TIDMCWR
RNS Number : 4221O
Ceres Power Holdings plc
02 October 2019
Ceres Power Holdings plc - Final results for the year ended 30
June 2019
REVENUE DOUBLES FOR FOURTH CONSECUTIVE YEAR
Horsham UK, 2 October 2019 - Ceres Power Holdings plc ("Ceres
Power", "Ceres", the "Company" of the "Group") (AIM: CWR.L), a
global leader in fuel cell technology and engineering, announces
its final results for the year ended 30 June 2019.
Financial Highlights
-- Revenue and other operating income up 133% to GBP16.4 million
with higher margin license activity delivering an improved gross
margin of 75%
-- Net cash used in operating activities down significantly to
GBP3.1 million from GBP9.5 million, reflecting improved operating
loss reduced 33% to GBP7.9 million from GBP11.9 million
-- Equity-free cash outflow(1) up slightly to GBP11.9 million
from GBP10.9 million. GBP9.0 million invested, largely on new CP2
manufacturing facility in UK
-- Raised GBP77.1 million of new equity in the year from
strategic partners and financial institutions. Cash and short-term
investments of GBP71.3 million at 30 June 2019
Commercial and Operational Highlights
-- First product launch with Japan's Miura Co. using Ceres'
SteelCell(R) in a combined heat and power (CHP) system for
commercial use
-- Strategic partnerships signed with both Bosch and Weichai
including equity investment and licensing agreements
-- SteelCell(R) reached a key milestone of 60% net efficiency,
twice that of a conventional gas engine and greater than that of a
centralised megawatt-scale gas turbine
-- GBP8.0 million investment in new blueprint manufacturing
facility (CP2) in Redhill, UK on track for production from January
2020, creating 60 new skilled jobs
Current Trading
-- New system licence and joint development agreement worth
GBP8.0 million over two years signed with Doosan post year end
-- Completed joint development with Weichai of a prototype 30kW
range extender system for electric buses targeting the Chinese
market
-- Strong order book of GBP28.4 million and pipeline(2) worth
more than GBP50 million (as at report date)
(1) Equity free cash outflow is the net change in cash and cash
equivalents in the year (GBP1.2 million) less net cash generated
from financing activities (GBP76.8 million) add the movement in
short-term investments (GBP63.7 million).
(2) Order book is the contracted commercial revenue and grant
income scheduled to be realised in future years. Pipeline is
contracted revenue and other income which management estimate is
contingent upon options not under the control of Ceres.
Phil Caldwell, Chief Executive Officer of Ceres Power,
commented:
"2019 was a milestone year for Ceres, which saw us double
revenue for the fourth year running through significant license
deals and secure our first commercial product launch in Japan later
this year, while also approaching first production at our new UK
reference manufacturing facility.
"We now have license agreements in place with four of the
world's largest engineering and power companies. Bosch and Weichai
have chosen not only to partner with us but have invested in
significant equity stakes, aligning them to the future success of
our business and ensuring that Ceres is well-capitalised to deliver
against its strategy.
"Global awareness of the role that fuel cells can play in
tackling climate change and improving air quality is growing
rapidly. The talent of our team and the quality of our customer
partnerships give us increased confidence in the future prospects
of Ceres and its long-term value to shareholders."
Presentation
A presentation of the results for analysts and institutional
investors will take place at 09.00am today at the offices of
Powerscourt, 1 Tudor Street, London EC4Y 0AH. A replay will be
available on www.cerespower.com later in the day.
For further information, please contact:
Ceres Power Holdings plc Tel: +44 (0)1403 273
Elizabeth Skerritt 463
Tel: +44 (0)207 597 5970
Investec Bank PLC (NOMAD & Joint
Broker)
Jeremy Ellis / Patrick Robb
Berenberg (Joint Broker) Tel: +44 (0) 203 207
Ben Wright / Mark Whitmore 7800
Powerscourt Tel: +44 (0) 20 7250
Peter Ogden / James White 1446
About Ceres Power
Ceres Power (http://www.cerespower.com/) is a world leader in
low cost, next generation fuel cell technology for use in
distributed power products that reduce operating costs, lower CO2,
SOx and NOx emissions, increase efficiency and improve energy
security. The Ceres Power unique patented SteelCell(R) technology
generates power from widely available fuels such as natural gas and
future fuels such as hydrogen enabling a transition from low to
zero carbon power generation at high efficiency. The SteelCell(R)
is manufactured using standard processing equipment and
conventional materials such as steel, meaning that it can be mass
produced at an affordable price. Ceres Power offers its partners
the opportunity to develop power systems and products using its
unique technology and know-how, as well as the opportunity to
manufacture the SteelCell(R) in volume.
