REG - Invinity Energy Sys - 2022 Financial Results and Current Trading
28/06/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230628:nRSb1175Ea&default-theme=true
RNS Number : 1175E Invinity Energy Systems PLC 28 June 2023
28 June 2023
Invinity Energy Systems plc
("Invinity" or the "Company")
2022 Financial Results and Current Trading
Invinity Energy Systems plc (AIM: IES) (AQSE: IES) (OTCQX: IESVF), a leading
global manufacturer of utility-grade energy storage, is pleased to announce
its Full Year Results for the year ended 31 December 2022 and provide an
update on current trading. The Company's 2022 Annual Report will be posted to
shareholders and available for download from the Company's shareholder
documents portal
(https://invinity.com/investors/shareholder-documents/?utm_source=fyctrns)
shortly.
The Company will hold a virtual meeting for analysts at 12 noon (UK time)
today. Analysts wishing to attend are kindly asked to email IR@invinity.com
(mailto:IR@invinity.com) .
Invinity's management team will also host a virtual results presentation and
interactive Q&A for all shareholders at 4pm (UK time) on Monday 3 July
2023. Those wishing to join the session can sign up to Investor Meet Company
for free via this registration link
(https://www.investormeetcompany.com/invinity-energy-systems-plc/register-investor)
.
2022 Highlights
Financial
· £3.6m total income including sales revenue and project related grant
income, a 13% increase YoY (2021: £3.2m).
· 12% YoY reduction in loss from operations - £19.0m (2021: £21.3m).
· Inventory and Pre-paid inventory increased 51% to £14.9m (2021:
£9.9m).
· £15.3m current cash as at 31 May 2023. Year-end cash £5.1m.
· Post Period: Completion of an oversubscribed £23m fundraise (March
2023) including securing a £2.5m strategic investment from Taiwanese
technology group Everbrite. Further discussions with a number of potential
strategic partners are ongoing.
· Post Period: Repayment of the Riverfort Loan Facility (March 2023).
Commercial
· 39.2 MWh of Closed sales in 2022 (2021: £0.5 MWh).
· Secured government and agency support for key projects including the
Viejas Microgrid, funded by the California Energy Commission, and the first
phase of the UK Department of Energy Security and Net Zero's LODES competition
(which Invinity subsequently won in April 2023).
· Independent bankability review completed by leading assurance and
risk management company DNV. The associated report independently confirmed
Invinity's products meet or exceed their stated specifications and validated
the Company's position as a leader in the flow battery industry and as a
strong challenger to lithium-ion incumbents.
· Signed commercial partnerships in the UK, EU and Asia, all of which
have subsequently resulted in product sales including those with:
o Hyosung Heavy Industries in South Korea,
o Everdura Technology Company in Taiwan, and
o Bei Ying International in Taiwan.
Operational
· Delivered 4.56 MWh of products between January and December 2022 to
projects in the UK, EU, U.S. and Asia.
· Manufactured 13.2 MWh of products during 2022 representing a 100%
increase YoY.
· Further expanded manufacturing capabilities in line with demand:
o Completed manufacturing expansion in Asia with the move to new, larger
manufacturing partner Baojia New Energy;
o Significantly expanded Invinity's Vancouver manufacturing facility (which
was officially opened in June 2023).
· Gained certification as compliant with multiple ISO and UL standards
in April 2022.
Current Trading
In the year to date and against a background of increasingly positive policy
and regulatory developments looking to further incentivise global deployment
of longer duration, high-throughput energy storage technologies, the Company
has achieved significant milestones across all facets of its business. These
include:
· Closing 2023 year to date sales totalling 5.38 MWh for vanadium flow
batteries ("VFBs") to customers including The Wave (UK), OPALCO (U.S.) and
IBEW (U.S.);
o Year to date sales also include initial and follow-on orders with new
regional partners Dawsongroup plc in the UK and STS Group in the EU.
· Delivering an 8.4 MWh VFB to Elemental Energy for its Chappice Lake
Solar Storage project in Alberta, Canada;
· Delivering an 8 MWh VFB to Yadlamalka Energy for its Spencer Energy
project in South Australia;
· Securing £11m of matched-funding for the UK LODES project; and
· Announcing the Company's first Mistral pilot prototype project.
Revenue Backlog and Commercial Pipeline
The Company's 2023 revenue backlog (defined as both contracted orders already
recognised in 2023 and contracted orders still to be delivered over the
remainder of 2023) was £23.7m as at 31 May 2023.
Invinity's current commercial pipeline as at 24 May 2023, is detailed below:
Date Closed (MWh) Base (MWh) Advanced (MWh) Qualified Qualified
Near Term(1) (MWh)
Further Term(1) (MWh)
25-May-22 28.0 11.6 66.3 608.3 -(2)
(2021 Annual Report)
22-Sept-22 28.0 22.8 63.5 405.8 -(2)
(HY22 results)
20 Jan-23 59.8 15.6 129.4 766.4 1,190.0
(Operational Update)
24-May-23 64.3 42.8 73.4 957.1 1,397.4
(FY22 Results)
% change +129.6% +269.0% +10.7% +57.3% +17.4%(3)
(May 2022 to May 2023)
(1) Near term dates in the Qualified categories are where estimated delivery
is within the next 24 months. Further term reflects estimated deliveries that
are beyond the next 24 months.
(2) Not reported at time of pipeline publication.
(3) Increase given from when figure first reported.
The significant year-on-year increases across all categories of the Company's
sales pipeline continues to reinforce both the Company's strengthening
position in the market for non-lithium, longer duration energy storage,
reinforced by the growing global demand for products within that segment.
Additionally, the pipeline now includes over 1 GWh of qualified commercial
interest for Invinity's next-generation product.
Next-Generation Product Development Progress
Invinity continues to make significant progress in designing and developing
its next-generation vanadium flow battery. In June 2023 the Company announced
its first Mistral prototype project, supported by the British Columbia Centre
for Innovation and Clean Energy, at a site near the Company's recently
expanded Vancouver manufacturing facility.
The ongoing achievement of developmental and engineering milestones has
continued to validate the commercial and technical targets established for the
programme. Invinity continues to expect more contracts for a limited number of
initial pilot projects to be announced later in 2023, with publication of full
product details, product certification and unrestricted sale of the product
expected mid-2024.
Larry Zulch, Chief Executive Officer at Invinity said:
"We're pleased with the progress we made in 2022 along Invinity's pathway to
profitability. Achieving and exceeding our expectations for signing new deals
was foundational for achieving the significant increase in revenue we expect
in 2023. Government support around the globe demonstrated acknowledgement of
the long duration energy storage imperative. And progress on our next
generation product, code-named Mistral, keeps us on target for first customer
shipments next year of an offering we expect to be transformative for the
prospects for non-lithium storage. Our confidence and optimism have never been
higher."
Stay up to date with news from Invinity. Join the distribution list for the
Company's monthly investor newsletter here
(https://invinity.com/newsletter/?utm_source=iesrns) .
Enquiries:
Invinity Energy Systems plc +44 (0)20 4551 0361
Jonathan Marren, Chief Development Officer and Interim CFO
Joe Worthington, Director of Communications
Canaccord Genuity (Nominated Adviser and Joint Broker) +44 (0)20 7523 8000
Henry Fitzgerald-O'Connor / Harry Pardoe / Gordon Hamilton
VSA Capital (Financial Adviser and Joint Broker) +44 (0)20 3005 5000
Andrew Monk / Simon Barton
Tavistock (Financial PR Advisor) +44 (0)20 7920 3150
Simon Hudson / Charles Baister invinity@tavistock.co.uk (mailto:invinity@tavistock.co.uk)
Notes to Editors
Invinity Energy Systems plc (AIM: IES) (AQSE: IES) (OTCQX: IESVF) manufactures
vanadium flow batteries for large-scale, high-throughput energy storage
requirements of business, industry and electrical networks.
Invinity's factory-built flow batteries run continually with no degradation
for over 25 years, making them suitable for the most demanding applications in
renewable energy production. Energy storage systems based on Invinity's
batteries are safe, reliable, and economical, and range in size from less than
250 kilowatt-hours to tens of megawatt-hours.
Invinity was created in April 2020 through the merger of two flow battery
industry leaders: redT energy plc and Avalon Battery Corporation. With over 65
MWh of systems already deployed or contracted for delivery across over 70
sites in 15 countries, Invinity is active in all major global energy storage
markets and has operations in the UK, Canada, USA, China and Australia.
Invinity Energy Systems plc is listed in the UK on AIM and AQSE and trades in
the USA on OTCQX.
To find out more, visit invinity.com (https://invinity.com/?utm_source=rns) ,
sign up to our monthly Investor Newsletter here
(https://invinity.com/newsletter/?utm_source=iesrns) or contact Investor
Relations on via +44 (0)20 4551 0361 or ir@invinity.com
(mailto:ir@invinity.com) .
Audited financial results for the year ended 31 December 2022
Introduction: A Company and an Industry Race Forward
By Matt Harper, Chief Commercial Officer
Last year I talked about how Invinity was at a critical threshold where the
three pillars of value, cost and proof - value to our customers, cost of
delivering that value, and proof that we and our products can deliver - were
the foundation for significantly growing our commercial opportunities. Since
that time we were able to solidify those pillars, and I'm thrilled that doing
so massively accelerated the commercial acceptance of our product.
The Three Pillars
We and our customers now have data that shows the value our pioneering
projects are delivering; going above and beyond traditional lithium-ion
systems to deliver multiple value streams in parallel. At the Energy Superhub
Oxford, for instance, our 5 MWh battery has been operating in wholesale
electricity markets and performing ancillary services since the summer of
2022, proving the range of capabilities our products provide for customers.
Similarly at Scottish Water Perth, our battery is increasing the on-site use
of self-generated, low carbon electricity while also saving the site operator
money by decreasing the amount of electricity they purchase when electricity
tariffs are at their peak.
But even the most valuable assets need to be purchased and financed - so cost
matters, and Invinity made significant advancements in 2022. Product design
simplifications, new supply chain partners and new, more streamlined
facilities have decreased our production costs, allowing us to sell at prices
that contribute to our bottom line while keeping customer business cases
resoundingly positive. We have also worked to further decrease the costs our
customers incur to operate and maintain our products over a service life
measured in decades rather than years, truly maximizing their return on
investment. And perhaps most importantly, the focus on full lifecycle cost
reduction has set the stage for our next generation product, code-named
"Mistral", whose fundamentally simpler, lower-cost design will allow us to
compete directly with the most aggressively priced energy storage systems on
the market.
Finally when we think about proof, we have made significant leaps in giving
new partners - be they customers, financiers, resellers or regulators -
confidence that our batteries are the right solution for solving the toughest
problems on the electric grid. Not only have we implemented data analytics and
reporting tools that show our existing customers how our products are
befitting them both in real-time and in aggregate, but we have developed
assets such as a bankability report from global assurance and risk management
leader DNV to prove how Invinity's vanadium flow batteries deliver as
expected.
From a Strong Foundation
And it worked. Invinity saw tremendous commercial success through the latter
half of 2022 building directly on these pillars, contracting for more business
in that period than in the history of the Company to date. Excitingly this
included projects that are in potentially massive new segments like data
centres (with Kinetic Solutions in Arizona); that present a first engagement
with regional partners who plan to revamp entire national electricity grids
(with Hyosung in South Korea, Everdura in Taiwan and, more recently, both
Equans and STS in Europe); and that will demonstrate how at any scale our
batteries, combined with renewables, can decrease costs and accelerate
decarbonization for major electricity users (with Indian Energy in Southern
California). With each of these projects progressing towards delivery, we are
looking forward to further proving how our batteries can revolutionise energy
storage applications the world over in 2023.
From One to Many
The above-stated developments are impressive, and I am energized every day by
being part of a team that continues to deliver commercial success year after
year. Beyond Invinity's walls, though, those same three pillars of value, cost
and proof are beginning to deliver huge leaps forward for grid-connected
energy storage in general. In the last year, industry associations like the
Long Duration Energy Storage Council have worked to advance a consensus view
of how longer duration storage, especially incorporating non-lithium
technologies, can create enormous value while unlocking a renewables-fueled
global path to net zero. Across the nascent long duration energy storage
("LDES") industry costs are decreasing and supply chains are normalizing; by
contrast, the growing EV market is driving costs up and availability down for
lithium-ion batteries, broadening the opportunity for competition.
And the proof? One only needs to look to the funding governments and
regulators are putting into our industry, from the California Energy
Commission (or CEC)'s US$380m for non-lithium LDES to the UK Department of
Energy Security and Net Zero (DESNZ)'s £69m for Longer Duration Energy
Storage (LODES) solutions for the UK grid. We are delighted to see broad
support for our sector and especially thrilled that, in both cases, Invinity
is at the forefront, with the CEC and DESNZ providing financial support to our
Viejas Resort and Casino project in California and our Phase 2 LODES
competition project in the UK, respectively. Additionally, the U.S. Department
of Energy has recently published a report titled "Pathways to Commercial
Liftoff: Long Duration Energy Storage", which projects that the intra-day LDES
market, on which Invinity is focused, is expected to be as large as 274 GW in
the U.S. alone by 2050. These and other agencies the world over are convinced
long duration storage is critical to a net zero grid; their support of
Invinity to date proves they see us as leaders in delivering that vision.
The Best is Yet to Come
In 2023 Invinity will build on this momentum. First, we expect to deliver a
fleet of flow batteries totaling over 35 MWh across four continents, embodying
almost 1000 individual flow batteries. That's not just a commercial success;
it will give us operational experience, applications expertise and an
unparalleled dataset from which to draw the customer, technical and
data-driven insights that will accelerate our progress and advance our
market-leading position.
Perhaps most exciting though are our plans to initiate on our first projects
this year for our next-generation battery, Mistral. This isn't just about
developing a cheaper, higher-performance battery; we expect Mistral will
define a new category of high-throughput grid-connected energy storage. A
major trend in renewables over the last five years has been the combination of
solar photovoltaic generation with storage as the dominant paradigm for
utility-scale plants. By contrast, maximising intermittent wind output with
fast-responding, durable battery storage is a much more demanding service,
requiring intervention by the second, by the hour and over days. The economics
of delivering that level of throughput over the decades-long service life of a
wind farm by lithium-ion batteries simply do not add up.
Mistral, whose development draws from deep expertise from the wind industry,
will be the first product designed from the ground up to maximise the benefits
storage can deliver to renewable generation. This matters because in the UK,
wind dominates over solar; but even with recent increases in the cost of gas
generation driven by geopolitical uncertainty, wind power's intermittency has
limited its ability to substitute for gas as prices rise. Mistral will close
that gap, delivering energy on demand from wind and helping to stabilize UK
energy prices with low-cost, low-carbon, domestically-produced power.
No matter what proportion of the global energy storage market Invinity is able
to capture - and we think we are ideally positioned to capture a large slice
of the pie - it is unequivocal that this is a revolutionary opportunity of the
kind that comes about only once in a generation. The last two decades have
proven that renewables are an inexpensive, effective source of clean energy
for the electric grid; the next two will prove that energy storage can turn
that energy into on-demand, low-cost power our homes, our industry, and our
institutions in a net zero future. The year ahead will see Invinity continue
to accelerate our part in making that future a reality.
Chairman's Report: Breaking New Ground
I am delighted to report to shareholders that Invinity has accelerated its
deployment of working assets and built up a significant order book for
delivery in 2023 and 2024. We are focused on deploying and operating the units
that have been shipped, winning new contracts and developing the next
generation of our vanadium flow battery which we believe will play a
significant role in Invinity's rapid progression through the current
loss-making phase towards becoming a self-sustaining, profitable business. It
is worth restating why we see Invinity winning a significant market share in
the global energy storage market. Invinity has created a modular,
long-duration battery with a 20+ year asset life, capable of achieving some of
the lowest possible levelised cost of storage metrics. This means our
technology is an ideal solution for both commercial and utility-scale
customers wishing to reduce their energy costs, utilise greater amounts of
renewable energy and accelerate progress towards net zero. Given the world's
urgent focus across these key areas, this opens up a potentially huge
addressable global market for Invinity, who are uniquely positioned with a
mature, production-ready product which has already been proven in the field.
2022 saw record global deployment of energy storage, particularly in the U.S.
and the UK, and I am pleased to note Invinity's own contribution to this
trend. We sold a record number of vanadium flow batteries during the period to
customers in both new and existing markets, making this our best commercial
year to date, and underscoring my belief that the Company has reached a key
milestone in terms of commercial acceptance. One of the key drivers of this
success was potential customers being able to see our batteries in operation
at key sites and I was proud to represent Invinity at the launch of our 5 MWh
vanadium flow battery, the UK's largest operational VFB, at the Energy
Superhub Oxford in July 2022. Projects such as this attract worldwide
attention and have helped to place Invinity at the forefront of many
developers' minds.
Delivery is an important target for Invinity. Signing contracts is the first
step of the commercial process, but the follow through to delivery and
handover generates revenue and ultimately long-term value for our
shareholders. Having operational systems in the field is an important
indicator of the significant progress the Company has made in this regard, but
as a manufacturer of 'emerging' battery technology, at the core of our
business will always be our ability to build and deliver our products
effectively. Notably, the expansion of our manufacturing capabilities has set
us on the path towards delivering even larger projects, faster and more
economically than ever before.
