REG - Ceres Power Holdings - Interim results
28/09/2023 07:00
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RNS Number : 9104N Ceres Power Holdings plc 28 September 2023
28 September 2023
Ceres Power Holdings plc
Interim results for the six months ended 30 June 2023
Horsham, UK: Ceres Power Holdings plc ("Ceres", the "Company") (CWR.L), a
global leader in fuel cell, electrolysis and electrochemical technology,
announces its interim results for the six months ended 30 June 2023.
Financial update
· Revenue increased by 17% to £11.3 million (H1 2022: £9.7
million)
· Gross profit of £6.9 million (H1 2022: £4.7 million),
maintaining sector-leading gross margin at 61% (H1 2022: restated to 49%)
· "Investment in the future"(1) increased by 19% to £30.6 million
(H1 2022: £25.7 million), in line with strategy to expand into electrolysis
for green hydrogen and deliver the next generation of fuel cell technology
· Reduction in equity free cash outflow by 24% to £21.8m from
£28.6m
· Cash and investments of £161.2 million as at 30 June 2023 (31
December 2022: £182.3 million)
Strategic highlights
· Bosch's 'Power Units' have received European funding of ~€160
million as an Important Project of Common European Interest (IPCEI) to
support the development and mass production of its solid oxide fuel
cell product, utilising Ceres' stack technology
· Building construction for Doosan's 50MW factory in South Korea
is now complete. All machinery and processes have undergone factory
acceptance testing, installation is almost complete, and commissioning is on
schedule for completion in H2 2024
· Our second-generation design of fuel cell stacks has passed
Critical Design Review (a key milestone), which offers improvements in
performance and cost for SOFC partners
· The first-of-a-kind megawatt-scale electrolyser is undergoing
commissioning and initial testing at AVL in Germany, in preparation for
deployment at the end of this year to Shell's R&D centre in Bangalore,
India, in line with the timetable set out in the 28 June 2022 announcement
· A two-year collaboration with Linde Engineering and Bosch has
been signed to validate the performance, cost, and operational functionality
of Ceres' electrolyser technology, which starts next year
· Ceres has been announced as the Winner of the Royal Academy of
Engineering's 2023 MacRobert Award, widely regarded as the UK's most
prestigious prize for engineering innovation
· Further augmented the Board with Karen Bomba and Caroline Brown
joining as Non-Executive Directors
· As of 18 September 2023, Ceres has joined the FTSE 250 index,
following its graduation from AIM to a Premium Listing on the Main Market of
the London Stock Exchange
Current trading and outlook
· As previously announced, given the continued delay of signing the
China JVs with Bosch and Weichai, as well as taking into account time needed
for regulatory clearances, we do not expect revenue associated with these to
be recognised this year
· Full-year growth against the prior year is subject to the timing
of securing new licensees
Phil Caldwell, Chief Executive Officer of Ceres said: "We are at an important
stage of the Company's growth as we support our partners to scale manufacture
for our existing fuel cell business, and make rapid progress in the
development of our game-changing electrolyser technology, which will enable
new partnerships to address the huge market opportunity for green hydrogen.
Our recent inclusion in the FTSE250 index and the recognition for engineering
innovation of the MacRobert Award have been made possible by the progress of
the Company, and the hard work the team has put into maturing the Ceres
technology over many years."
1. "Investment in the future" comprises R&D costs, capitalised development
and capital expenditure.
Financial Summary: Six months ended Six months ended 12 months ended 31 December 2022
30 June 2023 30 June 2022 Audited
Unaudited Unaudited
Restated(1)
£'000 £'000 £'000
Total revenue, comprising: 11,310 9,687 22,130
Licence fees 3,401 3,404 7,711
Engineering services revenue 4,679 4,206 9,039
Provision of technology hardware 3,230 2,077 5,380
Gross profit 6,868 4,735 13,051
Gross margin(1) % 61% 49% 59%
Adjusted EBITDA loss(2) (23,769) (20,808) (43,230)
Operating loss (28,482) (25,516) (51,522)
Net cash used in operating activities (15,457) (20,599) (51,522)
Net cash and investments 161,230 221,625 182,320
(1) The results for the six months ended 30 June 2022 has been restated (gross
margin was previously 55%) to reflect the classification of the RDEC tax
credit within other operating income rather than offsetting cost of sales and
to reduce the credit by £313,000 following the adjustment of prior year
R&D tax credit claims. See Note 1 for details.
(2) Adjusted EBITDA loss is an Alternative Performance Measure, as defined and
reconciled to operating loss in the non-GAAP section at the end of this
report.
Analyst presentation
Ceres Power Holdings plc will be hosting a live webcast for analysts and
investors on 28 September 2023 at 09.30 BST. To register your interest in
participating, please go to:
https://www.investormeetcompany.com/ceres-power-holdings-plc/register-investor
(https://www.investormeetcompany.com/ceres-power-holdings-plc/register-investor)
.
For further information visit www.ceres.tech (http://www.ceres.tech) or
contact:
Ceres Power Holdings plc Tel: +44 (0)7932 023 283
Elizabeth Skerritt
FTI Consulting (Financial PR) Tel: +44 (0)203 727 1000
Dwight Burden / Ben Brewerton Email: ceres_power@fticonsulting.com (mailto:Ceres_power@fticonsulting.com)
About Ceres Power
Ceres is a world-leading developer of electrochemical technologies: fuel cells
for power generation, electrolysis for the creation of green hydrogen and
energy storage. Its asset-light, licensing model has seen it establish
partnerships with some of the world's largest engineering and technology
companies, such Bosch, Doosan, Shell, Linde and Weichai, to develop systems
and products that address climate change for power generation, transportation,
industry, data centres and everyday living. 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.
About Ceres Power
Ceres is a world-leading developer of electrochemical technologies: fuel cells
for power generation, electrolysis for the creation of green hydrogen and
energy storage. Its asset-light, licensing model has seen it establish
partnerships with some of the world's largest engineering and technology
companies, such Bosch, Doosan, Shell, Linde and Weichai, to develop systems
and products that address climate change for power generation, transportation,
industry, data centres and everyday living. 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.
Chief Executive's Statement
Over the summer, we have yet again witnessed record high temperatures,
flooding across northern China and devastating fires in Canada, southern
Europe and Hawaii. It seems nowhere is immune from the effects of climate
change, and the need for rapid deployment of technologies that significantly
reduce greenhouse gas emissions, whilst continuing to meet our energy and
economic demands, is as urgent as ever.
Wholesale change of our energy systems is not straightforward, and it is
contingent on bold decisions from governments and corporates at a time when we
are also seeing rising inflation and higher costs of capital. Nonetheless,
many parts of the world including Europe, Asia and North America are pursuing
wide-ranging decarbonisation plans.
