REG - Invinity Energy Sys - 2023 Financial Results
27/06/2024 07:00
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RNS Number : 0743U Invinity Energy Systems PLC 27 June 2024
The information contained within this Announcement is deemed by Invinity
Energy Systems plc to constitute inside information as stipulated under the
Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK law by virtue
of the European Union (Withdrawal) Act 2018 ("MAR").
27 June 2024
Invinity Energy Systems plc
("Invinity" or the "Company")
2023 Financial Results
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 2023 that are in line
with expectations.
The Company will hold a virtual meeting for analysts at 10am (UK time) today.
Analysts wishing to attend are kindly asked to email invinity@tavistock.co.uk
(mailto:invinity@tavistock.co.uk) to receive instructions on how to join the
meeting.
Invinity's management team will host a virtual results presentation and
interactive Q&A for all shareholders at 3pm (UK time) on Wednesday 3 July
2024 via the Investor Meet Company platform. Investors wishing to join the
session will be automatically invited if they already follow Invinity on that
platform, or can register for free via this link
(https://www.investormeetcompany.com/invinity-energy-systems-plc/register-investor)
.
The Company's 2023 Annual Report will shortly be available for download from
the Company's website
(https://invinity.com/investors/shareholder-documents/?utm_source=fy23rns) and
will be posted to shareholders' registered addresses.
Highlights
· 511% increase in total income(1) YoY to £22.0m (2022: £3.6m),
marginally ahead of guidance provided on 18 December 2023 and largely due to
an 800% YoY increase in products shipped (32.5 MWh) during the period.
· 136.7 MWh of Invinity batteries sold or awarded funding during 2023
for delivery in 2024 or 2025 including 99.6 MWh relating to Invinity's next
generation Mistral product, which remains on track for commercial launch later
this year.
· 170% increase in total global pipeline of commercial interest to 6.6
GWh as of 17 June 2024 (24 May 2023: 2.47 GWh) reflecting growing commercial
interest in Invinity's products and longer duration energy storage solutions
in general.
· Loss from operations of £22.8m (2022: £19.0m). The majority of the
2023 gross loss relates to projects signed before 2022. Margin improvement is
a key strategic objective and more recent projects are forecast to achieve
broadly flat or small positive gross margins at the project level (before
allocation of facility costs).
· 10% reduction in cash outflows YoY to £19.7m (2022: £21.9m) and
broadly unchanged administrative costs of £19.1m (2022: £19.0m) reflecting a
net improvement in operating assets and liabilities as well as a continued
focus on cost management.
· Debt-free with £53.2m of cash at 31 May 2024 (2023: £15.4m)
reflecting a post period £57.4m fundraise cornerstoned by a £25m investment
from UK Infrastructure Bank completed in May 2024.
(1)Includes sales revenue and project related grant income
Commercial Pipeline
Invinity's commercial pipeline development over the past year is detailed
below:
Date Base (MWh) Advanced (MWh) Qualified Qualified
Near Term (MWh)
Further Term (MWh)
24-May-2023 42.8 73.4 957.1 1,397.4
(2022 Annual Report)
22-Sep-2023 43.1 137.3 1,415.0 3,057.8
(HY23 Results)
30-Nov-2023 49.8 92.0 1,898.5 3,790.7
(YE Business Update)
17-Jun-2024 45.8 446.5 2,009.4 4,122.2
(2023 Annual Report)
% change (May 2023 to June 2024) +7% +508% +110% +195%
N.B. Definitions of pipeline category terms can be found in the Company's
announcements
Larry Zulch, Chief Executive Officer at Invinity said:
"Our impressive gains in 2023 delivered on the very high expectations we set
for ourselves and established an appropriate foundation for a successful
fundraise just completed. We welcome our new investors as we focus on
progressing toward positive cashflow with a compelling new product and a
low-capex strategy for delivering it at scale into a market hungry for energy
storage."
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 Financial Officer and Chief Development Officer
Joe Worthington, Director of Communications and Investor Relations
Canaccord Genuity (Nominated Adviser and Joint Broker) +44 (0)20 7523 8000
Henry Fitzgerald-O'Connor / Bobbie Hilliam / Harry Pardoe / Ana Ercegovic
VSA Capital (AQSE Corporate Advisor, Financial Adviser and Joint Broker) +44 (0)20 3005 5000
Andrew Monk / Andrew Raca
Tavistock (Financial PR Advisor) +44 (0)20 7920 3150
Simon Hudson / Saskia Sizen / Adam Baynes 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 75 MWh
of systems already deployed or contracted for delivery across 82 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 quoted 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 2023
Introduction - Foundations for Scale
Matt Harper, Chief Commercial Officer
An unprecedented level of attention and capital is flowing towards building a
net zero grid by the customers, regulators and grid operators who make up
global electricity markets.
Wind and solar power are the least-cost form of generation almost everywhere.
Markets that can take that low-carbon electricity and deliver it to users
reliably and at low cost are the focus of policymakers worldwide. This is the
opportunity on which Invinity is focused.
Over the past two years, the Invinity team has delivered ever-larger projects
- proving how our vanadium flow batteries can deliver the capabilities our
customers want: durable, safe, long duration energy storage ("LDES"). With the
launch of our next-generation vanadium flow battery, code-named "Mistral",
expected later this year we will have the product that can deliver those
capabilities to electric grids around the world at any scale.
This combination of opportunity and capability in markets around the world are
Invinity's "foundations for scale". As we look forward, we see tremendous
opportunity from those foundations. Invinity will go from strength to strength
by proving at increasing scale the benefits of durable long duration storage.
If we do that job right, we believe our products will fundamentally inform the
structure of, and be widely deployed across, the global energy system for
decades to come.
Market Headwinds and Tailwinds
Tremendous commercial opportunities are emerging on the path to net zero.
First and foremost, renewables are the world's lowest cost source of new
electric generating capacity. This is reflected in the massive solar farms
being built from northern Canada to Dubai and the wind farms now serving
Micronesia to northern Scotland.
However, headwinds are beginning to appear. In jurisdictions like California
and Australia that have a large proportion of photovoltaic generating assets,
negative electricity market prices are becoming common at peak solar
generation times, challenging the economics of expanding such generation. More
solar also means that fuel-powered generators are operating fewer hours per
day, lowering asset utilisation and thus pushing up costs for peaking
capacity. Even conventional low carbon sources are struggling: from Canada to
Australia, hydro projects are taking longer and costing more, as are recent
nuclear plants in the UK and U.S.
Fortunately, energy storage assets are increasingly proving their ability to
"firm up" the output from intermittent renewables. Batteries are now meeting a
significant portion of demand in some high renewables markets. LDES solutions
promise to further extend the benefits of renewables when the sun isn't
shining and the wind isn't blowing. Even in jurisdictions like California, the
largest batteries in the world are only starting to fill in where solar power
cuts off.
If batteries are going to facilitate an even higher proportion of our energy
needs being served by renewables, critical questions remain: what kind of
batteries will serve not just peak hours but power our businesses and homes 24
hours per day? How much capacity is required? Where should it be installed?
And who will pay for it?
Fortunately, Invinity is already helping to answer these questions. Our
batteries are ideally suited for a 24-hour non-stop cycle shifting solar
overnight, doing so for the life of the generating asset and with a chemistry
safe enough to be installed alongside homes and critical infrastructure.
Additionally, our team are actively engaging with policymakers and regulators
worldwide to ensure their plans contemplate these advantages, seeding markets
for the revenue and profits that will see our business grow and thrive.
The UK: Less Sun, More Wind but Similar Challenges to California
The UK's transition towards a net zero grid saw a massive inflection point
this winter, with wind outstripping fossil fuel generation in consecutive
quarters for the first time ever. However, the UK battery market has
struggled. Revenues for UK-based battery assets dropped significantly over the
course of 2023, presenting challenging economics for asset operators and
developers alike.
We've also seen significant delays in permitting and grid interconnection,
which have been particularly challenging in the context of our LODES project,
which was awarded funds by the UK Department of Energy Security and Net Zero
("DESNZ"). Fortunately, as regulations adapt to the benefits that batteries
can deliver to the grid, and as local planning councils awaken to the safety
benefits of our flow batteries over lithium alternatives, we are seeing
individual projects accelerate.
The broad economic picture is improving as well. Revenues from installed
assets on a £-per-MW basis have trended up over the first quarter of 2024,
with LSE-listed Gresham House Energy Storage Fund reporting portfolio revenue
of £77,900 per MW per year in April 2024 as compared with £43,800 per MW per
year as recently as January 2024. While monthly variation can be expected, as
more variable resources come online, we expect the overcapacity in the UK
battery market to be absorbed and asset values return to an investable level.
Finally, on the regulatory front, 2024 so far has seen two exciting
developments. In January, DESNZ released the first working paper on a proposed
"Cap and Floor" scheme to accelerate the deployment of non-lithium, long
duration storage on the UK grid. This scheme, on whose development the
Department did and continues to seek Invinity's input, is designed to ensure
investable returns for operators of large-scale LDES projects and inform the
development of future markets for LDES services.
Then in March, the House of Lords' Science and Technology Committee released a
paper titled "Long-duration energy storage: get on with it", presenting a
compelling vision for how batteries like Invinity's can both advance the path
to net zero while decreasing consumers' electricity costs. We expect strongly
positive policies and regulation will flow from this work.