During 2022 the team successfully deployed funds that were raised in late 2021
to support our operational and commercial growth and I'm greatly encouraged to
report demonstrable progress in both areas during the period. The funds raised
at the beginning of 2023 are already supporting the next steps of our growth
as we progress from a revenue-generating to a profit-generating business. The
work we have done means I remain confident that Invinity is now even better
positioned to take advantage of this buoyant market evidenced by our
well-developed commercial pipeline, which now includes a first look at the
over 1 GWh of qualified commercial interest for our next-generation vanadium
flow battery and confirms Invinity's place as one of the global market leaders
for vanadium flow battery technology.
My Board and I have ensured Invinity continues to follow a clear and
well-developed strategy, set out in detail later in this report. Invinity's
core markets remain the UK, North America and Australia and we maintain our
belief that these are the most appropriate areas for focus given the Company's
current capabilities. However, new markets are also emerging in Europe and
Asia and the formation of key partnerships that enable us to expand our reach
commercially and operationally without the need for a full corporate presence
and the associated overhead costs is another important strategic decision that
has been made.
To this end, I am pleased to note we signed three new reseller partnerships in
2022 that enable us to access some of the fastest growing markets in the
world, such as Korea and Taiwan. Encouragingly, this momentum has continued
into 2023 with entry into new European markets and further important business
relationships initiated in our core UK and U.S. markets. The hard work carried
out by our team in establishing and supporting these strategic relationships
is already bearing fruit with our largest sale of 2022 being a 15 MWh deal
with our Taiwanese partner Everdura.
Looking inward, the Invinity team is operating strongly, winning new
contracts, deploying our batteries and continuing to develop our leading-edge
technology. I would like to take this opportunity to thank the entire team for
their hard work and perseverance during 2022 and the current year to date. I
would also like to thank all my Board colleagues for their support and
assistance over the year, particularly to Jonathan Marren who, stepping back
into an Executive role, is already making a significant impact on the
strategic and financial side of the business.
In summary, 2022 can be marked as a key inflection point in Invinity's
progress, with almost 40 MWh of sales signed, a £23.7m sales orderbook for
delivery across 2023, our largest project to date launched and operational and
a growing partnership network that is already bringing commercial benefits to
the Company. An improved corporate and operational structure has set us up
well for the future and 2023 is already shaping up to be another
transformational year, supported by the successful March fundraise and
continued commercial progress.
I remain extremely optimistic in the outlook for Invinity. I am extremely
grateful for the continued support from you, our shareholders, without which
we would not be in our strongest position yet to take this next step on our
journey.
Neil O'Brien
Non-executive Chairman
27 June 2023
Chief Executive's Report: Progress on the Pathway to Profitability
Efforts from years past bore fruit in 2022. We closed deals for more energy
storage than we had closed in our entire previous history. As expected, we
reported a loss for 2022, but were able to transition from closing loss-making
deals to signing ones that are anticipated to yield positive gross margins.
I'm pleased to report that all but one of the contracts closed in 2022 is
forecast to achieve this requirement. We manufactured more product than in any
previous year, progressed our next generation product and established
significant new partnerships. Perhaps most importantly, we set the stage for
an even better 2023 in every critical measure.
We have set ourselves to a task that is not easy. The significant investment
we are making now will ensure Invinity is better prepared commercially,
operationally and financially as we take rapid and significant strides towards
profitability. We are passionately committed to building a profitable,
self-sustaining company that creates a net zero future where vanadium flow
batteries deliver renewable power on demand. This means delivering large
amounts of high-performance stationary energy storage at a price that
customers find compelling and signing contracts in sufficient volume and at
low enough costs that we generate corporate profit. We believe our next
generation product "Mistral" will play a key role in achieving these goals.
We know what we need to do to achieve this ambition and we are doing it. Our
accomplishments in 2022 were largely presented as goals in 2021. In my report
for that year, I said that we wanted to achieve demonstrable progress in the
fields of sales, partnerships, and delivery, recognise revenue on our existing
VS3 product, and progress development of our next-generation product,
code-named "Mistral". Our accomplishments in these key areas, despite (or
perhaps enhanced by) the challenges we've encountered and overcome marks
progress toward our goals and will help us deliver long-term value to our
shareholders.
We believe our accomplishments in 2022 allow us to state that we have
successfully navigated the difficult transition from a company delivering
pilot projects to a commercial entity. Our work continues to require
significant effort and resources as we progress, but we are moving
purposefully and determinately along our pathway to profitability.
Delivery and Sales
Our success derives from delivering our proven technology to a growing list of
customers. I am pleased to report that last year we delivered more than 100
individual VS3 modules and commissioned more than 200 to customers across
three continents. At the time of writing, we believe we have delivered more
individual flow batteries-each capable of operating independently-than all
other flow battery companies combined across their histories.
Current installations of each BESS (Battery Energy Storage System; an
industry-standard acronym for stationary storage) incorporating Invinity's
products undergo a multi-step process. Contracted project objectives are
turned into a storage system architecture and expressed in plans and
documentation. Our customer prepares the battery system's foundations, grid
connections and supporting infrastructure. Once site works are complete, we
deliver the battery modules, ensure those modules are installed correctly and
bring the system online. Demonstrating that the battery system can properly
store and discharge energy allows us to declare the BESS "energised". Once the
system is integrated with site-level controls and fully operating, we formally
hand it over to the customer and consider it "commissioned".
During 2022, we commissioned our largest site to date, the 5 MWh system at the
Energy Superhub Oxford, in addition to a number of behind-the-meter systems
including a project with Scottish Water and one with a Taiwanese industrial
group. We also delivered two California Energy Commission-funded projects: for
the Soboba Band of Luiseño Indians and at Marine Corps Air Station Miramar
near San Diego. In August, we energized our project with the European Marine
Energy Centre in the Orkney islands.
Successfully closing a significant number of deals, delivering those products
around the world and ensuring they meet our customers' requirements provides
important proof of our commercial status. It demonstrates that the market
wants our batteries and that we have built an organisation capable of
converting market interest into revenue.
We and our customers continued to experience various external challenges,
including ongoing supply chain disruptions, in 2022. Those disruptions caused
some delays but did not impact our ability to sign nearly 40 MWh of sales
contracts for our VS3 batteries. In doing so, the Company sold more batteries
in the last three months of 2022 than in Invinity's entire history. These
sales were based in part on our ability to demonstrate to new customers how
existing projects are already delivered and operating. I am grateful to the
entire Invinity team for the work they carried out to make this happen.
Importantly, I believe these recent contract wins, expected to be delivered at
positive gross margin, combined with robust growth in the Company's sales
pipeline, reflect an inflection point in the commercial acceptance of
Invinity's products. The Company is increasingly well positioned to address
the growing global demand for commercial, non-lithium and longer-duration
energy storage solutions.
Partnerships
I stated in my previous report that our strategy included finding substantial
partners who can represent us and our products by providing sales,
installation and service support. These partnerships are valuable for two
reasons.
First, they allow us to reach a wider market without incurring significant
costs that would delay profitable growth for the Company, particularly outside
our core markets of Europe, North America and Australia. Second, our
reputation is enhanced through association with established entities that have
chosen to work with us because they recognise the size of the opportunity and
the advantages of our product. I am proud that Invinity has developed
important relationships with Hyosung Heavy Industries in Korea, Everdura
Technology Company and Bei Ying International in Taiwan, Indian Energy in the
U.S., and post period, with Dawsongroup in the UK and Ideona Group and STS
Group in the EU. I am delighted that we have closed sales opportunities with
each of these partners and are developing further opportunities that have
contributed to our growing pipeline of commercial deals.
Our partners recognise the critical need for energy storage, not just to use
renewable energy effectively but to avoid relying on more expensive,
higher-emissions sources of power when renewable sources-wind, solar and
tidal-are not available. They believe that alternative chemistries are vital
to overcome lithium-ion batteries' limitations in safety and lifetime and
because the demand for lithium-ion batteries needed to support the
electrification of transport is already impacting global supplies and has
increased the price of lithium and other battery materials significantly.
Our ability to deliver our product has been enhanced through establishing a
manufacturing relationship with long-time Invinity supporter Suzhou Baojia New
Energy Technology Co. (Baojia). They have taken on the manufacturing of our
balance of system from our previous manufacturing partner, BCI, who provided
an important foundation for Invinity in the early years and for whose
continued support we are grateful. With Baojia's larger facilities, we are
already achieving greater production scale, having so far shipped more than 25
MWh of batteries directly to project sites and our facilities in both Bathgate
and Vancouver. This level of output bodes well for the future, brings us
greater cost efficiencies and enhances our ability to expand to meet the
growing demand for our products.
Progressing Mistral
Our most important partnership is with Gamesa Electric and Siemens Gamesa
Renewable Energy (SGRE) as reflected in our previously announced Joint
Development and Commercialisation Agreement. Nothing on our pathway to
profitability is more important than the investment we are making to progress
the joint development of our next-generation product. The objectives for
Mistral are simple, albeit quite challenging to realize: lower costs
substantially from our current VS3 product while increasing the suitable
project size addressed by our product from 10s to 100s of MWh. These
objectives are captured in a single metric: Levelized Cost of Storage (LCOS).
LCOS captures the total cost of operating a BESS, including purchase,
operating costs and efficiency, on a throughput (in MWh) basis. Mistral is
targeting the best LCOS of any BESS, bar none, and to beat years early the
U.S. Department of Energy's LCOS target of $50/MWh by 2030.
We are pleased with the progress we are making on Mistral alongside our
partner. We will not be making any specific announcements of Mistral's
specifications until we can do so jointly and in full confidence that
Mistral's capabilities are validated in field trials and large-scale internal
tests. While this discipline may not be customary in our field-we often hear
of the 'revolutionary' importance of what is only, in reality, a lab
demonstration, or of the 'sales success' of a company that signs deals at a
fraction of their production cost or has yet to prove capabilities in the
field-it is what you should expect from us as an increasingly mature
multinational product company.
Corporate Strength
We continue to be grateful for the support of our investors. The funds we
raised in late 2021 enabled us to progress our pipeline, sign a record volume
of business and invest in Mistral. The support shown by our existing and new
shareholders, particularly including Everbrite, in March of this year has
provided sufficient working capital to support and grow our existing
operations and to advance Mistral to its next critical milestone.
We are not alone in enduring delays and having challenges to overcome that
cost more than anticipated. The pandemic had a significant impact on Invinity
as it did on countless companies. But we believe we are alone, and happily so,
as the only provider of products for non-lithium BESS that is successfully
deploying megawatt-scale projects to customers at positive gross margin, and
we are doing so in multiple countries. We celebrate this major step toward
corporate profitability, a step we could not have taken without our
shareholders' support.
Looking to the Future
A future electric grid without renewables as its primary energy source simply
will not meet global objectives for carbon emission reduction. Yet that future
renewable-intensive electric grid will be unstable-unless it incorporates
adequate energy storage. Grid instability is already increasing with greater
renewable generation, and already significant disruption events have occurred
in the UK, the U.S., Australia and elsewhere.
No single technology will meet all future needs for stationary battery energy
storage, not even our vanadium flow battery technology. Instead, battery
characteristics will be matched to requirements. Governmental initiatives
globally seek to stimulate more energy storage generally and to support
domestically produced alternatives to lithium-ion batteries able to discharge
for longer durations or operate with greater safety and lower total costs.
Invinity has and will continue to be a significant beneficiary of these
initiatives.
The macro environment continues to strongly support the Company's business. To
meet this opportunity, Invinity has determined that a four-part strategy is
required: 1) deliver projects; 2) close new and larger deals; 3) progress
Mistral; and 4) advance our operational excellence. Our view of the
significance of each of these priorities:
1) Delivering contracted-for projects is not just an obligation incurred
upon signing a contract; rather, each one is an opportunity. Every
installation further demonstrates that our technology is proven and exceeds
customer expectations. We gain critical field experience that further refines
our product development. And we earn revenue.
2) Closing new deals enhances our position as the clear leader in
large-scale, low-LCOS energy storage that can be deployed anywhere and
provides for future revenue.
3) Mistral will transform our product offering from competitive to
compelling for a great many applications, becoming a platform for profitable
revenue growth bounded, we believe, not by demand but by supply.
4) Operational excellence is based on putting in the right processes and
operations now and not waiting until the need is acute. This focus is vital to
maintaining our growth trajectory and enabling us to adroitly address the
inevitable challenges-whether supply chain, competition, macro events, or
something else-that we encounter.
In my 2021 report, I acknowledged the challenges from supply chain disruptions
that we had underestimated and sales processes that took longer than we
anticipated. We continued to see challenges in 2022, but we have entered 2023
with what we believe is the best technology we've ever deployed, the largest
order book we've ever had, and the most sales prospects by far. At the same
time, we have made great strides toward the development of our next-generation
VFB which promises both improved performance and significantly increased
margins. It is hard to contain our excitement at the future which lies ahead
for us. Energy storage is the key to unlocking the potential for the world to
be powered by clean energy and we are well on our way to achieving a
profitable position at the heart of this fundamentally important industry.
I remain highly optimistic for the future of our business and remain confident
that we will realise our potential. I therefore thank you again for your
support for Invinity and look forward to bringing you more success in 2023.
Larry Zulch
Chief Executive Officer
27 June 2023
Chief Financial Officer's Report: Growth and Investment - a view to the future
Financial Highlights
2022 2021
£'000 £'000
Revenue 2,944 3,185
Project related grant income shown against cost of sales 647 -
Total revenue and grant income other than revenue 3,591 3,185
Loss from operations (18,982) (21,264)
Inventory on hand for battery projects 9,827 5,797
2022 Financial Performance
I am pleased to report that total income including sales revenue and project
related grant income increased to £3.6 million in 2022 (2021: £3.2 million).
Revenue is recognised against projects when specific performance obligations
related to those projects have been satisfied. Grant funding specific to
customer projects has been presented alongside the relevant project revenue
and associated direct costs where that funding is project specific and
represents a direct subsidy against project costs.
Another positive development during the period was that the Company was able
to show a materially reduced cost of delivering its VS3 products to customers,
resulting in a significant £3.2 million reduction in the provision for
contract losses. This contributed to an 12% year-on-year reduction in
operating loss and a material improvement in gross margin. Invinity was also
able to narrow the loss before tax by 13% to £18.5 million for the year.
These movements represent important progress as the Company moves along the
path to achieving industry standard gross margins which are expected to be
delivered with the launch of the Company's next-generation product.
Administrative costs were £19.0 million (2021: £14.4 million), an increase
of £4.6 million primarily represented by investment in people with staff
costs of £10.3 million in 2022 (2021: £9.0 million) and IT costs of £1.2
million in 2022 (2021: £0.6 million). Research and development costs that did
not meet the threshold for capitalisation and were therefore expensed were
£2.6 million (2021: £1.8 million). In addition, professional fees increased
to £3.0 million in 2022 (2021: £2.0 million) as a result of predominantly
non-recurring matters and costs of £1.0 million in 2022 (2021: £0.2 million)
were incurred in relation to the transfer of manufacturing from BCI to Baojia
at year end.
2022 Cash Performance
Year-on-year cash outflow from operations of £21.9 million (2021: £23.0
million) is largely consistent with the prior year.
All bar one of the Company's most recent sales contracts have been signed with
a forecast positive margin. Delivering on this margin is a key corporate
priority and will make an important contribution to the Company being able to
fund its administrative costs from cash from operations in the future.
To this end, the Company continues to develop its next-generation battery,
code-named "Mistral". Mistral is expected to be manufactured at significantly
lower cost than the Company's existing product, the VS3, and will occupy a
comparatively smaller physical footprint that will lead to lower costs for
operations and maintenance. These characteristics are expected to enable the
Company to sell this new product at a materially lower and more competitive
price point than currently. This is anticipated to drive additional sales at a
materially better gross margin thus leading to future cash generation and
profitability and reducing the Company's reliance on external sources of
funding.
Growth and Investment - Looking to the Future
In addition to the delivery and commissioning of contracts for battery systems
with customers, 2022 has been a year of growth in the underlying business of
the Company as evidenced by a significant increase in the number of new
contracts for battery systems closed in the year. In total, 7 new sales
contracts were signed in 2022 with a total potential revenue value of £22.0
million. Each of these new contracts (other than one entered for strategic
reasons) are currently expected to be delivered at a positive gross margin as
improvements are made to the Company's supply chain and manufacturing
infrastructure. As a Company, we continue build on the experience gained from
systems delivered to date and seek to use those learnings improve operational
and financial performance related to contracts.
The expected growth in the business has required investment to be made in a
number of areas including people, facilities, infrastructure and inventory.
Headcount increased by 23 people to efficiently manage the backlog of orders
for delivery in 2023 and beyond. Other specific operational investments made
in 2022 included leasehold improvements related to our production facilities
and offices of £0.4 million and an increase in prepayments and deposits of
£1.3 million. Buying the equipment necessary to build our batteries in
advance helps the Company to reduce the delivery timeframe for its vanadium
flow battery systems and accelerates the associated construction and
installation of the units, advancing revenue recognition and as a result,
prepaid inventory rose £1.0 million to £5.0 million.
These investments are all focused on improving contract delivery, logistics
and providing the necessary funding for further research and development as
Invinity moves forward on its pathway to profitability. That next stage will
come as we mature and ultimately launch our next-generation product,
code-named "Mistral", currently in joint development with Siemens Gamesa.
Funding and Net Working Capital
At 31 December 2022 the Company had net working capital of £4.3 million,
inclusive of cash and cash equivalents of £5.1 million. The cash balance of
£5.1 million included the net cash proceeds from the initial drawdown of
US$2.5 million from a US$10.0 million convertible loan instrument (the
"Investment Agreement") taken out with Riverfort Global Opportunities PCC Ltd
("Riverfort") and YA II PN ("Yorkville") that was entered into on 14 December
2022 to provide additional working capital for the business.
