REG - Ceres Power Holdings - Interim results for the six months ended 30 June
27/09/2024 07:00
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RNS Number : 8937F Ceres Power Holdings plc 27 September 2024
CWR.L
27 September 2024
Ceres Power Holdings plc
Interim results for the six months ended 30 June 2024
Strong growth in revenue and order intake, significant reduction in cash
outflows
Ceres Power Holdings plc ("Ceres", the "Company") (CWR.L), a leading developer
of clean energy technology, announces its results for the six month period
ended 30 June 2024.
Financial highlights
· Revenue increased 144% to £28.5 million (H1 2023: £11.7
million(1))
· Record order intake from signing new contracts of £46.9 million
in H1, growing to £103.3 million since the start of the year to 31 August
2024
· Gross profit increased 217% to £22.9 million (H1 2023: £7.2
million(1)), and a gross margin of 80% (H1 2023: 62%(1)) reflecting impact of
technology transfer to Delta
· Adjusted EBITDA loss significantly reduced to £9.0 million (H1
2023: £23.5 million(1)), demonstrating the operational leverage of the
business
· Significantly reduced cash outflow of £13.9 million (H1 2023:
£21.1 million) driving robust cash and short-term investments of £126.1
million (H1 2023: £161.2 million)
Commercial acceleration
· Delta becomes new major licensing partner: a global long-term
manufacturing collaboration with Delta Electronics in Taiwan for both solid
oxide electrolysis cell ("SOEC") and solid oxide fuel cell ("SOFC") stack
production was signed in January to drive revenues in 2024 and beyond. Initial
production is expected by the end of 2026, with royalties expected to follow
· Denso manufacturing licence continues strong business momentum:
Since the end of the first half period, Ceres announced its second major
manufacturing licence agreement of the year with Denso Corporation in Japan,
incorporating licence fees, engineering services and hardware revenues over
multiple years
· Thermax deal signals market entry into attractive new region: A
new systems licence partnership with Thermax takes Ceres into the dynamic and
high-growth Indian market. It positions Ceres closer to end customers in
India's hard-to-abate industrial markets such as green hydrogen, steel and
ammonia production
· Current SOFC manufacturing scale-ups progressing: Both Bosch and
Doosan continue to implement their initial volume manufacturing capabilities,
Doosan confirms mass manufacturing to start in 2025
· Electrolysis demonstrator programme progressing well: Megawatt
scale electrolyser now being commissioned in India by Shell, which has signed
a follow-on contract to design a 10MW pressurised SOEC module to produce green
hydrogen
· Accelerating customers to market: Ceres continues to work closely
with AtkinsRéalis to develop optimal system architecture for 100MW+
electrolyser systems suitable for gigawatt-scale hydrogen plants, helping to
accelerate customer time to market and drive future Ceres revenues
Outlook
· Cost base optimisation: Following successful milestone
achievements in our product development roadmap, and certain non-recurring
investment programmes coming to an end, there is a natural reduction in
investment requirements from historical peak levels. Consequently - in
tandem with the implementation of a new organisational structure in September
2024 to ensure the business is optimised to accelerate its growth strategy -
management is implementing a rationalisation of the cost base. This will
reduce the overall expenditure by approximately 15% to sustain Ceres'
competitive advantage and meet the needs of our partners, whilst also
maintaining a strong financial footing
· Upgraded revenue guidance for the year re-confirmed: In its July
trading update the Company increased its revenue guidance for the year ending
31 December 2024 to the range of £50-60 million, based on the contracts
secured to date
Phil Caldwell, Chief Executive Officer of Ceres, said:
"We are delivering a record year at Ceres with two major manufacturing licence
deals announced so far this year. This is testament to the hard work of our
teams in developing our electrolysis technology, which is now gaining
commercial traction as major global partners embrace our technology to
accelerate their own ambitions to decarbonise the hard-to-abate industrial
processes. We continue to broaden our SOEC capabilities, establishing an
ecosystem of engineering services partners and system licensees to further
support the demand for our electrolyser technology to end markets.
"In parallel our engineering teams continue to work closely with our SOFC
partners as they progress towards initial mass production volumes. The growing
number of high-quality manufacturing partners implementing our technology at
scale and pace demonstrates the effectiveness of our licensing business model
in action.
"Simply put, partners come to us because we offer the best overall technology
solution for their needs."
Ends
Financial Summary 30 June 2023
30 June 2024 Restated(1)
£'000 £'000
Total revenue(1), comprising: 28,500 11,660
Licence fees 20,226 2,816
Engineering services revenue 5,065 5,679
Provision of technology hardware 3,209 3,165
Gross profit 22,887 7,217
Gross margin % 80% 62%
Adjusted EBITDA loss(2) (9,042) (23,528)
Operating loss(1) (13,757) (28,266)
Net cash used in operating activities (13,220) (15,629)
Net cash and investments 126,092 161,230
1. The restatement to 30 June 2023 is described in Note 1
2. Adjusted EBITDA loss is an Alternative Performance Measure, as defined and
reconciled to operating loss at the end of this report.
Analyst presentation
Ceres Power Holdings plc will be hosting a live webcast for analysts and
investors on 27 September 2024 at 09.30 GMT. To register your interest in
participating, please go to:
https://www.investormeetcompany.com/ceres-power-holdings-plc/register-investor
(https://www.investormeetcompany.com/ceres-power-holdings-plc/register-investor)
.
For further information visit www.ceres.tech (http://www.ceres.tech) or
contact:
Ceres Power Holdings plc Tel: +44 (0)7884 654 179
Patrick Yau / Merryl Black Email: investors@cerespower.com
FTI Consulting (PR Adviser) Tel: +44 (0)203 727 1000
Ben Brewerton / Dwight Burden Email: ceres_power@fticonsulting.com (mailto:Ceres_power@fticonsulting.com)
About Ceres
Ceres is a leading developer of clean energy technology: electrolysis for the
production of green hydrogen and fuel cells for power generation. Its
asset-light, licensing model has seen it establish partnerships with some of
the world's largest companies, such as Bosch, Doosan, Delta, Denso, Shell,
Thermax and Weichai. Ceres' solid oxide technology supports greater
electrification of our energy systems and produces green hydrogen at high
efficiencies as a route to decarbonise emissions-intensive industries such as
steelmaking, ammonia and future fuels. Ceres is listed on the London Stock
Exchange ("LSE") (LSE: CWR) and is classified by the LSE Green Economy Mark,
which recognises listed companies that derive more than 50% of their activity
from the green economy. Read more on our website www.ceres.tech
(http://www.ceres.tech) or follow us on LinkedIn
(https://www.linkedin.com/company/ceres-power/) .
Chief Executive's statement
The undeniable effects of climate change continue to impact lives around the
world on an increasingly regular basis, including the dislocation of
communities fleeing floods and extreme weather events in Asia or the
devastation to forests, farmland and buildings caused by wildfires that have
been sweeping across parts of the US, Europe and Australia.
Many governments have responded with decisive action on decarbonisation,
putting in place specific hydrogen strategies to incentivise the production,
infrastructure development and adoption of green hydrogen. For example, the EU
is targeting the deployment of 40GW of green hydrogen electrolysis by 2030,
committing up to €470 billion in investments up to 2050 for the hydrogen
economy; Japan aims to generate public and private investment in hydrogen
worth 15 trillion yen over the next 15 years, with specific reference to the
hard-to-abate sectors; and South Korea's Hydrogen Economy Roadmap to develop
its hydrogen infrastructure and commercialisation strategies is being backed
by around $35 billion of government funding.
Ceres is committed to working in partnership with global OEMs and systems
design companies to help nations decarbonise as they strive towards their net
zero targets. These strategies will take time and resources to bring into
effect, especially in the complex industrial sectors where value chains are
long and where fossil fuels and feedstocks are well entrenched. A move towards
decarbonisation requires disrupting the status quo - leveraging more advanced
technologies, putting in place new supply chains and redesigning complex
industrial processes. After an extended period of industry stagnation in the
wake of high fuel costs, rising rates of inflation and elevated interest
rates, confidence now appears to be returning as these effects moderate. In
2023 the number of announced green hydrogen projects grew by about 35% from
1,050 in January 2023 to over 1,400 at the end of the year, with a value of
over $570 billion. Solid oxide technology offers significant efficiency
advantages particularly when coupled with waste heat from industrial
processes.
Ceres's solid oxide technology also has a role to play in decarbonising energy
systems. As some nations transition away from coal to liquefied natural Gas
(LNG) for their power needs, Ceres' SOFC technology can enable more efficient
power generation from a range of fuels. Closures of coal plants are offset by
increases in nuclear, gas and renewable output. This transition is seen in
regions such as South Korea, China, India and Taiwan, supported by various
government initiatives. Currently the adoption of lower carbon and zero carbon
power generation is being further driven by the ramp in energy demand for
applications such as AI and datacentres alongside existing opportunities in
areas of stationary power generation and grid reinforcement. In its Global
Energy Perspective 2024 report, McKinsey estimates that the rise of cloud
solutions, cryptocurrency, and AI could see datacentres accounting for 2,500
to 4,500 terawatt hours (TWh) of global electricity demand by 2050 (5-9
percent of total electricity demand). This demand creates greater need for gas
or other firming sources of energy to balance out the intermittency of
renewable energy sources.
Ceres is rapidly becoming the technology of choice for leading companies
adopting solid oxide as the licensing model enables rapid adoption as the pace
for change picks up across the global green hydrogen and power generation
markets.
Green hydrogen in hard-to-abate industries
Hard-to-abate industries such as steel production, chemical manufacturing and
long-haul transportation, are characterized by their reliance on
high-temperature processes, the need for energy-dense fuels, or the use of
fossil fuels as feedstock. As a result, they are difficult to decarbonise
using current renewable energy sources or electric alternatives alone. Green
hydrogen offers a versatile alternative that can address many of these
challenges as it can be produced in a zero carbon manner using renewable
energy and electrolysis.
Hydrogen can be used as a fuel to generate power efficiently; as a feedstock
to decarbonise industrial processes; and as an energy carrier. Importantly, it
can be deployed using modified versions of existing industrial equipment,
reducing transition costs and time-to-market. Bloomberg New Energy Finance
believes that by 2050 around 49% of total green hydrogen consumption will be
accounted for by the production of green steel, ammonia and sustainable
aviation fuels, expected to be approximately 191 Mt per annum.
Ceres' SOEC technology, based on over 20 years of solid oxide innovation and
development, enables the highly efficient production of hydrogen, particularly
where by-product industrial heat can be harnessed for the electrolysis
process. In tandem, the company's business model has been established to help
accelerate decarbonisation across these hard-to-abate industrial sectors. As
the partner of choice for leading global OEMs and systems developers, Ceres
offers a faster route to market and efficient zero carbon hydrogen production.