With DESNZ projecting that deploying up to 20 GW of LDES can save UK
electricity ratepayers up to £24bn, there is ample reason to expect success.
An election year always injects some uncertainty, but with both the current
government's "Powering up Britain" and the Labour party's "Great British
Energy" platforms firmly supporting long duration storage, we feel confident
of our prospects.
The U.S.: Focused on Deployment
Where the UK has focused on market innovation to accelerate storage, the U.S.
focus has been on individual technologies and the companies that build them.
In March 2023 the U.S. Department of Energy ("DOE") published its "Pathways to
Liftoff" paper presenting how various forms of energy storage can enhance
integration of renewables. That paper was strongly supportive of storage that
delivers inter-day shifting of renewable energy, the segment where Invinity
focuses. In June 2023, the Invinity team presented a whitepaper based on the
U.S. DOE's analysis at the International Flow Battery Forum which identified
the inter-day LDES segment as the one that would deliver the largest amount of
energy to the grid by 2040.
Based on that work, the DOE has set out to allocate up to $3.5 billion worth
of funds to LDES projects. Results of the highly competitive first round of
solicitations were announced in September 2023 with only 12 projects being
funded, and Invinity being the only company to have been awarded funds twice.
Upon delivery, our 12 MWh project at the DOE's Pacific Northwest National
Labs' Grid Storage Launchpad, and our 72 MWh of VFBs installed at five sites
with the National Renewables Cooperative Organization, will be a massive leap
forward in proving not just the deployability of our batteries at scale, but
the impact they can have for the grid at large.
From Our Shores to Their Shores
The one undeniable trend all over the world has been towards the regional
manufacturing of infrastructure equipment in general, components for a net
zero grid in particular, and battery, solar and wind components
specifically.
We initially observed this trend in Asia where grid operators are increasingly
nervous about security risks posed by products made in China. The trend
accelerated with the introduction of the U.S. Inflation Reduction Act, which
provides incentives for domestic battery manufacturing. While not every
jurisdiction has the market power to shift an entire industry, in every
country where we operate we consistently hear the fastest path to adoption is
one that aligns with good, well-paying jobs and a strong domestic industry.
Fortunately, Invinity has a tremendous advantage in this respect. Our supply
chain already has global reach and does not rely on "gigafactory" scale
production or highly specialised manufacturing. As we are proving with our new
facility in Motherwell in Scotland that, upon completion, will take our UK
capacity to over 500 MWh per year for customers in the UK and EU, we can
expand manufacturing based on customer demand at a very low capital cost. As
we expand our partnership strategy to deliver our products globally through
capable regional partners, we will be able to further scale our business
faster than either lithium incumbents or new entrants to our industry.
Delivering on Capability
Invinity's plan to deliver the capabilities that will serve these massive and
growing opportunities can be summed up in one word: Mistral. Mistral is, at
its most fundamental, our platform for scale. The north star for our business
is to build a battery that can deliver low-cost, low carbon renewable power on
demand at a lower total cost of energy than any other source. With commercial
rollout imminent, both we and our regional partners are getting ever more
inbound sales inquiries, significantly enhancing our commercial pipeline.
Our business is highly regional. Mistral is designed for a global supply chain
both inbound to Invinity and outbound to our regional partners, who will
deliver the market-specific operating knowledge, regional installation
capabilities and domestic sources of supply that are critical to success.
However, we must also achieve ultra-low cost, protect our intellectual
property and ensure consistently high product quality all while accelerating
speed to market.
In support of those plans, we have been encouraged by our current and
prospective partners' response to the "license and royalty" model with which
we intend to grow our international business. In this model, Invinity will
deliver core technology components to our regional manufacturing partners, who
will assemble and deliver products to their own regional client base. This
will allow us to rapidly scale while remaining a capital-light business. Our
first partner to adopt this model, Everdura in Taiwan, has begun work on their
final assembly plant, and is painting a path for steadily evolving
relationships in Australia, Eastern Europe and the Middle East.
Conclusion
The coming years for Invinity are all about scale. We need our products to be
at a scale so they can solve grid operators' and project developers' most
pressing challenges. We need our book of business to scale to where we can set
the direction of a rapidly evolving global market and regulatory landscape.
And we need our organisation to scale so we can deliver the revenue and
profits that will see us continually enhance shareholder value.
The foundations for scale - both the opportunity we seek to serve and the
capabilities we'll deliver to do so - are clear. The need for durable, safe,
long duration storage as a critical component of a high renewables net zero
grid is no longer in question and plans to deliver on that need are being
developed by the world's most influential agencies, governments and
regulators. With Mistral, Invinity will have the tool to deliver our vanadium
flow batteries' capabilities to the global market. This foundation is an
incredible starting point, and I'm looking forward to delivering its potential
alongside the Invinity team.
Chairman's Report: Delivering Progress
I'm pleased to report that Invinity continues to make further progress on its
Pathway to Profitability Strategy that was set out on pages 12-13 of our 2022
Annual Report. Our achievements in 2023 were focused on our key themes of
delivery and scaling our business.
I am especially pleased to note that Invinity has secured significant orders
for its vanadium flow batteries and grown its pipeline of confirmed commercial
interest. Growing commercial traction underpins our current ramp-up and
investment phase aimed at delivering a profitable, self-sustaining business.
Our achievements in 2023 were delivered against a backdrop of rapidly growing
global renewable energy production and storage. Long duration energy storage
is a key enabler in delivering these plans and governments are being
increasingly urged to "get on with it" as a means to unlock lower cost, lower
carbon energy on demand. The launch of our next-generation product later this
year will further open up this potentially huge addressable global market.
Last year I stated that delivery is an important target for the Company and I
am pleased to report that in 2023 Invinity delivered and commissioned more
vanadium flow batteries in 12 months than ever before. This proven ability to
deliver cements Invinity's position as a world leading manufacturer of
vanadium flow batteries that is meeting the needs of its customers. I have
been to two site openings in the last 12 months. One a large Canadian classic
solar/storage site and secondly a European "behind-the-meter" project
delivered by ENGIE Belgium, Equans BeLux and Jan De Nul with support from the
Belgium Energy Ministry. These projects highlight the flexibility of our
technology and its ability to generate value for our customers in a broad
range of applications.
During 2023 we brought in our customer Everdura as a new strategic partner,
enabling Invinity to gain operational and commercial access into a new market.
Strategic partnerships are going to be of great importance to Invinity's long
term growth and I am pleased to note that our partnership with Everdura took a
step further early in 2024 when they signed up to become an exclusive
manufacturer of our next-generation product for the Taiwanese market. The
partnership route will enable Invinity's leading energy storage products to be
deployed in more markets, quicker and more economically.
I am also pleased to note more recently the strategic investment secured from
the UK Infrastructure Bank ("UKIB") and Korea Investment Partners, who
participated in an oversubscribed fundraise alongside existing and new
investors in May 2024. Their backing not only gives a valuable endorsement of
Invinity and its technology but provides important growth capital which will
further accelerate our progress towards profitability.
These successes are a testament to the foundations Invinity has laid over the
last 18 months and I would like to take this opportunity to thank the entire
team for their hard work and perseverance that made this possible. I would
also like to thank all my Board colleagues for their support and assistance
over the year, particularly Jonathan Marren who has taken on the role of Chief
Financial Officer in addition to his role as Chief Development Officer. The
years of experience, responsibility and focus that our Board collectively
brings to bear will ensure that the Company continues to make the right
decisions for its long-term future.
Invinity is making progress, having delivered more batteries than ever before
and secured funding and contracts for almost 100 MWh of our next generation
product. I wish to express the thanks of the entire Board for the support we
received for our recent oversubscribed fundraise. Invinity is now adequately
capitalised to address the opportunity at hand. We can attract and retain
quality staff, expand manufacturing capacity and deliver our next-generation
product to our clients. I look forward to this new phase in our development.
I have confidence in our team's ability to deliver on our publicly stated
strategy. The opportunity is huge and there is much to be done.
Neil O'Brien
Non-executive Chairman
26 June 2024
Chief Executive's Report: Getting on with it
I've taken inspiration for my report title from Baroness Brown who simply
titled her recent report to the House of Lords "Long-duration energy storage:
get on with it"; I feel it succinctly captures our challenge. The need is
acute and progress is required.
Every step toward renewable energy from wind, solar, or the tides is
simultaneously a call for more energy storage to reduce instability. While the
most widespread use of energy storage-stabilising the grid over seconds or
minutes-remains important, grid stability over the course of a day, the
"long-duration" referred to in the title, is increasingly vital. Invinity's
products can do both.
Invinity is progressing well. In 2023, we:
· Delivered more product than ever before;
· Recognised five times more revenue than in 2022;
· Closed significant new deals across each of our core markets;
· Secured funding for major projects using Mistral, our next-generation
product; and
· Progressed our strategic aim to deliver projects at positive gross
margin, an important step towards net cash generation.
I am incredibly proud of our team for these accomplishments. We are receiving
recognition for them: Bloomberg New Energy Finance included Invinity on its
list of Global Tier 1 battery manufacturers for the first time, the only flow
battery company and the only UK company they recognised.