Chairman's Statement
2019 marked an inflection point for Ceres, when plans and
potential began to translate into tangible delivery and measurable
gains. Our close links with two of the world's major players in
engine manufacture developed into two significant commercial
licences and a commitment to form a manufacturing joint venture
with Weichai in China.
Successful capital raising also ensured that our investment
plans are fully funded, freeing us to concentrate on the growth of
the business. We also widened our partner portfolio and, with our
Japanese partner Miura Co. Ltd, will reach the first
commercialisation of our technology in Q4 2019.
Market potential
Ceres is playing a leading role in providing technology that
cuts emissions and air pollution, for transportation, industry,
data centres and everyday living. The SteelCell(R) solid oxide fuel
cell's capability to deliver much more efficient power than
centralised generation, and with minimal emissions, comes to market
as both governments and industry recognise climate change as a
clear and present danger.
The UK Government is the first G20 country to legislate towards
meeting a net-zero emissions target by 2050, and the EU is debating
following suit. In Japan, there are now more than 300,000 ENE-Farm
domestic energy units installed, heated and powered by fuel cells
and, at next year's Tokyo Olympics, there will be a fleet of 100
fuel-cell-powered buses to transport spectators.
The Korean Government has announced a target of 15GW of
stationary fuel cell capacity by 2040, and to put 80,000 hydrogen
fuel cell electric vehicles (FCEVs) on its roads within the next
three years. China, with its targets to reduce emissions and to
counter considerable issues over air pollution in their cities,
also has an active programme for new electric vehicles, including
buses.
These types of measures, in territories that are focus areas for
Ceres, come in addition to a myriad of urban and national targets,
controls, incentives and penalties worldwide. Their effects can be
seen driving new low-carbon, low-pollutant strategies. For example,
Volkswagen has announced that its final generation of combustion
engines will roll off the line in 2026 signalling the end of its
internal combustion engine era.
During the year, the industry saw an increased level of
investment in fuel cell technology, led by corporates with
financial institutions following, as was the case with Ceres Power.
The fuel cell market is projected to reach US$25 billion by
2025.
Operational activity
During FY2019, we continued to strengthen our relationships with
leading global OEMs.
In particular, our relationships with Weichai, one of the
world's leading automotive companies, and Bosch became even
stronger. In Japan, we provide the fuel cell system for Miura's new
4.2kW CHP system, to be launched later this year; and in Korea,
just after the close of the financial year, we added Doosan, one of
the world's largest producers of fuel cell systems, to our partner
portfolio. We also continue development projects with Cummins and
Honda.
Each of these collaborations brings new learning and insight,
and during the year we were delighted to appoint Dr Haoran Hu from
Weichai to the Board as a Non-Executive Director. Ceres will
benefit from his wealth of experience in the power and technology
sectors, and his distinguished record of commercialising
technology.
ESG
As our business grows, we are determined to manage our growth
while focusing on environmental, social and governance (ESG)
issues. As a business rooted in environmental improvement, this
comes naturally to us. For the first time, we are reporting our
progress against the UN's Sustainable Development Goals (SDGs), and
have defined our own ESG policy, which can be found on the Ceres
website.
Conclusion
This excellent year is once again the product of the powers of
our people: their drive to innovate, their passion for challenge
and their commitment to bring to market ever-more sustainable
solutions. We attracted many new professionals to our team during
the year and will create a further 60 high-skilled manufacturing
roles as we open our new GBP8 million fuel cell manufacturing
facility in early 2020 in Redhill, UK.
I thank everyone for their contribution, along with all our
commercial partners, as we look forward to even greater things in
FY2020.
ALAN AUBREY
CHAIRMAN
Chief Executive's review
We can look back on FY2019 with a great deal of pride. The
collective effort of our teams, the strength of our technology and
the important foundations laid in previous years all combined to
see us double our revenues - an achievement we have now recorded
for four successive years.
This progress has been broadly based. Commercially, we continue
to attract new partners in new dynamic territories, such as South
Korea, and to deepen relationships with world-class manufacturers
who will give our technology the global platform it deserves.