The Company only made one drawdown under the Investment Agreement. This was
due to the Company successfully raising additional equity capital of £23.0
million through a placing, subscription and open offer in March 2023. Part of
these proceeds were used to redeem in full the balance then outstanding under
the Investment Agreement. In doing so, the warrants that were issued alongside
the Company entering the Investment Agreement were repriced to reflect the
open offer price of 32p. Those repriced warrants remain in place.
Notwithstanding, any proceeds from the future exercise of the warrants held by
each of Riverfort and Yorkville will be distributed 97% to the Company and 3%
to Riverfort and Yorkville.
Strategic Investment
Importantly, and as part of the capital raise in March 2023, Everbrite
Technology Co. Ltd. (Everbrite), a leading Taiwanese manufacturer of
industrial technology, subscribed for £2.5 million of shares in the Company.
The investment by Everbrite followed the 1 December 2022 reseller agreement
and initial 15 MWh purchase order of vanadium flow batteries with Everdura
Technology Company, a joint venture between Everbrite and Taiwanese clean
energy company, Pronergy Technology Co. Ltd covering Taiwan and Southeast
Asia.
This strategic investment underscores the development progress of the Company
since the 2020 merger transaction that formed the Group as it is today and is
intended to support a closer strategic relationship for the deployment of
vanadium flow batteries in Taiwan and further afield.
Invinity sees strategic partnerships and investment as an important pillar of
its future corporate growth and as previously disclosed, discussions with a
number of potential strategic partners remain ongoing.
Grant Funding
The participation in grant schemes is an important source of funds for the
Company. Grant awards may be project specific or general in nature. Grants
that are more general in nature typically help to defray ongoing costs such as
research and development where projects are seen as strategically important by
local or national governments.
Other grant funding is more project specific and aimed at increasing the
application of new technology and its commercial uses.
In 2022, the Company received £0.6 million of grant funding related to a
specific customer project under Phase One of the UK Government's Longer
Duration Energy Storage (LODES) Competition that is administered by the
Department for Energy Security and Net Zero (DESNZ). As this income was
project specific, it has been identified in the profit and loss account
alongside but separate to revenue on account of it being recognised against
direct costs.
Going Concern
In assessing whether the Group has the ability to continue as a going concern
the Directors have modelled cash flow forecasts for a period up to 31 December
2024. The Directors have prepared a base case scenario that assumes the 14.5m
Short-Term warrants originally granted in 2021 ("Short-Term Warrants"), the
terms of which are proposed to be amended as set out below are exercised
before June 2024. Under this scenario the Group would expect to remain cash
positive for the period up to 31 December 2024 assessed for going concern
purposes. The forecast does indicate that the Group would move into negative
cash shortly after the period assessed for going concern as a result of
working capital investment on future sales. The Group would defer any working
capital investment if it were to result in exhausting all cash. This forecast
is also based on delivering existing signed sales contracts during 2023 as per
forecast gross margins and existing and future sales contracts during 2024 at
anticipated positive gross margins. The Directors recognise there is a risk
that the Short-Term Warrants will not be exercised if they are not 'in the
money' before the expiry date and given it is not at the discretion of the
Group.
The Directors have also prepared an alternative 'adjusted base case' scenario
which does not include the exercise of the Short-Term Warrants but also
adjusts forecasted costs. The Directors have a plan to adjust costs in a
scenario where it does not look like the Short-Term Warrants will be
exercised. This plan includes the following:
· Non-payment or delayed payment of forecasted bonuses;
· No increase or delayed increase in salaries across the Group;
· Delayed recruitment of additional headcount;
· Reduction in planned increase in research and development
expenditure.
Under the adjusted base case the Group would expect to remain cash positive
for the period up to 31 December 2024 assessed for going concern purposes.
Therefore the Directors believe it is appropriate to prepare the accounts on a
going concern basis.
The Short-Term Warrants were initially granted in 2021 with an exercise price
of 150p and an expiry date of 15 September 2022. On 31 August 2022, the
holders of the Short-Term Warrants agreed at a general meeting of Short-Term
Warrant holders to amend the expiry date of the Short-Term Warrants to 15
September 2023. The Company is now planning to seek the approval of Warrant
holders at a general meeting, notice of which will be given shortly, to make
the following amendments to both the Short and Long-Term Warrants. The Company
intends to seek approval to amend the Short-Term Warrant subscription period
to 16 December 2023 (the Long-Term warrant subscription period will remain
unchanged at 16 December 2024) and amend the exercise prices of the Short and
Long-Term warrants to 50p and 100p respectively. There can however be no
certainty that such a change in the terms will be approved.
In assessing going concern the Directors have also prepared a severe but
plausible downside scenario which forecasts delivery of existing and future
sales being made during 2024 being delayed beyond June 2024 and forecasted
margins not being achieved. Under this scenario the Group would exhaust all
available cash by April 2024 and it will be necessary to raise further funding
within the next 12 months in order to continue trading and deliver on the
strategic objectives.
The Directors are in the process of evaluating potential additional funding
options from potential strategic investors but no such funding is committed as
at the date of approval of these financial statements. The Group has been, and
continues in, active discussions with a number of identified strategic
investors and is confident that it will be able to conclude an equity
investment from one or more of such parties within the period up to 31
December 2024 assessed for going concern purposes. The Directors also note
that the Company concluded an initial strategic investment from Everbrite
Technology Co., Ltd. for £2.5 million in March 2023 which gives them
confidence that the Company is capable of attracting further strategic
investment.
Due to the uncertainty in relation to obtaining additional funding this
indicates the existence of a material uncertainty that may cast significant
doubt about the Group's ability to continue as a going concern.
The financial statements do not include the adjustments that would result if
the Group were unable to continue as a going concern.
In addition to the issues discussed above, the directors have also reviewed
other varying, and wide-ranging information relating to both present and
future conditions when reaching their conclusion regarding going concern.
These included the:
· operational performance of the Company's products delivered to
customer sites to date;
· value of contracts signed for delivery in 2023 and 2024;
· growing sales pipeline of 2,470.3 MWh in May 2023 vs 686.2 MWh in May
2022;
· growing opportunities presented by the emergent energy storage
market;
· growing levels of Government engagement and support in the three key
markets; and
· positive discussions with potential strategic partners regarding
making an equity investment into the Company.
Jonathan Marren
Chief Development Officer and Interim Chief Financial Officer
27 June 2023
Financial Statements
Consolidated Statement of Profit and Loss
For the year ended 31 December 2022
2022 2021
Continuing operations Note £000 £000 £000 £000
Revenue 4 2,944 3,185
Direct costs (2,927) (6,622)
Grant income against direct costs 4 647 -
Cost of sales 5 (2,280) (6,622)
Gross profit 664 (3,437)
Operating costs
Administrative expenses 6 (19,042) (14,439)
Other items of operating income and expense 10 (604) (3,388)
Loss from operations (18,982) (21,264)
Finance income 11 62 -
Finance costs 11 (65) (45)
Gain/(loss) on foreign currency transactions 11 448 (63)
Net finance income/(costs) 11 445 (108)
Loss before income tax (18,537) (21,372)
Income tax expense 12 - -
Loss for the year (18,537) (21,372)
Loss per ordinary share in pence
Basic 13 (16.0) (24.1)
Diluted 13 (16.0) (24.1)
The above consolidated statement of profit and loss should be read in
conjunction with the accompanying notes.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
2022 2021
Continuing operations Note £000 £000
Loss for the year (18,537) (21,372)
Other comprehensive (Expense)/income
Exchange differences on the translation of foreign operations (137) 10
Total comprehensive loss for the year (18,674) (21,362)
The above consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
Consolidated Statement of Financial Position
For the year ended 31 December 2022
2022 2021
Note £000 £000
Non-current assets
Goodwill and other intangible assets 15 24,050 24,097
Property, plant and equipment 16 1,208 1,130
Right-of-use assets 17 1,845 975
Total non-current assets 27,103 26,202
Current assets
Inventory 19 9,827 5,797
Other current assets 20 8,781 6,280
Contract assets 21 500 324
Trade receivables 22 1,737 1,683
Cash and cash equivalents 23 5,137 26,355
Total current assets 25,982 40,439
Total assets 53,085 66,641
Current liabilities
Trade and other payables 24 (4,935) (3,513)
Derivative financial instruments 25 (769) -
Contract liabilities 21 (8,375) (5,142)
Lease liabilities 26 (740) (350)
Provisions 21 (2,907) (5,976)
Total current liabilities (17,726) (14,981)
Net current assets 8,256 25,458
Non-current liabilities
Lease liabilities 26 (969) (420)
Total non-current liabilities (969) (420)
Total liabilities (18,695) (15,401)
Net assets 34,390 51,240
Equity
Called up share capital 27 50,716 50,690
Share premium 27 141,579 140,445
Share-based payment reserve 27 5,957 5,293
Accumulated losses 27 (162,094) (143,557)
Currency translation reserve 27 (1,807) (1,670)
Other reserves 27 39 39
Total equity 34,390 51,240
The above consolidated statement of financial position should be read in
conjunction with the accompanying notes.
The financial statements were authorised by the Board of Directors and
authorised for issue on 27 June 2023 and were signed on its behalf by:
Jonathan Marren
Director
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Called up share capital Share premium Share-based payment reserve Accumul-ated losses Currency transla-tion reserve Other reserves Total
£000 £000 £000 £000 £000 £000 £000
At 1 January 2022 50,690 140,445 5,293 (143,557) (1,670) 39 51,240
Loss for the year - - - (18,537) - - (18,537)
Other comprehensive income
Foreign currency translation differences - - - - (137) - (137)
Total comprehensive loss for the year - - - (18,537) (137) - (18,674)
Transactions with owners in their capacity as owners
Investment funding arrangement, net of transaction costs 25 1,129 (23) - - - 1,131
Exercise of share options 1 5 - - - - 6
Share-based payments - - 681 - - - 681
Equity settled interest on Investment funding arrangement - - 6 - - - 6
Total contributions by owners 26 1,134 664 - - - 1,824
At 31 December 2022 50,716 141,579 5,957 (162,094) (1,807) 39 34,390
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
Called up share capital Share premium Share-based payment reserve Accumul-ated losses Currency transla-tion reserve Other reserves Total
£000 £000 £000 £000 £000 £000 £000
At 1 January 2021 37,870 124,545 3,762 (122,185) (1,680) 39 42,351
Loss for the year - - - (21,372) - - (21,372)
Other comprehensive income
Foreign currency translation differences - - - - 10 - 10
Total comprehensive loss for the year - - - (21,372) 10 - (21,362)
Transactions with owners in their capacity as owners
Contribution of equity, net of transaction costs 12,286 15,148 - - - - 27,434
Exercise of share options 534 752 (296) - - - 990
Share-based payments - - 1,827 - - - 1,827
Total contributions by owners 12,820 15,900 1,531 - - - 30,251
At 31 December 2021 50,690 140,445 5,293 (143,557) (1,670) 39 51,240
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
2022 2021
Note £000 £000
Cash flows from operating activities
Cash used in operations 14 (21,934) (22,964)
Interest received 62 -
-
Net cash outflow from operating activities (21,872) (22,964)
Cash flows from investing activities
Acquisition of intangible assets 15 - (18)
Acquisition of property, plant and equipment 16 (708) (733)
Net cash outflows from investing activities (708) (751)
Cash flows from financing activities
Payment of lease liabilities 26 (591) (320)
Interest paid (59)
Proceeds from the issue of share capital, net of transaction costs 1,161 27,434
Proceeds from the Investment funding arrangement, net of transaction costs 25 769 -
Proceeds from the exercise of share options and warrants 6 990
Net cash inflow from financing activities 1,286 28,104
Net (decrease)/increase in cash and cash equivalents (21,294) 4,389
Cash and cash equivalents at the beginning of the year 26,355 21,953
Effects of exchange rate changes on cash and cash equivalents 76 13
Cash and cash equivalents at the end of the year 5,137 26,355
The above consolidated statement of cash flows should be read in conjunction
with the accompanying notes.
Notes
1 General Information
Invinity Energy Systems plc (the 'Company') is a public company limited by
shares incorporated and domiciled in Jersey. The registered office address is
Third Floor, IFC5, Castle Street, St. Helier, JE2 3BY, Jersey.
The Company is listed on the AIM Market of the London Stock Exchange with the
ticker symbol IES.L, on the AQSE Growth Market in the United Kingdom with the
ticker symbol IES and on the OTCQX Best Market in the United States of America
with the ticker symbol IESVF.
The principal activities of the Company and its subsidiaries (together the
'Group') relate to the manufacture and sale of vanadium flow battery systems
and associated installation, warranty and other services.
2 Summary of significant accounting policies
Basis of preparation
These consolidated financial statements have been prepared in accordance with
International UK-adopted International Accounting Standards, the associated
interpretations issued by the IFRS Interpretations Committee (together 'IFRS')
and in accordance with the Companies (Jersey) Law 1991.
Separate presentation of the parent company financial statements is not
required by the Companies (Jersey) Law 1991 and, accordingly, such statements
have not been included in this report.
The significant accounting policies applied in preparing these consolidated
financial statements are set out below. These policies have been
consistently applied throughout the period and to each subsidiary within the
Group.
The financial statements have been prepared under the historical cost
convention except where stated.
Going concern
In assessing whether the Group has the ability to continue as a going concern
the Directors have modelled a base cash flow forecast for a period up to 31
December 2024. The Directors have prepared a base case scenario that assumes
the 14.5m Short-Term warrants originally granted in 2021 ("Short-Term
Warrants"), the terms of which are proposed to be amended as set out below are
exercised before June 2024. Under this scenario the Group would expect to
remain cash positive for the period up to 31 December 2024 assessed for going
concern purposes. The forecast does indicate that the Group would move into
negative cash shortly after the period assessed for going concern as a result
of working capital investment on future sales. The Group would defer any
working capital investment if it were to result in exhausting all cash. This
forecast is also based on delivering existing signed sales contracts during
2023 as per forecast gross margins and existing and future sales contracts
during 2024 at anticipated positive gross margins. The Directors recognise
there is a risk that the Short-Term Warrants will not be exercised if they are
not 'in the money' before the expiry date and given it is not at the
discretion of the Group.
The Directors have also prepared an alternative 'adjusted base case' scenario
which does not include the exercise of the Short-Term Warrants but also
adjusts forecasted costs. The Directors have a plan to adjust costs in a
scenario where it does not look like the Short-Term Warrants will be
exercised. This plan includes the following:
· Non-payment or delayed payment of forecasted bonuses;
· No increase or delayed increase in salaries across the Group;
· Delayed recruitment of additional headcount
· Reduction in planned increase in research and development
expenditure;
Under the adjusted base case the Group would expect to remain cash positive
for the period up to 31 December 2024 assessed for going concern purposes.
Therefore the Directors believe it is appropriate to prepare the accounts on a
going concern basis.
The Short-Term Warrants were initially granted in 2021 with an exercise price
of 150p and an expiry date of 15 September 2022. On 31 August 2022, the
holders of the Short-Term Warrants agreed at a general meeting of Short-Term
Warrant holders to amend the expiry date of the Short-Term Warrants to 15
September 2023. The Company is now planning to seek the approval of Warrant
holders at a general meeting, notice of which will be given shortly, to make
the following amendments to both the Short and Long-Term Warrants. The Company
intends to seek approval to amend the Short-Term Warrant subscription period
to 16 December 2023 (the Long-Term warrant subscription period will remain
unchanged at 16 December 2024) and amend the exercise prices of the Short and
Long-Term warrants to 50p and 100p respectively. There can however be no
certainty that such a change in the terms will be approved.
In assessing going concern the Directors have also prepared a severe but
plausible downside scenario which forecasts delivery of existing and future
sales being made during 2024 being delayed beyond June 2024 and forecasted
margins not being achieved. Under this scenario the Group would exhaust all
available cash by April 2024 and it will be necessary to raise further funding
within the next 12 months in order to continue trading and deliver on the
strategic objectives.
The Directors are in the process of evaluating potential additional funding
options from potential strategic investors but no such funding is committed as
at the date of approval of these financial statements. The Group has been, and
continues in, active discussions with a number of potential strategic
investors and is confident that it will be able to conclude an equity
investment from one or more of such parties within the period up to 31
December 2024 assessed for going concern purposes. The Directors also note
that the Company concluded an initial strategic investment from Everbrite
Technology Co., Ltd. for £2.5 million in March 2023 which gives them
confidence that the Company is capable of attracting further strategic
investment.
Due to the uncertainty in relation to obtaining additional funding this
indicates the existence of a material uncertainty that may cast significant
doubt about the Group's ability to continue as a going concern.
The financial statements do not include the adjustments that would result if
the Group were unable to continue as a going concern.
In addition to the issues discussed above, the directors have also reviewed
other varying, and wide-ranging information relating to both present and
future conditions when reaching their conclusion regarding going concern.
These included the:
· operational performance of the Company's products delivered to
customer sites to date;
· value of contracts signed for delivery in 2023 and 2024;
· growing sales pipeline of 2,470.3 MWh in May 2023 vs 686.2 MWh in May
2022;
· growing opportunities presented by the emergent energy storage
market;
· growing levels of Government engagement and support in the three key
markets; and
· positive discussions with potential strategic partners regarding
making an equity investment into the Company.
Foreign currency
Presentation currency
The consolidated financial statements are presented in Great British Pounds
(GBP) rounded to the nearest thousand (£000), except where otherwise
indicated.