But our 2023 accomplishments only serve to heighten our determination to
rapidly and efficiently advance our products, their commercial recognition,
and our ability to deliver ever-larger orders. Before looking forward,
however, we should review our commitments from 2022.
Our 2023 Achievements
In my 2022 report, I outlined a four-part strategy that would enable Invinity
to make demonstrable progress year-on-year. I am pleased to report significant
progress in each area:
1) Deliver on Backlog
Invinity delivered more than 32,000 kilowatt-hours of our vanadium flow
batteries ("VFBs") to customers across four continents.
Scaling up manufacturing and improving our supply chain was a major focus in
2023. A new manufacturing facility in Vancouver added 200,000 kilowatt-hours
of yearly capacity. I am pleased that we have recently expanded our capacity
in the UK and plan to do the same in the U.S. as well in due course. Our
supply chain improvements reduced costs while keeping environmental, social
and governance obligations front of mind.
2) Close New Deals
2023 saw Invinity sign deals with eight new customers and enter into a number
of commercial partnerships. We targeted and subsequently won a number of
funding opportunities that will support progressing large high-profile
projects toward financial close.
Our sales pipeline, with continued application of strict criteria, has grown
170% year-on-year to over 6,000 megawatt-hours of qualified commercial demand,
giving us confidence that the market opportunity remains very real and very
large.
3) Deliver Mistral
Mistral, the code name for our next-generation product currently being
co-developed with Gamesa Electric and Siemens Gamesa Renewable Energy,
promises to be more capable, more scalable, and more economical than other
energy storage. That means it must operate continuously for decades without
degradation, function at gigawatt-hour scale, and do so with a low lifetime
cost per unit of energy stored and no risk of an expensive fire. Our current
VS3 product has proven these goals are eminently achievable, and Mistral will
deliver them.
Developing an ambitious new product is not easy, but I am pleased to report
that the team made significant progress in 2023, achieving a fully operational
prototype that validated Mistral's fundamental performance targets and
operating parameters. This major step gave us confidence to initiate pilot
manufacturing in readiness for Mistral's official launch later this year.
Performance verification enabled us to begin commercial activity for Mistral
in 2023 and I am pleased that we met our target of securing a Mistral pilot
project in the first half of 2023 and a commercial order for Mistral later in
the year. Additional validation came from the U.S. Department of Energy
("DOE") which awarded funding for 84,000 kilowatt-hours of Mistral projects
after an extensive process evaluating Mistral and Invinity's capability to
deliver it.
4) Operational Excellence
Outward progress must be matched by internal capabilities, and in 2023 we
focused on efficient delivery of more product than ever before and the
processes that enable us to continue to grow. The delivery and commissioning
of more than 28,000 kilowatt-hours of our VS3 product demonstrates success.
We focus on making Invinity a great place to work; the best workforce allows
us to produce the best VFBs.
Looking Forward
In our recent fundraise, we highlighted our strategy of utilising
partnerships. In the U.S. and UK, our partners help us pursue capex-light
manufacturing and direct sales. Outside these core markets, we are working
with existing and pursuing new partners capable of commercial engagement,
product and project support, and after-sales activities. Our relationship with
rest-of-world partners typically starts with reselling our products but can
lead to manufacturing under a licence and royalty model.
1) The UK Market
Each year, the UK discards ("curtails") enough renewable energy to power an
estimated million homes. Much of this could be captured in LDES and used
effectively. However, current regulatory support for energy storage focuses on
grid stability and therefore shorter-duration batteries. We know LDES projects
to be economically compelling but proving that requires financial returns from
operating LDES projects. The UK Government is helping us provide that proof:
· In April 2023, Invinity secured £11 million of matched funding under
Phase 2 of the UK Government's Longer Duration Energy Storage ("LODES")
Competition for the largest VFB deployed in the UK.
· The House of Lords released the aforementioned report from the
Science and Technology Committee on LDES and its critical role in UK
electricity supply.
· More recently, the UK Infrastructure Bank, wholly owned and backed by
HM Treasury but operating independently, made a £25 million equity investment
in Invinity to support UK LDES projects, manufacturing and jobs.
The UK electricity market has great potential for Invinity given the
significant need for LDES and the UK Government's support for its deployment.
Our manufacturing and electrochemical research in Scotland supports our focus
on the UK. We envision an LDES growth phase occurring in the UK just as
Mistral becomes available to dramatically expand our capabilities.
2) The North American Market
A somewhat different approach is required to address the enormous LDES market
in North America, though in both markets, adoption of renewable energy is
limited by the deployment of energy storage. Governments are stepping in to
accelerate LDES projects with one prominent example being the U.S. Inflation
Reduction Act of 2022 which provides tax credits that support energy storage
projects. Further examples include:
· In June 2023, The British Columbia Centre for Innovation and Clean
Energy provided funding to support the very first Mistral project.
· In September 2023, the U.S. DOE awarded funding for a 12,000
kilowatt-hour Mistral project at the Pacific Northwest National Laboratory
("PNNL"), an energy research lab with more than 6,000 scientists, engineers,
and professional staff. This will be the largest battery system ever provided
to PNNL.
· The September 2023 U.S. DOE announcement also announced funding for
72,000 kilowatt-hours of Mistral to be installed at five regional energy
cooperatives.
Qualifying for government support in the U.S. requires meeting certain
requirements for U.S. domestic content. Invinity has developed relationships
with various partners to support a capex-light strategy to optimize our supply
chain and U.S. manufacturing.
We see the North American market as having very high potential for Invinity.
There is an emerging need for non-lithium LDES, and Invinity is in a prime
position to address that need with Mistral.
3) Outside Core Markets
Invinity cannot address the worldwide need for LDES with a local presence in
every area with potential. The solution is to identify partners able to fully
represent our products.
An example is our relationship with Everdura in Taiwan. Everdura, whose parent
Everbrite made an equity investment in 2023 in Invinity, has been pursuing
commercial opportunities for Invinity's products across the entire ASEAN
region. In September 2023, Everdura became our first commercial customer to
place a Mistral order.
In February 2024, Everdura signed a manufacturing agreement for Mistral that
gives Invinity a royalty based on a percentage of their Mistral revenue in
exchange for direct access to our supply chain and the ability to order our
proprietary cell stacks and software directly from Invinity.
We are pursuing other similar high-potential relationships and look forward to
announcing them in due course.
Conclusion
Mistral is a differentiated product with compelling economics. It promises to
operate continuously for decades with high throughput, no degradation, and
zero chance of a fire (our water-based electrolyte is entirely non-flammable).
Bringing Mistral to market is our highest priority and I'm pleased to say it
is going well, though certainly there are challenges, many we've met and some
still to come. However, we view every challenge as an opportunity to prove our
capabilities and take us further ahead of the competition.
Mistral in itself is not enough. We must have an appropriate strategy,
tailored by region, for commercialization and manufacturing; embrace and
enhance our relationships with partners; operate efficiently and effectively;
and reduce the potential impact of events outside of our control. And,
finally, we must rapidly become profitable, the ultimate measure of our
success.
We are doing all of this with the finest team I have ever had the privilege of
leading and the continued support of our investors and our partners. I am
endlessly grateful for both.
Larry Zulch
Chief Executive Officer
26 June 2024
Chief Financial Officer's Report: Building a Sustainable Business
Financial Highlights
2023 2022
£'000 £'000
Revenue 22,006 2,944
Project related grant income shown against cost of sales 11 647
22,017 3,591
Total revenue and grant income other than revenue
Loss from operations (22,778) (18,982)
2023 2022
£ 000 £ 000
Total inventory 3,288 9,827
Pre-paid inventory 1,073 5,102
Total inventory and Pre-paid inventory 4,361 14,929
Amounts due from customer contracts included in trade receivables 2,496 1,737
Contract assets (accrued income for work done not yet invoiced) 1,192 500
Contract liabilities (deferred revenue related to advances on customer (1,312) (8,375)
contracts)
Trade payables (2,166) (3,706)
Provision for contract losses (333) (1,607)
Warranty provision (602) (284)
Net position 3,636 3,194
2023 Financial Performance
I am pleased to report that total income including sales revenue and project
related grant income increased significantly to £22.0 million in 2023 (2022:
£3.6 million). Revenue is recognised against projects when specific
performance obligations related to those projects have been satisfied.
In the year, revenue was recognised on 15 projects across Australia, the U.S.,
Canada, the UK and Europe totalling over 35 MWh of projects. This marks the
first time the Company has recorded significant revenue and represents a major
milestone.
As in the prior year, 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. Unlike 2022, such grant funding only constituted a negligible
part of total revenue and grant income other than revenue.
The Company recorded a gross loss of £3.3 million (2022: gross profit of
£0.7 million) but it is notable that the gross profit recorded in 2022
included the writing back of £3.2 million of provisions.
The Company has a strategic aim to move to delivering projects at positive
gross margins and this positive trend continues with the majority of the gross
loss being attributed to projects signed before 2022 and with the more recent
projects being at broadly flat or small positive gross margins at the project
level (before allocation of facility costs).
