
Net cash and short term investments
22,174
12,753
6,947
The Group typically places surplus funds into pooled money market funds and bank deposits with durations of up to 12 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/MR1+ (Moody's) and AAA V1+ (Fitch) and deposits with banks with minimum long-term rating of A/A-/A3 and short-term rating of F-1/A-2/P-2 for banks which the UK Government holds less than 10% ordinary equity.
INDEPENDENT REVIEW REPORT TO CERES POWER HOLDINGS PLC
Introduction 
We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the six months ended 31 December 2016 which comprises Consolidated statement of profit and loss and other comprehensive income, Consolidated statement of financial position, Consolidated cash flow statement, Consolidated statements of changes in equity and the related explanatory notes. We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. 
Directors' responsibilities 
The half-yearly report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.
The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly report has been prepared in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.
Scope of review 
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 31 December 2016 is not prepared, in all material respects, in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU and the AIM Rules.
James Ledward
for and on behalf of KPMG LLP
Chartered Accountants
1 Forest Gate,
Brighton Road, Crawley
RH11 9PT
8 March 2017

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