Functional currency
Items included in the financial information of the individual companies that
comprise the Group are measured using the currency of the primary economic
environment in which each subsidiary operates (its functional currency).
Whilst Jersey uses the Jersey Pound as its currency, Jersey is in a currency
union with the United Kingdom and so the functional currency of the parent
company of the Group has been determined to be GBP.
Foreign currency transactions
Transactions in currencies other than an entity's functional currency (foreign
currencies) are translated using the exchange rate on the date of the
transaction. Foreign exchange gains and losses resulting from the settlement
of transactions denominated in a foreign currency are translated into GBP
using the relevant exchange rate at the date of the transaction.
Foreign exchange gains and losses resulting from the settlement of foreign
currency transactions and from the translation at the balance sheet date of
monetary assets and liabilities denominated in foreign currencies, are
recognised in the consolidated statement of comprehensive loss within
gains/(losses) on foreign currency transactions.
Foreign currency gains/(losses) realised on the retranslation of subsidiaries
as part of the year-end consolidation are recorded in the translation reserve
that forms a part of shareholders' funds in the consolidated financial
statements of the Group.
Consolidation of subsidiaries
Subsidiaries are all entities over which the Company has control. The Company
controls an entity when it is exposed to, or has rights over, variable returns
from its involvement with the entity and can affect those returns through its
ability to exercise control over the entity. Subsidiaries are consolidated in
the Group financial statements from the date at which control is transferred
to the Company.
Subsidiaries are deconsolidated from the date that control ceases. The
ability to control an entity may cease because of the sale of a subsidiary or
other change in the Company's shareholding in that subsidiary, voting rights
or board representation.
Foreign operations
Subsidiaries of the Company that are based in countries other than the UK or
Jersey may have functional currencies that are different from that of the
Company. Since the Group financial statements are presented in GBP, the assets
and liabilities of foreign subsidiaries consolidated into these financial
statements are translated into the Group's presentational currency using
exchange rates prevailing at the end of the reporting period. Income and
expense items are similarly translated using the month-end rate for each month
during the year. The exchange rates on the actual dates of transactions are
used where exchange rates fluctuate significantly within a month. Exchange
differences arising on consolidation are recognised in other comprehensive
income and are accumulated as part of shareholder's equity.
Investments in associates and joint arrangements
Associates are entities where the Company can exert significant influence but
is not able to exercise control.
Joint arrangements may be incorporated, where an entity exists, or may be
unincorporated, where the venture or joint operation is governed by contract
or other arrangement between two or more parties. The Company is not currently
party to any unincorporated joint arrangements.
The Group accounts for its interests in associates and incorporated joint
ventures using the equity method of accounting where the relevant investment
is initially recorded at the cost to acquire the interest. After initial
recognition, the Group recognises its share in the post-acquisition income and
expenses of the associate in the statement of profit and loss with a
corresponding increase (for income) or decrease (for losses) in the carrying
value of the investment in the associate.
Dividends received by the Company from an associate are treated as a reduction
in the carrying value of the associate (as its net assets have reduced by it
giving the dividend) and income for the Group (as its net assets have
increased by receiving the dividend).
The Group assesses the carrying value of associates for impairment at each
reporting period end or at any other time where there is an indication that an
impairment may exist. Where there is an indication of impairment of an
investment, the Group assesses if an actual impairment loss exists by
comparing the carrying value of the investment to its recoverable amount which
is the lower of its fair value less cost to sell or its value in use.
Fair value less costs to sell is determined by reference to the proceeds that
could be expected to be received should the interest in the associate be sold
less the costs of doing so. Value-in-use is typically calculated by reference
to the value of the discounted cash flows expected to be received from the
associate.
Where there is a deficit of recoverable value as compared to the carrying
value of the investment then an impairment loss is recognised in the
consolidated statement of profit and loss in the amount of the calculated
deficit. The carrying value of the investment in the associate is also reduced
by a corresponding amount.
Acquisitions
The Group allocates the purchase consideration given in respect of the
acquisition of a subsidiary to the assets acquired and liabilities assumed
based on an assessment of their individual fair values at the date of
acquisition. Any excess of the cost of the acquisition over the fair value of
assets acquired and liabilities assumed in the business combination is
recognised as goodwill.
The assessment of fair value is made by comparing the discounted value of the
future net cash flows expected to be generated from the CGU to which the
goodwill has been allocated to the net book value of the assets and
liabilities of that CGU including the allocated goodwill. Where a deficit of
discounted cash flows compared to the carrying value of the CGU's net assets
and allocated goodwill exists, the goodwill is reduced to its recoverable
amount with a corresponding amount recognised as an impairment charge in
profit or loss. A corresponding reduction is made to the carrying value of
goodwill and then to the net assets of the CGU if goodwill is insufficient to
absorb the loss. Goodwill may also be tested for impairment under the fair
value less costs to sell method where the recorded value of goodwill is
compared to the market or value of the Company calculated by reference to its
share price.
Any such impairment loss is recognised in profit and loss in the period in
which it is identified. Impairment losses related to goodwill cannot be
reversed in future years.
Transaction between entities within the Group
Transactions and balances between companies forming part of the Group together
with any unrealised income and expenses arising from intra-group transactions
are eliminated in the preparation of the consolidated financial statements of
the Group.
Discontinued operations
A discontinued operation is a component of the Company's business that
represents a separate major line of business or geographical area of
operations that has been disposed of or is held for sale. Classification as a
discontinued operation occurs on actual disposal or earlier if the operation
meets the criteria to be held for sale. When an operation is classified as a
discontinued operation, the comparative consolidated statement of profit and
loss is restated as if the operation had been discontinued from the start of
the comparative period.
Disposal of subsidiaries
Transactions that result in the loss of control of a subsidiary are accounted
for as disposals. The previously consolidated assets and liabilities and the
carrying amount of any non-controlling interests in the subsidiary are
derecognised. Any retained interest in the former subsidiary is recognised at
its fair value at the date when control is lost. A gain or loss on disposal is
recognised as the difference between the fair value of the consideration
received together with the fair value adjustment made in respect of any
retained interest in the subsidiary as offset by the carrying value of the
assets and liabilities derecognised. Any gains or losses of the disposed
entity that were previously recognised in other comprehensive income or loss
and that require to be recycled to profit or loss also form part of the gain
or loss on disposal.
New standards, amendments and interpretations effective and adopted by the
Group in 2022
Amendments to existing standards previously issued by the IASB with effective
dates during the year ended 31 December 2022 are summarised below. There was
no effect on the Group's consolidated financial statements for the year ended
31 December 2022 as a result of the adoption of these amendments.
Amendment to 'IFRS 16 Leases'
On 28 May 2020, the IASB issued an amendment to the standard related to the
treatment of rent concessions given by lessors in relation to COVID-19. The
Group did not receive any rent concessions related to COVID-19 that would
require consideration of the amendment to IFRS 16 and, accordingly, the
amendment had no impact on the consolidated financial statements for the years
ended 31 December 2021 or 2022.
Amendments to 'IFRS 3 Business Combinations'
On 2 July 2021, the IASB published amendments to references to the 2018
version of the Conceptual Framework for Financial Reporting. The amendment was
effective on or after 1 January 2022.
Amendments to 'IAS 16 Property, Plant and Equipment - Proceeds before Intended
Use'
On 2 July 2021, the IASB published an amendment to IAS 16 which prohibits
deducting from the cost of an item of property, plant and equipment the
proceeds from selling items produced before that asset is available for use.
The Company does not deduct revenue from the cost of assets before they are
available for use and therefore, there is no impact on the Group financial
statements for the year ended 31 December 2022. The amendment was effective on
or after 1 January 2022.
Amendment to 'IAS 37 Provisions, contingent liabilities and contingent assets'
On 2 July 2021, the IASB published an amendment which requires the provision
in respect of an onerous contract to also include an assessment of the
indirect costs, such as production overhead or indirect labour, that are
expected to be incurred in servicing a contract considered to be onerous. The
amendment was effective on or after 1 January 2022.
Annual Improvements 2018-2020
· Improvement to 'IFRS 1 First-time Adoption of IFRS' (effective for
periods beginning on or after 1 January 2022)
· Improvement to 'IFRS 9 Financial Instruments' (effective for periods
beginning on or after 1 January 2022)
· Improvement to illustrative examples to 'IFRS 16 Leases'
· Improvement to 'IAS 41 Agriculture' (effective for periods beginning
on or after 1 January 2022)
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2022 reporting periods and have not been
early adopted by the Company. These standards are not expected to have a
material impact on the entity in the current or future reporting periods or on
foreseeable future transactions and are summarized below.
· IAS 1 Classification of Liabilities as Current or Non-Current
(effective for periods beginning on or after 1 January 2024)
· IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting Policies
from significant to material (effective for periods beginning on or after 1
January 2023)
· IAS 8 Amendments to Definition of Accounting Estimates (effective for
periods beginning on or after 1 January 2023)
· IAS 12 Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (effective for periods beginning on or after 1 January
2023)
· IFRS 17 Insurance Contracts (effective for periods beginning on or
after 1 January 2023)
Critical accounting judgments and key sources of estimation uncertainty
The preparation of the financial statements in conformity with generally
accepted accounting practice (GAAP) requires management to make estimates and
judgments. Those estimates and judgments can affect the reported values for
assets and liabilities as well as the disclosure of contingent assets and
liabilities at the balance sheet date.
Management is also required to make estimates and judgments related to the
reported amounts of revenues and expenses and related to the timing of the
recognition of those revenues and expenses.
Judgments made and estimates applied are based on historical experience and
other factors including management's expectations of future events that are
considered relevant. Actual results may differ from these estimates. The
estimates, judgments and underlying assumptions made are reviewed on an
ongoing basis and specifically in the preparation of the interim and annual
published financial information.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised and applied consistently in future periods subject to the
ongoing reassessment of estimates.
Critical judgments for the year under review
Going concern
The Directors are required to assess whether it is appropriate to prepare the
financial statements on a going concern basis. In making this assessment the
Directors need to be satisfied that the Group can meet its obligations as they
fall due and will remain cash-positive for a period of at least 12 months from
the date of approval of the financial statements. Potential additional funding
that is not yet committed at the date of approval of the financial statements
cannot be anticipated in making the assessment of going concern.
The Directors make their assessment based on a cash flow model prepared by
management and based on its expectation of cash flows for the 18-month period
from the date of approval of the financial statements. The extended period in
the model provides additional comfort that the 12-month solvency requirement
can be met when making the assessment of going concern.
In preparing the cash flow model, assumptions have been made regarding the
timing of cash collection from customers based on the expected cash receipt
under contracts that require milestone payments to be made by customers. The
timing of the receipt of milestone payments may not always align with or
precede the costs incurred by the Company in performing its obligations under
a contract.
Downside sensitivities have been applied to the cash flows primarily related
to no sales being made in 2024 and insufficient Short-Term Warrants being
exercised. Refer to 'Basis of preparation' for details of the going concern
analysis performed and the Directors' conclusions regarding going concern.
Notwithstanding the material uncertainty articulated in relation to the basis
of preparation, the Directors expect that the business will continue to be
viable throughout the model period and, accordingly, the financial statements
have been prepared on a going concern basis.
Revenue recognition
Sales contracts are assessed in accordance with the Group accounting policy
for revenue recognition. The policy requires the identification of the
performance obligations, or promises, under the contract and a determination
of the conditions and implications of each performance obligation. Revenue is
recognised only when a distinct and appropriate performance obligation under a
contract is satisfied.
Some performance obligations are satisfied separately - examples include the
delivery of equipment. Other obligations may be satisfied in conjunction with
other contract promises or where a contract calls for equipment sold under the
contract to be integrated into a larger project before formal acceptance is
notified by the customer.
Where the ability of a customer to benefit from a product or service is
dependent on the satisfaction of other performance obligations, more than one
promise may need to be bundled together as a combined performance obligation
that must be satisfied before the revenue related to each element can be
recognised.
Identifying where equipment or, more likely, services are readily available
from other providers is a key determinant as to whether a contract promise
represents a separate performance obligation or if it should be bundled with
other promises that, together, represent a single performance obligation.
The assessment of what constitutes a performance obligation can be complex and
requires judgment. Revenue is only recognised for each performance obligation
under a contract when that performance obligation, bundled or otherwise, is
satisfied. The requirement to bundle combinations of goods and/or services
together as a single performance obligation could delay the timing of revenue
recognition where the separate promises comprising the performance obligation
are delivered sequentially.
Key sources of estimation uncertainty for the year under review
Warranty provision
The Company provides time-limited standard warranties in its contracts for
sale of battery systems. In addition, customers may elect to purchase
separate, standalone extended warranties. Extended warranties are for periods
greater than the standard warranties that are provided with the purchase of
all battery systems.
Estimating the costs that may be incurred by the Company in servicing warranty
agreements requires management to estimate the number of expected claims in
relation to the total number of battery systems sold. In addition, an estimate
of costs that the Company could expect to incur to remedy each warranty claim
should also be made to determine the amount of the total provision that should
be recorded for warranties.
Provisions made in respect of expected warranty obligations are reassessed and
remeasured where actual experience indicates the claim rate may be higher or
lower than initially expected or where costs to remedy warranty claims differ
from the assumptions used in calculating the provision. The release of an
over-provision of warranty costs results in other operating income being
recognised in the period whereas an additional provision for warranties
results in a charge being recognised.
A 10% increase in the number of warranty claims or a 10% increase in the cost
to remedy warranty issues would have a corresponding effect on warranty cost
in a given period.
Refer to note 21, contract related balances.
Provision for legacy products
Management has elected to provide ongoing maintenance for certain legacy
contracts not otherwise covered under warranty. Management has determined that
it is necessary to provide for the costs of this ongoing maintenance or to
provide for outright decommissioning.
Refer to note 21, contract related balances.
Provision for onerous contracts
A contract is onerous when the unavoidable costs of meeting the Company's
obligations under the contract are expected to be greater than the revenue
earned under that contract. Previously, assessment of the unavoidable costs
under a contract only required direct costs such as parts and labour to be
considered.
An amendment to 'IAS 37 Provisions, contingent liabilities and contingent
assets' was published in May 2020 and requires the provision in respect of an
onerous contract to also include an assessment of the indirect costs, such as
production overhead or indirect labour, that are expected to be incurred in
servicing a warranty claim. The Company elected to early adopt the amendment
as of 1 January 2020 and therefore has applied the provisions of the standard
in the current and prior years.
The assessment of future costs is inherently subjective and requires the use
of estimates in determining the appropriate amount of provision that may be
required.
Refer to note 21, contract related balances.
Share based payments, warrants and employee options
The Company determines the fair value of share-based payments and employee
options using a Black-Scholes methodology. Black-Scholes uses certain
assumptions to determine fair value including measures of share price
volatility, expected conversion or exercise rates and levels of employee
retention, among others.
In estimating the value of future share price volatility, a key input of the
Black-Scholes methodology, the Company uses historic data relating to its
share price. As the short and long-term warrants are listed, and therefore can
be publicly traded, this provides an alternative arms-length determination of
fair value.
Operating segments
The Group is organised internally to report to the Executive Directors as a
whole. The Executive Directors comprise the Chief Executive Officer, the Chief
Commercial Officer, and the Chief Development Officer and Interim Chief
Financial Officer. The Executive Directors, as a group, have been determined,
collectively, to prosecute the role of chief operating decision maker of the
Group.
The chief operating decision maker is ultimately responsible for entity-wide
resource allocation decisions, the evaluation of the financial, operating and
ESG performance of the Group.
The Group's activities have been determined to represent a single operating
segment being the provision of vanadium flow batteries and ancillary services,
principally comprising installation and integration services, and the
provision of extended warranties for battery units sold.
3 Accounting policies
Revenue
The Group measures revenue based on the consideration specified in the
contracts for sale with customers. Revenue is recognised when a performance
obligation is satisfied by transferring control over a good or service to a
customer. Control is usually considered to have transferred to a customer on
delivery of equipment to the customer's site of operations or when title to
the equipment is transferred to the customer (if stored offsite). Revenue
excludes any taxes such as sales taxes, value added tax or other levies that
are invoiced and collected on behalf of third parties, such as government tax
authorities.
The Group generates revenue from the sale of battery storage systems and
related hardware and services. The main portion of sales is derived from
contractual arrangements with customers that have multiple elements (or
performance obligations), those elements usually being the sale of battery
systems, system related options, installation, and extended warranties. The
sales contracts do not include a general right of return.
For contracts that contain multiple elements or promises, the Group accounts
for individual goods and services separately if they are distinct. A product
or service is distinct if it is separately identifiable from other items in
the agreement and where a customer can benefit from the good or service on its
own or together with other resources that are readily available.
The consideration paid for each performance obligation is typically fixed. A
significant portion of the aggregate payment due under a contract for sale is
normally due before delivery or completion of the service. The total
consideration under the contract is allocated between the distinct performance
obligations contained in the contract based on their stand-alone selling
prices. The stand-alone selling price is estimated using an adjusted market
assessment approach that looks to industry benchmarks or pricing surveys for
certain standalone products or services.
In addition, under the terms of its contracts for sale, the Group may be
responsible for delivering battery systems to its customers. When this is the
case, the Group will invoice the relevant customer for, and will recognise as
revenue, any charges incurred together with any associated handling costs. The
related costs incurred by the Group for shipping and handling services are
recognised as cost of sales concurrent with the recognition of the associated
revenue.
Grant income
Government and other grants received are recognised in the consolidated
statement of profit and loss in the period that the related expenditure is
incurred. Grant income received in respect of costs incurred is presented net
within the associated cost category. Capital grants are similarly netted
against the relevant asset acquired or constructed.