Administrative expenses did not change significantly from the prior year at
£19.1 million (2022: £19.0 million) reflecting a continued focus on managing
costs. Administrative costs were represented by an increased investment in
people with staff costs of £12.8 million in 2023 (2022: £10.3 million) and
professional fees decreased to £0.7 million in 2023 (2022: £3.0 million),
benefiting from the one-off items in 2022 not recurring in the current year.
Sales and marketing costs increased to £1.0 million (2022: £0.2 million) as
a result of continuing investment in this area to support marketing the
Company's products, depreciation of £1.1 million (2022: £1.2 million) and IT
costs of £0.9 million (2022 £1.2 million). Net research and development
recoveries were £0.1 million (2022: £1.6 million costs) reflecting
recoveries from Gamesa Electric S.A.U. ("Gamesa Electric") under the Joint
Development and Commercialisation Agreement ("JDCA") whereby Gamesa Electric
agreed to fund up to an aggregate US$4.62 million of Invinity's activities
towards the development of the Company's next-generation product, code-named
"Mistral", payable as development milestones are met.
Net Finance costs were £0.4 million (2022: £0.4 million income) with the
majority of the difference being the costs associated with the repayment and
termination of the convertible loan instrument that was entered into on 14
December 2022 to provide additional working capital for the business and was
completed in the year.
Total inventory and pre-paid inventory reduced to £4.4 million (2022: £14.9
million) as a result of the conversion into revenue from the delivery of
products during the year and in particular the Spencer Energy, Viejas Casino
& Resort and Elemental Energy projects. Considering wider balance sheet
items directly relating to product sales (i.e. Trade receivables, Accrued
income, Deferred revenue, Trade payables, Provision for contract losses and
Warranty provision), the net balance sheet position increased by £0.4 million
to £3.6 million (2022: £3.2 million).
2023 Cash Performance
Year-on-year cash outflow from operations reduced to £19.7 million (2022:
£21.9 million) principally as a result of a net improvement in operating
assets and liabilities as set out in note 14.
As stated above, the Company has a strategic aim to move to delivering
projects at positive gross margin and this positive trend continues with the
more recent projects being at broadly flat or small positive gross margins at
the project level (before allocation of facility costs). 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 Mistral. Mistral is expected to
be manufactured at significantly lower cost than the Company's existing
product, the VS3 and, when deployed, 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.
Funding and Net Working Capital
At 31 December 2023 the Company had cash and cash equivalents of £5.0 million
(2022: £5.1 million). The Company's cash balance during 2024 has been
materially increased following the successful conclusion of a capital raising
of £57.4 million which completed in May 2024.
At the prior year end, the Company had recorded a US$2.5 million convertible
loan instrument taken out with Riverfort Global Opportunities PCC Ltd and YA
II PN that was entered into on 14 December 2022 to provide additional working
capital for the business. This convertible was entirely repaid during the
period.
Accordingly, the Company was debt free as at 31 December 2023 and remains so
as at the date of this document.
Strategic Investment
As noted last year, Invinity sees strategic partnerships and investment as an
important pillar of its future corporate growth and it was delighted to
conclude a material strategic investment from the UK Infrastructure Bank of
£25.0 million and an investment from Korea Investment Partners of £3.0
million as part of a larger £57.4 million fundraising completed in May 2024.
In addition, 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.
These strategic investments underscore the development progress of the Company
since the 2020 merger transaction that formed the Group as it is today and, in
relation to the agreement with Everbrite, is intended to support a closer
strategic relationship for the deployment of vanadium flow batteries in Taiwan
and further afield.
Going Concern
Following completion of the fundraising in May 2024, the Company had cash of
£53.2 million as at 31 May 2024 (2023: £15.4 million)
The Directors have prepared a cash flow forecast for the period from the
balance sheet date until 30 June 2025. This forecast indicates that the Group
would expect to remain cash positive during this period and without the
requirement for further fundraising. The business continues to be in a cash
outflow position, using funding generated from previous fundraises (although
it is planning to move to a cash inflow position upon the launch and delivery
of material volume of Mistral). As such, this cash flow forecast was
stress-tested for a worst-case scenario of no positive cash receipts from
sales. In this tested scenario, the business would remain cash positive for
the 12 months from the date of approval of these financial statements. The
accounts have therefore been prepared on a going concern basis.
Jonathan Marren
Chief Financial Officer and Chief Development Officer
26 June 2024
Financial Statements
Consolidated Statement of Profit and Loss
For the year ended 31 December 2023
2023 2022
Note £000 £000 £000 £000
Revenue 4 22,006 2,944
Direct costs (25,361) (2,927)
Grant income against direct costs 4 11 647
Cost of sales 5 (25,350) (2,280)
Gross (loss)/profit (3,344) 664
Operating costs
Administrative expenses 6 (19,085) (19,042)
Other items of operating income and expense 10 (349) (604)
Loss from operations (22,778) (18,982)
Finance income 719 62
Finance costs (1,233) (65)
Gain on foreign currency transactions 113 448
Net finance (costs)/ income 11 (401) 445
Loss before income tax (23,179) (18,537)
Income tax expense 12 - -
Loss for the year (23,179) (18,537)
Loss per ordinary share in pence
Basic 13 (13.1) (16.0)
Diluted 13 (13.1) (16.0)
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 2023
2023 2022
Continuing operations £000 £000
Loss for the year (23,179) (18,537)
Other comprehensive expense
Items that may be reclassified subsequently to profit or loss:
Exchange differences on the translation of foreign operations (60) (137)
Total comprehensive loss for the year (23,239) (18,674)
The above consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
Consolidated Statement of Financial Position
As at 31 December 2023
2023 2022
Note £000 £000
Non-current assets
Goodwill and other intangible assets 15 24,002 24,050
Property, plant and equipment 16 1,699 1,208
Right-of-use assets 17 1,558 1,845
Contract assets 21 304 -
Total non-current assets 27,563 27,103
Current assets
Inventory 19 3,288 9,827
Other current assets 20 2,721 8,781
Contract assets 21 888 500
Trade receivables 22 2,496 1,737
Cash and cash equivalents 23 5,014 5,137
Total current assets 14,407 25,982
Total assets 41,970 53,085
Current liabilities
Trade and other payables 24 (3,948) (4,935)
Derivative financial instruments 25 (406) (769)
Contract liabilities 21 (1,312) (8,375)
Lease liabilities 26 (723) (740)
Provisions 21 (812) (2,907)
Total current liabilities (7,201) (17,726)
Net current assets 7,206 8,256
Non-current liabilities
Lease liabilities 26 (833) (969)
Provisions 21 (123) -
Total non-current liabilities (956) (969)
Total liabilities (8,157) (18,695)
Net assets 33,813 34,390
Equity
Called up share capital 27 51,348 50,716
Share premium 27 162,883 141,579
Share-based payment reserve 27 6,683 5,957
Accumulated losses 27 (185,273) (162,094)
Currency translation reserve 27 (1,867) (1,807)
Other reserves 27 39 39
Total equity 33,813 34,390
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 26 June 2024 and were signed on its behalf by:
Jonathan Marren
Director
Consolidated Statement of Changes in Equity
As at 31 December 2023
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 2023 50,716 141,579 5,957 (162,094) (1,807) 39 34,390
Loss for the year - - - (23,179) - - (23,179)
Other comprehensive income
Foreign currency translation differences - - - - (60) - (60)
Total comprehensive loss for the year - - - (23,179) (60) - (23,239)
Transactions with owners in their capacity as owners
Investment funding arrangement, net of transaction costs 631 21,295 - - - - 21,926
Exercise of share options 1 9 - - - - 10
Share-based payments - - 726 - - - 726
Total contributions by owners 632 21,304 726 - - - 22,662
At 31 December 2023 51,348 162,883 6,683 (185,273) (1,867) 39 33,813
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 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.
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
2023 2022
Note £000 £000
Cash flows from operating activities
Cash used in operations 14 (19,657) (21,934)
Interest received 299 62
Interest paid (1) (1)
Net cash outflow from operating activities (19,359) (21,872)
Cash flows from investing activities
Acquisition of property, plant and equipment 16 (1,013) (708)
Proceeds from disposal of property, plant and equipment 16 57 -
Deposits on right-of-use assets (28) -
Net cash outflows from investing activities (984) (708)
Cash flows from financing activities
Payment of lease liabilities 26 (629) (591)
Interest paid on lease liabilities 26 (44) (59)
Proceeds from the issue of share capital 23,044 1,161
Proceeds from the Investment funding arrangement, net of transaction costs 25 - 769
Proceeds from sale of conversion shares 742 -
Financing charges on repayment of derivative financial instruments (992) -
Repayment of investment funding arrangement (881) -
Proceeds from the exercise of share options and warrants 10 6
Payment of transaction costs for the issue of share capital (1,117) -
Net cash inflow from financing activities 20,133 1,286
Net decrease in cash and cash equivalents (210) (21,294)
Cash and cash equivalents at the beginning of the year 5,137 26,355
Effects of exchange rate changes on cash and cash equivalents 87 76
Cash and cash equivalents at the end of the year 5,014 5,137
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 quoted 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 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 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
The Directors are satisfied that the Group has adequate resources to continue
to operate as a going concern for the foreseeable future and that no material
uncertainties exist which could cause significant doubt with respect to this
assessment. In making this assessment, the Directors have considered the
Group's balance sheet position and forecast earnings and cash flows for the
period from the date of approval of these financial statements to 30 June
2025.