This saves our partners the time, effort and resource needed to develop their
own solutions and allows them to focus on their strengths in industrial
manufacturing and distribution. Ceres believes this synergy is key to enabling
industrial decarbonisation at scale and pace.
Commercial acceleration into SOEC bearing fruit
In 2021, Ceres made the strategic decision to accelerate development of its
electrolysis technologies to position the company in the rapidly expanding
green hydrogen industry. Over the last three years continuing innovation of
the company's core solid oxide technology has created a highly efficient and
lower cost mode of hydrogen electrolysis for the hard-to-abate industrial
sectors. At the same time the Company invested in its Commercial teams to
implement new customer programmes for SOEC; this emphasis on building
commercial relationships across the hydrogen industry is now starting to bear
fruit.
In January 2024 Ceres and Delta Electronics signed a global long-term
manufacturing collaboration and licence agreement for both SOEC and SOFC stack
production. Headquartered in Taiwan, Delta employs over 80,000 people across
approximately 200 facilities worldwide, with a Taiwan Stock Exchange market
capitalisation of approximately US$23 billion. It provides solutions to
customers across a range of sectors including chemicals, energy,
transportation and steel.
This dual licence agreement is the first of its kind for Ceres, underlining
the efficiency that Ceres' solid oxide stack technologies can bring to both
power generation and green hydrogen production. These capabilities complement
Delta's current expertise in mass manufacturing, power electronics and data
centres for customers like Microsoft. The partnership also enables its move
into turnkey decarbonisation solutions and the development of smart buildings,
energy infrastructure, grid balancing and energy storage for customers such as
Tesla. The deal will generate a total revenue of £43 million to Ceres through
technology transfer, development licence fees, and engineering services, of
which approximately half is expected to be recognised in 2024. Delta is
expected to start manufacturing by the end of 2026 with strong ambitions for
future scale-up. Royalty revenues are separately covered in the scope of the
agreement and will be generated when Delta products are sold into their end
markets.
In June 2024, the Company extended its relationship with Shell to design a
SOEC demonstrator module for use in large-scale industrial applications such
as synthetic fuels, ammonia and green steel. This builds on the initial
contract to deploy a 1MW SOEC system at Shell's R&D facility in Bangalore,
India focusing on the development of a 10MW pressurised module to produce
green hydrogen at 36 kWh/kg. It is intended that this design can be scaled to
hundreds of megawatts and be integrated with industrial plants to produce
sustainable future fuels.
Separately, Bosch and Linde started work on a 1MW pressurised stack array
module based on Ceres' SOEC technology. This will be a repeating unit and form
abuilding block for larger scale electrolysis systems. The two-year
demonstration project is anticipated to showcase that SOEC provides a highly
efficient pathway to low-cost green hydrogen production for industrial
applications.
As the Company has accelerated commercial delivery, the momentum of the first
half of the year has continued into current trading. In July 2024, Ceres
announced that it had signed a long term SOEC manufacturing licence with
Japan's Denso Corporation, a Fortune 500 company employing over 160,000 people
in 35 countries and regions worldwide. Denso aims to leverage the expertise of
system control and thermal management it has built in automotive system
development to develop technology in hydrogen production.
The partnership will enable Denso to produce Ceres' current and future
generations of stack technology under licence, in line with its aim to
establish a hydrogen supply chain. In common with other manufacturing licence
partnerships, this agreement provides revenues for licence fees, engineering
services and hardware over multiple years, as well as future royalty payments.
In addition to securing new manufacturing licences, Ceres also signed a new
system licensing partnership with Thermax, one of India's largest process
equipment manufacturers with an extensive industrial portfolio that includes
clean air, clean energy, clean water and chemical solutions. The partnership
is driven by accelerating system development for commercial use within the
hard-to-abate green ammonia, petrochemical and steel industries in India where
Thermax already has established market presence.
System licence fees are more modest than manufacturing licences, but this
partnership is of high strategic importance for Ceres. First, it gives the
company a foothold in the fast growing Indian hydrogen market, a major new
territory for the Company that is well supported through India's $2.3 billion
National Green Hydrogen Mission incentives. Secondly, the relationship will
seed Ceres technology into the market with key end market customers,
leveraging Ceres' highly differentiated electrolysis technology and Thermax's
experience and market position in the industrial process market, to enable it
to become a vertically integrated SOEC system solution provider.
As well as helping our partners to speed up market entry of their
decarbonisation products, Ceres has been working with AtkinsRéalis, a
world-leading engineering, procurement and construction (EPC) services group,
to deliver the front-end engineering design (FEED) for a commercial
multi-megawatt modularised hydrogen production system based on Ceres' SOEC
technology. This design will provide commissioners of green hydrogen
production plants with a blueprint of the optimum system architecture for a
100MW+ electrolyser system to produce green hydrogen. This will be a key
building block for GW-scale plants based on Ceres' robust, low cost and highly
efficient SOEC approach.
While Ceres has focused on generating commercial momentum in its electrolysis
activities we continue to work closely with existing SOFC partners to support
the implementation of their respective solid oxide cell and stack
manufacturing facilities. Both Bosch and Doosan are progressing towards mass
manufacturing and the Company continues to anticipate initial royalty payments
from Doosan to be received by the end of 2025. We continue to support the
system development of 75 kW power modules by Weichai who have a leading
position in China's gas engine market and Delta is the latest addition to our
SOFC licensees.
Financial review
The Company reported revenue for the six-month period ended 30 June 2024 of
£28.5 million, compared to £11.7(1) million in the same period in 2023. Most
of the revenue was from the technology transfer licence fees associated with
the Manufacturing and Collaboration Agreement signed with Delta in January
2024, this revenue has no associated cost of sales. Revenue from existing
partners Bosch and Doosan continued as we supported them through ongoing
development activities leading up to commercial launch. Revenue from the
Manufacturing and Licence Agreement with Denso signed in July 2024 will
commence in the second half of the year as we anticipate record revenue for
the financial year.
Gross profit of £22.9 million in the year (H1 2023: £7.2 million(1))
increased when compared to the prior year due to the impact of increased
licence revenue which has no associated cost of sales. Consequently, gross
margins remain high at 80% (H1 2023: 62%(1)), which illustrates the Company's
asset-light, licencing business model.
Operating costs were comparable to H1 2023 at £37.9 million (H1 2023: £37.1
million) as Ceres maintained investment in core technology to drive future
growth, including the development of the second generation of stacks to
operate more effectively in electrolysis mode and further development in
modular stack designs for output efficiencies. R&D costs of £23.3 million
were lower than the £26.8 million in the prior year period, as the business
achieved significant technology development milestones and passes peak
investment needs.
Adjusted EBITDA loss for H1 2024 reduced to £9.0 million (H1 2023: £23.5
million(1)). Adjusted EBITDA is a non-statutory measure and is detailed in the
Alternative Performance Measures section in this review. The decreased loss is
primarily due to the high margin revenue recognised explained above.
Capital expenditure in the half reduced to £2.8 million (H1 2023: £3.1
million) as there was reduced requirement to invest in prototype manufacturing
capacity and test stand infrastructure. Capitalised development costs
reduced to £1.3 million compared to £3.4 million in the prior year period
mainly due to the second generation of stack design development working
towards completion.
Cash outflow in the period (change in cash, cash equivalents and short-term
investments) was £13.9 million (H1 2023: £21.1 million). This improvement
was driven by customer receipts, reduced capital investments and increased
finance income. Ceres therefore ends the period in a strong position with
£126.1 million in cash, cash equivalents and short-term investments (H1 2023:
£161.2 million, 31 December 2023: £140.0 million). This will support future
investment as the Company drives revenue growth, maintains discipline over
costs and expenditure and tracks towards profit and cashflow break‑even.
Principal risks and uncertainties
The Directors have reviewed the principal risks and uncertainties that could
have a material impact on the Group's performance and have updated the risks
from those described in the Ceres Annual Report, 2023. The Directors have
determined that cyber security is now an elevated risk and that there is a
risk that a cyber-attack or breach of system security could disrupt our
operations, cause the loss of, destruction of, or unauthorised access to
sensitive IP and trade secrets. The Directors have also determined that the
risk of detrimental partner actions has reduced to no longer be considered a
principal risk. A summary of the Group's principal risks can be found at the
end of this report.
Restructuring and cost optimisation
Following significant investment in the development of SOEC and SOFC
programmes in recent years, some projects have passed peak investment
requirements and there is now a natural reduction of future investment
requirements. Since the end of the period, management has reviewed roles and
responsibilities across the company to ensure the business is optimised to
accelerate its growth strategy and has implemented a new organisational
structure to take it forward. The proposed changes will result in a headcount
reduction of approximately 15% in Q4 2024, and also a reduction in the overall
cost base by a similar level, whilst also delivering on our commitments to our
partners and maintaining our strong competitive advantage as a leader in clean
energy conversion technology.
Board change
In September 2024 the Company separately announced that Eric Lakin will step
down as CFO and from the Board to pursue other interests, to be replaced by
Stuart Paynter. These changes will become effective on 1 October 2024 and Eric
will remain with Ceres for sufficient time to ensure a smooth transition of
responsibilities. Previously CFO of advanced therapies innovator Oxford
BioMedica plc, Stuart has extensive financial and commercial experience across
arange of advanced technology sectors, as well as a strong capital markets,
UK governance and transformation delivery track record.
Outlook: building commercial traction
Ceres is progressing well on the path to commercialisation with our partners.
The biggest global manufacturers and systems developers looking to enter the
dynamic hydrogen market have chosen to partner with Ceres to leverage our
world-leading technology and a highly flexible licencing business model to
gain rapid access to the growing hydrogen market.
In a short period of time Ceres has progressed from investment phase in SOEC
to commercial partnerships, validating our business model and strategy. This
acceleration of our commercial success is reflected in the recent upgrade to
financial guidance and positions us well to deliver a record year in revenues
for the Company. Record order intake of £103.3 million since the start of the
year to 31 August 2024 was achieved by the Company due to the higher levels of
commercial activity. Given the recent restructuring and commercial progress we
are now well positioned for the future and expect continued momentum for the
full year performance as we continue to grow the business to meet the needs
for industrial decarbonisation and reliable clean power generation.
Phil Caldwell
Chief Executive Officer
Responsibility Statement
The directors confirm that to the best of their knowledge:
· the condensed set of financial statements has been prepared in
accordance with UK adopted IAS 34 'Interim Financial Reporting'; and
· the interim management report includes a fair review of the
information required by DTR 4.2.7 (indication of important events and their
impact, and a description of principal risks and uncertainties for the
remaining six months of the financial year) and DTR 4.2.8 (disclosure of
related parties' transactions and changes therein).