Grant income received in advance of the associated expenditure is presented as
deferred income within contract liabilities and released to profit and loss as
the associated expenditure is incurred. Grant income receivable is presented
as accrued income within contract assets until such time as it can be claimed
or is received.
Finance income and costs
Finance income comprises interest on cash deposits, foreign currency gains and
the unwind of discount on any assets that are carried at amortised cost.
Interest income is recognised as it accrues using the effective interest rate
method.
Finance costs include foreign currency losses and the unwind of the discount
on any liabilities held at amortised cost, such as lease liabilities arising
from lease contracts.
Employee benefits
Short-term benefits
Benefits provided to employees that are short-term in nature are recognised as
expenses in the statement of profit and loss as the related service is
provided. The principal short-term benefits given to employees are salaries,
associated holiday pay and other periodic benefits such as healthcare and
pension contributions made by the Company for the benefit of the employee. A
liability is recognised for the amount expected to be paid under short-term
cash bonus plans if there is either a present legal or constructive obligation
to pay the amount and the amount can be reliably estimated.
Share-based payments
The Group operates equity-settled share-based compensation plans, under which
it compensates employees for services rendered through the issue of equity
instruments, deferred share awards or options to subscribe for ordinary shares
of the Company. The fair value of the employee services received in exchange
for the grant of the equity instruments, shares or options is recognised as an
expense. The total amount to be expensed is determined by reference to the
fair value of the options granted:
· including any market conditions (for example, the Company's share
price);
· excluding the impact of any service and non-market performance
vesting conditions (for example, profitability, sales growth targets, and the
requirement to remain as an employee of the Group over a specified period);
· including the impact of any non-vesting conditions (for example, the
requirement for an employee to save).
Non-market performance and service conditions are included in the assumptions
regarding the number of options that are expected to vest. The total expense
is recognised over the vesting period, which is the period over which all the
specified vesting conditions are to be satisfied.
In some circumstances, employees may provide services in advance of the grant
date and therefore the grant date fair value is estimated for the purposes of
recognising the expense during the period between service commencement and the
grant date.
At the end of each reporting period, the Group revises its estimates of the
number of options that are expected to vest based on the non-market vesting
conditions. It recognises the impact of the revision to original estimates, if
any, in the consolidated statement of profit and loss, with a corresponding
adjustment to equity.
Any social security contributions payable in connection with the grant of the
share options is considered an integral part of the grant itself, and the
charge will be treated as a cash-settled transaction.
Taxes
The total tax charge or credit recognised in the statement of profit and loss
comprises both current and deferred taxes.
Taxation is recognised in the consolidated statement of profit and loss except
to the extent that it relates to a business combination or items recognised
directly in equity or other comprehensive income.
Current tax
The current tax charge is based on the taxable profit for the year. Taxable
profit or loss is different from the profit or loss reported in the statement
of profit and loss as it excludes items of income and/or expense that are
taxable or deductible in other years (temporary differences) and it further
excludes items that are never taxable nor deductible (permanent differences).
Deferred tax
Deferred tax is the tax that is expected to be payable or recoverable on
differences between the carrying value of assets and liabilities in the
financial statements and the corresponding value of those assets and
liabilities used to calculate taxable profit or loss.
Deferred tax assets are recognised as deductible temporary differences only
where it is probable that taxable profits will be generated against which the
carrying value of the deferred tax asset can be recovered. Deductible
temporary differences exist where there is a difference in the timing of the
recognition of an item of income or expense between the statement of profit
and loss and the calculation of taxable profit or loss (a temporary
difference).
Deferred tax assets and liabilities are recognised using the liability method
for all taxable temporary differences, except in respect of taxable temporary
differences associated with investments in subsidiaries, associates and
interests in joint operations. Where the timing of the reversal of temporary
difference arising from such investment related assets and liabilities can be
controlled and it is probable that the temporary difference will not reverse
in the foreseeable future then the Group does not recognise deferred tax
liabilities on these items.
A deferred tax asset or liability is not recognised if a temporary difference
arises on initial recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss.
Current and deferred tax is calculated using tax rates and laws that have been
enacted or substantively enacted at the balance sheet date.
Earnings per share
The Group presents basic and diluted earnings per share ("EPS") data for its
ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the year.
Diluted EPS is determined by adjusting the weighted average number of ordinary
shares outstanding used in the EPS calculation to include all potentially
dilutive ordinary shares, which, in the case of the Company, represents
additional shares that could be issued in relation to 'in-the-money'
convertible notes, warrants or share options.
The effects of anti-dilutive potential ordinary shares are ignored in
calculating diluted EPS. Anti-dilution is when an increase in earnings per
share or a reduction in loss per share would result from the exercise of such
options, warrants or convertible instruments.
Intangible assets
Goodwill
The Group allocates the fair value of the purchase consideration on the
acquisition of a subsidiary to the assets acquired and liabilities assumed
based on an assessment of fair value at the acquisition date. Any excess of
purchase consideration is recognised as goodwill. Where goodwill is
recognised, it is allocated to the cash generating units (CGUs) in a
systematic manner reflective of how the Group expects to recover the value of
the goodwill.
Goodwill arising is recognised as an intangible asset in the balance sheet and
is subject to annual reviews for impairment. Goodwill is written off where
circumstances indicate that the recoverable amount of the underlying CGU may
no longer support the carrying value of the goodwill. An impairment charge is
recognised in the statement of profit and loss for the period in which it is
determined the goodwill is no longer recoverable. Impairment losses related to
goodwill cannot be reversed in future periods.
In testing for impairment, goodwill recognised on business combinations is
allocated to the Group of CGUs representing the lowest level at which it will
be monitored. Because the Group has been determined to consist of a single
business unit, the carrying value of goodwill is tested for impairment based
on the recoverable value of the Group as a whole.
The recoverable amount of a CGU or a group of CGUs is based on the higher of
its assessed fair value less costs of disposal or its value-in-use.
Value-in-use is calculated by reference to the expected future cash flows from
the CGU, after discounting to take account of the time value of money. Fair
value less costs to sell can be based on a similar cash flow measure adjusted
for disposal costs or can be estimated by reference to similar comparable
reference transactions.
Because the Company is listed, fair value can also be assessed by reference to
the Company's market capitalisation. Where cash flows are used, they are risk
weighted to reflect an assessment of future commercial success.
The key assumptions in assessing cash flows relate to the ability of the
Company to develop existing markets and applications and to establish new
markets and applications for the sale and use of its battery systems.
Prospective cash flows are also sensitive to the Company's ability to realise
economies of scale as market penetration grows.
Internally generated intangible assets - research and development costs
Research
Expenditure on research activities is recognised as an expense in the period
in which it is incurred. Research activities are aimed at creating new
knowledge or the use of existing knowledge in new or creative ways to generate
new concepts. Research activity does not typically have a defined commercial
objective at the outset.
Development
Where projects evolve toward commerciality or are related to a specific
commercial objective they are assessed to determine whether the activity
constitutes development that is associated with a commercial objective or
practical application.
The associated costs represent development costs and can be capitalised if,
and only if, the following conditions can be demonstrated:
· the technical feasibility of completing the intangible asset so that
it can be made available for use or sale;
· the intention to complete the intangible asset for use or sale;
· the availability of adequate technical, financial and other resources
to complete the development and to use or sell it;
· an asset is created that can be separately identified for use or
sale;
· it is probable that the asset created will generate future economic
benefits; and
· the development cost of the asset can be measured reliably.
Development work undertaken by the Group typically relates to the refinement
of design, materials selection, construction techniques, firmware and control
systems to enhance battery system performance over successive generations.
Where development costs are capitalised, they are amortised over the expected
period to the introduction of the next generation of battery system.
Amortisation is recorded over that period on a straight-line basis with the
corresponding amortisation charge recognised in the statement of profit and
loss as a component of administrative expenses.
Four years has historically been the typical cycle time between successive
generations of battery system design.
Other intangible assets
Intangible assets other than goodwill that are acquired by the Group are
stated at their historical cost of acquisition less accumulated amortisation
and any impairment losses.
Software and purchased domain names
Third-party software is initially capitalised at its cost of purchase.
Amortisation is charged to administrative expenses over the expected useful
life of the software which has been assessed as three years from the date of
acquisition.
Acquired domain names are initially capitalised at cost of purchase.
Amortisation is charged to administrative expenses over the expected useful
life of the domain name which has been assessed as ten years from the date of
acquisition.
Patents and certifications
Patent rights and certifications are initially capitalised at the cost of
applying for relevant patent rights and other protections, and certifications.
Amortisation is charged to administrative expenses over the expected useful
life of the patents and certifications which has been assessed as five years
from the date of acquisition.
Property, plant and equipment
Items of property, plant and equipment are stated at historical cost less
accumulated depreciation and any impairment losses. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Subsequent expenditure is only included in the asset's carrying amount or
recognised as a separate asset, as appropriate, when it is probable that
future economic benefits associated with that item will flow to the Group.
Costs that do not enhance the value of an asset such as repair and maintenance
costs are charged to the statement of profit and loss in the period in which
they are incurred.
Depreciation is charged to write off the cost of assets over their estimated
useful lives on a straight-line basis. Depreciation commences on the date the
asset is brought into use. Work-in-progress assets are not depreciated until
they are brought into use and transferred to the appropriate category of
property, plant and equipment.
Estimated useful lives for property, plant and equipment and other intangible
assets are:
Category Period (years) Recognition in statement of profit and loss
Computer and office equipment 3 - 5 Administrative expenses
Leasehold improvements Shorter of lease term or useful life Administrative expenses / Cost of sales
Vehicles 3 Administrative expenses
Manufacturing equipment and tooling 3 - 20 Cost of sales
R&D Equipment 5 - 10 Administrative expenses
Software and purchased domain names 3 Administrative expenses
Patents and certifications 10 Administrative expenses
Depreciation methods, useful lives and residual values of assets are reviewed,
and adjusted prospectively as appropriate, at each reporting date.
Where an asset is disposed of, the corresponding gain or loss on disposal is
determined by comparing the sales proceeds received with the carrying amount
of that asset at the date of disposal. Gains or losses on disposal of fixed
assets are included within other items of operating income and expense in the
statement of profit and loss.
Impairment of tangible and intangible assets
The Group reviews the carrying values of its tangible and intangible assets,
other than goodwill, at each balance sheet date to determine if any indicators
exist that could mean those assets are impaired. Where an indicator of
impairment exists the recoverable amount of the relevant asset (or CGU) is
estimated to determine the amount of any potential impairment loss.
Recoverable amounts are determined using a discounted cash flow model related
to each asset or CGU being assessed. The discount rate applied to the cash
flows in the model is a pre-tax discount rate that reflects market assessment
of the time value of money and risks specific to the Company or the groups of
assets being considered.
If the recoverable value estimated in the cash flow model for a specific asset
(or CGU) is lower than the carrying value, then the carrying value of the
asset is reduced to its estimated recoverable value with a corresponding
charge immediately recognised in the statement of profit and loss.
Where the condition that gave rise to an impairment loss reverses in a
subsequent period, the impairment loss is similarly reversed and the carrying
value of the asset increased to the revised estimate of its recoverable value.
The carrying value of an asset immediately following the reversal of an
impairment cannot exceed the carrying value that the asset would have had if
the original impairment had not been made and the asset was depreciated as
normal.
A reversal of an impairment loss is recognised immediately in profit or loss.
The value of any impairment (or reversal of impairment) of an asset is
recorded in the same financial statement line item where depreciation or
amortisation of the asset would normally be shown.
Where it is impractical to meaningfully assess recoverable amount using a
discounted cash flow model, for instance where near term cash flows are low or
negative, an assessment of the fair value adjusted for the costs that would be
incurred in the disposal of an asset or operation is used. This is typically
the case for development stage assets, operations or associated intangible
assets (including goodwill) where the underlying products or technologies have
not yet been commercialised.
Provisions
Provisions are established when the Group has a present legal or constructive
obligation because of past events, it is probable that an outflow of resources
will be required to settle the obligation and the amount of that outflow can
be reliably estimated.
Provisions are measured at the present value of the expenditures that are
expected to be incurred in settling the obligation using a pre-tax discount
rate that reflects current market assessment of the time value of money and
the risks related to the obligation. The initial recognition of a provision
results in a corresponding charge to profit or loss.
The increase in a provision as the discount rate unwinds due to the passage of
time, is recognised in the statement of profit and loss as other items of
operating income and expense.
Leases
Group entities only participate in lease contracts as the lessee. Lease
contracts typically relate to vehicles and facilities.
On inception of a contract, the Group assesses whether it contains a lease. A
contract is a lease or contains a lease if it conveys the right to control the
use of an identified asset for a period of time in exchange for consideration.
The right to control the use of an identified asset is determined based on
whether the Group has the right to obtain substantially all the economic
benefits from the use of the asset throughout the period of use, and if the
Group has the right to direct the use of the asset.
Obligations under a lease are recognised as a liability with a corresponding
right-of-use asset, these are recognised at the commencement date of the
lease.
The lease liability is initially measured at the present value of the lease
payments that have not yet been paid at the inception of the lease, discounted
using the interest rate implicit in the lease contract. Where the interest
rate implicit in the lease contract cannot be readily determined, the Group's
incremental borrowing rate is used.
Variable lease payments that do not depend on an index or rate are not
included in the measurement of the lease liability. The lease liability is
measured at amortised cost using the effective interest rate method.
The lease liability is subsequently measured at amortised cost using the
effective interest method. It is remeasured when:
· there is a change in future lease payments arising from a change in
an index or rate;
· there is a change in the Group's estimate of the amount expected to
be payable under a residual value guarantee; or
· the Group changes its assessment of whether it will exercise a
purchase, extension or termination option.
When a lease liability is remeasured under one of these scenarios, a
corresponding adjustment is made to the carrying value of the right-of-use
asset or in profit and loss when the carrying amount of the asset has already
been reduced to zero.
The corresponding right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability plus any lease payments
made at or before the commencement date, any initial direct costs incurred and
an estimate of the costs required to remove or restore the underlying asset,
less any lease incentives received. The right-of-use asset is amortised over
the shorter of the asset's useful life and the lease term on a straight-line
basis.
The Group has elected not to recognise right-of-use assets and corresponding
lease liabilities for short-term leases, those existing leases with a
remaining lease term of less than 12 months at 1 January 2022 and leases
related to low value assets with an annual lease cost of £3,500 or less.
The Group recognises these lease payments as an expense on a straight-line
basis over the lease term.
Inventory
Inventory is stated at the lower of cost and net realisable value. Cost
comprises direct materials and, where applicable, direct labour costs and
those overheads that have been incurred in bringing the inventories to their
current location and condition. Cost is calculated using the first-in,
first-out method.
Net realisable value is calculated as the estimated selling price for an item
of inventory less estimated costs of completion and the costs that would be
incurred in the marketing, selling and distribution of an item of inventory.
Prepaid inventory
Prepaid inventory is recognised on inventory payments where physical delivery
of that inventory has not yet been taken by the Group and is stated at the
lower of cost and net realisable value.
Financial instruments
Financial assets and liabilities are recognised by the Group and recorded in
the statement of financial position when the Group is contractually bound to
the terms of the financial instrument. Financial assets and liabilities are
derecognised when the Group is no longer bound by the terms of the financial
instrument through settlement or expiry.
Financial assets
The classification of financial assets to which the Group is a party is
determined by the nature of the underlying financial instrument and the
characteristics of the contractual cash flows expected to be received under
the terms of instrument.
Financial assets are not reclassified after their initial recognition unless
there is a contractual change in the nature of the cash flows under the
instrument or the business purpose of the instrument has changed.
A financial asset is recorded at amortised cost where it is expected to be
held to maturity and the objective of the Group is to collect the contractual
cash flows under the financial instrument based on specified contractual
terms, including the timing of receipt of cash flows.
Financial assets that the Group is party to are classified and measured as
follows:
Financial asset Measurement basis
Trade receivables and accrued income Amortised cost
Other current assets Amortised cost
Contract assets Amortised cost
Cash and cash equivalents Amortised cost
Amortised cost
On initial recognition, the Group measures amortised cost for financial assets
based on the fair value of each financial asset together with any transaction
costs that are directly attributable to the financial asset.
After initial recognition, amortised cost is measured for each financial asset
held using the effective interest rate method less any impairment loss
identified. Interest income is recognised for all financial assets, other than
those that are classified as short-term, by applying the effective interest
rate for the instrument. Interest income on short-term financial assets is not
considered to be material. Short-term financial instruments are determined as
those that have contractual terms of 12-months or less at inception.
Interest income, foreign exchange gains and losses, impairment, and any gain
or loss on derecognition are recognised in profit or loss.
Impairment of financial assets
A loss allowance for financial assets is determined based on the lifetime
expected credit losses for financial assets. Lifetime expected credit losses
are estimated based on factors including the Group's experience of collection,
the number and value of delayed payments past the average credit periods
across the Group's financial assets. The Group will also consider factors such
as changes in national or local economic conditions that correlate with
default on receivables and financial difficulties being experienced by the
counterparty.
Financial assets are impaired in full and a corresponding charge is recognised
in profit or loss where there is no reasonable expectation of recovery.
Financial liabilities
The classification of financial liabilities is determined at initial
recognition. Financial liabilities are classified and measured as follows:
Financial liability Measurement basis
Trade and other payables Amortised cost
Derivative Financial Instrument Fair Value through Profit and Loss
Lease liabilities Amortised cost
Amortised cost
At initial recognition, the Group measures financial liabilities at amortised
cost using the fair value of the underlying instrument less transaction costs
directly attributable to the acquisition of the financial liability.