The Group has relied on fundraising in previous years and following the
completion of successful fundraising in May 2024, the Group had cash of £53.2
million as at 31 May 2024 (2022: £15.4 million).
As part of the going concern assessment the Directors have prepared a cash
flow forecast which indicates that the Group would expect to remain cash
positive during this period and without the requirement for further
fundraising. The business continues in a cash outflow position, using funding
generated from previous fundraises. However, it plans to move to a cash
inflow position upon the launch and delivery of material volume of the next
generation product.
This cash flow forecast was stress-tested for a worst-case scenario of no
positive cash receipts from sales. In these tested scenarios, the business
would remain cash positive for the 12 months from the date of approval of
these financial statements.
Therefore, the Directors believe it is appropriate to prepare the accounts on
a going concern basis.
New standards, amendments and interpretations effective and adopted by the
Group in 2023
Amendments to existing standards previously issued by the IASB with effective
dates during the year ended 31 December 2023 are summarised below. There was
no effect on the Group's consolidated financial statements for the year ended
31 December 2023 as a result of the adoption of these amendments.
IFRS 17 Insurance Contracts
The Group has adopted IFRS 17 and the related amendments for the first time in
the current year. IFRS 17 establishes the principles for the recognition,
measurement, presentation and disclosure of insurance contracts and supersedes
IFRS 4 Insurance Contracts.
IFRS 17 outlines a general model, which is modified for insurance contracts
with direct participation features, described as the variable fee approach.
The general model is simplified if certain criteria are met by measuring the
liability for remaining coverage using the premium allocation approach. The
general model uses current assumptions to estimate the amount, timing and
uncertainty of future cash flows and it explicitly measures the cost of that
uncertainty. It considers market interest rates, and the impact of
policyholders' options and guarantees.
The Group does not have any contracts that meet the definition of an insurance
contract under IFRS 17.
Amendments to 'IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2 - Making Materiality Judgements - Disclosure of Accounting
Policies'
The Group has adopted the amendments to IAS 1 for the first time in the
current year. The amendments change the requirements in IAS 1 with regard to
disclosure of accounting policies. The amendments replace all instances of the
term 'significant accounting policies' with 'material accounting policy
information'. Accounting policy information is material if, when considered
together with other information included in an entity's financial statements,
it can reasonably be expected to influence decisions that the primary users of
general-purpose financial statements make on the basis of those financial
statements.
The supporting paragraphs in IAS 1 are also amended to clarify that accounting
policy information that relates to immaterial transactions, other events or
conditions is immaterial and need not be disclosed. Accounting policy
information may be material because of the nature of the related transactions,
other events or conditions, even if the amounts are immaterial. However, not
all accounting policy information relating to material transactions, other
events or conditions is itself material.
The IASB has also developed guidance and examples to explain and demonstrate
the application of the 'four-step materiality process' described in IFRS
Practice Statement 2.
Amendments to 'IAS 12 Income Taxes - Deferred Tax related to Assets and
Liabilities arising from a Single Transaction'
The Group has adopted the amendments to IAS 12 for the first time in the
current year. The amendments introduce a further exception from the initial
recognition exemption. Under the amendments, an entity does not apply the
initial recognition exemption for transactions that give rise to equal taxable
and deductible temporary differences. Depending on the applicable tax law,
equal taxable and deductible temporary differences may arise on initial
recognition of an asset and liability in a transaction that is not a business
combination and affects neither accounting profit nor taxable profit.
Following the amendments to IAS 12, an entity is required to recognise the
related deferred tax asset and liability, with the recognition of any deferred
tax asset being subject to the recoverability criteria in IAS 12.
Amendments to 'IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors -Definition of Accounting Estimates'
The Group has adopted the amendments to IAS 8 for the first time in the
current year. The amendments replace the definition of a change in accounting
estimates with a definition of accounting estimates. Under the new definition,
accounting estimates are "monetary amounts in financial statements that are
subject to measurement uncertainty". The definition of a change in accounting
estimates was deleted.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2023 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 summarised below:
§ IAS 1 Classification of Liabilities as Current or Non-Current (effective
for periods beginning on or after 1 January 2024);
§ IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and
its Associate or Joint Venture (the effective date of the amendments has yet
to be set by the IASB);
§ IAS 1 Non-current Liabilities with Covenants (effective for periods
beginning on or after 1 January 2024);
§ IAS 7 and IFRS 7 Supplier Finance Arrangements (effective for periods
beginning on or after 1 January 2024); and
§ IFRS 16 Lease Liability in a Sale and Leaseback (effective for periods
beginning on or after 1 January 2024).
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
functional currency 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 currency operations
Subsidiaries of the Company 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 currency 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
average 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.
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.
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 Financial Officer and Chief Development
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.
Revenue
The Group generates revenue from the sale of battery storage systems
integration hardware, installation, extended warranty and other services.
These multiple elements are separate performance obligations that are derived
from contractual arrangements with customers. 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.
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. With respect to the battery system, associated control systems and
integration hardware, control is transferred at a point in time and is usually
based on the contractual shipping terms. In certain instances, the battery
system and integration hardware may be ready for delivery although the
customer is not ready to receive the product. The Group will recognise revenue
in accordance with IFRS 15 as a Bill-and-Hold arrangement if all of the
following conditions are satisfied:
§ The reason for the bill and hold arrangement is substantive;
§ The battery systems and hardware are identified separately as belonging to
the customer;
§ The battery systems and hardware are currently ready for physical transfer
to the customer; and
§ The Company does not have the ability to use the product or to direct it to
another customer.
With respect to the services that includes installation and commissioning, the
performance obligation is usually satisfied at a point in time when a when a
commissioning certificate or site performance report has been issued to the
customer. 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.
In addition, under the terms of its contracts for sale, the Group may be
responsible for other services such as storing and 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. Revenue is recognised for the storage
services over time as the services are delivered and for shipping services at
a point in time when the goods are delivered to the agreed upon location. The
related costs incurred by the Group for storage, 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 Group 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 Group. 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 Group'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);
and
§ including the impact of any non-vesting conditions.
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 for all deductible temporary differences,
the carry forward of unused tax credits and any unused tax losses. Deferred
tax assets are recognised to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences,
and the carry forward of unused tax credits and unused tax losses can be
utilised.
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 and associates. 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 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. Deferred tax
balances are presented on a gross basis. Refer to note 18, deferred tax
balances.
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. 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.
Goodwill is tested for impairment on an annual basis, and the Group will also
test for impairment at other times if there is an indication that an
impairment may exist. Determining whether goodwill is impaired requires an
estimation of the value-in-use of the CGU. The key estimates are therefore the
selection of the suitable discount rates and the estimation of future growth
rates which may depend on specific risks and the anticipated economic and
market conditions related to the CGU.
As part of determining the value in use of the CGU, sensitivities have been
considered on the underlying inputs included within the value-in-use
calculations used for impairment reviews and no impact exists on the carrying
value of goodwill, given the headroom identified as a result of the impairment
test. Goodwill is impaired where circumstances indicate that the recoverable
amount of the underlying CGU may no longer support the carrying value of the
CGU. 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.
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
assets are available for use. Work-in-progress assets are not depreciated
until they are available for 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 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 Group's best estimate of the expenditure
required to settle the obligation at the financial position date, considering
the risks and uncertainties of the obligation, and are discounted to 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. Where discounting is used, the carrying amount of a provision
increases in each period to reflect the passage of time, this increase is
recognised as borrowing cost.
Leases
Group entities only participate in lease contracts as the lessee. Lease
contracts typically relate to 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 lease
term of less than 12 months and leases related to low value assets with an
annual lease cost of £5,000 or less. The payments for the exempt leases are
recognised as an expense on a straight-line basis over the lease term.
The Group has elected not to separate non-lease components from lease
components, by class of underlying asset. Each lease component and any
associated non-lease components are accounted for as a single lease component.
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.
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
Financial assets are classified, at initial recognition, as subsequently
measured at amortised cost, fair value through other comprehensive income
(OCI), and fair value through profit or loss.
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.
For a financial asset to be classified and measured at amortised cost or fair
value through OCI, it needs to give rise to cash flows that are 'solely
payments of principal and interest (SPPI)' on the principal amount
outstanding. This assessment is referred to as the SPPI test and is performed
at an instrument level. Financial assets with cash flows that are not SPPI are
classified and measured at fair value through profit or loss, irrespective of
the business model.
Financial assets that the Group is party to are classified and measured as
follows:
Financial asset Measurement basis
Trade receivables 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 instruments 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 are recognised immediately in profit or loss and are
included in other gains/(losses).
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and on demand deposits, and
other short-term highly liquid investments that are readily convertible to a
known
amount of cash and are subject to an insignificant risk of change in value.
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
Financial assets and financial liabilities are offset and the net amount is
reported in the consolidated statement of financial position if there is a
currently enforceable legal right to offset the recognised amounts and there
is an intention to settle on a net basis, to realise the assets and settle the
liabilities simultaneously.
3 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. Refer to 'Basis of preparation' for details of the
going concern analysis performed and the Directors' conclusions regarding
going concern.
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 such as the delivery of
the battery systems and integration hardware. 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 hardware or 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.