Ceres' licensing business model provides unique and powerful advantages:
enabling the adoption of green energy technology at speed and building on the
existing capability of global partners to establish localised supply chains,
skills, manufacturing and systems and products suited to their end markets and
applications.
Strategic update
Our aim is to enable multi-gigawatts of capacity producing hydrogen and fuel
cell technologies to decarbonise the hard-to-abate sectors of the energy
system and in the process build a sustainable business that delivers long-term
benefits for our people and shareholders, our communities, and our planet.
The strategy is based on three pillars: to enable our licence partners to
succeed; to build commercial scale; and to maintain our technology leadership.
Our partners are investing significant time and resources into manufacturing
Ceres' solid oxide technology, and we have expanded our engineering and
specialist teams to ensure these early adopters are supported and successful
in deploying new technology into new market opportunities.
We create commercial scale by generating more demand through increasing
commercial partnerships and licences, growing applications and addressing new
markets. This year we have increased the commercial team's presence in several
global locations including in the US, Europe and Asia.
As a licensing company it is imperative that we stay at the leading edge of
our technology - and that is why we continue to innovate, from the next
generation of our solid oxide technology, continued innovation of our IP for
both fuel cell and electrolyser systems, to digitalisation programmes and what
further technologies we may need to hit a net zero future.
For the first six months of 2023 the group reported revenues of £11.3 million
(H1 2022: £9.7 million). The 17% increase when compared with the prior period
is primarily driven by both hardware and engineering services revenue relating
to ongoing progress being made with Bosch and Doosan as we industrialise our
technology in readiness for partner product launch. The improvement of gross
margin to 61% (H1 2022: 49%) is partly due to reduced scrap and warranty
provisions compared to prior year, and also higher cost absorption from
increased hardware revenue. We expect a long-term trend of high gross
margins reflecting Ceres' unique technology and licencing business model.
We have continued our investment in future growth, focused on scaling our
technology for use in multiple applications and geographies. We have continued
the planned development of our fuel cell business (SOFC) with global partners,
with the development of a second-generation cell and stack design resulting in
astack focused on cost and manufacturability to enable scale production. We
have also made progress with the expansion of our electrolysis activities
(SOEC), and signed new partnerships with Linde Engineering and Bosch in
addition to the earlier Shell agreement. Furthermore, we have strengthened
the business development team to address the substantial market opportunities
globally that exist for our clean energy technology.
In July, Ceres was very proud to be named as the winner of the Royal Academy
of Engineering MacRobert Award (https://macrobertaward.raeng.org.uk/) , the
UK's longest-running and most coveted prize for engineering innovation. The
Company's pioneering and highly differentiated solid oxide stack technology,
including fuel cells for power generation and electrolysers for green
hydrogen, was hailed by the MacRobert Award judges as a huge breakthrough in
the clean energy revolution, enabling low-cost materials, fuel-flexibility,
higher efficiency and improved performance.
Ceres Power - fuel cells
The fuel cells business recorded revenues of £10.6 million (H1 2022: £9.7
million) and a gross profit of £6.3 million (H1 2022: £4.7 million), with
the year-on-year revenue increase reflecting the progress made with our
commercial partners as they work toward scaling manufacture in Germany and
South Korea.
In July, the stationary power SOFC system being developed by our partner Bosch
received European funding of ~€160 million following its designation as an
IPCEI aimed at developing an integrated hydrogen economy in Europe. The EU
funding is to enable the mass production of Bosch 'Power Units', utilising
Ceres' stack technology, with the aim of strengthening innovative capacity,
global competitiveness and creating new jobs in Germany.
Construction of Doosan's 50MW factory in South Korea is complete. All
machinery and processes have undergone factory acceptance testing,
installation on site is underway, and factory commissioning is on track for H2
2024. Doosan is also pursuing the market for maritime power using SOFC
technology, the operation of which meets the International Maritime
Organization's regulations to achieve the 2050 GHG reduction goals. It has an
ongoing programme with Shell and Korea Shipbuilding & Offshore Engineering
for auxiliary propulsion and is seeking to launch its first marine fuel cell
(using Ceres' stack technology) in 2025.
Ceres Hydrogen - electrolysis
Earlier this year, we announced significant initial results from the testing
of our first 120kW electrolyser modules, providing confidence that the
technology can deliver green hydrogen at <40kWh/kg, around 25% more
efficiently than incumbent lower temperature technologies. The team is now
working on the next SOEC product concept for a 2-3MW modularised system, which
would facilitate larger scale installations. You can hear the team talking
about our SOEC technology, programmes and partners from the Technology
Teach-in held in June via the investor section of the Ceres website
https://www.ceres.tech/investors/presentations/
(https://www.ceres.tech/investors/presentations/) .
Meanwhile, the first-of-a-kind megawatt-scale electrolyser is undergoing
commissioning and testing at AVL in Germany, in preparation for deployment
later in the year to Shell's R&D centre in Bangalore, India, where the
hydrogen will be used in industrial processes on site. The testing programme
is intended to run for at least three years, forming the first stage of a
collaborative relationship. Shell and Ceres are building this partnership to
utilise SOEC technology to deliver high-efficiency, low-cost green hydrogen,
which has a significant role to play in harder-to-decarbonise industrial
sectors. It also allows for future generations of technology to be tested.
In March 2023, we signed contracts with Linde Engineering and Bosch to
start a collaboration to validate the performance, cost, and operational
functionality of our SOEC technology. The companies are preparing a two-year
demonstration of another megawatt class SOEC system, starting in 2024 and to
be located at a Bosch site in Stuttgart, Germany. Its aim is to showcase
that the technology provides a highly efficient pathway to low-cost green
hydrogen.
Our electrolysis business has recognised revenues of £0.7m (H1 2022: £nil),
which relates to early-stage evaluation contracts with prospective partners.
Focused investment for the future
The first six months of 2023 saw continued investment into people and
capabilities to deliver our technology roadmap and drive future growth. Our
highly skilled employee base grew as planned, with 586 people employed as at
30 June 2023 compared to 570 as at 31 December 2022. Recruitment will level
off as we reach critical mass and fully resource the core business activities
for SOFC and SOEC. Additional growth will be to support new customer
programmes. Research and development expenditure increased by 27% to £26.7
million as planned progress is made with both the expansion of our SOFC
business and development of our SOEC business.
Capitalised development costs in the period, which only relate to ongoing SOFC
development, increased to £3.4 million compared to £2.9 million for H1
2022. We have capitalised £16.2 million to 30 June 2023 (31 December 2022:
£13.3 million). Amortisation of this to the income statement was in line with
the prior period being a charge of £0.5 million (H1 2022: £0.5 million).