Operationally, we are scaling up, and the fit-out of our new
Redhill manufacturing reference facility is on schedule to commence
production in January 2020. Technologically our R&D continues
to find measurable ways in which our products can deliver even
more.
As a result, we finished the year with revenues and other income
up by 133% to GBP16.4 million. The Group also has a strong order
book of GBP28.4 million, a pipeline worth more than GBP50 million
and an investment programme that is fully funded with GBP71.3
million of cash, cash equivalents and short-term deposits at the
year end.
Market dynamics
Just as climate change and its threats are now being recognised
by governments worldwide, so fuel cell technology is regarded as a
key asset in mitigating the causes of climate change and air
pollution.
Our SteelCell(R) product is a solid oxide fuel cell (SOFC) - a
technology that has multiple applications providing decentralised
electricity for offices, homes and powering datacentres as well as
for electric vehicles.
With its key attributes of conversion efficiency, versatility
and exceptionally competitive production cost, SteelCell(R) met
with notable success during the year in becoming a technology of
choice with world-class OEMs. Critically, Ceres Power also has firm
relationships in the main territories where SOFC technology is
growing rapidly: these include Japan, China, the US, the EU and,
perhaps the most active market for fuel cells, South Korea.
Excellent commercial progress
Ceres' growth strategy is driven by licensing our technology to
global OEM partners, and generating royalties as those partners
achieve full-scale commercialisation. We therefore benefit from an
asset-light business model with a favourable margin.
Our success is directly linked to that of our licensees, and our
teams can regularly be found on-site at customers' sites in
Germany, China, Japan and Korea, helping to implement technology
transfer and drive application development.
During the year, we achieved significant steps forward in our
commercial deals with four licensees:
- Bosch. We had been working with Robert Bosch through a joint
development agreement (JDA) in the previous financial year, and in
FY2019 we strengthened that relationship with a Collaboration and
Licence Agreement. This provides significant staged revenues to
Ceres from the date of contract signing in August 2018 to the end
of 2020, amounting to around GBP20 million.
Bosch also made a GBP9 million strategic equity investment
during the year, becoming a 4% shareholder in Ceres, aligning them
to the future success of the business.
The collaboration injects momentum and resources as we develop
our technology, while also establishing low-volume production of
our SteelCell(R) technology at Bosch in Germany - the precursor to
a potential scale-up to high volume production.
- Weichai Power. This major Chinese automotive and equipment
manufacturer has a market cap in excess of US$10 billion, and among
multiple interests, its output includes some 600,000 engines a
year.
In December 2018, we were proud to finalise a long-term
strategic collaboration with Weichai that was initially announced
in May 2018. The landmark deal includes a licence agreement, a
joint development agreement worth GBP9 million to Ceres, and a
commitment to form a JV to invest in a new high-volume fuel cell
manufacturing facility. The licence agreement will generate
technology transfer payments of up to GBP30m for Ceres, separate
from ongoing future royalties.
Following a successful technology transfer and the licensing of
system-level technology, we announced in September 2019 that the
combined team has produced a first prototype 30kW SteelCell(R)
range extender system for demonstration in an electric city bus
utilising widely available compressed natural gas fuel.
This successfully marks the completion of the initial joint
development agreement between Ceres and Weichai and our teams are
now focused on developing the next stage system to go on bus field
trials in 2020. Following these field trials, Weichai and Ceres
intend to establish a fuel cell manufacturing joint venture in
Shandong Province, China to manufacture SteelCell(R) SOFC
systems.
Like Bosch, Weichai is also a direct investor in Ceres Power;
raising its shareholding in the business to 20%, bringing its total
equity investment to GBP48.1 million.
- Miura Co., Ltd. Japan's largest industrial boiler manufacturer
has been working with Ceres since 2016 to develop an SOFC CHP unit
for the commercial market. Operating on the main gas supply and
capturing heat as hot water, the overall efficiency of the system
reaches 90%, delivering both major energy savings and a lower
carbon footprint. This product will have a soft market launch in Q4
2019, marking a milestone for Ceres as the first commercialisation
of our SteelCell(R) technology.
- Doosan. Immediately following the financial year-end, Doosan
Corporation signed a two-year collaboration and licensing agreement
with Ceres. Doosan has established itself as a world leader in the
fuel cell industry and the agreement with Ceres brings solid oxide
technology to its current fuel cell portfolio. Doosan's existing
stationary fuel cell business exceeded 1 trillion won (c. $850
million) in orders for the first time in 2018. The deal is worth
GBP8 million to Ceres over two years and marks our entry into the
progressive Korean market with the potential to expand the
partnership to new applications and manufacturing.