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 20% increase in the number of warranty claims or a 20% increase in the cost
to remedy warranty issues would increase the provision by £120,436. A 40%
increase in the number of warranty claims or a 40% increase in the cost to
remedy warranty issues would increase the provision by £240,872.
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.
The assessment of unavoidable costs includes direct costs such as parts and
labour and indirect costs, such as production overhead or indirect labour,
that are expected to be incurred in servicing a warranty claim.
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.
A 20% increase in unavoidable costs would increase the provision by £66,493.
A 40% increase in unavoidable costs would increase the provision by £132,986.
Refer to note 21, contract related balances.
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 2023 were derived from continuing operations.
2023 2022
Revenue from contracts with customers £000 £000
Battery systems and associated control systems 19,425 2,548
Integration hardware 1,470 -
Installation and commissioning 504 254
Other services 607 142
Total revenue in the consolidated statement of profit and loss 22,006 2,944
Analysed as:
Revenue recognised at a point in time 22,000 2,936
Revenue recognised over time 6 8
Total revenue in the consolidated statement of profit and loss 22,006 2,944
Grant income shown against cost of sales 11 647
22,017 3,591
Geographic analysis of revenue
The Group's revenue from contracts with customers was derived from the
following geographic regions:
2023 2022
Geographic analysis of revenue £000 £000
Asia 737 160
Australia 6,212 -
Europe 2,826 1,691
North America 12,231 1,093
Total revenue in the consolidated statement of profit and loss 22,006 2,944
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 (2022: three)
customers who each accounted for more than 10% of total revenue as follows:
2023 2022
Significant customers and concentration of revenue £000 £000
Customer A 6,238 -
Customer B 6,038 -
Customer C 4,299 -
Customer D - 1,247
Customer E - 466
Customer F - 466
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 total
grant income that was received in the year was as follows:
2023 2022
Grant income received £000 £000
Business support grants against employee costs - COVID-19 - (11)
Grants for research and development 160 647
Grants for product deployment 378
Economic and social development 1 -
Total government grants 539 636
11 647
Disclosed as:
Grant income against cost of sales
Grant income against administrative expenses 528 (11)
5 Cost of sales
2023 2022
£000 £000
Movement in inventories of finished battery systems 27,023 6,168
Movement in provisions for warranty and warranty costs (429) 763
Movement in provisions for sales contracts (1,233) (4,004)
Total cost of sales 25,361 2,927
6 Administrative expenses
2023 2022
£000 £000
Staff costs 12,750 10,322
Research and development costs 1,868 2,184
Research and development recoveries, tax credits and grants (1,949) (592)
Professional fees 669 2,983
Sales and marketing costs 1,048 249
Facilities and office costs 232 385
Depreciation and amortisation 1,056 1,150
Other administrative costs 3,411 2,361
Total administrative expenses 19,085 19,042
No development costs were capitalised in the period (2022: £nil).
7 Auditors' Remuneration
2023 2022
£000 £000
Fees payable to the Company's auditors for the audit of the consolidated
financial statements
282 271
Audit of financial statements of subsidiaries pursuant to legislation 17 33
Fees payable to the Company's auditor for other services:
· Tax compliance services - 19
299 323
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
2023 2022
Staff costs £000 £000
Wages and salaries 11,475 9,280
Employer payroll taxes 839 840
Contributions to defined contribution plans 123 95
Other benefits 977 822
Share-based payments 726 388
Total staff costs 14,140 11,425
Administrative staff costs in the year were £12,749,556 (2022: £10,321,870)
and staff costs included in cost of sales were £1,390,336 (2022:
£1,103,027).
2023 2022
Average headcount Number Number
Canada 73 71
United Kingdom 59 68
United States of America 8 7
South Africa - 1
Total 140 147
Key management compensation
The key management of the Group comprises the members of the senior leadership
team.
2023 2022
Key management compensation £000 £000
Short-term employee benefits 2,364 1,812
Post-employment benefits 14 16
Equity settled share-based payment 263 225
Total key management compensation 2,641 2,053
Prior year equity settled share-based payment was included into the table
above to conform to the current period presentation.
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 2023.
Standard Grant date Final Expiry date Exercise price 2023 2022
redT 2015 plan 07 Dec 2015 07 Jan 2020 58.95 €c - 68,803
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 151,428 185,143
Invinity Energy 2018 ESOP 01 Apr 2020 12 Mar 2030 82.50 p 290,000 290,000
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 1,052,134 1,052,134
Invinity Energy 2018 ESOP 01 Apr 2020 08 May 2029 6.84 p 628,358 658,314
Invinity Energy 2018 ESOP 26 Aug 2020 26 Aug 2030 113.00 p 1,540,000 2,043,334
Invinity Energy 2018 ESOP 28 Jan 2021 28 Jan 2031 204.00 p 313,000 372,000
Invinity Energy 2018 ESOP 04 Mar 2021 04 Mar 2031 152.00 p 170,000 194,000
Invinity Energy 2018 ESOP 15 Apr 2021 15 Apr 2031 151.00 p 84,000 108,000
Invinity Energy 2018 ESOP 03 Aug 2021 03 Aug 2031 134.50 p 290,000 375,000
Invinity Energy 2018 ESOP 29 Oct 2021 29 Oct 2031 111.50 p 263,000 297,000
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 150,000 186,000
Invinity Energy 2018 ESOP 02 Mar 2022 APR 02 Mar 2032 93.50 p 45,000 60,000
Invinity Energy 2018 ESOP 11 Apr 2022 11 Apr 2032 90.00 p 60,000 60,000
Invinity Energy 2018 ESOP 11 Jul 2022 11 Jul 2032 45.50 p 500,000 500,000
Invinity Energy 2018 ESOP 08 Dec 2022 08 Dec 2032 38.00 p 531,000 822,000
Invinity Energy 2018 ESOP 27 Jan 2023 27 Jan 2033 42.00 p 2,655,100 -
Invinity Energy 2018 ESOP 20 Apr 2023 20 Apr 2033 43.50 p 97,000 -
Invinity Energy 2018 ESOP 19 Jul 2023 19 Jul 2033 51.20 p 4,177,000 -
Invinity Energy 2018 ESOP 26 Oct 2023 26 Oct 2033 38.00 p 369,000 -
Invinity Energy 2018 ESOP 07 Dec 2023 07 Dec 2033 29.50 p 75,000 -
13,957,908 7,788,616
Non-standard Grant date Expiry date Exercise price 2023 2022
Long-term Incentive plan 8 Dec 2009 30 Jul 2023 50.00 €c - 15,000
Camco 2006 Executive Share Plan 30 Jul 2013 30 Jul 2023 50.00 €c - 68,127
redT 2018 plan 30 May 2018 30 Jul 2023 400.00 p - 70,000
- 153,127
Total 13,957,908 7,941,743
Weighted average remaining contractual life of options outstanding at the end 7.96 7.18
of the year
A total of 39,956 employee options were exercised during the year (2022:
87,678) with a weighted average exercise price of 14.64 pence per share (2022:
4.34p).
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 Group.
The Long-term Incentive Plan, Camco 2006 Executive Share Plan and redT 2015
Plan are closed and all options have expired in 2023. No further option awards
will be made under any 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 2023 3,538,691 84.86p 4,249,925 72.80p
Granted 8,184,600 46.41p - -
Forfeited (1,279,738) 52.13p (695,614) 114.21p
Vested (1,844,379) 91.84p 1,844,379 91.84p
Exercised - - (39,956) 14.64p
At 31 December 2023 8,599,174 51.64p 5,358,734 74.42p
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
Plans with standard performance conditions
The primary share plan that remains outstanding at 31 December 2023 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.
Parallel options issued
In addition, certain legacy redT options were reissued in 2020 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. The options
expire on 10 May 2025.
Warrants issued in the period or outstanding
The Company had 909,090 warrants outstanding at 31 December 2023 in relation
to a 2020 investment agreement with Riverfort Global Opportunities
("Riverfort") which expired 2 April 2024.
VSA Capital was awarded 340,000 warrants with an exercise price of 82.5 pence
in April 2020, at the time of the merger. These warrants are outstanding and
expire on 2 April 2025. In June 2023, the exercise price was amended to 50
pence with the expiry date remaining unchanged.
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 2023, the Company had nil (2022: 14,464,317) short-term
warrants and 14,463,665 (2022: 14,646,317) long-term warrants outstanding.
Short-term warrants expired 16 December 2023. The long-term warrants'
subscription price was amended to 100 pence per ordinary share, giving the
holder the right to subscribe to one new ordinary share at any time from
Second Admission until 16 December 2024. The warrants are trading on the Aquis
Stock Exchange (AQSE) and have been deemed to have no fair value based on the
price at which they are currently 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 32 pence per ordinary share until 14 December
2026.
In consideration of the Noteholders undertakings, the Company has agreed to
grant a further 449,980 warrants at an exercise price of 32 pence which will
expire on 14 December 2026.