The full list of current Directors can be found on the Ceres website at
https://www.ceres.tech (https://www.ceres.tech) .
About Ceres
Ceres is a leading developer of clean energy technology: electrolysis for the
production of green hydrogen and fuel cells for power generation. Its
asset-light, licensing model has seen it establish partnerships with some of
the world's largest companies, such as Bosch, Doosan, Delta, Denso, Shell,
Thermax and Weichai. Ceres' solid oxide technology supports greater
electrification of our energy systems and produces green hydrogen at high
efficiencies as a route to decarbonise emissions-intensive industries such as
steelmaking, ammonia and future fuels. Ceres is listed on the London Stock
Exchange ("LSE") (LSE: CWR) and is classified by the LSE Green Economy Mark,
which recognises listed companies that derive more than 50% of their activity
from the green economy. Read more on our website www.ceres.tech
(http://www.ceres.tech) or follow us on LinkedIn
(https://www.linkedin.com/company/ceres-power/) .
Chief Executive's statement
The undeniable effects of climate change continue to impact lives around the
world on an increasingly regular basis, including the dislocation of
communities fleeing floods and extreme weather events in Asia or the
devastation to forests, farmland and buildings caused by wildfires that have
been sweeping across parts of the US, Europe and Australia.
Many governments have responded with decisive action on decarbonisation,
putting in place specific hydrogen strategies to incentivise the production,
infrastructure development and adoption of green hydrogen. For example, the EU
is targeting the deployment of 40GW of green hydrogen electrolysis by 2030,
committing up to €470 billion in investments up to 2050 for the hydrogen
economy; Japan aims to generate public and private investment in hydrogen
worth 15 trillion yen over the next 15 years, with specific reference to the
hard-to-abate sectors; and South Korea's Hydrogen Economy Roadmap to develop
its hydrogen infrastructure and commercialisation strategies is being backed
by around $35 billion of government funding.
Ceres is committed to working in partnership with global OEMs and systems
design companies to help nations decarbonise as they strive towards their net
zero targets. These strategies will take time and resources to bring into
effect, especially in the complex industrial sectors where value chains are
long and where fossil fuels and feedstocks are well entrenched. A move towards
decarbonisation requires disrupting the status quo - leveraging more advanced
technologies, putting in place new supply chains and redesigning complex
industrial processes. After an extended period of industry stagnation in the
wake of high fuel costs, rising rates of inflation and elevated interest
rates, confidence now appears to be returning as these effects moderate. In
2023 the number of announced green hydrogen projects grew by about 35% from
1,050 in January 2023 to over 1,400 at the end of the year, with a value of
over $570 billion. Solid oxide technology offers significant efficiency
advantages particularly when coupled with waste heat from industrial
processes.
Ceres's solid oxide technology also has a role to play in decarbonising energy
systems. As some nations transition away from coal to liquefied natural Gas
(LNG) for their power needs, Ceres' SOFC technology can enable more efficient
power generation from a range of fuels. Closures of coal plants are offset by
increases in nuclear, gas and renewable output. This transition is seen in
regions such as South Korea, China, India and Taiwan, supported by various
government initiatives. Currently the adoption of lower carbon and zero carbon
power generation is being further driven by the ramp in energy demand for
applications such as AI and datacentres alongside existing opportunities in
areas of stationary power generation and grid reinforcement. In its Global
Energy Perspective 2024 report, McKinsey estimates that the rise of cloud
solutions, cryptocurrency, and AI could see datacentres accounting for 2,500
to 4,500 terawatt hours (TWh) of global electricity demand by 2050 (5-9
percent of total electricity demand). This demand creates greater need for gas
or other firming sources of energy to balance out the intermittency of
renewable energy sources.
Ceres is rapidly becoming the technology of choice for leading companies
adopting solid oxide as the licensing model enables rapid adoption as the pace
for change picks up across the global green hydrogen and power generation
markets.
Green hydrogen in hard-to-abate industries
Hard-to-abate industries such as steel production, chemical manufacturing and
long-haul transportation, are characterized by their reliance on
high-temperature processes, the need for energy-dense fuels, or the use of
fossil fuels as feedstock. As a result, they are difficult to decarbonise
using current renewable energy sources or electric alternatives alone. Green
hydrogen offers a versatile alternative that can address many of these
challenges as it can be produced in a zero carbon manner using renewable
energy and electrolysis.
Hydrogen can be used as a fuel to generate power efficiently; as a feedstock
to decarbonise industrial processes; and as an energy carrier. Importantly, it
can be deployed using modified versions of existing industrial equipment,
reducing transition costs and time-to-market. Bloomberg New Energy Finance
believes that by 2050 around 49% of total green hydrogen consumption will be
accounted for by the production of green steel, ammonia and sustainable
aviation fuels, expected to be approximately 191 Mt per annum.
Ceres' SOEC technology, based on over 20 years of solid oxide innovation and
development, enables the highly efficient production of hydrogen, particularly
where by-product industrial heat can be harnessed for the electrolysis
process. In tandem, the company's business model has been established to help
accelerate decarbonisation across these hard-to-abate industrial sectors. As
the partner of choice for leading global OEMs and systems developers, Ceres
offers a faster route to market and efficient zero carbon hydrogen production.
This saves our partners the time, effort and resource needed to develop their
own solutions and allows them to focus on their strengths in industrial
manufacturing and distribution. Ceres believes this synergy is key to enabling
industrial decarbonisation at scale and pace.
Commercial acceleration into SOEC bearing fruit
In 2021, Ceres made the strategic decision to accelerate development of its
electrolysis technologies to position the company in the rapidly expanding
green hydrogen industry. Over the last three years continuing innovation of
the company's core solid oxide technology has created a highly efficient and
lower cost mode of hydrogen electrolysis for the hard-to-abate industrial
sectors. At the same time the Company invested in its Commercial teams to
implement new customer programmes for SOEC; this emphasis on building
commercial relationships across the hydrogen industry is now starting to bear
fruit.
In January 2024 Ceres and Delta Electronics signed a global long-term
manufacturing collaboration and licence agreement for both SOEC and SOFC stack
production. Headquartered in Taiwan, Delta employs over 80,000 people across
approximately 200 facilities worldwide, with a Taiwan Stock Exchange market
capitalisation of approximately US$23 billion. It provides solutions to
customers across a range of sectors including chemicals, energy,
transportation and steel.
This dual licence agreement is the first of its kind for Ceres, underlining
the efficiency that Ceres' solid oxide stack technologies can bring to both
power generation and green hydrogen production. These capabilities complement
Delta's current expertise in mass manufacturing, power electronics and data
centres for customers like Microsoft. The partnership also enables its move
into turnkey decarbonisation solutions and the development of smart buildings,
energy infrastructure, grid balancing and energy storage for customers such as
Tesla. The deal will generate a total revenue of £43 million to Ceres through
technology transfer, development licence fees, and engineering services, of
which approximately half is expected to be recognised in 2024. Delta is
expected to start manufacturing by the end of 2026 with strong ambitions for
future scale-up. Royalty revenues are separately covered in the scope of the
agreement and will be generated when Delta products are sold into their end
markets.
In June 2024, the Company extended its relationship with Shell to design a
SOEC demonstrator module for use in large-scale industrial applications such
as synthetic fuels, ammonia and green steel. This builds on the initial
contract to deploy a 1MW SOEC system at Shell's R&D facility in Bangalore,
India focusing on the development of a 10MW pressurised module to produce
green hydrogen at 36 kWh/kg. It is intended that this design can be scaled to
hundreds of megawatts and be integrated with industrial plants to produce
sustainable future fuels.
Separately, Bosch and Linde started work on a 1MW pressurised stack array
module based on Ceres' SOEC technology. This will be a repeating unit and form
a building block for larger scale electrolysis systems. The two-year
demonstration project is anticipated to showcase that SOEC provides a highly
efficient pathway to low-cost green hydrogen production for industrial
applications.
As the Company has accelerated commercial delivery, the momentum of the first
half of the year has continued into current trading. In July 2024, Ceres
announced that it had signed a long term SOEC manufacturing licence with
Japan's Denso Corporation, a Fortune 500 company employing over 160,000 people
in 35 countries and regions worldwide. Denso aims to leverage the expertise of
system control and thermal management it has built in automotive system
development to develop technology in hydrogen production.
The partnership will enable Denso to produce Ceres' current and future
generations of stack technology under licence, in line with its aim to
establish a hydrogen supply chain. In common with other manufacturing licence
partnerships, this agreement provides revenues for licence fees, engineering
services and hardware over multiple years, as well as future royalty payments.
In addition to securing new manufacturing licences, Ceres also signed a new
system licensing partnership with Thermax, one of India's largest process
equipment manufacturers with an extensive industrial portfolio that includes
clean air, clean energy, clean water and chemical solutions. The partnership
is driven by accelerating system development for commercial use within the
hard-to-abate green ammonia, petrochemical and steel industries in India where
Thermax already has established market presence.
System licence fees are more modest than manufacturing licences, but this
partnership is of high strategic importance for Ceres. First, it gives the
company a foothold in the fast growing Indian hydrogen market, a major new
territory for the Company that is well supported through India's $2.3 billion
National Green Hydrogen Mission incentives. Secondly, the relationship will
seed Ceres technology into the market with key end market customers,
leveraging Ceres' highly differentiated electrolysis technology and Thermax's
experience and market position in the industrial process market, to enable it
to become a vertically integrated SOEC system solution provider.
As well as helping our partners to speed up market entry of their
decarbonisation products, Ceres has been working with AtkinsRéalis, a
world-leading engineering, procurement and construction (EPC) services group,
to deliver the front-end engineering design (FEED) for a commercial
multi-megawatt modularised hydrogen production system based on Ceres' SOEC
technology. This design will provide commissioners of green hydrogen
production plants with a blueprint of the optimum system architecture for a
100MW+ electrolyser system to produce green hydrogen. This will be a key
building block for GW-scale plants based on Ceres' robust, low cost and highly
efficient SOEC approach.
While Ceres has focused on generating commercial momentum in its electrolysis
activities we continue to work closely with existing SOFC partners to support
the implementation of their respective solid oxide cell and stack
manufacturing facilities. Both Bosch and Doosan are progressing towards mass
manufacturing and the Company continues to anticipate initial royalty payments
from Doosan to be received by the end of 2025. We continue to support the
system development of 75 kW power modules by Weichai who have a leading
position in China's gas engine market and Delta is the latest addition to our
SOFC licensees.