As planned, we have continued the expansion of our test capability to support
demand from our partners, and to cater for additional market opportunities
including SOEC, and SOFC applications such as marine and alternative fuels. We
have also continued expanding and upgrading our Redhill manufacturing capacity
for prototype production of the next generation of our SOFC cell and stack
technology. As a result, our committed investment in property, plant and
equipment was £4.7 million in H1 2023 (H1 2022: £5.5 million) and
depreciation charged increased to £3.4 million compared to £2.6 million in
H1 2022.
Overall, this focused "investment in the future" (R&D costs, capitalised
development and capital expenditure) increased by 19% to £30.6 million (H1
2022: £25.7 million). The £30.6 million comprises £22.5 million (H1 2022:
£17.3 million) in R&D (excluding depreciation, amortisation and
share-based payments), £4.7 million (H1 2022: £5.5 million) in capital
expenditure and £3.4 million (H1 2022: £2.9 million) in capitalised
development.
As a result of these investments, increased amortisation and depreciation, and
other operating income of £1.6 million (H1 2022: £0.5 million) primarily
relating to RDEC tax credits, the Group reported an increased operating loss
of £28.5 million in H1 2023, up from a loss of £25.5 million in H1 2022.
Strong financial position: the foundation for continued development and growth
The Group ended the period with a strong cash position of £161.2 million in
cash and investments as at 30 June 2023 (31 December 2022: £182.3 million),
with the decrease since 31 December 2022 reflecting the investment in the
period and is in line with our plans to invest for future growth and further
expansion into electrolysis.
Interest income (on an accrual basis) on cash, cash equivalents and
investments increased to £2.8 million (H1 2022: £0.7 million) due to
improved interest rates on money market funds and short-term investments.
Equity free cash outflow (defined and reconciled to net cash from operating
activities at the end of this report) reduced by 24% at £21.8 million (H1
2022: £28.6 million), being driven by net cash used in operating activities
of £15.5 million (H1 2022: £20.6 million) reflecting the Group's operating
loss in the period, capital expenditure (net of disposal proceeds) of £4.6
million (H2 2022: £5.5 million), capitalised development of £3.4 million (H1
2022: £2.9 million), net interest receipts of £1.8 million (H1 2022: £0.2
million) and exchange rate movements. Movements in working capital included a
£2.0 million decrease in inventories (H1 2022: £4.0 million increase),
reflecting stacks shipped in the period and used in internal R&D projects,
and a £3.6 million decrease in trade and other receivables (H1 2022: increase
of £2.8 million) following the successful receipt of outstanding trade
receivable balances in the first half of 2023.
Order Backlog as at 30 June 2023 was £61.1 million (31 December 2022: £67.8
million).
Main Market and Board
In June this year, we graduated to the Main Market of the London Stock
Exchange and, as of 18 September, joined the FTSE 250 index. This follows
almost 20 years on the Alternative Investment Market ("AIM"). Being on the
Main Market with a Premium Listing enables Ceres to access new pools of
investment and build greater international appeal.
We already operate to high levels of governance and this year we welcomed
Karen Bomba and Caroline Brown as Non-Executive Directors. They each possess
extensive business and sector knowledge as well as experience in growing teams
to support international expansion. Their skills and perspectives are highly
relevant to Ceres as we mature the business and continue to scale our
partnership model globally.
Professor Dame Julia King, Baroness Brown of Cambridge, also assumed the
position of Senior Independent Director succeeding Steve Callaghan who
stepped down from the Board after 11 years' service. Julia has served on the
Ceres Board since June 2021. She brings huge experience across industry,
academia and government and a focus on climate change and the low carbon
economy, which has been hugely valuable in the progression of the Company's
sustainability strategy as Chair of the ESG Committee.
The company would like to thank Steve for his outstanding contribution over
many years seeing the company through a difficult turnaround in 2012 to
positioning it to the FTSE 250 and to whom we owe a great deal.
Outlook
The business is continuing to make strong progress in award-winning green
hydrogen technology following the significant investment we have made in this
area over the past two years and our first demonstration at a megawatt-scale
will be a major proof point for the business. We expect SOEC will grow to
become the largest part of the business in the second half of this decade and
we are building our technical and commercial offering to address this market.
As flagged in our recent trading update, the timing of the establishment of
the China JVs with Bosch and Weichai, and the associated revenue, remains
uncertain. We continue to make good progress in other areas of the SOFC
business particularly in our partnerships with Bosch and Doosan.
The revenue for the full year will be impacted by the China JVs as already
flagged in our recent trading update, and full-year numbers will depend on the
timing of securing new licence partners.
Despite what has been a challenging market backdrop over the past 12 months,
we are approaching an important time for the business as we scale
manufacturing and new developments in our first megawatt-scale deployment of
SOEC, and our core cell, stack and systems come to fruition. I have
confidence that the investments we have made in the business, and the level of
interest we are now seeing from new and existing partners, position us well to
exploit the significant future global market for clean power and green
hydrogen.
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/)
Philip Caldwell
Chief Executive Officer
CONDENSED CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE
INCOME
For the six months ended 30 June 2023
6 months ended 6 months ended Year ended
30 June 2023 30 June 2022 Unaudited 31 December 2022
Unaudited Restated(1) Audited
Note £'000 £'000 £'000
Revenue 2 11,310 9,687 22,130
Cost of sales (4,442) (4,952) (9,079)
Gross profit 6,868 4,735 13,051
Other operating income(2) 1,583 464 1,332
Operating costs 4 (36,933) (30,715) (65,905)
Operating loss (28,482) (25,516) (51,522)
Finance income 5 2,834 1,153 2,830
Finance expense 5 (724) (143) (304)
Loss before taxation (26,372) (24,506) (48,996)
Taxation (charge)/credit 6 (68) 1,908 3,872
Loss for the financial period and total comprehensive loss (26,440) (22,598) (45,124)
Loss per £0.10 ordinary share expressed in pence per share:
Basic and diluted loss per share 7 (13.74)p (11.83)p (23.58)p
The accompanying notes are an integral part of these consolidated financial
statements.
(1) The results for the 6 months ended 30 June 2022 have been re-presented to
reflect the re-classification of the Group's RDEC tax credit of £610,000 to
align to the change in presentation applied for the Group's 2022 full year
results. This was previously disclosed within cost of sales but is now
presented within other operating income. The Group's RDEC tax credit for the 6
months results to 30 June 2022 has also been restated to decrease the credit
by £313,000 following the adjustment of prior year R&D tax credit claims.
See Note 1 for details.