10 Other items of operating income and expense
The following items are included in comprehensive loss:
2023 2022
£000 £000
(Income)/expense
Provision for onerous contracts, net of amounts used - 554
(Gain)/Loss on disposal of property, plant and equipment (15) 33
Obsolete inventory 8 25
Impairment of inventory to net realisable value 151 -
Loss/(gain) on curtailment of right-of-use asset 205 (8)
Total other operating expenses 349 604
11 Net finance income and costs
2023 2022
£000 £000
Finance income
Interest on bank deposits and money market funds (299) (62)
Gain on realised foreign currency transactions (42) (38)
Gain on unrealised foreign currency transactions (71) (410)
Finance costs
Finance charges on convertible loan notes and financial instruments 768 6
Finance charges for lease liabilities 44 58
Finance charges for liabilities held at amortised cost 1 1
Net finance costs/(income) 401 (445)
12 Income tax expense
2023 2022
£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
2023 2022
£000 £000
Loss before tax (23,179) (18,537)
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 67 181
Differences in overseas tax rates (4,761) (4,707)
Unrelieved tax losses carried forward 4,615 4,350
Origination and reversal of timing differences not recognised 79 176
Total income tax expense - -
13 Loss per share
2023 2022
Basic loss per share In pence In pence
From continuing operations (13.1) (16.0)
2023 2022
Diluted loss per share In pence In pence
From continuing operations (13.1) (16.0)
2023 2022
Loss used in calculation of basic and diluted loss per share £000 £000
From continuing operations (23,179) (18,537)
2023 2022
Weighted average number of shares used in calculation Number Number
Basic 176,439,069 116,151,378
Diluted 177,915,837 117,754,966
Additional potential shares used in the calculation of diluted earnings per
share primarily relate to potential shares outstanding at 31 December 2023
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.
2023 2022
Weighted average number of shares used in loss per share calculation - basic
and diluted
Number Number
In issue at 1 January 119,007,846 116,048,761
Shares issued in the year - weighted average 57,431,223 102,617
Weighted average shares in issue 31 December 176,439,069 116,151,378
Effect of employee share options and other warrants not exercised 1,476,768 1,603,588
Weighted average number of diluted shares in issue 31 December 177,915,837 117,754,966
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 are not included in the diluted loss per share
calculation because they had an anti-dilutive effect on the calculation was
26,279,049 (2022: 29,170,511).
14 Cash flows from operating activities
2023 2022
£000 £000
Loss after income tax (23,179) (18,537)
Adjustments for:
Depreciation and amortisation 1,399 1,350
(Gain)/loss on disposal of property, plant and equipment (15) 33
Impairment of inventory 151 24
Obsolete inventory 8 -
Share-based payments charge 726 681
Equity settled interest and transaction costs on Investment funding - 6
arrangement
Net finance costs 481 (8)
Gain on unrealised foreign currency transactions (71) (168)
(20,500) (16,619)
Change in operating assets & liabilities
Decrease/(increase) in inventory 6,144 (3,875)
Increase in contract assets (694) (174)
Increase in trade receivables and other receivables (796) (88)
Decrease/(increase) in other current assets and prepaid inventory 5,823 (2,354)
(Decrease)/increase in trade and other payables (956) 1,263
(Decrease)/increase in warranty provision (647) 183
Decrease in onerous contract provision (1,217) (3,252)
(Decrease)/increase in contract liabilities (6,814) 2,982
843 (5,315)
Cash used in operations (19,657) (21,934)
15 Goodwill and other intangible assets
Goodwill Patents and certifications Software and domain names Total
£000 £000 £000 £000
Cost
At 1 January 2023 23,944 203 50 24,197
Disposals - - (15) (15)
Foreign currency exchange differences - - (1) (1)
At 31 December 2023 23,944 203 34 24,181
Accumulated amortisation
At 1 January 2023 - (112) (35) (147)
Amortisation charge - (41) (7) (48)
Disposals - - 15 15
Foreign currency exchange differences - - 1 1
At 31 December 2023 - (153) (26) (179)
Net book value
At 1 January 2023 23,944 91 15 24,050
At 31 December 2023 23,944 50 8 24,002
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
For impairment testing goodwill acquired through business combinations and
patents and certifications with indefinite useful lives are allocated to the
single CGU.
Goodwill
All goodwill is tested annually for impairment. At 31 December 2023, 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 35.0 pence per share at that date and the discounted cash flow
forecasts used to estimate the recoverable amounts. The discount rate used in
the calculation amounted to 15%. Change of discount rate by 5% would not
result in impairment of goodwill given significant headroom was maintained
under all sensitivity scenarios run. No impairment loss was identified in
relation to goodwill.
On 24 May 2024, the Company announced the results of a placing, subscription
and open offer. The fundraising raised total proceeds of £57.38 million
through placing of 121,739,130 new ordinary shares, subscription of
121,739,130 new ordinary shares and open offer of 6,011,983 new ordinary
shares at 23.0 pence per share.
The closing share price on 30 May 2024 was 22.00 pence, giving a market
capitalisation of £42.0 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
2023.
16 Property, plant and equipment
Computer and office equipment Leasehold improvements Vehicles and equipment Total
£000 £000 £000 £000
Cost
At 1 January 2023 699 1,119 1,402 3,220
Additions 76 212 799 1,087
Disposals (214) (328) (125) (667)
Transfers - (161) 191 30
Foreign currency exchange differences (7) (19) (32) (58)
At 31 December 2023 554 823 2,235 3,612
Accumulated Depreciation
At 1 January 2023 (662) (635) (715) (2,012)
Depreciation charge (23) (271) (230) (524)
Disposals 214 328 83 625
Transfers - 147 (177) (30)
Foreign currency exchange differences 6 7 15 28
At 31 December 2023 (465) (424) (1,024) (1,913)
Net book value
At 1 January 2023 37 484 687 1,208
At 31 December 2023 89 399 1,211 1,699
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
The Group has no assets pledged as security. No amounts of interest have been
capitalised within property, plant and equipment at 31 December 2023 (2022:
£nil).
17 Right-of-use assets
Offices and facilities Vehicles and equipment Total
£000 £000 £000
Cost
At 1 January 2023 3,330 31 3,361
Additions 929 - 929
Adjustments(1) (392) - (392)
Transfers(2) - (30) (30)
Curtailments and disposals (738) - (738)
Foreign currency exchange differences (83) (1) (84)
At 31 December 2023 3,046 - 3,046
Accumulated Depreciation
At 1 January 2023 (1,489) (27) (1,516)
Depreciation charge (824) (4) (828)
Adjustments(1) 200 - 200
Transfers(2) - 30 30
Curtailments and disposals 582 - 582
Foreign currency exchange differences 43 1 44
At 31 December 2023 (1,488) - (1,488)
Net book value
At 1 January 2023 1,841 4 1,845
At 31 December 2023 1,558 - 1,558
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 (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 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 1,841 4 1,845
(1. ) During the year, adjustments were
made to remove variable payments related to non-lease components from the
lease liability and right-of use assets.
(2. ) During the year, right-of-use
assets were transferred to property, plant and equipment upon completion of
lease terms.
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
2023 2022
£000 £000
Deferred tax relates to the following:
Accelerated capital allowances 5,292 1,003
Share options 292 595
Accrued liabilities 266 137
Reserves and other 901 3,008
Tax losses 110,568 91,482
Total deferred tax assets 117,319 96,225
Tax losses
The Company's subsidiaries carry on business in other tax regimes where the
corporation tax rate is not zero. At 31 December 2023, the Group had the
following tax losses carried forward available for use in future periods:
2023 2022
£000 £000
United Kingdom 51,887 46,416
Canada 35,928 27,707
United States of America 16,539 12,892
Ireland 6,214 4,467
Total potential tax benefit 110,568 91,482
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.
The UK Government announced that the Corporation Tax rate increased from 19%
to 25% on profits of over £250,000, effective 1 April 2023. Profits below
£50,000 continue to be chargeable to Corporation Tax at 19%. 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
2023 2022
£000 £000
Raw materials and consumables 2,961 1,815
Work in progress 285 6,370
Finished goods 42 1,642
Total inventory 3,288 9,827
Inventory recognised as an expense within cost of sales during the current
year amounted to £27,023,108 (2022: £3,356,045).
At 31 December 2023, inventory impairment to net realisable value totalled
£150,988 (2022: nil). Net reversal of inventory write-downs during the
current year amounted to £nil (2022: £5,154).
20 Other current assets
2023 2022
£000 £000
Prepayments and deposits 475 1,879
Prepaid inventory 1,073 5,102
Tax credits - recoverable 719 551
Other receivables 454 1,249
Total other current assets 2,721 8,781
Prepaid inventory is recognised on inventory payments where physical delivery
of that inventory has not yet been taken by the Group.
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:
2023 2022
£000 £000
Amounts due from customer contracts included in trade receivables 2,496 1,737
Contract assets (accrued income for work done not yet invoiced) 888 500
Non-current contract assets 304 -
Contract liabilities (deferred revenue related to advances on customer (1,312) (8,375)
contracts)
Net position of sales contracts 2,376 (6,138)
The amount of revenue recognised in the year that was included in contract
liabilities at the end of the prior year was £8,097,770 (2022: £428,417).