Financial review
The Company reported revenue for the six-month period ended 30 June 2024 of
£28.5 million, compared to £11.7(1) million in the same period in 2023. Most
of the revenue was from the technology transfer licence fees associated with
the Manufacturing and Collaboration Agreement signed with Delta in January
2024, this revenue has no associated cost of sales. Revenue from existing
partners Bosch and Doosan continued as we supported them through ongoing
development activities leading up to commercial launch. Revenue from the
Manufacturing and Licence Agreement with Denso signed in July 2024 will
commence in the second half of the year as we anticipate record revenue for
the financial year.
Gross profit of £22.9 million in the year (H1 2023: £7.2 million(1))
increased when compared to the prior year due to the impact of increased
licence revenue which has no associated cost of sales. Consequently, gross
margins remain high at 80% (H1 2023: 62%(1)), which illustrates the Company's
asset-light, licencing business model.
Operating costs were comparable to H1 2023 at £37.9 million (H1 2023: £37.1
million) as Ceres maintained investment in core technology to drive future
growth, including the development of the second generation of stacks to
operate more effectively in electrolysis mode and further development in
modular stack designs for output efficiencies. R&D costs of £23.3 million
were lower than the £26.8 million in the prior year period, as the business
achieved significant technology development milestones and passes peak
investment needs.
Adjusted EBITDA loss for H1 2024 reduced to £9.0 million (H1 2023: £23.5
million(1)). Adjusted EBITDA is a non-statutory measure and is detailed in the
Alternative Performance Measures section in this review. The decreased loss is
primarily due to the high margin revenue recognised explained above.
Capital expenditure in the half reduced to £2.8 million (H1 2023: £3.1
million) as there was reduced requirement to invest in prototype manufacturing
capacity and test stand infrastructure. Capitalised development costs
reduced to £1.3 million compared to £3.4 million in the prior year period
mainly due to the second generation of stack design development working
towards completion.
Cash outflow in the period (change in cash, cash equivalents and short-term
investments) was £13.9 million (H1 2023: £21.1 million). This improvement
was driven by customer receipts, reduced capital investments and increased
finance income. Ceres therefore ends the period in a strong position with
£126.1 million in cash, cash equivalents and short-term investments (H1 2023:
£161.2 million, 31 December 2023: £140.0 million). This will support future
investment as the Company drives revenue growth, maintains discipline over
costs and expenditure and tracks towards profit and cashflow break‑even.
Principal risks and uncertainties
The Directors have reviewed the principal risks and uncertainties that could
have a material impact on the Group's performance and have updated the risks
from those described in the Ceres Annual Report, 2023. The Directors have
determined that cyber security is now an elevated risk and that there is a
risk that a cyber-attack or breach of system security could disrupt our
operations, cause the loss of, destruction of, or unauthorised access to
sensitive IP and trade secrets. The Directors have also determined that the
risk of detrimental partner actions has reduced to no longer be considered a
principal risk. A summary of the Group's principal risks can be found at the
end of this report.
Restructuring and cost optimisation
Following significant investment in the development of SOEC and SOFC
programmes in recent years, some projects have passed peak investment
requirements and there is now a natural reduction of future investment
requirements. Since the end of the period, management has reviewed roles and
responsibilities across the company to ensure the business is optimised to
accelerate its growth strategy and has implemented a new organisational
structure to take it forward. The proposed changes will result in a headcount
reduction of approximately 15% in Q4 2024, and also a reduction in the overall
cost base by a similar level, whilst also delivering on our commitments to our
partners and maintaining our strong competitive advantage as a leader in clean
energy conversion technology.
Board change
In September 2024 the Company separately announced that Eric Lakin will step
down as CFO and from the Board to pursue other interests, to be replaced by
Stuart Paynter. These changes will become effective on 1 October 2024 and Eric
will remain with Ceres for sufficient time to ensure a smooth transition of
responsibilities. Previously CFO of advanced therapies innovator Oxford
BioMedica plc, Stuart has extensive financial and commercial experience across
a range of advanced technology sectors, as well as a strong capital markets,
UK governance and transformation delivery track record.
Outlook: building commercial traction
Ceres is progressing well on the path to commercialisation with our partners.
The biggest global manufacturers and systems developers looking to enter the
dynamic hydrogen market have chosen to partner with Ceres to leverage our
world-leading technology and a highly flexible licencing business model to
gain rapid access to the growing hydrogen market.
In a short period of time Ceres has progressed from investment phase in SOEC
to commercial partnerships, validating our business model and strategy. This
acceleration of our commercial success is reflected in the recent upgrade to
financial guidance and positions us well to deliver a record year in revenues
for the Company. Record order intake of £103.3 million since the start of the
year to 31 August 2024 was achieved by the Company due to the higher levels of
commercial activity. Given the recent restructuring and commercial progress we
are now well positioned for the future and expect continued momentum for the
full year performance as we continue to grow the business to meet the needs
for industrial decarbonisation and reliable clean power generation.
Phil Caldwell
Chief Executive Officer
Responsibility Statement
The directors confirm that to the best of their knowledge:
· the condensed set of financial statements has been prepared in
accordance with UK adopted IAS 34 'Interim Financial Reporting'; and
· the interim management report includes a fair review of the
information required by DTR 4.2.7 (indication of important events and their
impact, and a description of principal risks and uncertainties for the
remaining six months of the financial year) and DTR 4.2.8 (disclosure of
related parties' transactions and changes therein).
The full list of current Directors can be found on the Ceres website at
https://www.ceres.tech (https://www.ceres.tech) .
About Ceres
Ceres is a leading developer of clean energy technology: electrolysis for the
production of green hydrogen and fuel cells for power generation. Its
asset-light, licensing model has seen it establish partnerships with some of
the world's largest companies, such as Bosch, Doosan, Delta, Denso, Shell,
Thermax and Weichai. Ceres' solid oxide technology supports greater
electrification of our energy systems and produces green hydrogen at high
efficiencies as a route to decarbonise emissions-intensive industries such as
steelmaking, ammonia and future fuels. Ceres is listed on the London Stock
Exchange ("LSE") (LSE: CWR) and is classified by the LSE Green Economy Mark,
which recognises listed companies that derive more than 50% of their activity
from the green economy. Read more on our website www.ceres.tech
(http://www.ceres.tech) or follow us on LinkedIn
(https://www.linkedin.com/company/ceres-power/) .
Chief Executive's statement
The undeniable effects of climate change continue to impact lives around the
world on an increasingly regular basis, including the dislocation of
communities fleeing floods and extreme weather events in Asia or the
devastation to forests, farmland and buildings caused by wildfires that have
been sweeping across parts of the US, Europe and Australia.
Many governments have responded with decisive action on decarbonisation,
putting in place specific hydrogen strategies to incentivise the production,
infrastructure development and adoption of green hydrogen. For example, the EU
is targeting the deployment of 40GW of green hydrogen electrolysis by 2030,
committing up to €470 billion in investments up to 2050 for the hydrogen
economy; Japan aims to generate public and private investment in hydrogen
worth 15 trillion yen over the next 15 years, with specific reference to the
hard-to-abate sectors; and South Korea's Hydrogen Economy Roadmap to develop
its hydrogen infrastructure and commercialisation strategies is being backed
by around $35 billion of government funding.
Ceres is committed to working in partnership with global OEMs and systems
design companies to help nations decarbonise as they strive towards their net
zero targets. These strategies will take time and resources to bring into
effect, especially in the complex industrial sectors where value chains are
long and where fossil fuels and feedstocks are well entrenched. A move towards
decarbonisation requires disrupting the status quo - leveraging more advanced
technologies, putting in place new supply chains and redesigning complex
industrial processes. After an extended period of industry stagnation in the
wake of high fuel costs, rising rates of inflation and elevated interest
rates, confidence now appears to be returning as these effects moderate. In
2023 the number of announced green hydrogen projects grew by about 35% from
1,050 in January 2023 to over 1,400 at the end of the year, with a value of
over $570 billion. Solid oxide technology offers significant efficiency
advantages particularly when coupled with waste heat from industrial
processes.
Ceres's solid oxide technology also has a role to play in decarbonising energy
systems. As some nations transition away from coal to liquefied natural Gas
(LNG) for their power needs, Ceres' SOFC technology can enable more efficient
power generation from a range of fuels. Closures of coal plants are offset by
increases in nuclear, gas and renewable output. This transition is seen in
regions such as South Korea, China, India and Taiwan, supported by various
government initiatives. Currently the adoption of lower carbon and zero carbon
power generation is being further driven by the ramp in energy demand for
applications such as AI and datacentres alongside existing opportunities in
areas of stationary power generation and grid reinforcement. In its Global
Energy Perspective 2024 report, McKinsey estimates that the rise of cloud
solutions, cryptocurrency, and AI could see datacentres accounting for 2,500
to 4,500 terawatt hours (TWh) of global electricity demand by 2050 (5-9
percent of total electricity demand). This demand creates greater need for gas
or other firming sources of energy to balance out the intermittency of
renewable energy sources.
Ceres is rapidly becoming the technology of choice for leading companies
adopting solid oxide as the licensing model enables rapid adoption as the pace
for change picks up across the global green hydrogen and power generation
markets.
Green hydrogen in hard-to-abate industries
Hard-to-abate industries such as steel production, chemical manufacturing and
long-haul transportation, are characterized by their reliance on
high-temperature processes, the need for energy-dense fuels, or the use of
fossil fuels as feedstock. As a result, they are difficult to decarbonise
using current renewable energy sources or electric alternatives alone. Green
hydrogen offers a versatile alternative that can address many of these
challenges as it can be produced in a zero carbon manner using renewable
energy and electrolysis.
Hydrogen can be used as a fuel to generate power efficiently; as a feedstock
to decarbonise industrial processes; and as an energy carrier. Importantly, it
can be deployed using modified versions of existing industrial equipment,
reducing transition costs and time-to-market. Bloomberg New Energy Finance
believes that by 2050 around 49% of total green hydrogen consumption will be
accounted for by the production of green steel, ammonia and sustainable
aviation fuels, expected to be approximately 191 Mt per annum.
Ceres' SOEC technology, based on over 20 years of solid oxide innovation and
development, enables the highly efficient production of hydrogen, particularly
where by-product industrial heat can be harnessed for the electrolysis
process. In tandem, the company's business model has been established to help
accelerate decarbonisation across these hard-to-abate industrial sectors. As
the partner of choice for leading global OEMs and systems developers, Ceres
offers a faster route to market and efficient zero carbon hydrogen production.