(2) Other operating income relates to grant income and the Group's RDEC tax
credit.
( )
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2023
30 June 2023 30 June 2022 31 Dec 2022
Unaudited Unaudited Audited
Restated(1)
Note £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 8 25,599 21,092 25,964
Right-of-use assets 9 2,411 2,167 2,647
Intangible assets 10 16,218 10,882 13,278
Investment in associate 2,398 460 2,460
Other receivables 12 741 741 741
Total non-current assets 47,367 35,342 45,090
Current assets
Inventories 11 3,719 7,149 5,714
Contract assets 2 5,316 5,314 3,309
Other current assets 13 1,180 1,024 957
Derivative financial instruments 17 508 703 54
Current tax receivable 7,553 3,386 7,396
Trade and other receivables(1) 12 13,022 8,915 17,153
Short-term investments 14 117,088 114,177 119,011
Cash and cash equivalents 14 44,142 107,448 63,309
Total current assets 192,528 248,116 216,903
Liabilities
Current liabilities
Trade and other payables 15 (4,718) (4,857) (4,933)
Contract liabilities 2 (9,043) (5,004) (6,387)
Other current liabilities 16 (8,479) (7,660) (7,286)
Derivative financial instruments 17 ꟷ (5) ꟷ
Lease liabilities 18 (664) (655) (610)
Provisions 19 (449) (1,495) (929)
Total current liabilities (23,353) (19,676) (20,145)
Net current assets 169,175 228,440 196,758
Non-current liabilities
Lease liabilities 18 (2,243) (1,971) (2,514)
Provisions 19 (1,926) (1,910) (1,933)
Total non-current liabilities (4,169) (3,881) (4,447)
Net assets 212,373 259,901 237,401
Equity attributable to the owners of the parent
Share capital 20 19,272 19,157 19,209
Share premium 406,076 405,272 405,463
Capital redemption reserve 3,449 3,449 3,449
Merger reserve 7,463 7,463 7,463
Accumulated losses(1) (223,887) (175,440) (198,183)
Total equity 212,373 259,901 237,401
(1)Trade and other receivables and accumulated losses as at 30 June 2022 have
been restated to reflect an adjustment to prior year R&D tax claims. See
Note 1 for details
The accompanying notes are an integral part of these consolidated financial
statements.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2023
Note 6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
Restated(1)
£'000 £'000 £'000
Cash flows from operating activities
Loss before taxation (26,372) (24,506) (48,996)
Adjustments for:
Finance income (2,834) (1,153) (2,830)
Finance expense 724 143 304
Depreciation of property, plant and equipment 3,371 2,578 5,486
Depreciation of right-of-use assets 303 271 620
Amortisation of intangible assets 475 542 1,032
Net foreign exchange losses/(gains) 282 153 (690)
Net change in fair value of financial instruments (454) 375 1,020
Profit on disposal of property, plant and equipment (21) ꟷ ꟷ
Share-based payments charge 736 1,214 997
Operating cash flows before movements in working capital (23,790) (20,383) (43,057)
Decrease/(increase) in trade and other receivables (1) 3,634 (2,804) (12,693)
Decrease/(increase) in inventories 1,995 (4,004) (2,569)
Increase in trade and other payables 2,581 3,900 2,655
(Increase)/decrease in contract assets (2,007) 2,017 4,022
Increase in contract liabilities 2,656 714 1,137
Decrease in provisions (526) (39) (637)
Net cash used in operations (15,457) (20,599) (51,142)
Taxation received ꟷ ꟷ (380)
Net cash used in operating activities (15,457) (20,599) (51,522)
Investing activities
Investment in associate ꟷ ꟷ (1,000)
Purchase of property, plant and equipment (4,725) (5,529) (12,347)
Proceeds received on disposal of property, plant and equipment 137 ꟷ ꟷ
Capitalised development expenditure (3,415) (2,946) (5,832)
Repayment of long-term investments ꟷ 5,000 5,000
Acquisition of short-term investments (37,470) (70,998) (99,618)
Repayment of short-term investments 39,444 49,950 74,950
Finance income received 2,227 730 1,443
Net cash used in investing activities (3,802) (23,793) (37,404)
Financing activities
Proceeds from issuance of ordinary shares 676 630 873
Repayment of lease liabilities (284) (413) (744)
Interest paid (128) (103) (212)
Net cash generated from/(used by) financing activities 264 114 (83)
Net decrease in cash and cash equivalents (18,995) (44,278) (89,009)
Exchange (losses)/gains on cash and cash equivalents (172) 271 863
Cash and cash equivalents at beginning of period 63,309 151,455 151,455
Cash and cash equivalents at end of period 14 44,142 107,448 63,309
(1) Loss before taxation and other receivables as at 30 June 2022 have been
restated to reflect the adjustment of prior year R&D tax claims. See Note
1 for details.
The accompanying notes are an integral part of these consolidated financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2023
Share Share Capital redemption reserve Merger Accumulated losses Total
capital premium reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 (audited) 19,073 404,726 3,449 7,463 (154,056) 280,655
Comprehensive income
Loss for the financial year ꟷ ꟷ ꟷ ꟷ (45,124) (45,124)
Total comprehensive loss ꟷ ꟷ ꟷ ꟷ (45,124) (45,124)
Transactions with owners
Issue of shares, net of costs 136 737 ꟷ ꟷ ꟷ 873
Share-based payments charge ꟷ ꟷ ꟷ ꟷ 997 997
Total transactions with owners 136 737 ꟷ ꟷ 997 1,870
At 31 December 2022 (audited) 19,209 405,463 3,449 7,463 (198,183) 237,401
Comprehensive income
Loss for the financial period ꟷ ꟷ ꟷ ꟷ (26,440) (26,440)
Total comprehensive loss ꟷ ꟷ ꟷ ꟷ (26,440) (26,440)
Transactions with owners
Issue of shares 63 613 ꟷ ꟷ ꟷ 676
Share-based payments charge ꟷ ꟷ ꟷ ꟷ 736 736
Total transactions with owners 63 613 ꟷ ꟷ 736 1,412
At 30 June 2023 (unaudited) 19,272 406,076 3,449 7,463 (223,887) 212,373
Comparatives for the six months ended 30 June 2022 are provided separately
below:
Share Share Capital redemption reserve Merger Accumulated losses Total
capital premium reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 (audited) - restated(1) 19,073 404,726 3,449 7,463 (154,056) 280,655
Comprehensive income
Loss for the financial period(1) ꟷ ꟷ ꟷ ꟷ (22,598) (22,598)
Total comprehensive loss ꟷ ꟷ ꟷ ꟷ (22,598) (22,598)
Transactions with owners
Issue of shares 84 546 ꟷ ꟷ ꟷ 630
Share-based payments charge ꟷ ꟷ ꟷ ꟷ 1,214 1,214
Total transactions with owners 84 546 ꟷ ꟷ 1,214 1,844
At 30 June 2022 (unaudited) 19,157 405,272 3,449 7,463 (175,440) 259,901
(1)2021 results have been restated to reflect an adjustment to prior year
R&D tax claims and as a result the accumulated losses have increased by
£968,000 from £153,088,000 to £154,056,000. See Note 1 for details.