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 2023 284 1,016 1,607 2,907
Charges to profit or loss:
· Provided in the year 552 15 332 899
· Unused amounts reversed (38) (968) (235) (1,241)
Amounts used in the year (195) (13) (1,315) (1,523)
Foreign exchange (1) (50) (56) (107)
At 31 December 2023 602 - 333 935
Current 586 - 226 812
Non-current 16 - 107 123
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 204 555 565 1,324
· Unused amounts reversed (28) (94) (2,059) (2,181)
Amounts used in the year (153) (406) (1,980) (2,539)
Foreign exchange 4 101 222 327
At 31 December 2022 284 1,016 1,607 2,907
Current 284 1,016 1,607 2,907
Non-current - - - -
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
for the costs of ongoing maintenance for certain legacy products. Provisions
in respect of legacy products have fully unwound in 2023 and are no longer
provided.
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 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 2024 and will therefore unwind during that year.
Provisions in respect of contract losses relating to extended warranties for
up to a total of ten years will unwind over that period.
22 Trade receivables
2023 2022
£000 £000
Total trade receivables 2,496 1,737
All trade 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 2023 was determined to be less than 1% of total
sales (2022: less than 1%). An allowance for potential credit losses of
£139,639 (2022: £23,953) has been recognised.
23 Cash and cash equivalents
2023 2022
£000 £000
Total cash and cash equivalents 5,014 5,137
Term deposits are presented as cash equivalents if they have a maturity of
three months or less from the date of acquisition.
24 Trade and other payables
2023 2022
£000 £000
Trade payables 2,166 3,706
Other payables 29 78
Accrued liabilities 877 701
Accrued employee compensation 772 143
Government remittances payable 104 306
Total trade and other payables 3,948 4,934
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
2023 2022
£000 £000
Derivative value of warrants issued 406 449
Other - 320
Total derivative financial instruments 406 769
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.
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 2023 capital raise. 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.
The convertible notes balance was fully repaid by 31 March 2023 using funds
from the 2023 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 totalling US$208,107.
Following the redemption of the investment agreement, proceeds from the sale
of the conversion shares were split 97% to the company and 3% to the
Noteholders, resulting in net proceeds to the Company of £742,601.
Information about the Group's exposure to interest rate, foreign currency and
liquidity risks is included in note 29.
26 Lease liabilities
The Group's obligations under lease contracts are presented as follows:
2023 2022
At 31 December £000 £000
Current - due within 12 months 723 740
Non-current - due after 12 months 833 969
Total lease liabilities 1,556 1,709
Payments of lease principal and interest in the period to 31 December were:
2023 2022
At 31 December £000 £000
Payments of lease principal 629 591
Payments of interest 44 58
Total payments under leases 673 649
The contractual undiscounted cash flows for lease obligations at each period
end were:
2023 2022
At 31 December £000 £000
Less than one year 784 804
One to five years 884 1,009
Total lease liabilities 1,668 1,813
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.
Amounts recognised in the consolidated statement of profit and loss were:
2023 2022
£000 £000
Variable lease payments 230 117
Expenses relating to short-term leases 70 82
Expenses relating to leases of low-value assets 8 5
27 Issued share capital and reserves
2023 2022
No: 000 £000 No: 000 £000
Authorised at 31 December 1,000,000 - 1,000,000 -
Issued and fully paid
At 1 January 119,007 50,716 116,048 50,690
Issued in the year 72,060 632 2,959 26
At 31 December 191,067 51,348 119,007 50,716
During the year, 72,059,618 new shares were issued with a nominal value of
£631,857. The total gross proceeds were £23,045,832 with the balance of
£22,413,975 credited to the share premium account. Total costs of issuance
were £1,117,307 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.
Ordinary shares have a par value of €0.01. 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 capital and share premium
Share capital comprises issued capital in respect of issued and paid-up
shares, at their par value. Share premium comprises the difference between the
proceeds received and the par value of the issued and paid-up shares.
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 2023, 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.
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 2023 (2022: 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 Australian dollar
Sterling Euro dollar Total
31 December 2023 £000 £000 £000 £000 £000 £000
Cash and cash equivalents 3,284 696 346 444 244 5,014
Trade receivables 747 1,350 11 388 - 2,496
Trade and other payables (1,799) (178) (1,466) (505) - (3,948)
Derivative financial instruments (406) - - - - (406)
Lease liabilities (254) - (1,169) (133) - (1,556)
Net exposure 1,572 1,868 (2,278) 194 244 1,600
Canadian dollar US South African rand Australian dollar
Sterling Euro dollar Total
31 December 2022 £000 £000 £000 £000 £000 £000 £000
Cash and cash equivalents 1,545 354 106 2,810 5 317 5,137
Trade receivables 350 - 1,475 (88) - - 1,737
Trade and other payables (1,197) (557) (2,867) (313) - - (4,934)
Derivative financial instruments (769) - - - - - (769)
Lease liabilities (279) - (1,347) (83) - - (1,709)
Net exposure (350) (203) (2,633) 2,326 5 317 (538)
Prior year comparatives were updated to exclude foreign exchange risk on
contract assets and other current assets to conform to the current period
presentation.
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.
2023 2022
At 31 December +/- 5% £000 £000
Euro 93 24
Canadian dollar (114) 227
US dollar 10 137
South African rand - 1
Australian dollar 12 16
1 405
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:
2023 2022
At 31 December £000 £000
Aa1 220 780
Aa2 566 1,315
A1 4,228 3,037
Ba2 - 5
5,014 5,137
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. 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. The assessment reflects the probability-weighted
outcome, the time value of money and reasonable and supportable information
that is available at the reporting date about past events, current conditions
and forecasts of future economic conditions.
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:
2023 2022
At 31 December £000 £000
Current 1,940 1,582
Past due - less than 30 days 339 112
Past due - more than 30 days 217 43
Total trade receivables 2,496 1,737
Past due amounts at 31 December 2023, related to six customers (2022: four
customers) and £139,639 (2022: £23,953) 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 2023 £000 £000 £000 £000 £000 £000
Trade and other payables 3,948 - - - 3,948 3,948
Derivative financial instruments 406 - - - 406 406
Lease liabilities 784 422 462 - 1,668 1,556
Total financial liabilities 5,138 422 462 6,022 5,910
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 4,394
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
Capital management
At 31 December 2022, 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 2024, the Group had £53.2 million of cash on hand.
30 Related parties
The only related parties of the Group are the key management and close members
of their family. Key management has been determined as the CEO and his direct
reports.
Invinity Energy Systems plc purchased a total of 15,000 shares at the issue
price of 32 pence per share in the March 2023 fundraising on behalf of two
executive directors. 31,250 shares were purchased on behalf of Larry Zulch and
15,625 shares on behalf of Matt Harper. At 31 December 2023, the £15,000 owed
by executive directors had been settled.
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 2023 2022
Camco Holdings UK Limited England 128 City Road, London, EC1V 2NX, United Kingdom Holding company 100% 100%
Invinity Energy Systems Limited (formerly Camco Services (UK) Limited) England 128 City Road, London, EC1V 2NX, United Kingdom Support services 100% 100%
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 128 City Road, London, EC1V 2NX, United Kingdom Energy storage 100% 100%
Indirect subsidiary undertakings
redT Energy Holdings (UK) Limited England 128 City Road, London, EC1V 2NX, United Kingdom Research and consultancy 100% 100%
Re-Fuel Technology Limited England 128 City Road, London, EC1V 2NX, United Kingdom Energy storage 99% 99%
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 128 City Road, London, EC1V 2NX, United Kingdom Vanadium procurement 50% 50%
32 Contingent Liability
The Group is involved in legal proceeding with a landlord with a received
claim which has a possible range from £nil to £693k. While the outcome of
this matter is uncertain and difficult to predict, management believes that,
based on the information currently available, the ultimate resolution of these
matters will not have a material adverse effect on the Group's financial
position.
33 Events occurring after the report period
On 26 February 2024, the Company announced that it had entered into an
agreement with its Taiwanese strategic partner, Everdura, to undertake
domestic manufacturing of its next generation vanadium flow battery ("VFB")
product, code-named "Mistral", to serve the Taiwanese and other markets ("the
Agreement"). Under the Agreement, Everdura will manufacture Mistral VFBs to
fulfil orders it intends to secure under the terms of the existing reseller
agreement which targets more than 255 MWh of product sales over a three-year
period. The Agreement states that Everdura will pay Invinity a royalty fee
based on a material percentage of the sale price of any Mistral products sold.
Everdura will also utilise Invinity's existing supply chain and purchase cell
stacks directly from the Company, which will continue to be manufactured by
Invinity at its facilities in the UK and Canada.
In addition, on 24 May 2024, the Company announced it had raised gross
proceeds of £57.4 million through the issue of 249,490,243 new ordinary
shares of €0.01 each at the issue price of 23 pence per new ordinary share.
Of this amount, £25.0 million was raised through a subscription by the UK
Infrastructure Bank (the British state-owned policy bank), £3.0 million by
Korean Investment Partners (an affiliate of Korea Investment Holdings, a
leading financial conglomerate in the Republic of Korea) acting through an
investment fund, £28.0 million through an oversubscribed placing with
institutional and other investors and £1.38 million from an open offer of 3
open offer shares for every 20 ordinary shares held to existing shareholders.
The fundraising shares were admitted to trading on the AIM market of the
London Stock Exchange and the APEX segment of the AQSE Growth Market on 24 May
2024.
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