This saves our partners the time, effort and resource needed to develop their
own solutions and allows them to focus on their strengths in industrial
manufacturing and distribution. Ceres believes this synergy is key to enabling
industrial decarbonisation at scale and pace.
Commercial acceleration into SOEC bearing fruit
In 2021, Ceres made the strategic decision to accelerate development of its
electrolysis technologies to position the company in the rapidly expanding
green hydrogen industry. Over the last three years continuing innovation of
the company's core solid oxide technology has created a highly efficient and
lower cost mode of hydrogen electrolysis for the hard-to-abate industrial
sectors. At the same time the Company invested in its Commercial teams to
implement new customer programmes for SOEC; this emphasis on building
commercial relationships across the hydrogen industry is now starting to bear
fruit.
In January 2024 Ceres and Delta Electronics signed a global long-term
manufacturing collaboration and licence agreement for both SOEC and SOFC stack
production. Headquartered in Taiwan, Delta employs over 80,000 people across
approximately 200 facilities worldwide, with a Taiwan Stock Exchange market
capitalisation of approximately US$23 billion. It provides solutions to
customers across a range of sectors including chemicals, energy,
transportation and steel.
This dual licence agreement is the first of its kind for Ceres, underlining
the efficiency that Ceres' solid oxide stack technologies can bring to both
power generation and green hydrogen production. These capabilities complement
Delta's current expertise in mass manufacturing, power electronics and data
centres for customers like Microsoft. The partnership also enables its move
into turnkey decarbonisation solutions and the development of smart buildings,
energy infrastructure, grid balancing and energy storage for customers such as
Tesla. The deal will generate a total revenue of £43 million to Ceres through
technology transfer, development licence fees, and engineering services, of
which approximately half is expected to be recognised in 2024. Delta is
expected to start manufacturing by the end of 2026 with strong ambitions for
future scale-up. Royalty revenues are separately covered in the scope of the
agreement and will be generated when Delta products are sold into their end
markets.
In June 2024, the Company extended its relationship with Shell to design a
SOEC demonstrator module for use in large-scale industrial applications such
as synthetic fuels, ammonia and green steel. This builds on the initial
contract to deploy a 1MW SOEC system at Shell's R&D facility in Bangalore,
India focusing on the development of a 10MW pressurised module to produce
green hydrogen at 36 kWh/kg. It is intended that this design can be scaled to
hundreds of megawatts and be integrated with industrial plants to produce
sustainable future fuels.
Separately, Bosch and Linde started work on a 1MW pressurised stack array
module based on Ceres' SOEC technology. This will be a repeating unit and form
a building block for larger scale electrolysis systems. The two-year
demonstration project is anticipated to showcase that SOEC provides a highly
efficient pathway to low-cost green hydrogen production for industrial
applications.
As the Company has accelerated commercial delivery, the momentum of the first
half of the year has continued into current trading. In July 2024, Ceres
announced that it had signed a long term SOEC manufacturing licence with
Japan's Denso Corporation, a Fortune 500 company employing over 160,000 people
in 35 countries and regions worldwide. Denso aims to leverage the expertise of
system control and thermal management it has built in automotive system
development to develop technology in hydrogen production.
The partnership will enable Denso to produce Ceres' current and future
generations of stack technology under licence, in line with its aim to
establish a hydrogen supply chain. In common with other manufacturing licence
partnerships, this agreement provides revenues for licence fees, engineering
services and hardware over multiple years, as well as future royalty payments.
In addition to securing new manufacturing licences, Ceres also signed a new
system licensing partnership with Thermax, one of India's largest process
equipment manufacturers with an extensive industrial portfolio that includes
clean air, clean energy, clean water and chemical solutions. The partnership
is driven by accelerating system development for commercial use within the
hard-to-abate green ammonia, petrochemical and steel industries in India where
Thermax already has established market presence.
System licence fees are more modest than manufacturing licences, but this
partnership is of high strategic importance for Ceres. First, it gives the
company a foothold in the fast growing Indian hydrogen market, a major new
territory for the Company that is well supported through India's $2.3 billion
National Green Hydrogen Mission incentives. Secondly, the relationship will
seed Ceres technology into the market with key end market customers,
leveraging Ceres' highly differentiated electrolysis technology and Thermax's
experience and market position in the industrial process market, to enable it
to become a vertically integrated SOEC system solution provider.
As well as helping our partners to speed up market entry of their
decarbonisation products, Ceres has been working with AtkinsRéalis, a
world-leading engineering, procurement and construction (EPC) services group,
to deliver the front-end engineering design (FEED) for a commercial
multi-megawatt modularised hydrogen production system based on Ceres' SOEC
technology. This design will provide commissioners of green hydrogen
production plants with a blueprint of the optimum system architecture for a
100MW+ electrolyser system to produce green hydrogen. This will be a key
building block for GW-scale plants based on Ceres' robust, low cost and highly
efficient SOEC approach.
While Ceres has focused on generating commercial momentum in its electrolysis
activities we continue to work closely with existing SOFC partners to support
the implementation of their respective solid oxide cell and stack
manufacturing facilities. Both Bosch and Doosan are progressing towards mass
manufacturing and the Company continues to anticipate initial royalty payments
from Doosan to be received by the end of 2025. We continue to support the
system development of 75 kW power modules by Weichai who have a leading
position in China's gas engine market and Delta is the latest addition to our
SOFC licensees.
Financial review
The Company reported revenue for the six-month period ended 30 June 2024 of
£28.5 million, compared to £11.7(1) million in the same period in 2023. Most
of the revenue was from the technology transfer licence fees associated with
the Manufacturing and Collaboration Agreement signed with Delta in January
2024, this revenue has no associated cost of sales. Revenue from existing
partners Bosch and Doosan continued as we supported them through ongoing
development activities leading up to commercial launch. Revenue from the
Manufacturing and Licence Agreement with Denso signed in July 2024 will
commence in the second half of the year as we anticipate record revenue for
the financial year.
Gross profit of £22.9 million in the year (H1 2023: £7.2 million(1))
increased when compared to the prior year due to the impact of increased
licence revenue which has no associated cost of sales. Consequently, gross
margins remain high at 80% (H1 2023: 62%(1)), which illustrates the Company's
asset-light, licencing business model.
Operating costs were comparable to H1 2023 at £37.9 million (H1 2023: £37.1
million) as Ceres maintained investment in core technology to drive future
growth, including the development of the second generation of stacks to
operate more effectively in electrolysis mode and further development in
modular stack designs for output efficiencies. R&D costs of £23.3 million
were lower than the £26.8 million in the prior year period, as the business
achieved significant technology development milestones and passes peak
investment needs.
Adjusted EBITDA loss for H1 2024 reduced to £9.0 million (H1 2023: £23.5
million(1)). Adjusted EBITDA is a non-statutory measure and is detailed in the
Alternative Performance Measures section in this review. The decreased loss is
primarily due to the high margin revenue recognised explained above.
Capital expenditure in the half reduced to £2.8 million (H1 2023: £3.1
million) as there was reduced requirement to invest in prototype manufacturing
capacity and test stand infrastructure. Capitalised development costs
reduced to £1.3 million compared to £3.4 million in the prior year period
mainly due to the second generation of stack design development working
towards completion.
Cash outflow in the period (change in cash, cash equivalents and short-term
investments) was £13.9 million (H1 2023: £21.1 million). This improvement
was driven by customer receipts, reduced capital investments and increased
finance income. Ceres therefore ends the period in a strong position with
£126.1 million in cash, cash equivalents and short-term investments (H1 2023:
£161.2 million, 31 December 2023: £140.0 million). This will support future
investment as the Company drives revenue growth, maintains discipline over
costs and expenditure and tracks towards profit and cashflow break‑even.
Principal risks and uncertainties
The Directors have reviewed the principal risks and uncertainties that could
have a material impact on the Group's performance and have updated the risks
from those described in the Ceres Annual Report, 2023. The Directors have
determined that cyber security is now an elevated risk and that there is a
risk that a cyber-attack or breach of system security could disrupt our
operations, cause the loss of, destruction of, or unauthorised access to
sensitive IP and trade secrets. The Directors have also determined that the
risk of detrimental partner actions has reduced to no longer be considered a
principal risk. A summary of the Group's principal risks can be found at the
end of this report.
Restructuring and cost optimisation
Following significant investment in the development of SOEC and SOFC
programmes in recent years, some projects have passed peak investment
requirements and there is now a natural reduction of future investment
requirements. Since the end of the period, management has reviewed roles and
responsibilities across the company to ensure the business is optimised to
accelerate its growth strategy and has implemented a new organisational
structure to take it forward. The proposed changes will result in a headcount
reduction of approximately 15% in Q4 2024, and also a reduction in the overall
cost base by a similar level, whilst also delivering on our commitments to our
partners and maintaining our strong competitive advantage as a leader in clean
energy conversion technology.
Board change
In September 2024 the Company separately announced that Eric Lakin will step
down as CFO and from the Board to pursue other interests, to be replaced by
Stuart Paynter. These changes will become effective on 1 October 2024 and Eric
will remain with Ceres for sufficient time to ensure a smooth transition of
responsibilities. Previously CFO of advanced therapies innovator Oxford
BioMedica plc, Stuart has extensive financial and commercial experience across
a range of advanced technology sectors, as well as a strong capital markets,
UK governance and transformation delivery track record.
Outlook: building commercial traction
Ceres is progressing well on the path to commercialisation with our partners.
The biggest global manufacturers and systems developers looking to enter the
dynamic hydrogen market have chosen to partner with Ceres to leverage our
world-leading technology and a highly flexible licencing business model to
gain rapid access to the growing hydrogen market.
In a short period of time Ceres has progressed from investment phase in SOEC
to commercial partnerships, validating our business model and strategy. This
acceleration of our commercial success is reflected in the recent upgrade to
financial guidance and positions us well to deliver a record year in revenues
for the Company. Record order intake of £103.3 million since the start of the
year to 31 August 2024 was achieved by the Company due to the higher levels of
commercial activity. Given the recent restructuring and commercial progress we
are now well positioned for the future and expect continued momentum for the
full year performance as we continue to grow the business to meet the needs
for industrial decarbonisation and reliable clean power generation.
Phil Caldwell
Chief Executive Officer
Responsibility Statement
The directors confirm that to the best of their knowledge:
· the condensed set of financial statements has been prepared in
accordance with UK adopted IAS 34 'Interim Financial Reporting'; and
· the interim management report includes a fair review of the
information required by DTR 4.2.7 (indication of important events and their
impact, and a description of principal risks and uncertainties for the
remaining six months of the financial year) and DTR 4.2.8 (disclosure of
related parties' transactions and changes therein).
The full list of current Directors can be found on the Ceres website at
https://www.ceres.tech (https://www.ceres.tech) .