Derecognition of financial liabilities
The Group derecognises financial liabilities when the Group's obligations
under the relevant instrument are discharged, expired or cancelled.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative
contract is entered into, and they are subsequently remeasured to their fair
value at the end of each reporting period. Changes in the fair value of any
derivative instrument is recognised immediately in profit or loss and are
included in other gains/(losses).
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held with financial
institutions that can be called on demand together with other short-term,
highly liquid investments with maturities of three months or less and are
readily convertible to known amounts of cash.
Equity instruments
Instruments are classified as equity instruments if the substance of the
relative contract arrangements evidences a residual interest in the assets of
the Group after deducting all of its liabilities. Equity instruments issued by
the Company are recorded as proceeds received, net of direct issue costs not
charged to income.
Offsetting
A financial asset and a financial liability are offset and the net amount
presented in the statement of financial position when, and only when, the
Group:
· has a legally enforceable right to set off the recognised amounts;
and
· intends either to settle on a net basis, or to realise the asset and
settle the liability simultaneously.
4 Revenue from contracts with customers and income from government grants
Segment information
The Group derives revenue from a single business segment, being the
manufacture and sale of vanadium flow battery systems and related hardware
together with the provision of services directly related to battery systems
sold to customers.
The Group is organised internally to report on its financial and operational
performance to its chief operating decision maker, which has been identified
as the three Executive Directors as a group.
All revenues in 2022 were derived from continuing operations.
2022 2021
Revenue from contracts with customers £000 £000
Battery systems and associated control systems 2,548 2,481
Integration and commissioning 254 701
Other services 142 3
Total revenue in the consolidated statement of profit and loss 2,944 3,185
Analysed as:
Revenue recognised at a point in time 2,936 3,182
Revenue recognised over time 8 3
Total revenue in the consolidated statement of profit and loss 2,944 3,185
Grant income shown against cost of sales 647 -
3,591 3,185
Geographic analysis of revenue
The Group's revenue from contracts with customers was derived from the
following geographic regions:
2022 2021
Geographic analysis of revenue £000 £000
United Kingdom 1,691 2,796
Asia 160 273
United States of America 1,093 116
Total revenue in the consolidated statement of profit and loss 2,944 3,185
The Group maintains its principal production and assembly facilities in
Bathgate, Scotland and Vancouver, Canada. These facilities include office
space for design, sales and administrative teams. The Group also has offices,
operations and management based in London, England and San Francisco,
California.
The Group does not consider that the locations of its operations constitute
geographic segments as they are managed centrally by the executive management
team. The location of the manufacturing plants and business development
activity is a function of time-zone when servicing customers both pre-sale and
during product delivery. The geographic location of offices, facilities and
management is not related to distinct markets or customer characteristics at
the present time.
Significant customers and concentration of revenue
Revenue from contracts with customers was derived from three (2021: two)
customers who each accounted for more than 10% of total revenue as follows:
2022 2021
Significant customers and concentration of revenue £000 £000
Customer A 1,247 -
Customer B 466 -
Customer C 466 -
Customer D - 2,300
Customer E - 495
Grant income other than revenue
The Group receives grant income to help fund certain projects that are
eligible for support, typically in the form of innovation grants. The Group
also received grant income related to operating costs under government subsidy
programmes as part of national COVID response efforts. The total grant income
that was received in the year was as follows:
2022 2021
Grant income received £000 £000
Business support grants against employee costs - COVID-19 (11) 156
Grants for research and development 647 302
Total government grants 636 458
5 Cost of sales
2022 2021
£000 £000
Movement in inventories of finished battery systems 3,356 5,240
Production costs 2,640 826
Depreciation of production facilities, equipment and amortisation of 172 116
intangibles
Movement in provisions for warranty and warranty costs 763 440
Movement in provisions for sales contracts (4,004) -
Total cost of sales 2,927 6,622
6 Administrative expenses
2022 2021
£000 £000
Staff costs 10,322 8,980
Research and development costs 2,592 1,792
Professional fees 2,983 1,950
Sales and marketing costs 399 249
Facilities and office costs 385 655
Other administrative costs 2,361 813
Total administrative expenses 19,042 14,439
No development costs were capitalised in the period (2021: £nil).
7 Auditors' Remuneration
2022 2021
£000 £000
Fees payable to the Company's auditors for the audit of the consolidated
financial statements
271 172
Audit of financial statements of subsidiaries pursuant to legislation 33 21
Fees payable to the Company's auditor for other services:
· Tax compliance services 19 9
323 202
The Group has a policy in place related to the commissioning of non-audit
service from its auditors where all such work requires pre-approval by the
Audit & Risk Committee before the commencement of any non-audit work.
Audit fees are discussed with and approved by the Audit & Risk Committee.
8 Staff costs and headcount
2022 2021
Staff costs £000 £000
Wages and salaries 9,280 7,617
Employer payroll taxes 840 625
Other benefits 917 508
Share-based payments 388 1,827
Total staff costs 11,425 10,577
Administrative staff costs in the year were £10,321,870 (2021: £8,979,790)
and staff costs included in cost of sales were £1,103,027 (2021:
£1,596,839).
2022 2021
Average headcount Number Number
Canada 71 55
United Kingdom 68 60
United States of America 7 7
South Africa 1 2
Total 147 124
Increases in staff costs are due to hiring for expansion in operating activity
and the delivery of key projects to customers.
Key management compensation
From 1 April 2020, the key management of the Group has been determined to
comprise the members of the senior leadership team.
2022 2021
Key management compensation £000 £000
Short-term employee benefits 1,828 1,590
Total key management compensation 1,828 1,590
The Group made contributions to the defined contribution schemes of key
management in the year of £16,078 (2021: £12,917).
9 Share based payments
Since its incorporation, the Company has operated various share-based
incentive plans. The purpose of each of the schemes has been to incentivise
Directors and employees related to improving Company performance and building
shareholder value.
Set out below is a summary of the option awards in issue at 31 December 2022.
Standard Grant date Final Expiry date Exercise price 2022 2021
redT 2015 plan 07 Dec 2015 07 Jan 2020 58.95 €c 68,803 137,602
redT 2018 plan 18 May 2018 18 May 2023 352.50 p 3,888 3,888
Invinity Energy 2018 ESOP 01 Apr 2020 12 Mar 2030 82.50 p 185,143 185,143
Invinity Energy 2018 Consultant SOP 01 Apr 2020 12 Mar 2030 82.50 P 378,000 378,000
Invinity Energy 2018 ESOP 01 Apr 2020 07 Jul 2026 4.34 p 1,342,134 1,429,812
Invinity Energy 2018 ESOP 01 Apr 2020 08 May 2029 6.84 p 658,314 661,237
Invinity Energy 2018 ESOP 26 Aug 2020 26 Aug 2030 113.00 p 2,043,334 2,505,000
Invinity Energy 2018 ESOP 28 Jan 2021 28 Jan 2031 204.00 p 372,000 480,000
Invinity Energy 2018 ESOP 04 Mar 2021 04 Mar 2031 152.00 p 194,000 222,000
Invinity Energy 2018 ESOP 15 Apr 2021 15 Apr 2031 151.00 p 108,000 126,000
Invinity Energy 2018 ESOP 03 Aug 2021 03 Aug 2031 134.50 p 375,000 455,000
Invinity Energy 2018 ESOP 29 Oct 2021 29 Oct 2031 111.50 p 297,000 359,000
Invinity Energy 2018 ESOP 20 Dec 2021 20 Dec 2031 91.00 p 135,000 135,000
Invinity Energy 2018 ESOP 03 Feb 2022 03 Feb 2032 64.50 p 186,000 -
Invinity Energy 2018 ESOP 02 Mar 2022 APR 02 Mar 2032 93.50 p 60,000 -
Invinity Energy 2018 ESOP 11 Apr 2022 11 Apr 2032 90.00 p 60,000 -
Invinity Energy 2018 ESOP 11 Jul 2022 11 Jul 2032 45.50 p 500,000 -
Invinity Energy 2018 ESOP 08 Dec 2022 08 Dec 2032 38.00 p 822,000 -
7,788,616 7,077,682
Non-standard Grant date Expiry date Exercise price 2022 2021
Long-term Incentive plan 8 Dec 2009 30 Jul 2023 50.00 €c 15,000 15,000
Camco 2006 Executive Share Plan 30 Jul 2013 30 Jul 2023 50.00 €c 68,127 68,127
redT 2018 plan 30 May 2018 30 Jul 2023 400.00 p 70,000 70,000
153,127 153,127
Total 7,941,743 7,230,809
Weighted average remaining contractual life of options outstanding at the end 7.18 8.82
of the year
A total of 87,678 options were exercised during the year with a weighted
average exercise price of 4.34p per share.
The grant-date fair value of share options issued is calculated using a
Black-Scholes methodology at the date of grant. Key inputs to the model
include the share price at the date of grant, the option exercise price, the
term of the award, share price volatility, the risk-free interest rate (by
reference to government bond yields) and the expected dividend yield rate,
which has historically been and continues to be zero, reflective of the
development-stage nature of the Company.
The Long-term Incentive Plan, Camco 2006 Executive Share Plan and the redT
2015 Plan are now closed. No further option awards will be made under either
of these plans.
The aggregate number of options granted, vested, exercised and forfeited
during the year under the plans are summarised and analysed between unvested
and vested awards as follows:
Unvested Vested
At 1 January 2022 4,369,588 113.47p 2,708,094 35.26p
Granted 1,781,000 50.39p - -
Forfeited (900,589) 121.89p (81,799) 96.31p
Vested (1,711,308) 108.00p 1,711,308 108.00p
Exercised - - (87,678) 4.34p
At 31 December 2022 3,538,691 82.73p 4,249,925 69.24p
Unvested Vested
At 1 January 2021 4,034,591 98.84p 1,839,032 29.09p
Granted 2,015,000 149.64p 1,301,543 87.15p
Forfeited (378,460) 134.35p (100,000) 317.00p
Vested (1,301,543) 87.15p - -
Exercised - - (332,481) 15.33p
At 31 December 2021 4,369,588 113.47p 2,708,094 35.26p
Plans with non-standard performance conditions
Long-term incentive plan (LTIP)
The LTIP for Directors and employees was approved by the Board in 2008 and
entitled Directors and employees to receive equity settled payments annually
based on the achievement of certain market and non-market performance
conditions.
The LTIP is now closed. At the end of the year, there were 15,000 (2021:
15,000) options vested and exercisable at €0.50 per share.
CAMCO 2006 executive share plan (the plan)
The plan was established in 2017 to make awards of shares up to an aggregate
of 10% of the share capital of the Company over a period of ten years.
The plan is now closed. At the end of the year there were 68,127 (2021:
68,127) options vested exercisable at €0.50 per share.
redT 2018 plan
Options with non-standard performance conditions were also issued under the
2018 plan. At the end of the year there were 70,000 (2021: 70,000) options
vested and exercisable at 400p per share.
Plans with standard performance conditions
The primary share plan that remains outstanding at 31 December 2022 is the
2018 plan. The 2018 plan was adopted by the Board on 14 May 2018 and
introduced HMRC scheme rules related to certain non-taxable option grants.
The plan contains a provision to issue options as CSOP, EMI or unapproved
awards.
In the year ended 31 December 2020 the Board approved the expansion of awards
to be made under the 2018 plan with grants expected to be made more frequently
going forward and to a potentially wider group of employees. The intention
of the increase in frequency and quantity of employee share options granted
was to incentivise and to better align employee compensation with shareholder
return.
Options issued to legacy Avalon employees at the merger date
Following the merger transaction, 1,432,000 options were granted to legacy
Avalon employees to replace options held by them in the former Avalon employee
share plan.
Parallel options issued
In addition, certain legacy redT options were reissued as they were considered
by the Board to be sufficiently 'out-of-the-money' such that they no longer
provided a performance incentive to the holders of the options. As a mechanism
to adjust the terms of the unfavourable options, new parallel options were
issued on a one-for-one basis with the same terms as the original awards
excepting that they were issued with a lower exercise price.
Both the original and parallel option schemes remain in existence. However,
the exercise by an employee of a single option from either pool (original or
parallel) allocated to them will cause the equivalent value in the other pool
to be forfeited. Accordingly, the number of options disclosed above has been
adjusted to remove the number of options that is equivalent to the number of
parallel options issued.
Other options
On 10 May 2021, the Company granted an option for 8,672,273 shares to Gamesa
Electric S.A. Unipersonal (GaE), a wholly-owned subsidiary of Siemens Gamesa
Renewable Energy S.A. The options were granted to GaE in consideration of its
entering into a joint development and commercialisation agreement with
Invinity Energy Nexus Limited, a wholly-owned subsidiary of the Company.
The exercise price of the options is 175 pence and upon exercise of those
options then for as long as GaE holds at least 5% of the issued share capital
of the Company it shall be entitled, subject to certain conditions, to
nominate one non-executive director to the Board of the Company.
Warrants issued in the period or outstanding
In December 2021, the Company issued 14,464,571 'placing units' comprised of
one share, one short-term warrant and one long-term warrant.
At 31 December 2022, the Company had 14,464,317 short-term warrants and
14,464,478 long-term warrants outstanding.
Each short-term warrant gives the holder the right to subscribe for one new
Ordinary Share at a price of 150 pence per Ordinary Share at any time from
Second Admission until 15 September 2023. Each long-term warrant gives the
holder the right to subscribe for one new Ordinary Share at a price of 225
pence per Ordinary Share at any time from Second Admission until 16 December
2024.
The warrants were admitted to trading on the Aquis Stock Exchange (AQSE) on 9
March 2022. There was no adjustment to the issue price in respect of the
attached warrants and they have been deemed to have no fair value based on the
price at which they are currently being quoted.
In December 2022, the Company issued 1,350,020 warrants as part of the
convertible loan facility with Riverfort Global Opportunities and YA II PN Ltd
("Noteholders"). Each warrant gives the holder the right to subscribe for one
new Ordinary Share at a price of 67.35 pence per Ordinary Share until 14
December 2026.
Subsequent to year-end, the Company was required to amend the exercise price
of these warrants to 32 pence, being the issue price of the Placing and Open
Offer on 22 February 2023. In consideration of the Noteholders undertakings,
the Company has agreed to grant a further 449,980 warrants at an exercise
price of 32p which will expire on 14 December 2026.
10 Other items of operating income and expense
The following items are included in comprehensive loss:
2022 2021
£000 £000
(Income)/expense
Provision for onerous contracts, net of amounts used 554 3,762
Impairment of property, plant and equipment - 60
Loss on disposal of property, plant and equipment 33
Reversal of impairment of obsolete inventory and disposal of scrap inventory - (390)
Impairment of obsolete inventory and disposal of scrap inventory 25 -
Profit on disposal of subsidiary - (15)
Gain on curtailment of right-of-use asset (8) (29)
Total other operating expenses (net) 604 3,388
11 Net finance income and costs
2022 2021
£000 £000
Finance income
Interest on bank deposits and money market funds (62) -
Finance costs
Finance charges on convertible loan notes 6 -
Finance charges for lease liabilities held at fair value 58 45
Finance charges for liabilities held at amortised cost 1 -
(Gains)/losses on foreign currency transactions (448) 63
Net finance (income)/costs (445) 108
12 Income tax expense
2022 221
£000 £000
Current tax
Current tax on profits for the year - -
Total current tax expense - -
Reconciliation of income tax expense calculated using statutory tax rate
2022 2021
£000 £000
Loss before tax (18,537) (21,372)
Tax at the Jersey rate of nil% - -
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income:
Non-taxable gains and expenses not deductible for tax 181 (113)
Differences in overseas tax rates (4,707) (3,942)
Unrelieved tax losses carried forward 4,350 3,109
Origination and reversal of timing differences not recognised 176 946
Total income tax expense - -
13 Loss per share
2022 2021
Basic loss per share In pence In pence
From continuing operations (16.0) (24.1)
From continuing and discontinued operations (16.0) (24.1)
2022 2021
Diluted loss per share In pence In pence
From continuing operations (16.0) (24.1)
From continuing and discontinued operations (16.0) (24.1)
2022 2021
Loss used in calculation of basic and diluted loss per share £000 £000
From continuing operations (18,537) (21,372)
From continuing and discontinued operations (18,537) (21,372)
All operational activity in the years ended 31 December 2022 and 2021 relate
to continuing operations.
2022 2021
Weighted average number of shares used in calculation Number Number
Basic 116,151,378 88,768,750
Diluted 117,754,966 119,792,519
Additional potential shares used in the calculation of diluted earnings per
share primarily relate to potential shares outstanding at 31 December 2022
that may be issued in satisfaction of 'in-the-money' employee share options.
Potentially dilutive shares related to 'in-the-money' outstanding warrants to
subscribe for ordinary shares in the Company are also included in calculating
diluted earnings per share.
Where additional potential shares have an anti-dilutive impact on the
calculation of loss per share calculation, such potential shares are excluded
from the weighted average number of shares used in the calculation.
2022 2021
Weighted average number of shares used in loss per share calculation - basic
and diluted
Number Number
In issue at 1 January 116,048,761 85,900,616
Shares issued in the year - weighted average 102,617 2,868,134
Weighted average shares in issue 31 December 116,151,378 88,768,750
Effect of employee share options and other warrants not exercised 1,603,588 31,023,769
Weighted average number of diluted shares in issue 31 December 117,754,966 119,792,519
Additional potential shares are anti-dilutive where their inclusion in the
calculation of loss per share results in a lower loss per share. The weighted
average number of shares not included in the diluted loss per share
calculation because they had an anti-dilutive effect on the calculation was
29,170,511 (2021: 2,094,626).