We continued to make good progress with leading players Cummins
and Honda in joint development programmes. Separately, there was a
participant change to a Ceres programme funded by the UK's Advanced
Propulsion Centre (APC). Our original planned partner Nissan chose
not to proceed for its own business reasons, but we were pleased to
announce that Weichai has come on board in their place. The project
focuses on our fuel cell technology for EVs and, in particular,
larger commercial vehicles.
Technology
As a technology licensing company, we are judged on our capacity
to innovate. In essence, this requires us to excel in two areas.
Firstly, we must continually mature and refine the products we have
already created and ensure our licensees are getting the very best
from them. Secondly, we must break new ground, applying restless
and rigorous R&D maintaining our leading position in SOFC.
Our R&D team continues to develop the next generation (V6)
of our core technology, with a focus on reducing manufacturing
stages and increasing power density, whilst reducing cost. We are
also engineering the next design of our 5kW stacks, as well,
utilising our capabilities in energy conversion technology.
Operations
Our strategy is not for Ceres Power to become a mainstream fuel
cell manufacturer, but an asset-light creator and licensor of our
technology. However, a certain manufacturing scale is required to
service our partners, and to define and prove processes that they
can then replicate on a much greater scale - such as our current
technology transfer programme with Bosch in Bamberg, Germany.
To meet these needs, which require more than we can service with
our existing R&D lines in Horsham, we have installed the UK's
first SOFC manufacturing blueprint plant in Redhill, UK. CP2 will
have an initial capacity of 2MW per year - sufficient to meet our
near-term needs, and act as a reference design for our partners -
who will typically be looking to install volumes 100 times that
capacity per site, using our licensing model. CP2 is on track to
commence fuel cell production in January 2020.
Strong financials
The business achieved excellent commercial growth of revenue and
other income of 133% in the reporting year, driven principally by
licence revenues from our main partners.
We expect licence fees to represent a high proportion of our
revenues over time, which is significant as they deliver excellent
gross margins. This period, a higher proportion of license activity
delivered gross margin of 74%, substantially ahead of our target of
maintaining margins above 50%.
We also successfully raised GBP77.1 million of new equity from
strategic partners and via a private placing with institutions
during the year. This leaves us in the strong position of being
fully-funded for our investment plans and frees the management team
to focus on growing the business.
However, we are also looking to grow sustainably, striking a
careful balance between targeting profitability and making
essential investments for our long-term future - such as in the new
CP2 facility, additional talent and further R&D. Our underlying
operational cash outflow has reduced significantly, reflecting our
increasing revenues and the careful balance we are striking.
Our people
During the year we welcomed around 70 new professionals into the
business, predominantly technicians and engineers. We have now
doubled our workforce since 2017 to 240, a figure that includes 30
different nationalities and a positive gender split.
I would like to place on record my thanks to this exceptional
team, who have excelled on every front: from serving the needs of
our main licensees, here in the UK and away on-site; to the design,
project management and build of CP2; to the performance increases
achieved with our technology and achieving high quality
manufacturing of fuel cells for our partners; to attracting new
licensees including, at the close of the year, the global leader
Doosan.
Outlook
We are absolutely focused on the needs and expectations of our
licensees, for whom operational excellence, added value and robust
delivery are key. Alongside this, we are aware and prepared for the
challenges of scaling up, launching CP2, and not only refining our
technology but adapting it for further and future applications.
We are proud to be setting the pace and standards for SOFC
technology and playing our part in addressing the major challenges
of climate change and air quality and look forward to extending our
technology to a widening portfolio of global partners and
applications.
PHIL CALDWELL
CHIEF EXECUTIVE OFFICER
Consolidated statement of profit and loss and other
comprehensive income
for the year ended 30 June 2019
2019 2018
Note GBP'000 GBP'000
-------------------------------------------------------------- ---- -------- --------
Revenue 2 15,300 6,329
Cost of sales (3,804) (3,097)
-------------------------------------------------------------- ---- -------- --------
Gross profit 11,496 3,232
Other operating income 1,065 680
Operating costs 3 (20,485) (15,854)
-------------------------------------------------------------- ---- -------- --------
Operating loss (7,924) (11,942)
Finance income 552 57
-------------------------------------------------------------- ---- -------- --------
Loss before taxation (7,372) (11,885)
Taxation credit 2,538 1,961
-------------------------------------------------------------- ---- -------- --------
Loss for the financial year and total comprehensive loss (4,834) (9,924)
-------------------------------------------------------------- ---- -------- --------
Loss per GBP0.10 ordinary share expressed in pence per share:
- basic and diluted 4 (3.43)p (9.78)p
-------------------------------------------------------------- ---- -------- --------
All activities relate to the Group's continuing operations and
the loss for the financial year is fully attributable to the owners
of the parent.