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
For the six month period ended 30 June 2024
30 June 2024 30 June 2023 31 December 2023
(unaudited) Restated(1) (audited)
(unaudited)
Note £'000 £'000 £'000
Revenue(1) 2 28,500 11,660 22,324
Cost of sales (5,613) (4,443) (8,770)
Gross profit 22,887 7,217 13,554
Other operating income(2) 1,262 1,584 3,665
Operating costs(1) 3 (37,906) (37,067) (76,620)
Operating loss (13,757) (28,266) (59,401)
Finance income 4 3,193 2,834 7,079
Finance expense 4 (248) (723) (1,287)
Loss before taxation (10,812) (26,155) (53,609)
Taxation (charge)/credit 5 (1,800) (68) (399)
Loss for the financial period and total comprehensive loss (12,612) (26,223) (54,008)
Loss per £0.10 ordinary share expressed in pence per share:
Basic and diluted loss per share 6 (6.53)p (13.63)p (28.03)p
The accompanying notes are an integral part of these consolidated financial
statements.
(1) The restatement to 30 June 2023 is described in Note 1.
(2) Other operating income relates to grant income and the Group's RDEC tax
credit.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2024
30 June 2024 30 June 2023 31 December 2023
(unaudited) Restated(1) (audited)
(unaudited)
Note £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment(1) 7 24,819 25,888 25,882
Right-of-use assets 8 2,139 2,411 2,141
Intangible assets 9 19,892 16,218 19,054
Investment in associate 2,236 2,398 2,350
Other receivables 11 741 741 741
Total non-current assets 49,827 47,656 50,168
Current assets
Inventories 10 5,583 3,719 2,825
Contract assets(1) 2 2,861 573 1,575
Other current assets 12 1,331 1,180 1,193
Derivative financial instruments 16 60 508 8
Current tax receivable 770 7,553 771
Trade and other receivables 11 11,128 13,022 9,876
Short-term investments(1) 13 62,649 109,153 90,249
Cash and cash equivalents(1) 13 63,443 52,077 49,707
Total current assets 147,825 187,785 156,204
Liabilities
Current liabilities
Trade and other payables 14 (7,518) (4,718) (4,983)
Contract liabilities(1) 2 (7,017) (7,835) (7,469)
Other current liabilities(1) 15 (6,774) (7,262) (6,301)
Derivative financial instruments 16 ꟷ ꟷ (99)
Lease liabilities 17 (756) (664) (694)
Provisions(1) 18 (749) (449) (647)
Total current liabilities (22,814) (20,928) (20,193)
Net current assets 125,011 166,857 136,011
Non-current liabilities
Lease liabilities 17 (1,851) (2,243) (1,902)
Other non-current liabilities(1) 15 (1,221) (1,217) (1,360)
Provisions(1) 18 (2,467) (2,098) (2,282)
Total non-current liabilities (5,539) (5,558) (5,544)
Net assets 169,299 208,955 180,635
Equity attributable to the owners of the parent
Share capital 19 19,343 19,272 19,297
Share premium 406,514 406,076 406,184
Capital redemption reserve 3,449 3,449 3,449
Merger reserve 7,463 7,463 7,463
Accumulated losses(1) (267,470) (227,305) (255,758)
Total equity 169,299 208,955 180,635
The accompanying notes are an integral part of these consolidated financial
statements.
(1) The restatements to 30 June 2023 are described in Note 1.
CONSOLIDATED CASH FLOW STATEMENT
For the six month period ended 30 June 2024
Note 30 June 2024 30 June 2023 31 December 2023
(unaudited) Restated(1) (audited)
(unaudited)
£'000 £'000 £'000
Cash flows from operating activities
Loss before taxation(1) (10,812) (26,155) (53,609)
Adjustments for:
Finance income 4 (3,193) (2,834) (7,079)
Finance expense 4 248 723 1,287
Depreciation of property, plant and equipment(1) 7 3,784 3,396 7,461
Depreciation of right-of-use assets 8 358 303 641
Amortisation of intangible assets 9 470 475 1,024
Net foreign exchange loss/(gains)(1) 223 282 (232)
Net change in fair value of financial instruments (151) (454) 143
Profit on disposal of property, plant and equipment ꟷ (21) ꟷ
Share-based payments charge 900 735 67
Operating cash flows before movements in working capital (8,173) (23,550) (50,297)
(Increase)/decrease in trade and other receivables(1) (1,275) 3,814 6,356
(Increase)/decrease in inventories (2,758) 1,995 2,889
Increase in trade and other payables 2,276 2,407 1,847
Increase in contract assets(1) (1,286) (173) (1,175)
(Decrease)/increase in contract liabilities(1) (452) 472 106
Increase/(decrease) in provisions(1) 248 (526) (536)
Net cash used in operations (11,420) (15,561) (40,810)
Taxation (paid)/received (1,800) (68) 6,911
Net cash used in operating activities (13,220) (15,629) (33,899)
Investing activities
Proceeds received on disposal of property, plant and equipment ꟷ 137 225
Purchase of property, plant and equipment(1) (2,383) (4,725) (7,922)
Capitalised development expenditure (1,308) (3,415) (6,800)
Decrease/(increase) in short-term investments(1) 25,220 1,990 21,168
Finance income received 5,573 2,227 5,616
Net cash generated/(used) in investing activities 27,102 (3,786) 12,287
Financing activities
Proceeds from issuance of ordinary shares 376 676 809
Repayment of lease liabilities (346) (284) (658)
Interest paid (129) (512) (393)
Net cash used by financing activities (99) (120) (242)
Net increase/(decrease) in cash and cash equivalents 13,783 (19,535) (21,854)
Exchange losses on cash and cash equivalents (47) (172) (223)
Cash and cash equivalents at beginning of period 49,707 71,784 71,784
Cash and cash equivalents at end of period(1) 13 63,443 52,077 49,707
The accompanying notes are an integral part of these consolidated financial
statements.
(1) The restatement to 30 June 2023 is described in Note 1.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six month period ended 30 June 2024
Share Share Capital redemption reserve Merger Accumulated losses Total
capital premium reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2023 19,209 405,463 3,449 7,463 (201,817) 233,767
Comprehensive income
Loss for the financial period ꟷ ꟷ ꟷ ꟷ (26,223) (26,223)
Total comprehensive loss ꟷ ꟷ ꟷ ꟷ (26,223) (26,223)
Transactions with owners
Issue of shares, net of costs 63 613 ꟷ ꟷ ꟷ 676
Share-based payments charge ꟷ ꟷ ꟷ ꟷ 735 735
Total transactions with owners 63 613 735 1,411
At 30 June 2023 (unaudited) 19,272 406,076 3,449 7,463 (227,305) 208,955
Comprehensive income
Loss for the financial period ꟷ ꟷ ꟷ ꟷ (27,785) (27,785)
Total comprehensive loss ꟷ ꟷ ꟷ ꟷ (27,785) (27,785)
Transactions with owners
Issue of shares, net of costs 25 108 ꟷ ꟷ ꟷ 133
Share-based payments charge ꟷ ꟷ ꟷ ꟷ (668) (668)
Total transactions with owners 25 108 ꟷ ꟷ (668) (535)
At 31 December 2023 (audited) 19,297 406,184 3,449 7,463 (255,758) 180,635
Comprehensive income
Loss for the financial period ꟷ ꟷ ꟷ ꟷ (12,612) (12,612)
Total comprehensive loss ꟷ ꟷ ꟷ ꟷ (12,612) (12,612)
Transactions with owners
Issue of shares 46 330 ꟷ ꟷ ꟷ 376
Share-based payments charge ꟷ ꟷ ꟷ ꟷ 900 900
Total transactions with owners 46 330 ꟷ ꟷ 900 1,276
At 30 June 2024 (unaudited) 19,343 406,514 3,449 7,463 (267,470) 169,299
The accompanying notes are an integral part of these consolidated financial
statements.
1. Basis of preparation
The unaudited condensed consolidated financial statements have been prepared
in accordance with UK-adopted International Accounting Standard 34 'Interim
financial reporting' (IAS 34). They do not include all of the information
required for full annual financial statements and should be read in
conjunction with the annual financial statements for the year ended 31
December 2023 which were prepared in accordance with UK adopted international
accounting standards. The condensed consolidated financial statements have
been prepared on a historical cost basis except derivative financial
instruments, which are stated at their fair value.
The condensed consolidated financial information has been prepared in
accordance with the recognition and measurement requirements of UK adopted
international accounting standards and applicable law and regulations. The
condensed consolidated financial statements are presented on a condensed basis
as permitted by IAS 34 and therefore do not include all disclosures that would
otherwise be required in a full set of financial statements.
For legacy licence agreements there has been no changes to the Groups revenue
accounting policy. To reflect the conditions present in its new licence
agreement the Group has extended its revenue accounting policy, a summary of
which includes:
Revenue recognised at a point in time: Revenue recognised on right to use
licences relating to the transfer of technology are measured on an observable
stand-alone basis. Revenue recognised for the sale of technology hardware is
recognised on a cost-plus basis.
Revenue recognised over time: Engineering services and right to access
licences are residually allocated and recognised using an input method.
There have been no other changes to the Group's accounting policies,
presentation and methods of computation for the unaudited condensed
consolidated financial statements and are disclosed in the Group's last
audited annual financial statements
The financial information contained in the condensed consolidated financial
statements 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 31 December 2023, on which the auditors gave an
unqualified audit opinion, and did not draw attention to any matters by way of
emphasis and did not contain a statement under 498(2) or 498(3) of the
Companies Act 2006, have been filed with the Registrar of Companies.
The condensed consolidated financial information for the six months ended 30
June 2024 has been reviewed by the Company's Auditor, BDO LLP in accordance
with International Standard of Review Engagements (UK) 2410, Review of Interim
Financial Information Performed by the Independent Auditor of the Entity.
Going Concern
The Group has reported a loss after tax for the six month period ended 30 June
2024 of £12.6 million (six months ended 30 June 2023: £26.2 million(1)) and
net cash used in operating activities of £13.2 million (six months ended 30
June 2023: £15.6 million(1)). At 30 June 2024, the Group held cash and cash
equivalents and investments of £126.1 million (31 December 2023: £140.0
million). The directors have prepared annual budgets and cash flow
projections that extend to 31 December 2025, 15 months from the date of
approval of this report. The decreased operating cash used in the year is a
result of favourable movements in working capital and significant receipts
from the new agreement signed with Delta in January 2024. Future projections
include management's expectations of the disciplined investment in key R&D
projects, new product development and capital investment. Projections also
take into account the implementation of the new organisational structure and
reduction in the overall cost basis of approximately 15%. Future cash inflows
reflect management's expectations of revenue from existing and new licensee
partners in both the power and green hydrogen markets.