1. Basis of preparation
The unaudited condensed consolidated interim 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 2022 which were prepared in accordance with UK adopted international
accounting standards. The interim financial statements have been prepared on a
historical cost basis except derivative financial instruments, which are
stated at their fair value.
The interim 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 same accounting
policies, presentation and methods of computation are followed in the interim
financial statements as were applied in the Group's latest annual audited
financial statements. The consolidated interim 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.
The financial information contained in the interim 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 2022, 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 consolidated interim financial information for the six months ended 30
June 2023 has been reviewed by the Company's Auditor, BDO LLP in accordance
with International Standard of Review Engagements 2410, Review of Interim
Financial Information Performed by the Independent Auditor of the Entity.
To reflect the presentation adopted by the Group in the preparation of the
2022 consolidated financial statements, the Research and Development
Expenditure Credit ("RDEC") tax credit within the consolidated statement of
profit and loss has been re-classified. The RDEC tax credit was previously
presented within cost of sales and is now presented within other operating
income. Prior year comparatives have been re-presented accordingly. The impact
of this change was to increase cost of sales and other operating income for
the six months ended 30 June 2022 by £0.6m.
Further, the June 2022 results have been restated to reflect an adjustment to
R&D tax credit claims for certain costs which were inadvertently claimed
in 2019 and 2020 under the Small and Medium-sized Enterprise (SME) R&D tax
credit schemes, whereas they should have been claimed at a lower claim rate
under the RDEC scheme. As a result, accumulated losses as at 1 January 2022
have been restated accordingly resulting in an increase from £153,088,000 to
£154,056,000. At 30 June 2022 the taxation credit and other operating income
has also been restated to increase the tax credit from £896,000 to
£1,908,000 and reduce other operating income by £313,000. Further details
are set out in Note 6. Other receivables as at 30 June 2022 have been restated
from £3,503,000 to £4,264,000, and current tax receivable as at 30 June 2022
has been restated from £4,416,000 to £3,386,000 to reflect the adjustments
of prior year R&D tax claims.
Going Concern
The Group has reported a loss after tax for the six months period ended 30
June 2023 of £26.4m (six months ended 30 June 2022: £22.6m) and net cash
used in operating activities of £15.5m (six months ended 30 June 2022:
£20.6m). At 30 June 2023, the Group held cash and cash equivalents and
investments of £161.2m (31 December 2022: £182.3m). The directors have
prepared annual budgets and cash flow projections that extend 15 months from
the date of approval of this report. These projections include management's
expectations of the cash flows associated with the Group's continued
investment in R&D projects and further expansion of our manufacturing and
testing capacity, together with contracted and anticipated customer contracts
and the planned investment in the China collaboration with Bosch and Weichai
which is not expected to occur until 2024. The projections were stress tested
by applying different scenarios including the loss of significant future
revenue and continued adverse macroeconomic factors as well as a scenario
where the Chinese JV does not progress at all. In each case the projections
demonstrated that the Group would have sufficient cash reserves to meet its
liabilities as they fall due and to continue as a going concern. For the above
reasons, the directors continue to adopt the going concern basis in preparing
the financial statements.
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 consolidated financial statements, the areas where
judgement has been exercised remain consistent with those applied to the
annual report and accounts for the year ended 31 December 2022.
New standards and amendments applicable for the reporting period
The Group has adopted all standards, interpretations amended or newly issued
by the IASB that were effective in the period. Their adoption has not had any
material effect on the consolidated financial statements.
2. Revenue
The Group's revenue is disaggregated by geographical market, major
product/service lines, and timing of revenue recognition:
Geographical market
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Europe 6,801 4,051 8,460
Asia 4,318 5,404 13,253
North America 191 211 394
Rest of World ꟷ 21 23
11,310 9,687 22,130
For the six months ended 30 June 2023, the Group has identified two major
customers (defined as customers that individually contributed more than 10% of
the Group's total revenue) that accounted for approximately 56% and 38% of the
Group's total revenue recognised in the period (6 months ended 30 June 2022
two major customers that accounted for approximately 44% and 39% of the
Group's total revenue recognised in the period and 12 months ended 31 December
2022: two major customers that accounted for approximately 51% and 36% of the
Group's total revenue recognised for that year).
Major product/service lines
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Engineering services 4,679 4,206 9,039
Provision of technology hardware 3,230 2,077 5,380
Licenses 3,401 3,404 7,711
11,310 9,687 22,130
Timing of transfer of goods and services
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Products and services transferred at a point in time 4,155 1,887 4,760
Products and services transferred over time 7,155 7,800 17,370
11,310 9,687 22,130
The contract-related assets and liabilities are as follows:
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Trade receivables 12 7,309 4,651 11,825
Contract assets - accrued income 5,316 5,314 3,309
Contract liabilities - deferred income (9,043) (5,004) (6,387)
3. Segmental analysis
In accordance with IFRS 8 the method applied to identify reporting segments is
based on internal management reporting information that is regularly reviewed
by the chief operating decision maker, which the Group considers to be the
Executive team. The Group's internal segmental reporting has changed and now
only separately presents results down to gross profit level from its Power
(SOFC) and Hydrogen (SOEC) divisions where previously presented to adjusted
EBITDA.
Power - SOFC Hydrogen - SOEC Consolidated
Six months ended 30 June 2023 (unaudited) £'000 £'000 £'000
Revenue (external) 10,569 741 11,310
Cost of sales (4,271) (171) (4,442)
Gross profit 6,298 570 6,868
Power - SOFC Hydrogen - SOEC Consolidated
Six months ended 30 June 2022 (unaudited) £'000 £'000 £'000
Restated(1)
Revenue (external) 9,687 ꟷ 9,687
Cost of sales(1) (4,952) ꟷ (4,952)
Gross profit 4,735 ꟷ 4,735
Power - SOFC Hydrogen - SOEC Consolidated
12 months ended 31 December 2022 (audited) £'000 £'000 £'000
Revenue (external) 21,950 180 22,130
Cost of sales (9,070) (9) (9,079)
Gross profit 12,880 171 13,051
(1) The results for the 6 months to 30 June 2022 have been restated as a
result of prior year R&D tax credit claims and further re-presented to
reflect the re-classification of the Group's RDEC tax credit from within cost
of sales now within other operating income.