14 Cash flows from operating activities
2022 2021
£000 £000
Loss after income tax (18,537) (21,372)
Adjustments for:
Depreciation and amortisation 1,350 727
Loss on disposal of property, plant and equipment 33 -
Gain on curtailment of right-of-use asset (8) -
Impairment of inventory 24 (390)
Share-based payments charge 681 1,827
Equity settled interest and transaction costs on Investment funding 6 -
arrangement
Net foreign exchange differences (168) (27)
(16,619) (19,235)
Change in operating assets & liabilities
Increase in inventory (3,875) (4,487)
Increase in contract assets (174) (319)
Increase in trade receivables and other receivables (88) (1,650)
Increase in other current assets and prepaid inventory (2,354) (4,866)
Increase in trade and other payables 1,263 1,046
Increase in warranty provision 183 293
(Decrease)/increase in onerous contract provision (3,252) 3,756
Increase in contract liabilities 2,982 2,498
(5,315) (3,729)
Cash used in operations (21,934) (22,964)
15 Goodwill and other intangible assets
Goodwill Patents and certifications Software and domain names Total
£000 £000 £000 £000
Cost
At 1 January 2022 23,944 203 47 24,194
Additions - - - -
Foreign currency exchange differences - - 3 3
At 31 December 2022 23,944 203 50 24,197
Accumulated amortisation
At 1 January 2022 - (71) (26) (97)
Amortisation charge - (41) (8) (49)
Foreign currency exchange differences - - (1) (1)
At 31 December 2022 - (112) (35) (147)
Net book value
At 1 January 2022 23,944 132 21 24,097
At 31 December 2022 23,944 91 15 24,050
Goodwill Patents and certifications Software and domain names Total
£000 £000 £000 £000
Cost
At 1 January 2021 23,944 203 29 24,176
Additions - - 18 18
At 31 December 2021 23,944 203 47 24,194
Accumulated amortisation
At 1 January 2021 - (30) (19) (49)
Amortisation charge - (41) (7) (48)
At 31 December 2021 - (71) (26) (97)
Net book value
At 1 January 2021 23,944 173 10 24,127
At 31 December 2021 23,944 132 21 24,097
Goodwill
All goodwill is tested annually for impairment. At 31 December 2022,
goodwill was tested for impairment using a fair value less costs of disposal
methodology by reference to the Company's quoted market capitalisation using
the price of 43.0 pence per share at that date. No impairment loss was
identified in relation to goodwill.
On 15 March 2023, the Company announced the results of a placing, open offer,
and subscription. The fundraising was oversubscribed and together raised total
proceeds of £23.0 million through placing of 72,012,592 new Ordinary Shares
at 32.0 pence per share.
The closing share price on 30 May 2023 was 35.5 pence, giving a market
capitalisation of £67.8 million which does not indicate impairment of
goodwill or net assets.
Patents and certifications
There have been no events or circumstances that would indicate that the
carrying value of patents and certifications may be impaired at 31 December
2022.
16 Property, plant and equipment
Computer and office equipment Leasehold improvements Vehicles and equipment Total
£000 £000 £000 £000
Cost
At 1 January 2022 780 681 1,165 2,626
Additions 45 429 234 708
Disposals (136) (2) (37) (175)
Foreign currency exchange differences 10 11 40 61
At 31 December 2022 699 1,119 1,402 3,220
Accumulated Depreciation
At 1 January 2022 (653) (427) (416) (1,496)
Depreciation charge (129) (204) (301) (634)
Disposals 125 1 16 142
Foreign currency exchange differences (5) (5) (14) (24)
At 31 December 2022 (662) (635) (715) (2,012)
Net book value
At 1 January 2022 127 254 749 1,130
At 31 December 2022 37 484 687 1,208
Computer and office equipment Leasehold improvements Vehicles and equipment Total
£000 £000 £000 £000
Cost
At 1 January 2021 748 513 753 2,014
Additions 158 169 406 733
Disposals (123) - - (123)
Foreign currency exchange differences (3) (1) 6 2
At 31 December 2021 780 681 1,165 2,626
Accumulated Depreciation
At 1 January 2021 (694) (357) (268) (1,319)
Depreciation charge (85) (71) (145) (301)
Disposals 123 - - 123
Foreign currency exchange differences 3 1 (3) 1
At 31 December 2021 (653) (427) (416) (1,496)
Net book value
At 1 January 2021 54 156 485 695
At 31 December 2021 127 254 749 1,130
The Group has no assets pledged as security. No amounts of interest have been
capitalised within property, plant and equipment at 31 December 2022 (2021:
£nil).
17 Right-of-use assets
Offices and facilities Vehicles and equipment Total
£000 £000 £000
Cost
At 1 January 2022 1,845 28 1,873
Additions 1,512 - 1,512
Curtailments and disposals(1) (106) - (106)
Foreign currency exchange differences 79 3 82
At 31 December 2022 3,330 31 3,361
Accumulated Depreciation
At 1 January 2022 (879) (19) (898)
Depreciation charge (661) (6) (667)
Curtailments and disposals 106 - 106
Foreign currency exchange differences (55) (2) (57)
At 31 December 2022 (1,489) (27) (1,516)
Net book value
At 1 January 2022 966 9 975
At 31 December 2022 1841 4 1,845
Offices and facilities Vehicles and equipment Total
£000 £000 £000
Cost
At 1 January 2021 1,572 28 1,600
Additions 627 - 627
Curtailments(2) (294) - (294)
Foreign currency exchange differences (60) - (60)
At 31 December 2021 1,845 28 1873
Accumulated Depreciation
At 1 January 2021 (576) (10) (586)
Depreciation charge (369) (9) (378)
Foreign currency exchange differences 66 - 66
At 31 December 2021 (879) (19) (898)
Net book value
At 1 January 2021 996 18 1,014
At 31 December 2021 966 9 975
1. In 2022, a lease on a right-of-use asset in South
Africa was curtailed by five months. There was a corresponding decrease in the
outstanding lease creditor and a gain on curtailment recognised in the
consolidated statement of profit and loss in 2022.
2. In 2021, a lease on a right-of-use asset in Canada was
curtailed, with the termination date changing from June 2027 to June 2023.
There was a corresponding decrease in the outstanding lease creditor and a
gain on curtailment recognised in the consolidated statement of profit and
loss in 2021.
Right-of-use assets relate to buildings, vehicles and equipment held under
leases with third-party lessors. A right-of-use asset represents the Company's
right to use a leased asset over the term of the lease. The Company's rights
to use specific buildings, items of equipment or specific vehicles under lease
arrangements represent assets to the Group.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, which is generally the case
for leases in the Group, the lessee's incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value to the right-of-use asset
in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
· where possible, uses recent third-party financing received by the
individual lessee as a starting point, adjusted to reflect changes in
financing conditions since third party financing was received;
· uses a build-up approach that starts with a risk-free interest rate
adjusted for credit risk for leases held by the Group, which does not have
recent third party financing; and
· makes adjustments specific to the lease, e.g. term, country, currency
and security.
18 Deferred tax balances
2022 2021
£000 £000
Timing differences and tax losses on which deferred tax is not recognised:
Accelerated capital allowances 1,003 450
Share options 595 1,576
Accrued liabilities 137 477
Reserves and other 3,008 4,161
Tax losses 91,482 70,880
Total deferred tax assets 96,225 77,544
Tax losses
The Company's subsidiaries carry on business in other tax regimes where the
corporation tax rate is not zero. At 31 December 2022, the Group had the
following tax losses carried forward available for use in future periods:
2022 2021
£000 £000
United Kingdom 46,416 40,530
Canada 27,707 16,557
United States of America 12,892 9,994
Ireland 4,467 3,799
Total potential tax benefit 91,482 70,880
Under current tax legislation tax losses in the United Kingdom and Ireland can
be carried forward indefinitely and be offset against future profits arising
from the same activities at the tax rate prevailing at that time. There is a
portion of the tax losses in the United States of America that will begin to
expire in 2035, whereas the majority can be carried forward indefinitely. The
tax losses in Canada can be carried forward 20 years and will begin to expire
in 2035.
Due to the uncertainty regarding the timing and extent of future profits
within these subsidiaries, no deferred tax assets have been recognised in
respect of these tax losses. Deferred tax is also not recognised on the
timing differences between accounting and tax treatment in these subsidiaries
given the offsetting tax losses on which no deferred tax has been recognised.
In March 2021, the UK Government announced that the rate of Corporation Tax
will increase from 19% to 25% on profits of over £250,000, effective 1 April
2023. Profits below £50,000 will continue to be chargeable to Corporation
Tax at 19% and profits between the two thresholds charged at the marginal rate
of 26.5%. In computing the UK deferred tax asset, management has assumed that
as neither the deferred tax assets nor the deferred tax liabilities will
crystallise in the immediate future, calculations based on 19% are
appropriate.
19 Inventory
2022 2021
£000 £000
Raw materials and consumables 1,815 1,897
Work in progress 6,370 3,900
Finished goods 1,642 -
Total inventory 9,827 5,797
Inventory recognised as an expense within cost of sales during the current
year amounted to £3,356,045 (2021: £5,239,682).
Net reversal of inventory write-downs during the current year amounted to
£5,154 (2021: £389,808).
20 Other current assets
2022 2021
£000 £000
Prepayments and deposits 1,879 533
Prepaid inventory 5,102 4,112
Tax credits - recoverable 551 247
Other receivables 1,249 1,388
Total other current assets 8,781 6,280
Prepaid inventory is recognised on inventory payments where physical delivery
of that inventory has not yet been taken by the Group and is stated at the
lower of cost and net realisable value.
21 Contract related balances
The Group has recognised the following assets and liabilities related to
revenue from contracts with customers that are in progress at the respective
year-ends:
2022 2021
£000 £000
Amounts due from customer contracts included in trade receivables 1,737 1,683
Contract assets (accrued income for work done not yet invoiced) 500 324
Contract liabilities (deferred revenue related to advances on customer (8,375) (5,142)
contracts)
Net position of sales contracts (6,138) (3,135)
The amount of revenue recognised in the year that was included in contract
liabilities at the end of the prior year was £428,417 (2021: £2,231,000).
The aggregate position on customer contracts included in the statement of
financial position will change according to the number and size of contracts
in progress at a given year-end as well as the status of payment milestones
made by customers toward servicing those contracts. The Group structures
payment milestones in its customer contracts to cover upfront expenditure for
parts and materials and other working capital requirements associated with the
delivery of promises under customer contracts to better manage Group cash
flow.
The timing of revenue recognition is based on the satisfaction of individual
performance obligations within a contract and is not based on the timing of
advances received. Customer advances are recognised as contract liabilities
in the statement of financial position and are released to income
progressively as individual performance obligations are met. The difference in
timing between the receipt of contract advances and the timing of the
satisfaction of performance obligations for revenue recognition can cause
values to remain in deferred income. The amount of such deferrals is related
to both the overall size of the underlying contract and the planned pace of
delivery in the related work schedule. This is expected to occur where
satisfaction of performance obligations is evidenced by customer acceptance of
the good or service that is the subject of the performance obligation.
Provisions related to contracts with customers
Legacy products provision Provision for contract losses
Warranty provision
Total
£000 £000 £000 £000
At 1 January 2022 257 860 4,859 5,976
Charges to profit or loss:
· Provided in the year 204 578 565 1,347
· Unused amounts reversed (24) (16) (2,059) (2,099)
Amounts used in the year (153) (406) (1,758) (2,317)
At 31 December 2022 284 1,016 1,607 2,907
Legacy products provision Provision for contract losses
Warranty provision
Total
£000 £000 £000 £000
At 1 January 2021 - 824 1,103 1,927
Charges to profit or loss:
· Provided in the year 257 36 4,028 4,321
· Unused amounts reversed - - (51) (51)
Amounts used in the year - - (221) (221)
At 31 December 2021 257 860 4,859 5,976
Warranty provision
The warranty provision represents management's best estimate of the costs
anticipated to be incurred related to warranty claims, both current and
future, from customers in respect of goods and services sold that remain
within their warranty period. The estimate of future warranty costs is
updated periodically based on the Company's actual experience of warranty
claims from customers.
The element of the provision related to potential future claims is based on
management's experience and is judgmental in nature. As for any product
warranty, there is an inherent uncertainty around the likelihood and timing of
a fault occurring that would cause further work to be undertaken or the
replacement of equipment parts.
A standard warranty of up to two years from the date of commissioning is
provided to all customers on goods and services sold and is included in the
original cost of the product. Customers are also able to purchase extended
warranties that extend the warranty period for up to a total of ten years.
Provision for legacy products
Where it is considered of commercial value, management has elected to provide
ongoing maintenance for certain legacy products not otherwise covered under
warranty. Management has determined that it is necessary to provide for the
costs of this ongoing maintenance or to provide for outright
decommissioning.
Provisions in respect of legacy products are expected to unwind over the next
two years when maintenance is either terminated or the products are
decommissioned.
Provision for contract losses
A provision is established for contract losses when it becomes known that a
customer contract has become onerous. A contract is onerous when the
unavoidable costs of fulfilling the Group's obligations under a contract are
greater than the revenue that will be earned from it.
The unavoidable costs of fulfilling contract obligations will include both
direct and indirect costs.
The creation of an additional provision is recognised immediately in profit
and loss. The provision is used to offset subsequent costs incurred as the
contract moves to completion.
In determining the amount to be provided, management has evaluated the
likelihood of input costs continuing to rise against a backdrop of inflation
and instability due to current macro-economic factors such as the, albeit
receding, impact of Covid-19, the increasing price of oil feeding through to
production and shipping costs and continuing supply chain issues.
Provisions in respect of contract losses relate to contracts which are
expected to be delivered in 2023 and will therefore unwind during that year.
22 Trade and other receivables
2022 2021
£000 £000
Total trade and other receivables 1,737 1,683
All trade and other receivables relate to receivables arising from contracts
with customers.
Trade receivables are amounts due from customers for sales of vanadium flow
battery systems in the ordinary course of business. Trade receivables do not
bear interest and generally have 30-day payment terms and therefore are all
classified as current.
The actual credit loss over 2022 was determined to be less than 1% of total
sales (2021: 0%). An allowance for potential credit losses of £23,953
(2021: £nil) has been recognised.
23 Cash and cash equivalents
2022 2021
£000 £000
Total cash and cash equivalents 5,137 26,355
Short term investments
Term deposits are presented as cash equivalents if they have a maturity of
three months or less from the date of acquisition and are repayable with 24
hours' notice with no loss of interest. The Company had no short-term
investments at 31 December 2022 (2021: £nil).
24 Trade and other payables
2022 2021
£000 £000
Trade payables 3,706 1,484
Other payables 78 456
Accrued liabilities 701 1,013
Accrued employee compensation 143 505
Government remittances payable 306 55
Total trade and other payables 4,934 3,513
Trade payables are unsecured and are usually paid within 30 days.
The carrying amounts of trade and other payables are the same as their fair
values due to the short-term nature of the underlying obligation representing
the liability to pay.
25 Derivative financial instruments
2022 2021
£000 £000
Derivative value of warrants issued 449 -
Other 320 -
Total derivative financial instruments 769 -
Information about the Group's exposure to interest rate, foreign currency and
liquidity risks is included in Note 29.
Investment funding arrangement
On 14 December 2022, the Company entered into an investment agreement with
Riverfort Global Opportunities PCC Limited and YA II PN Ltd. ("Noteholders").
The instrument was entered by way of an initial drawdown in the amount of
US$2.5 million and related subscription of 2,870,038 shares priced at nominal
value of €0.01 and to be used to facilitate the conversion of amounts
advanced under the investment agreement. Following the redemption of the
investment agreement any proceeds from the sale of the conversion shares are
to be split 97% to the company and 3% to the Noteholders.
Pursuant to the facility, the Noteholders were granted warrants exercisable
at 67.35p to subscribe for 1,350,020 ordinary shares for a period of up to
four years. These warrants remain outstanding and have been repriced to 32p
being the price per share achieved in the capital raise.
Prepayment was at the Company's option and carried a redemption premium of 10%
paid to the Noteholders at the date of prepayment.
The convertible notes balance was fully repaid by 31 March 2023 using funds
from the 2023 capital raise. The warrants issued to the Noteholders were
repriced to the price achieved in the 2023 capital raise of 32p per share.
See Note 32 for detailed events occurring after the report period.
26 Lease liabilities
The Group's obligations under lease contracts are presented as follows:
2022 2021
At 31 December £000 £000
Current - due within 12 months 740 350
Non-current - due after 12 months 969 420
Total lease liabilities 1,709 770
Payments of lease principal and interest in the period to 31 December were:
2022 2021
At 31 December £000 £000
Payments of lease principal 591 275
Payments of interest 58 45
Total payments under leases 649 320
The contractual undiscounted cash flows for lease obligations at each period
end were:
2022 2021
At 31 December £000 £000
Less than one year 804 379
One to five years 1,009 448
More than five years - -
Total lease liabilities 1,813 827
Lease liabilities represent the present value of the minimum lease payments
the Group is obliged to make to lessors under contracts for the lease of
assets that are presented as right-of-use assets.
27 Issued share capital and reserves
2022 2021
No: 000 £000 No: 000 £000
Authorised at 31 December 121,500 - 120,000 -
Issued and fully paid
At 1 January 116,048 50,690 85,900 37,870
Issued in the year 2,959 26 30,148 12,820
At 31 December 119,007 50,716 116,048 50,690
During the year, 2,959,085 new shares were issued with a nominal value of
£25,974. The total gross proceeds were £80,927 with the balance credited to
the share premium account. Total costs of issuance were £82,442 and these
costs were charged directly to the share premium account.