The projections were stress tested by applying different scenarios including
removing expected cash inflows relating to agreements not yet signed leading
to a loss of significant future revenue and potential further cost
mitigations. In each case the projections demonstrated that the Group is
expected to have sufficient cash reserves to meet its liabilities as they fall
due and to continue as a going concern. For the above reasons, the Directors
continue to adopt the going concern basis in preparing the condensed
consolidated financial statements.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, management is required
to make judgements, estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources.
In preparing the interim condensed consolidated financial statements, the
areas where judgement has been exercised and the key estimation uncertainties
were the same as those applied to the consolidated financial statements for
the year ended 31 December 2023.
Prior period adjustments
As a result of prior period adjustments made during the audit of the annual
report for the year ended 31 December 2023, the opening 2023 financial
position was impacted. Adjustments are noted below which have impacted the
opening financial position and therefore impacted the unaudited six months
period ended 30 June 2023. No new prior period adjustments outside the already
identified adjustments during the 2023 audit have been made. Documented below
are the implications of these adjustments on the comparative results, further
information on prior period adjustments has been presented in the annual
report for the year ended 31 December 2023.
Revenue
In respect of the consolidated statement of profit and loss for the period
ended 30 June 2023, revenue has been increased by £0.4 million with a
corresponding reduction to contract assets of £0.6 million and decrease to
contract liabilities of £1.0 million.
Property, plant and equipment and non-current provisions
The profit and loss for the six months ended 30 June 2023 was impacted by an
increase in operating costs for depreciation by £0.1 million and there was a
corresponding decrease to net assets as a result of the recognition of
depreciation for the assets under construction recognised as fixed assets.
There was no overall impact on the net cash used in operating activities or
other cash flows, or recognised tax as a result of these adjustments.
Other current and non-current liabilities
Other current liabilities as at 30 June 2023 have been restated to reflect the
non-current nature of deferred RDEC income to be realised in more than one
year, £1.2 million has been recognised as non-current liabilities. There was
no impact on net assets, recognised tax or the consolidated statement of cash
flows as a result of these adjustments.
Cash, cash equivalents and short-term investments
Cash and cash equivalents and short-term investments were restated as a result
of short-term investments incorrectly including cash balances at 30 June 2023
with a value of £7.9 million.
New standards and amendments applicable for the reporting period
None of the standards and interpretations which apply for the first time to
financial reporting periods commencing on or after 1 January 2024 materially
impact the Group.
The Group no longer presents segmental reporting information which is now
consistent with the information the chief operating decision maker receives.
This has changed since the 2023 annual report as a result of the combined SOFC
and SOEC agreement signed by Delta.
2. Revenue
The Group's revenue is disaggregated by geographical market, major
product/service lines, and timing of revenue recognition:
Geographical market
30 June 2024 30 June 2023 31 December 2023
(unaudited) Restated(1) (audited)
(unaudited)
£'000 £'000 £'000
Europe(2) 5,423 6,800 12,394
Asia(2) 22,979 4,669 9,589
North America 98 191 341
28,500 11,660 22,324
For the six month period ended 30 June 2024, the Group has identified three
major customers (defined as customers that individually contributed more than
10% of the Group's total revenue) that accounted for approximately 67%, 15%
and 11% of the Group's total revenue recognised in the period (30 June 2023:
two customer at 54% and 40% and 31 December 2023: two major customers that
accounted for approximately 51% and 39% of the Group's total revenue
recognised for that year).
Major product/service lines
30 June 2024 30 June 2023 31 December 2023
(unaudited) Restated(1) (audited)
(unaudited)
£'000 £'000 £'000
Engineering services 5,065 5,679 10,220
Provision of technology hardware 3,209 3,165 5,726
Licence fees(2) 20,226 2,816 6,378
28,500 11,660 22,324
Timing of transfer of goods and services
30 June 2024 30 June 2023 31 December 2023
(unaudited) Restated(1) (audited)
(unaudited)
£'000 £'000 £'000
Products and services transferred at a point in time 19,756 3,973 6,544
Products and services transferred over time 8,744 7,687 15,780
28,500 11,660 22,324
The contract-related assets and liabilities are as follows:
30 June 2024 30 June 2023 31 December 2023
(unaudited) Restated(1) (audited)
(unaudited)
£'000 £'000 £'000
Trade receivables 11 4,424 7,309 3,422
Contract assets - accrued income 2,861 573 1,575
Total contract related assets 7,285 7,882 4,997
Contract liabilities - deferred income (7,017) (7,835) (7,469)
(1) The restatement to 30 June 2023 is described in Note 1.
(2) The adjustments as described in Note 1 have impacted 2023 licences revenue
in both Europe and Asia.
3. Operating costs
Operating costs can be analysed as follows: 30 June 2024 30 June 2023 31 December 2023
(unaudited) Restated(1) (audited)
(unaudited)
£'000 £'000 £'000
Research and development costs 23,255 26,790 54,034
Administrative expenses 9,138 8,821 17,681
Commercial (sales and marketing) 5,513 1,456 4,905
37,906 37,067 76,620
(1) The restatement to 30 June 2023 is described in Note 1.
4. Finance income and expenses
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Interest income on cash, cash equivalents and investments 3,193 2,834 7,079
Interest paid ꟷ ꟷ (99)
Interest on lease liability (127) (128) (248)
Unwinding of discount on provisions (40) (39) (89)
Other finance costs ꟷ ꟷ (46)
Foreign exchange loss on cash, cash equivalents and short-term deposits (81) (556) (805)
Interest expense (248) (723) (1,287)
5. Taxation
No corporation tax liability has arisen during the period (30 June 2023 and 31
December 2023: £nil) due to the losses incurred. A tax charge has arisen as a
result of foreign withholding taxes suffered. The RDEC regime continues to be
accessible and has been recognised within other operating income.
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Foreign tax suffered 1,800 2 334
Adjustment in respect of prior periods ꟷ 66 65
1,800 68 399
6. Loss per share
30 June 2024 30 June 2023 31 December 2023
(unaudited) Restated(1) (audited)
(unaudited)
£'000 £'000 £'000
Loss for the financial period attributable to shareholders(1) (12,612) (26,223) (54,008)
Weighted average number of shares in issue 193,052,759 192,442,672 192,651,782
Loss per £0.10 ordinary share (basic and diluted) (6.53)p (13.63)p (28.03)p
(1) The restatement to 30 June 2023 is described in Note 1.
7. Property, plant and equipment
Leasehold improvements Plant and machinery Assets under construction
£'000
£'000 Computer equipment Fixtures and fittings £'000
£'000
£'000 Total
£'000
Cost
At 1 January 2023(1) 7,134 26,229 1,935 276 7,080 42,654
Additions 1,318 3,647 164 115 1,937 7,181
Transfers 511 2,009 ꟷ ꟷ (2,520) ꟷ
Disposal (150) (568) (57) ꟷ (68) (843)
At 31 December 2023 (audited) 8,813 31,317 2,042 391 6,429 48,992
Additions 337 1,354 ꟷ ꟷ 1,063 2,754
Transfers 51 260 ꟷ ꟷ (311) ꟷ
Disposals (225) (194) (102) (6) (33) (560)
At 30 June 2024 (unaudited) 8,976 32,737 1,940 385 7,148 51,186
Accumulated depreciation
At 1 January 2023(1) 2,730 11,901 1,403 233 ꟷ 16,267
Charge for the year 1,264 5,783 379 35 ꟷ 7,461
Depreciation on disposals (150) (411) (57) ꟷ ꟷ (618)
At 31 December 2023 (audited) 3,844 17,273 1,725 268 ꟷ 23,110
Charge for the period 782 2,845 132 25 ꟷ 3,784
Depreciation on disposals (225) (194) (102) (6) ꟷ (527)
At 30 June 2024 (unaudited) 4,401 19,924 1,755 287 ꟷ 26,367
Net book value
At 30 June 2024 (unaudited) 4,575 12,813 185 98 7,148 24,819
At 31 December 2023 (audited) 4,969 14,044 317 123 6,429 25,882
(1) The opening balances in the cost and accumulated depreciation have been
impacted by prior year restatements as described in Note 1 and disclosed in
the 2023 annual report'
'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.
8. Right of use assets
Land and Buildings Computer equipment Electric vehicles Total
£'000 £'000 £'000 £'000
Cost
At 1 January 2023 4,523 43 ꟷ 4,566
Additions 168 ꟷ ꟷ 168
Adjustment to lease term (33) ꟷ ꟷ (33)
At 31 December 2023 (audited) 4,658 43 ꟷ 4,701
Additions ꟷ ꟷ 211 211
Adjustment to lease term 145 ꟷ ꟷ 145
At 30 June 2024 (unaudited) 4,803 43 211 5,057
Accumulated depreciation
At 1 January 2023 1,895 24 ꟷ 1,919
Charge for the year 627 14 ꟷ 641
At 31 December 2023 (audited) 2,522 38 ꟷ 2,560
Charge for the period 334 5 19 358
At 30 June 2024 (unaudited) 2,856 43 19 2,918
Net book value
At 30 June 2024 (unaudited) 1,947 ꟷ 192 2,139
At 31 December 2023 (audited) 2,136 5 ꟷ 2,141
The lease liabilities are detailed in Note 17.
9. Intangible assets
Internally Customer and internal development programmes Patent costs
£'000
developed intangibles £'000 Total
£'000 £'000
Perpetual
software licences
£'000
Cost
At 1 January 2023 411 13,747 525 852 15,535
Additions ꟷ 6,443 ꟷ 357 6,800
At 31 December 2023 (audited) 411 20,190 525 1,209 22,335
Additions ꟷ 1,207 18 83 1,308
At 30 June 2024 (unaudited) 411 21,397 543 1,292 23,643
Accumulated amortisation
At 1 January 2023 246 1,786 148 77 2,257
Charge for the year 82 728 137 77 1,024
At 31 December 2023 (audited) 328 2,514 285 154 3,281
Charge for the period 41 299 72 58 470
At 30 June 2024 (unaudited) 369 2,813 357 212 3,751
Net book value
At 30 June 2024 (unaudited) 42 18,584 186 1,080 19,892
At 31 December 2023 (audited) 83 17,676 240 1,055 19,054
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.
10. Inventories
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Raw materials 2,429 975 1,648
Work in progress 1,394 1,423 787
Finished goods 1,760 1,321 390
Total inventory 5,583 3,719 2,825
Inventories have increased which reflects the recognition of the second
generation of stack technology during the period and the associated raw
materials and work in progress.