The accompanying notes are an integral part of these
consolidated financial statements.
Consolidated statement of financial position
as at 30 June 2019
2019 2018
Note GBP'000 GBP'000
------------------------------------------------ ---- --------- ---------
Assets
Non-current assets
Property, plant and equipment 9,769 2,197
Other intangible assets 5 1,322 47
Other receivables 741 -
------------------------------------------------ ---- --------- ---------
Total non-current assets 11,832 2,244
------------------------------------------------ ---- --------- ---------
Current assets
Inventories 1,403 1,400
Contract assets 722 -
Other assets 1,497 1,630
Derivative financial instruments 28 8
Current tax receivable 2,292 1,900
Trade and other receivables 4,204 3,151
Short-term investments 6 63,700 -
Cash and cash equivalents 6 7,567 6,395
------------------------------------------------ ---- --------- ---------
Total current assets 81,413 14,484
------------------------------------------------ ---- --------- ---------
Liabilities
Current liabilities
Trade and other payables (2,365) (1,734)
Contract liabilities (3,061) -
Other liabilities (1,838) (2,556)
Derivative financial instruments (66) (5)
Provisions (158) -
------------------------------------------------ ---- --------- ---------
Total current liabilities (7,488) (4,295)
------------------------------------------------ ---- --------- ---------
Net current assets 73,925 10,189
------------------------------------------------ ---- --------- ---------
Non-current liabilities
Other liabilities (323) -
Provisions (992) (851)
------------------------------------------------ ---- --------- ---------
Total non-current liabilities (1,315) (851)
------------------------------------------------ ---- --------- ---------
Net assets 84,442 11,582
------------------------------------------------ ---- --------- ---------
Equity attributable to the owners of the parent
Share capital 7 15,277 10,163
Share premium 179,116 107,445
Capital redemption reserve 3,449 3,449
Merger reserve 7,463 7,463
Accumulated losses (120,863) (116,938)
------------------------------------------------ ---- --------- ---------
Total equity 84,442 11,582
------------------------------------------------ ---- --------- ---------
The accompanying notes are an integral part of these
consolidated financial statements.
Consolidated cash flow statement
for the year ended 30 June 2019
2019 2018
GBP'000 GBP'000
--------------------------------------------------------------------------------------- -------- --------
Cash flows from operating activities
Loss before taxation (7,372) (11,885)
Adjustments for:
Finance income (552) (57)
Depreciation of property, plant and equipment 1,025 1,170
Amortisation of intangibles 13 -
Net foreign exchange losses/(gains) 67 (29)
Net change in fair value of financial instruments at fair value through profit or loss 42 (3)
Share-based payments 909 920
---------------------------------------------------------------------------------------- -------- --------
Operating cash flows before movements in working capital and provisions (5,868) (9,884)
Increase in trade, other receivables and assets (1,412) (2,319)
Increase in inventories (3) (805)
(Decrease)/increase in trade, other payables and liabilities (559) 1,636
Increase in contract assets (722) -
Increase in contract liabilities 3,061 -
Increase in provisions 299 23
---------------------------------------------------------------------------------------- -------- --------
Net cash used in operations (5,204) (11,349)
Taxation received 2,146 1,866
---------------------------------------------------------------------------------------- -------- --------
Net cash used in operating activities (3,058) (9,483)
---------------------------------------------------------------------------------------- -------- --------
Investing activities
Purchase of property, plant and equipment (7,693) (1,454)
Capitalised development expenditure (1,288) (47)
Movement in short-term investments (63,700) 14,000
Finance income received 193 57
---------------------------------------------------------------------------------------- -------- --------
Net cash generated (used in)/generated from investing activities (72,488) 12,556
---------------------------------------------------------------------------------------- -------- --------
Financing activities
Proceeds from issuance of ordinary shares 77,926 135
Expenses from issuance of ordinary shares (1,141) -
---------------------------------------------------------------------------------------- -------- --------
Net cash generated from financing activities 76,785 135
---------------------------------------------------------------------------------------- -------- --------
Net increase in cash and cash equivalents 1,239 3,208
Exchange (losses)/gains on cash and cash equivalents (67) 29
Cash and cash equivalents at beginning of year 6,395 3,158
---------------------------------------------------------------------------------------- -------- --------
Cash and cash equivalents at end of year 7,567 6,395
---------------------------------------------------------------------------------------- -------- --------
The accompanying notes are an integral part of these
consolidated financial statements.