4. Operating costs
Operating costs can be analysed as follows:
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Research and development costs 26,656 20,997 48,348
Administrative expenses 8,821 7,695 15,165
Commercial 1,456 2,023 2,392
36,933 30,715 65,905
5. Finance income and expenses
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Interest income on cash, cash equivalents and investments 2,834 730 2,657
Foreign exchange gain on cash, cash equivalents and short-term deposits ꟷ 423 173
Finance income 2,834 1,153 2,830
Interest on lease liability (128) (103) (212)
Unwinding of discount on provisions (39) (37) (87)
Other finance costs ꟷ (3) (5)
Foreign exchange loss on cash, cash equivalents and short-term deposits (557) ꟷ ꟷ
Interest expense (724) (143) (304)
6. Taxation
No corporation tax liability has arisen during the period (6 months ended 30
June 2022 and 12 months ended 31 December 2022: £nil) due to the losses
incurred. A tax charge has arisen as a result of foreign withholding taxes
suffered and an overprovisions of R&D tax credit for 2022 under the SME
R&D regime. The SME R&D tax credit regime is no longer accessible to
the Group. The RDEC regime continues to be accessible and has been recognised
within other operating income.
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
Restated(1)
£'000 £'000 £'000
UK corporation tax ꟷ (2,148) (4,470)
Foreign tax suffered 2 240 828
Adjustment in respect of prior periods 66 ꟷ (230)
68 (1,908) (3,872)
(1) The June 2022 taxation credit has been restated to increase the tax credit
from £896,000 to £1,908,000 relating to a prior year correction to the
R&D tax treatment of costs. This correction resulted from certain costs
that were inadvertently claimed in 2019 and 2020 under the Small and
Medium-sized Enterprise (SME) R&D tax credit schemes, whereas they should
have been claimed at a lower claim rate under the RDEC scheme. The restatement
has increased the June 2022 SME R&D tax credit by £126,000 from
£2,022,000 to £2,148,000 and has reversed the movement in R&D tax credit
provision in respect of prior periods from £886,000 to £nil since this has
now been recognised in the restated opening balance sheet position at 1
January 2022.
7. Loss per share
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Loss for the financial period attributable to shareholders (26,440) (22,598) (45,124)
Weighted average number of shares in issue 192,442,672 190,972,969 191,385,618
Loss per £0.10 ordinary share (basic and diluted) (13.74)p (11.83)p (23.58)p
8. Property, plant and equipment
Leasehold improvements Assets under construction
£'000 Plant and machinery Computer equipment Fixtures and fittings £'000 Motor vehicles
£'000
£'000
£'000 £'000 Total
£'000
Cost
At 1 January 2022 7,412 25,502 2,563 348 1,975 12 37,812
Additions 1,111 5,147 203 ꟷ 6,848 ꟷ 13,309
Transfers 71 893 ꟷ ꟷ (964) ꟷ ꟷ
Disposal (1,621) (6,669) (831) (72) ꟷ ꟷ (9,193)
At 31 December 2022 (audited) 6,973 24,873 1,935 276 7,859 12 41,928
Additions 489 1,614 134 90 795 ꟷ 3,122
Disposal ꟷ (225) ꟷ ꟷ ꟷ ꟷ (225)
Transfers 419 833 ꟷ ꟷ (1,252) ꟷ ꟷ
At 30 June 2023 (unaudited) 7,881 27,095 2,069 366 7,402 12 44,825
Accumulated depreciation
At 1 January 2022 3,358 14,285 1,790 232 ꟷ 6 19,671
Charge for the year 936 4,030 444 73 ꟷ 3 5,486
Depreciation on disposals (1,621) (6,669) (831) (72) ꟷ ꟷ (9,193)
At 31 December 2022 (audited) 2,673 11,646 1,403 233 ꟷ 9 15,964
Charge for the period 663 2,487 209 11 ꟷ 1 3,371
Depreciation on disposals ꟷ (109) ꟷ ꟷ ꟷ ꟷ (109)
At 30 June 2023 (unaudited) 3,336 14,024 1,612 244 ꟷ 10 19,226
Net book value
At 30 June 2023 (unaudited) 4,545 13,071 457 122 7,402 2 25,599
At 31 December 2022 (audited) 4,300 13,227 532 43 7,859 3 25,964
'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.
Comparatives for the six months ended 30 June 2022 are provided separately
below:
Unaudited Leasehold improvements Assets under construction
£'000 Plant and machinery Computer equipment Fixtures and fittings £'000 Motor vehicles
£'000
£'000
£'000 £'000 Total
£'000
Cost
At 1 January 2022 7,412 25,502 2,563 348 1,975 12 37,812
Additions 238 2,437 169 ꟷ 2,685 ꟷ 5,529
Transfers 22 264 ꟷ ꟷ (286) ꟷ ꟷ
At 30 June 2022 7,672 28,203 2,732 348 4,374 12 43,341
Accumulated depreciation
At 1 January 2022 3,358 14,285 1,790 232 ꟷ 6 19,671
Charge for the period 442 1,872 226 37 ꟷ 1 2,578
At 30 June 2022 3,800 16,157 2,016 269 ꟷ 7 22,249
Net book value
At 30 June 2022 3,872 12,046 716 79 4,374 5 21,092
9. Right of use assets
Land and Buildings Computer equipment Total
£'000 £'000 £'000
Cost
At 1 January 2022 3,694 43 3,737
Adjustment to lease term 829 ꟷ 829
At 31 December 2022 (audited) 4,523 43 4,566
Additions 67 ꟷ 67
At 30 June 2023 (unaudited) 4,590 43 4,633
Accumulated depreciation
At 1 January 2022 1,289 10 1,299
Charge for the year 606 14 620
At 31 December 2022 (audited) 1,895 24 1,919
Charge for the period 296 7 303
At 30 June 2023 (unaudited) 2,191 31 2,222
Net book value
At 30 June 2023 (unaudited) 2,399 12 2,411
At 31 December 2022 (audited) 2,628 19 2,647
The lease liabilities are detailed in Note 18.