11. Trade and other receivables
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
Current: £'000 £'000 £'000
Trade receivables 4,424 7,309 3,422
VAT receivable 1,395 656 2,273
RDEC receivable 5,269 4,822 4,008
Other receivables 40 235 172
11,128 13,022 9,876
Non-current:
Other receivables 741 741 741
12. Other current assets
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Prepayments 1,331 1,180 1,193
13. Net cash and cash equivalents, short-term and long-term investments
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash at bank and in hand 15,354 12,904 7,063
Money market funds 48,089 39,173 42,644
Cash and cash equivalents 63,443 52,077 49,707
Short-term investments 62,649 109,153 90,249
Cash and cash equivalents and investments 126,092 161,230 139,956
( )
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.
14. Trade and other payables
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
Current: £'000 £'000 £'000
Trade payables 6,633 4,349 3,624
Other payables 885 369 1,359
7,518 4,718 4,983
15. Other current liabilities
30 June 2024 30 June 2023 31 December 2023
(unaudited) Restated(1) (audited)
(unaudited)
£'000 £'000 £'000
Current:
Accruals 6,530 7,018 5,933
Deferred income(1) 244 244 368
6,774 7,262 6,301
Non-current:
Deferred income(1) 1,221 1,217 1,360
(1) The restatement to 30 June 2023 is described in Note 1.
16. Derivative financial instruments
Fair value Carrying amount Fair value Carrying amount Fair value
hierarchy 30 June 2024 30 June 2024 31 December 2023 31 December 2023
(unaudited) (unaudited) (audited) (audited)
£'000 £'000 £'000 £'000
Financial assets measured at fair value through profit or loss
Forward exchange contracts Level 2 ꟷ ꟷ 1 1
Currency swap contract Level 2 60 60 7 7
Total derivative assets 60 60 8 8
Financial liabilities measured at fair value through profit or loss
Forward exchange contracts ꟷ ꟷ (99) (99)
Total derivative liabilities ꟷ ꟷ (99) (99)
17. Lease liabilities
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
At the start of the period 2,596 3,124 3,124
New finance leases recognised 211 67 66
Lease payments (472) (412) (906)
Interest expense 127 128 248
Adjustment to lease term 145 ꟷ 64
At the end of the period 2,607 2,907 2,596
Current 756 664 694
Non-current 1,851 2,243 1,902
Total at the end of the period 2,607 2,907 2,596
18. Provisions
Property Dilapidations Total
Warranties Contract Losses
£'000 £'000 £'000 £'000
At 1 January 2023 2,105 875 54 3,034
Movements in the Consolidated Statement of Profit and Loss:
Unused amounts reversed ꟷ (553) (10) (563)
Unwinding of discount 89 ꟷ ꟷ 89
Increase in provision 88 281 ꟷ 369
At 31 December 2023 (audited) 2,282 603 44 2,929
Movements in the Consolidated Statement of Profit and Loss:
Unwinding of discount 40 ꟷ ꟷ 40
Change in provision 145 102 ꟷ 247
At 30 June 2024 (unaudited) 2,467 705 44 3,216
Current ꟷ 705 44 749
Non-current 2,467 ꟷ ꟷ 2,467
At 30 June 2024 (unaudited) 2,467 705 44 3,216
Current ꟷ 603 44 647
Non-current 2,282 ꟷ ꟷ 2,282
At 31 December 2023 (audited) 2,282 603 44 2,929
Property Dilapidations Total
Warranties Contract Losses
£'000 £'000 £'000 £'000
At 1 January 2023 2,105 875 54 3,034
Movements in the Consolidated Statement of Profit and Loss:
Unused amounts reversed ꟷ (567) ꟷ (567)
Unwinding of discount 39 ꟷ ꟷ 39
Change in provision (46) 87 ꟷ 41
At 30 June 2023 (unaudited) 2,098 395 54 2,547
Current ꟷ 395 54 449
Non-current 2,098 ꟷ ꟷ 2,098
At 30 June 2023 (unaudited) 2,098 395 54 2,547
19. Share capital
30 June 2024 31 December 2023
(unaudited) (audited)
Number of £0.10 £'000 Number of £0.10
Ordinary
Ordinary
shares
shares £'000
Allotted and fully paid
At 1 January 192,968,096 19,297 192,086,775 19,209
Allotted £0.10 Ordinary shares on exercise of employee share options 458,414 46 881,321 88
At 30 June 2024 / 31 December 2023 193,426,510 19,343 192,968,096 19,297
During the six month period ended 30 June 2024, 458,414 ordinary £0.10 shares
were allotted for cash consideration of £376,000 on the exercise of employee
share options (six months ended 30 June 2023: 630,205 ordinary £0.10 shares
were allotted for cash consideration of £676,000 and 31 December 2023:
881,321 ordinary £0.10 shares were allotted for cash consideration of
£809,000).
30 June 2023
(unaudited)
Number of £0.10
Ordinary
shares £'000
Allotted and fully paid
At 1 January 2023 192,086,775 19,209
Allotted £0.10 Ordinary shares on exercise of employee share options 630,205 63
At 30 June 2023 192,716,980 19,272
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.
20. Events after the balance sheet date
Since the end of the first half period, Ceres announced its second major
manufacturing licence agreement of the year with Denso Corporation and
announced a systems licence partnership with Thermax.
Since the end of the period, management has reviewed roles and
responsibilities across the company to ensure the business is optimised to
accelerate its growth strategy and has implemented a new organisational
structure to take it forward. The proposed changes will result in a headcount
reduction of approximately 15% in Q4 2024, and also a reduction in the overall
cost base by a similar level.
Eric Lakin will step down as CFO and from the Board to be replaced by Stuart
Paynter, effective on 1 October 2024.
21. Capital commitments
Capital expenditure that has been contracted for but has not been provided for
in the financial statements amounts to £1,076,000 as at 30 June 2024 (as at
30 June 2023: £7,710,000 and 31 December 2023: £5,671,000), in respect of
the acquisition of property, plant and equipment. The reduction compared to
December 2023 is due to termination of a contract to install test assets.
22. Related party transactions
As at 30 June 2024, 30 June 2023 and 31 December 2023, the Group's related
parties were its Directors and RFC Power Limited. During the six months to 30
June 2024 one Director exercised 380,424 share options under the Ceres Power
Holdings plc 2004 Employees' Share Option Scheme.
The following Directors exercised share options in the year to 31 December
2023:
Date of exercise Director Type of options Total number of options exercised Weighted average Total gain on exercise Number of shares retained
exercise price
30 March 2023 Phil Caldwell LTIP 200,000 £3.463 £672,600 200,000
04 May 2023 Phil Caldwell Sharesave 4,610 £1.952 £6,602 4,610
07 July 2023 Mark Selby 2004 ESS 2,063 £2.825 £4,066 2,063
12 July 2023 Michelle Traynor Sharesave 1,844 £1.952 £2,003 1,844
10 August 2023 Clarissa de Jager Sharesave 7,377 £1.952 £10,284 7,377
03 October 2023 Phil Caldwell 2004 ESS 11,859 £3.204 £27,869 11,859
During the year ended 31 December 2023 two Directors sold 141,313 2004
Employee Shareholder Status (ESS) shares in Ceres Power Intermediate Holdings
Ltd and received 92,864 Ceres Power Holdings plc shares in consideration in
addition to the linked ESS options as set out in the table above.
During the six months ended 30 June 2023, one Director exercised and retained
200,000 share options under the Company's Long Term Incentive Plan and also
exercised and retained 4,610 share options under the Company's employee share
save scheme.
Transactions between the Group and RFC Power Limited, being an associated
entity of the Group, comprised engineering consultancy services provided by
the Group to RFC Power Limited for the value of £410,000 (30 June 2023:
£271,000 31 December 2023: £574,000).
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.
30 June 2024 30 June 2023 31 December 2023
(unaudited) Restated(1)
(audited)
£'000
(unaudited) £'000
£'000
Operating loss(1) (13,757) (28,266) (59,401)
Depreciation and amortisation 4,612 4,174 9,126
Depreciation absorbed as part of inventory (869) ꟷ ꟷ
EBITDA (10,014) (24,092) (50,275)
Share-based payment charges 900 736 67
Unrealised (gains)/losses on forward contracts (151) (454) 143
Exchange losses/(gains) 223 282 (232)
Adjusted EBITDA (9,042) (23,528) (50,297)
(1) The restatement to 30 June 2023 is described in Note 1.
Principal Risks and Uncertainties
The Directors have reviewed the principal risks and uncertainties that could
have a material impact on the Group's performance and have concluded that
there has been a material change from those described in the Ceres Annual
Report 2023, which can be found on the Company's website. The new principal
risk identified is a cyber risk. The Directors have also determined that the
risk of detrimental partner actions has reduced to no longer be considered a
principal risk. The principal risks and uncertainties are summarised below:
Principal risk There is a risk that…
Viability of technology We will not be able to develop and apply the Group's technology.
Operational capability The Group may be unable to satisfy current contracts and demand.
IP and regulation The Group's competitive advantage could be at risk from successful challenges
to its patents.
Long-term value proposition The value proposition of our technology may become eroded.
Commercial traction/ Partner performance Our partners may choose not to use our technology in their products or go to
market slower than anticipated.
Partner scale-up/Supply chain We may not be able to meet the timeframes agreed with our partners for the
market launch of the Company's technology.
Cyber security A cyber-attack or breach of system security could disrupt our operations,
cause the loss of, destruction of, or unauthorised access to sensitive IP and
trade secrets.
Geopolitical The Company or our partners may be unable to conduct business in certain
geographies, or supply chains become disrupted due to warfare or sanctions.
People and capability A loss of key personnel or inability to attract required skillsets could
negatively impact our ability to innovate and maintain a competitive
advantage.
Funding and liquidity A failure to acquire new customers would impact the forecast cash position of
the company, potentially requiring further external funding.
INDEPENDENT REVIEW REPORT TO CERES POWER HOLDINGS PLC
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
financial report for the six months ended 30 June 2024 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2024 which comprises the Consolidated Statement of Profit and Loss and
Other Comprehensive Income, the Consolidated Statement of Financial Position,
the Consolidated Cash Flow Statement, the Consolidated Statement of Changes
in Equity and the Notes to the financial statements for the six months ended
30 June 2024.
Basis for conclusion
We conducted our review in accordance with Revised International Standard on
Review Engagements (UK) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410
(Revised)"). 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 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.
As disclosed in note one, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410 (Revised), however future events or conditions may cause the
group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so
by our prior written consent. Save as above, we do not accept responsibility
for this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, UK
26 September 2024 BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
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