On 22 November 2022, the Company subdivided each Ordinary Share of €0.50
nominal value into one Ordinary Share of €0.01 each and one deferred A share
of €0.49 each. The Deferred A Shares do not have any voting rights and are
not admitted to trading on AIM or any other market. They carry only a priority
right to participate in any return of capital or in any dividend to the extent
of €1 in aggregate over the class. The Deferred A Shares are, for all
practical purposes, valueless and it is the Board's intention, at an
appropriate time, to have the Deferred A Shares cancelled in accordance with
Companies Law.
In addition, the shares of the Company were admitted to trading on the AQSE
Growth Market in the UK and the OTCQX Best Market in the U.S. during the year.
The holders of ordinary shares are entitled to receive dividends as may be
declared from time to time and are entitled to one vote per share at meetings
of the Company.
Share-based payment reserve
The share-based payment reserve comprises the equity component of the
Company's share-based payments charges.
Currency translation reserve
The translation reserve comprises foreign currency differences arising from
the translation of the financial statements of foreign operations.
Other reserve
Other reserve comprises the portion of the consideration paid for redT energy
Holdings (Ireland) Limited's minority interests over the fair value of the
shares purchased.
28 Financial assets and liabilities
All financial assets are held at amortised cost. There were no financial
assets measured at fair value through other comprehensive income nor through
profit and loss in either period presented.
The maximum exposure to credit risk at the end of the reporting period is the
carrying amount of each class of financial asset presented above. The carrying
value of the financial assets approximate their fair values due to the
short-term maturities of these instruments.
The Group does not currently use derivative instruments for managing financial
risk. All financial liabilities are held at amortised cost.
Recognised fair value measurements
The Group uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique:
Level 1: The fair value of financial instruments traded
in active markets (such as publicly traded derivatives, and trading
securities) is based on quoted market prices at the end of the reporting
period.
The battery systems manufactured by the Company use vanadium metal as a key
component in the electrolyte. Vanadium is an actively traded commodity for
which quoted market prices are available.
The Company does not currently hold inventories of vanadium. Vanadium
purchased from third parties is solely for the use in electrolyte and open
purchase contracts are not accounted for as derivatives.
Level 2: The fair value of financial instruments that
are not traded in an active market (for example, over-the-counter derivatives)
is determined using valuation techniques that maximise the use of observable
market data and rely as little as possible on entity-specific estimates. If
all significant inputs required to fair value instrument are observable, the
instrument is included in Level 2.
At 31 December 2022, the Company held warrants issued to Riverfort Global
Opportunities and YA II PN Ltd as part of the December 2022 financing event.
The warrants are valued using Level 2 inputs as they do not represent a
fixed-for-fixed equity instrument and are valued using observable market
factors such as the share price at the date of the grant, the term of the
award, the share price volatility and the risk-free interest rate (2021:
none).
Level 3: If one or more of the significant inputs is not
based on observable market data the instrument is included in Level 3.
The Group did not hold any financial assets or liabilities that were required
to be valued using Level 3 inputs at 31 December 2022 (2021: none).
No other financial instruments were outstanding at the period end that
required to be valued using a methodology that uses Level 1, 2 or 3 inputs.
29 Financial risk management
This note explains the Group's exposure to financial risks and how these risks
could affect the Group's future financial performance. Current year profit
and loss information has been included where relevant to add further context.
Risk Exposure arising from Measurement Management
Market risk - foreign exchange Future commercial transactions Cash flow forecasting Cash is held in GBP until non-GBP requirements for up to the next six-months
are established, at which point the GBP is sold in favour of the required
Sensitivity analysis currency, which is then remitted to the relevant Group entity
Recognised financial assets and liabilities not denominated in GBP
Market risk - commodity price risk Price of vanadium to be used in the battery electrolyte Quoted market prices for vanadium Strategic supply arrangements with multiple pre-qualified suppliers
Credit risk Cash and cash equivalents, trade receivables and contract assets Ageing analysis Monitoring accumulation of bank balances.
Credit ratings Credit risk assessment for customers and pre-agreed deposits and interim
payments within customer contracts
Liquidity risk Borrowings and other liabilities Rolling cash flow forecasts Access to capital markets for equity or debt funding
Market risk - foreign exchange risk
The Group is primarily exposed to foreign exchange risk related to bank
deposits, receivables or payables balances and other monetary working capital
items that are denominated in a currency other than the Company's functional
currency which has been determined to be GBP.
The Group does not speculate on foreign exchange and aims to mitigate its
overall foreign exchange risk by holding currency in line with forecast
regional operating expenses, providing an element of natural hedge against
adverse foreign exchange movement.
The Group's exposure to foreign exchange risk at the end of the reporting
period, expressed in GBP, was as follows:
Canadian dollar US
Sterling Euro dollar
31 December 2022 £000 £000 £000 £000
Cash and cash equivalents 1,545 354 106 2,810
Trade receivables 350 - 1,475 (88)
Other current assets 491 690 7,172 421
Trade and other payables (1,197) (557) (2,867) (313)
Derivative financial instruments (769) - - -
Lease liabilities (279) - (1,347) (83)
Net exposure 141 487 4,539 2,747
South African rand Australian dollar
Total
31 December 2022 (continued) £000 £000 £000
Cash and cash equivalents 5 317 5,137
Trade receivables - - 1,737
Other current assets 7 - 8,781
Trade and other payables - - (4,934)
Derivative financial instruments - - (769)
Lease liabilities - - (1,709)
Net exposure 12 317 8,243
Canadian dollar US
Sterling Euro dollar
31 December 2021 £000 £000 £000 £000
Cash and cash equivalents 24,141 96 284 1,174
Trade receivables 1,288 23 223 150
Other current assets 2,985 278 2,113 345
Trade and other payables (1,438) (382) (1,229) (460)
Lease liabilities (356) - (299) (102)
Net exposure 26,620 15 1,092 1,107
South African rand Australian dollar
Total
31 December 2021 (continued) £000 £000 £000
Cash and cash equivalents 28 632 26,355
Trade receivables - - 1,684
Other current assets 10 - 5,731
Trade and other payables (4) - (3,513)
Lease liabilities (13) - (770)
Net exposure 21 632 29,487
Sensitivity - exchange rates
The sensitivity of profit or loss to changes in quoted exchange rates for
currencies to which the Group is exposed is as follows, based on each relevant
exchange rate strengthening (or weakening) by 5%.
There is no impact on other components of equity as the Group is not party to
any derivative financial instruments, such as hedging instruments, where
currency gains and losses would be recognised in other comprehensive loss.
Prior year sensitivity of profit or loss was restated to consistently use
monetary working capital as basis for analysis.
2022 Restated
2021
At 31 December +/- 5% £000 £000
Euro 24 1
Canadian dollar 227 55
US dollar 137 55
South African rand 1 1
Australian dollar 16 32
405 144
Market risk - commodity price risk
The Group's batteries use an electrolyte incorporating vanadium. Vanadium is
an elemental metal and is used primarily to strengthen steel, particularly for
the construction industry.
Whilst it is not a mature market traded commodity, such that one can buy
forward or derivative contracts, market prices for vanadium pentoxide (V2O5)
at 98% purity are quoted in US dollars per pound.
Vanadium forms about two-thirds of the value of the electrolyte, which in turn
forms about a quarter of the landed cost of a battery, and so a fluctuation in
the price of vanadium will impact the profitability of battery sales. An
increase or decrease in the market price of vanadium of 5% could cause the
value of the electrolyte component of a battery to increase or decrease by
approximately 3%.
Credit risk - cash held on deposit with banks
Credit risk arises from cash and cash equivalents and deposits with banks and
other financial institutions.
Credit risk related to holdings with financial institutions is managed by only
maintaining bank accounts with reputable financial institutions. The Group
aims only to place funds on deposit with institutions with a minimum credit
rating of B2 Moody's.
The Group's cash at bank and short-term deposits are held with institutions
with credit ratings as follows:
2022 2021
At 31 December £000 £000
Aa1 780 -
Aa2 1,315 1,087
A1 3,037 25,240
Ba2 5 28
5,137 26,355
Credit risk - trade and other receivables
Past due but not impaired
The Group's credit risk from receivables encompasses the default risk of its
customers and other counterparties.
Its exposure to credit risk is influenced mainly by the individual
characteristics of each customer or counterparty. The creditworthiness of
potential and existing customers is assessed prior to entering each new
transaction. A credit analysis is performed, and appropriate payment terms
implemented that may include increased level of upfront deposits for the
purchase of battery units.
Notwithstanding the above, the Group's standard terms of trade provide that up
to 90% of the sales price of a battery unit is paid prior to delivery.
Receivables are considered for impairment on a case-by-case basis when they
are past due or where there is objective evidence that the customer or counter
party may be a default risk. The Group takes into consideration the customer
or counter party payment history, its credit worthiness together with the
prevailing economic environment in which it operates to assess the potential
impairment of receivables.
On an ongoing basis, receivable balances attributable to each customer or
other counterparty are monitored and appropriate action is taken when the
relevant balance becomes or is considered likely to become overdue. The
maximum exposure to loss arising from receivables is equal to invoiced value.
The ageing of trade receivable balances was:
2022 2021
At 31 December £000 £000
Current 1,582 249
Past due - less than 30 days 112 -
Past due - more than 30 days 43 1,434
Total trade and other receivables 1,737 1,683
Past due amounts at 31 December 2022, related to four customers (2021: eight
customers) and £23,953 (2021: £nil) was considered to be impaired.
Liquidity risk
Liquidity risk relates to the Group's ability to meet its obligations as they
fall due.
The Group generates cash from its operations that are principally related to
the manufacture and installation of vanadium flow batteries. The market for
reliable and flexible grid-scale storage solutions for energy generated from
renewable sources is growing and the technology continues to develop.
The development of new and enhanced storage technologies can be capital
intensive and the Group has historically funded development and early-stage
commercial activity primarily from equity investment but also using cash from
operations and loan funding.
The Group forecasts cash generation using a comprehensive company financial
model and monitors the timing and amount of its payment obligations.
The following table shows the Group's financial liabilities by relevant
maturity grouping based on contractual maturities. The amounts included in the
analysis are contractual, undiscounted cashflows.
Less than one year One to two years Two to five years Over five years Total contracted cash flows Carrying amount
31 December 2022 £000 £000 £000 £000 £000 £000
Trade and other payables 4,582 352 - - 4,934 4,934
Derivative financial instruments 769 - - - 769 769
Lease liabilities 740 630 339 - 1,813 1,709
Total financial liabilities 6,091 982 339 - 7,516 7,412
Less than one year One to two years Two to five years Over five years Total contracted cash flows Carrying amount
31 December 2021 £000 £000 £000 £000 £000 £000
Trade and other payables 3,513 - - - 3,513 3,513
Lease liabilities 379 331 117 - 827 770
Total financial liabilities 3,892 331 117 - 4,340 4,283
Capital management
At 31 December the Group had debt from an investment agreement entered with
Riverfort Global Opportunities PCC Ltd and YA II PN Ltd. At 31 March 2023,
the loan has been repaid in full using proceeds from the March 2023 equity
raise. Following the loan redemption, the Company has no external debt
outstanding.
The Board regularly reviews the Group's cash requirements and future
projections to monitor cash usage and assess the need for additional funding.
At 31 May 2023, the Group had £15 million of cash on hand.
30 Related parties
The only related parties of the Company are the key management of the Group
and close members of their family. Key management has been determined as the
CEO and his direct reports.
During the year, the Company employed The Headhunters Recruitment Inc. to
perform recruitment services and paid a placement fee of £27,369 all of which
was outstanding as at 31 December 2022. The Headhunters Recruitment Inc. did
at the time employ Georgia Harper, Matt Harper's spouse.
During the year, Larry Zulch repaid £12,000 in respect of shares purchased on
his behalf in relation to fundraising in 2021.
Key management compensation is disclosed in note 8, Staff costs and headcount.
31 Group entities
Ownership %
Direct subsidiary undertakings Country of incorporation Registered office Principal activity 2022 2021
Camco Holdings UK Limited England Office 501 New Broad Street House, 35 New Broad Street, London, England, EC2M Holding company 100% 100%
1NH
United Kingdom
Camco Services (UK) Limited England Office 501 New Broad Street House, 35 New Broad Street, London, England, EC2M Support services 100% 100%
1NH
United Kingdom
Camco (Mauritius) Limited Mauritius 24 Dr Joseph Rivière Street Holding company 100% 100%
1st Floor, Felix House
Port Lewis, Mauritius
Invinity Energy Systems (U.S.) Corporation United States of America 1201 Orange St. #600 Energy storage 100% -100%
Wilmington, DE
USA 19899
Invinity Energy Nexus Limited England Office 501 New Broad Street House, 35 New Broad Street, London, England, EC2M Energy storage 100% 100%
1NH
United Kingdom
Indirect subsidiary undertakings
redT Energy Holdings (UK) Limited England Office 501 New Broad Street House, 35 New Broad Street, London, England, EC2M Research and consultancy 100% 100%
1NH
United Kingdom
Re-Fuel Technology Limited England Office 501 New Broad Street House, 35 New Broad Street, London, England, EC2M Energy storage 99% 99%
1NH
United Kingdom
Invinity Energy (UK) Limited England Office 501 New Broad Street House, 35 New Broad Street, London, England, EC2M Energy storage 99% 99%
1NH
United Kingdom
redT Energy Holdings (Ireland) Limited Ireland 22 Northumberland Road Energy storage 99% 99%
Ballsbridge, Dublin 4
Invinity Energy Systems (Ireland) Limited Ireland 22 Northumberland Road Energy storage 99% 99%
Ballsbridge, Dublin 4
redT energy (Australia) (Pty) Ltd Australia RSK Advisory, Energy storage 99% 99%
Level 2, Suite 7
66 Victoria Crescent
Narre Warren, Victoria 3805
Australia
Invinity Energy (South Africa) (Pty) Ltd South Africa 1st Floor, Kiepersol House Business Services 100% 100%
Stonemill Office Park
300 Acacia Road
Darrenwood
Randburg 2194
Invinity Energy Systems (Canada) Corporation Canada 2900-550 Burrard Street Energy storage 100% 100%
Vancouver, BC
Canada V6C 0A3
Suzhou Avalon Battery Company Limited The People's Republic of China 1809 Building 4 no.11888 East Taihu Avenue, Songling Town, Wujiang District, Business Services 100% 100%
Suzhou City
Associates
Vanadium Electrolyte Rental Limited England Office 501 New Broad Street House, 35 New Broad Street, London, England, EC2M Vanadium procurement 50% 50%
1NH
United Kingdom
32 Events occurring after the report period
On 23 February 2023, the Company announced it had raised gross proceeds of
£19 million through a placing of 59,375,000 new ordinary shares
of €0.01 each and £2.5 million through subscription by Everbrite
Technology Co., Ltd. of 7,812,500 new ordinary shares, both at an issue price
of 32 pence per new ordinary share.
The Company also offered to all qualifying shareholders the opportunity to
participate in an open offer to raise up to £4 million at issue price. The
open offer was made on the basis of: 2 open offer shares for
every 19 ordinary shares held.
On 14 March 2023, the Company announced it had received valid acceptances from
qualifying shareholders in respect of 4,825,092 open offer shares, therefore
raising an additional £1.5 million of proceeds.
As part of the placing and open offer, the Directors subscribed for new
ordinary shares which raised gross proceeds of approximately £60,000 in
aggregate.
The Company has therefore raised, in aggregate, gross proceeds of
approximately £23 million through the placing, subscription and open offer.
In addition, on 3 March 2023, the Company announced it had entered into a
repayment agreement to repay the outstanding drawn amount of the convertible
loan facility with Riverfort Global Opportunities PCC Ltd and YA II PN Ltd
("Noteholders"). The Company has settled the outstanding drawn amount together
with the redemption premium of 10% (US$208,107.53).
Pursuant to the facility, on 14 December 2022 the Noteholders were granted
warrants exercisable at 67.35p to subscribe for 1,350,020 ordinary shares for
a period of up to four years. In accordance with the terms of the warrant
instrument, the Company was required to amend the exercise price of these
warrants to 32p, being the issue price of the recently announced placing and
open offer. In consideration of the Noteholders undertakings, the Company has
agreed to grant a further 449,980 warrants at an exercise price of 32p which
will expire on 14 December 2026.
As part of the facility, 2,700,038 ordinary shares were issued to the
Noteholders to effect initial conversions relating to the initial advance. Any
shares held by Noteholders after the facility has been repaid will be sold
with relevant net proceeds remitted to the Company. At 3 March 2023, 1,779,640
of the Initial Shares are remaining and held by the Noteholders.
The ongoing events in Ukraine have led to international macro-economic
instability. The impact on sterling has fed through to increased input costs
and these are expected to continue while the situation remains unresolved.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR UBURROBUNUURRecent news on Invinity Energy Systems
See all newsRCS - Invinity Energy Sys - Invinity Hosts BC and Vancouver Elected Officials
AnnouncementRCS - Invinity Energy Sys - Strategic Partner Secures LDES Project Connections
AnnouncementREG - Invinity Energy Sys - Holding(s) in Company
AnnouncementREG - Invinity Energy Sys - LODES Project Secures Approval to Proceed
AnnouncementREG - Invinity Energy Sys - Q1 2025 Trading Update
Announcement