Comparatives for the six months ended 30 June 2022 are provided separately
below:
Unaudited Land and Buildings Computer equipment Total
£'000 £'000 £'000
Cost
At 1 January 2022 3,694 43 3,737
At 30 June 2022 3,694 43 3,737
Accumulated depreciation
At 1 January 2022 1,289 10 1,299
Charge for the period 264 7 271
At 30 June 2022 1,553 17 1,570
Net book value
At 30 June 2022 2,141 26 2,167
10. Intangible assets
Internal developments in relation to manufacturing site Customer and internal development programmes Patent costs
£'000
£'000 £'000 Total
£'000
Perpetual
software licences
£'000
Cost
At 1 January 2022 411 8,407 252 633 9,703
Additions ꟷ 5,340 273 219 5,832
At 31 December 2022 (audited) 411 13,747 525 852 15,535
Additions ꟷ 3,236 8 171 3,415
At 30 June 2023 (unaudited) 411 16,983 533 1,023 18,950
Accumulated amortisation
At 1 January 2022 164 1,038 23 ꟷ 1,225
Charge for the year 82 748 125 77 1,032
At 31 December 2022 (audited) 246 1,786 148 77 2,257
Charge for the period 41 359 70 5 475
At 30 June 2023 (unaudited) 287 2,145 218 82 2,732
Net book value
At 30 June 2023 (unaudited) 124 14,838 315 941 16,218
At 31 December 2022 (audited) 165 11,961 377 775 13,278
The customer and internal development intangible primarily relates to the
design, development and configuration of the Company's core fuel cell and
system technology. Amortisation of capitalised development commences once the
development is complete and is available for use.
Comparatives for the six months ended 30 June 2022 are provided separately
below:
Unaudited Internal developments in relation to manufacturing site Customer and internal
£'000 development programmes Total
£'000 £'000
Perpetual
software licences Patent costs
£'000
£'000
Cost
At 1 January 2022 411 8,407 252 633 9,703
Additions ꟷ 2,709 151 86 2,946
At 30 June 2022 411 11,116 403 719 12,649
Accumulated amortisation
At 1 January 2022 164 1,038 23 ꟷ 1,225
Charge for the period 41 377 56 68 542
At 30 June 2022 205 1,415 79 68 1,767
Net book value
At 30 June 2022 206 9,701 324 651 10,882
11. Inventories
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Raw materials 975 1,381 1,566
Work in progress 1,423 1,186 1,477
Finished goods 1,321 4,582 2,671
Total inventory 3,719 7,149 5,714
Inventories have reduced which reflects the stacks shipped to customers and
the use of stacks for internal R&D projects, particularly the SOEC
demonstrator.
12. Trade and other receivables
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
Restated(1)
Current: £'000 £'000 £'000
Trade receivables 7,309 4,651 11,825
Other receivables 5,713 4,264 5,328
13,022 8,915 17,153
Non-current:
Other receivables 741 741 741
(1) Other receivables as at 30 June 2022 have been restated to reflect the
adjustment of prior year R&D tax claims. See Note 1 for details.
Of the £7.3m trade receivables due at 30 June 2023, c£6.3m was received in
the first two months after the reporting period.
Included within other current receivables is the research and development tax
credit of £4,822,000 (30 June 2022: £1,551,000; 31 December 2022:
£2,084,000). All of which has been received in H2 2023.
13. Other current assets
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Prepayments 1,180 880 869
Accrued grant income ꟷ 144 88
1,180 1,024 957
14. Net cash and cash equivalents, short-term and long-term investments
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash at bank and in hand 4,969 6,601 7,837
Money market funds 39,173 100,847 55,472
Cash and cash equivalents 44,142 107,448 63,309
Short-term investments(1) 117,088 114,177 119,011
Cash and cash equivalents and investments 161,230 221,625 182,320
( )
(1) Short-term investments comprise bank deposits with a maturity greater than
3 months but less than 12 months.
The Group typically places surplus funds into pooled money market funds with
same day access and bank deposits with durations of up to 24 months. The
Group's treasury policy restricts investments in short-term sterling money
market funds to those which carry short-term credit ratings of at least two of
AAAm (Standard & Poor's), Aaa-mf (Moody's) and AAAmmf (Fitch) and deposits
with banks with minimum long-term rating of A-/A3/A and short-term rating of
A-2/P-2/F-1 for banks which the UK Government holds less than 10% ordinary
equity.
15. Trade and other payables
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
Current: £'000 £'000 £'000
Trade payables 4,349 4,537 4,795
Other payables 369 320 138
4,718 4,857 4,933
16. Other current liabilities
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Accruals 7,829 6,767 6,515
Deferred grant income 650 893 771
8,479 7,660 7,286
17. Derivative financial instruments
Fair value Carrying amount Fair value Carrying amount Fair value
hierarchy 30 June 2023 30 June 2023 31 December 2022 31 December 2022
Unaudited Unaudited Audited Audited
£'000 £'000 £'000 £'000
Financial assets measured at fair value through profit or loss
Forward exchange contracts Level 2 80 80 26 26
Non-deliverable forward contracts Level 2 428 428 28 28
Total derivative assets 508 508 54 54
Financial liabilities measured at fair value through profit or loss
Forward exchange contracts ꟷ ꟷ ꟷ ꟷ
Total derivative liabilities ꟷ ꟷ ꟷ ꟷ
Comparatives for the six months ended 30 June 2022 are provided separately
below:
Fair value Carrying amount Fair value
hierarchy 30 June 2022 30 June 2022
Unaudited Unaudited
£'000 £'000
Financial assets measured at fair value through profit or loss
Forward exchange contracts Level 2 241 241
Non-deliverable forward contracts Level 2 462 462
Total derivative assets 703 703
Financial liabilities measured at fair value through profit or loss
Forward exchange contracts (5) (5)
Total derivative liabilities (5) (5)
In 2020, the Group entered into a non-deliverable forward (NDF) to hedge its
exposure to Korean Won (KRW) with respect to a major customer contract. As at
30 June 2023, the unrealised fair value gain was £428,000 (31 December 2022:
£28,000). The Group also had a number of forward exchange contracts in place
to hedge expected transactions in other currencies including EUR and CAD, with
an unrealised total gain of £80,000 as at 30 June 2023 (31 December 2022:
£25,000). All derivative financial instruments are measured using techniques
consistent with level 2 of the fair value hierarchy.
18. Lease liabilities
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
At the start of the period 3,124 3,039 3,039
New finance leases recognised 67 ꟷ ꟷ
Lease payments (412) (516) (956)
Interest expense 128 103 212
Adjustment to lease term ꟷ ꟷ 829
At the end of the period 2,907 2,626 3,124
Current 664 655 610
Non-current 2,243 1,971 2,514
Total at the end of the period 2,907 2,626 3,124
19. Provisions
Property Dilapidations Total
Warranties Contract Losses
£'000 £'000 £'000 £'000
At 1 January 2022 1,828 1,253 326 3,407
Movements in the Consolidated Statement of Profit and Loss:
Amounts used ꟷ ꟷ (137) (137)
Unused amounts reversed ꟷ (707) (135) (842)
Unwinding of discount 87 ꟷ ꟷ 87
Increase in provision 18 329 ꟷ 347
At 31 December 2022 (audited) 1,933 875 54 2,862
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) 1,926 395 54 2,375
Current ꟷ 395 54 449
Non-current 1,926 ꟷ ꟷ 1,926
At 30 June 2023 (unaudited) 1,926 395 54 2,375
Current ꟷ 875 54 929
Non-current 1,933 ꟷ ꟷ 1,933
At 31 December 2022 (audited) 1,933 875 54 2,862
Following further progress on contracts and no new warranty issues identified
in the period, £0.5m of the warranty provision was released to the
Consolidated Statement of Profit or Loss. As at 30 June 2023 the Group has
recorded a contingent liability of approximately £0.4m (30 June 2022: £nil,
31 December 2022: £0.3m) to reflect the lower possibility of the Group paying
out on any potential failures for certain additional stacks that may still be
running where the contracts have concluded.
Comparatives for the six months ended 30 June 2022 are provided separately
below:
Unaudited Property Dilapidations Total
Warranties Contract Losses
£'000 £'000 £'000 £'000
At 1 January 2022 1,828 1,253 326 3,407
Movements in the Consolidated Statement of Profit and Loss:
Amounts used ꟷ ꟷ (138) (138)
Unused amounts reversed ꟷ ꟷ (124) (124)
Unwinding of the discount 37 ꟷ ꟷ 37
Increase in provision 45 178 ꟷ 223
At 30 June 2022 (unaudited) 1,910 1,431 64 3,405
Current ꟷ 1,431 64 1,495
Non-current 1,910 ꟷ ꟷ 1,910
At 30 June 2022 (unaudited) 1,910 1,431 64 3,405
20. Share capital
30 June 2023 (unaudited) 31 December 2022 (audited)
Number of £0.10 £'000 Number of £0.10
Ordinary
Ordinary
shares
shares £'000
Allotted and fully paid
At 1 January 192,086,775 19,209 190,729,638 19,073
Allotted £0.10 Ordinary shares on exercise of employee share options 630,205 63 1,357,137 136
At 30 June 2023 / 31 December 2022 192,716,980 19,272 192,086,775 19,209
During the six months ended 30 June 2023, 630,205 ordinary £0.10 shares were
allotted for cash consideration of £676,359 on the exercise of employee share
options (six months ended 30 June 2022: 844,978 ordinary £0.10 shares were
allotted for cash consideration of £627,427; year ended 31 December 2022:
1,357,137 ordinary £0.10 shares were allotted for cash consideration of
£866,717).
Comparatives for the six months ended 30 June 2022 are provided separately
below:
30 June 2022 (unaudited)
Number of £0.10
Ordinary
shares £'000
Allotted and fully paid
At 1 January 2022 190,729,638 19,073
Allotted £0.10 Ordinary shares on exercise of employee share options 844,978 84
Allotted £0.10 Ordinary shares on cash placing ꟷ ꟷ
At 30 June 2022 191,574,616 19,157
Reserves
The Consolidated Statement of Financial Position includes a merger reserve and
a capital redemption reserve. The merger reserve represents a reserve arising
on consolidation using book value accounting for the acquisition of Ceres
Power Limited at 1 July 2004. The reserve represents the difference between
the book value and the nominal value of the shares issued by the Company to
acquire Ceres Power Limited. The capital redemption reserve was created in the
year ended 30 June 2014 when 86,215,662 deferred ordinary shares of £0.04
each were cancelled.
21. Capital commitments
Capital expenditure that has been contracted for but has not been provided for
in the financial statements amounts to £7,710,000 as at 30 June 2023 (as at
30 June 2022: £8,131,000 and as at 31 December 2022: £8,679,000), in respect
of the acquisition of property, plant and equipment.
22. Related party transactions
As at 30 June 2023, as at 30 June 2022 and as at 31 December 2022, the Group's
related parties were its Directors and RFC Power Limited.
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. There were no other transactions between the Company and the
Directors during the period.
During the year ended 31 December 2022 and period ending 30 June 2022 one
Director exercised and retained 7,109 share options under the Company's
employee share save scheme and one Director exercised and sold 14,218 share
options under the Company's employee share save scheme. There were no other
transactions between the Company and the Directors during the year ended 31
December 2022.
Transactions in H1 2023 between the Group and RFC Power Limited, being an
associated entity of the Group, comprised engineering consultancy services
provided by the Group to RFC Power Limited for the value of £0.3m (6 months
ended 30 June 2022: £0.3m and 12 months ended 31 December 2022: £0.4m).
Reconciliation between operating loss and Adjusted EBITDA
Management believes that presenting Adjusted EBITDA loss allows for a more
direct comparison of the Group's performance against its peers and provides a
better understanding of the underlying performance of the Group by excluding
non-recurring, irregular and one-off costs. The Group currently defines
Adjusted EBITDA loss as the operating loss for the period excluding
depreciation and amortisation charges, share-based payment charges, unrealised
losses on forward contracts and exchange gains/losses.
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 Dec 2022
£'000 Restated(1) £'000
£'000
Operating loss (28,482) (25,516) (51,522)
Depreciation and amortisation 4,149 3,391 7,138
Share-based payment charges 736 1,214 997
Unrealised (gains)/losses on forward contracts (454) 374 1,020
Exchange losses/(gains) 282 (271) (863)
Adjusted EBITDA (23,769) (20,808) (43,230)
(1)The Group's operating loss has been restated due to the adjustment of prior
year R&D tax claims which has decreased the RDEC tax credit by £313,000.
Reconciliation between net cash used in operating activities and equity free
cash flow
The Group defines equity free cash flow as net cash from operating activities
plus capital expenditure and adjusted for interest payments and receipts and
exchange rate movements. The table below reconciles net cash from operating
activities to equity free cash flow for each period.
6 months ended 6 months ended 12 months ended
30 June 2023 30 June 2022 31 Dec 2022
£'000 £'000 £'000
Net cash from operating activities (15,457) (20,599) (51,522)
Capital expenditure (total) (8,003) (8,475) (18,179)
Interest and lease receipts (net) 1,815 214 487
Exchange rate movements (172) 271 863
Equity free cash flow (21,817) (28,589) (68,351)
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 2023 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 2023 which comprises Condensed Consolidated Statement of Profit and Loss
and Other Comprehensive Income, Condensed Consolidated Statement of Financial
Position, Condensed Consolidated Cash Flow Statement and the Condensed
Consolidated Statement of Changes in Equity and the Notes to the financial
statements for the six months ended 30 June 2023.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ("ISRE (UK) 2410"). 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, 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
Gatwick, UK
Date
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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