Consolidated statement of changes in equity
for the year ended 30 June 2019
Share Share Capital redemption Merger
capital premium reserve reserve Accumulated losses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- -------- ------------------------ --------- ------------------- ---------
At 1 July 2017 10,124 107,349 3,449 7,463 (107,934) 20,451
-------------------------- --------- -------- ------------------------ --------- ------------------- ---------
Comprehensive income
Loss for the financial
year - - - - (9,924) (9,924)
-------------------------- --------- -------- ------------------------ --------- ------------------- ---------
Total comprehensive loss - - - - (9,924) (9,924)
-------------------------- --------- -------- ------------------------ --------- ------------------- ---------
Transactions with owners
Issue of shares, net of
costs 39 96 - - - 135
Share-based payments - - - - 920 920
-------------------------- --------- -------- ------------------------ --------- ------------------- ---------
Total transactions with
owners 39 96 - - 920 1,055
-------------------------- --------- -------- ------------------------ --------- ------------------- ---------
At 30 June 2018 10,163 107,445 3,449 7,463 (116,938) 11,582
-------------------------- --------- -------- ------------------------ --------- ------------------- ---------
Comprehensive income
Loss for the financial
year - - - - (4,834) (4,834)
-------------------------- --------- -------- ------------------------ --------- ------------------- ---------
Total comprehensive loss - - - - (4,834) (4,834)
-------------------------- --------- -------- ------------------------ --------- ------------------- ---------
Transactions with owners
Issue of shares, net of
costs 5,114 71,671 - - - 76,785
Share-based payments - - - - 909 909
-------------------------- --------- -------- ------------------------ --------- ------------------- ---------
Total transactions with
owners 5,114 71,671 - - 909 77,694
-------------------------- --------- -------- ------------------------ --------- ------------------- ---------
At 30 June 2019 15,277 179,116 3,449 7,463 (120,863) 84,442
-------------------------- --------- -------- ------------------------ --------- ------------------- ---------
The accompanying notes are an integral part of these
consolidated financial statements.
Notes to the consolidated financial statements
for the year ended 30 June 2019
1. Basis of preparation
The consolidated financial statements of the Group are prepared
on a going concern basis, in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union, the IFRS Interpretations Committee (IFRS-IC) interpretations
and those parts of the Companies Act 2006 applicable to companies
reporting under IFRS. The consolidated financial statements have
been prepared on a historical cost basis except that the following
assets and liabilities are stated at their fair value: derivative
financial instruments and financial instruments classified as fair
value through the profit or loss.
The financial information contained in this final announcement
does not constitute statutory financial statements as defined by in
Section 434 of the Companies Act 2006. The financial information
has been extracted from the financial statements for the year ended
30 June 2019 which have been approved by the Board of Directors,
and the comparative figures for the year ended 30 June 2018 are
based on the financial statements for that year.
The financial statements for 2018 have been delivered to the
Registrar of Companies and the 2019 financial statements will be
delivered after the Annual General Meeting on 4 December 2019.
The Auditor has reported on both sets of accounts without
qualification, did not draw attention to any matters by way of
emphasis without qualifying their report, and did not contain a
statement under Section 498(2) or 498(3) of the Companies Act
2006.
The Directors confirm that, to the best of their knowledge, this
condensed set of consolidated financial statements has been
prepared in accordance with the AIM Rules.
Going Concern
Having reviewed the Group's forecast income and expenditure,
performing appropriate sensitivity and scenario analyses, and after
making appropriate enquiries, the Directors have a reasonable
expectation that the Group and Company have adequate resources to
progress their established strategy. Accordingly, they continue to
adopt the going concern basis in preparing these financial
statements.
New standards and amendments applicable for the reporting
period
The Group has adopted the following new standard with a date of
initial application of 1 July 2018.
- IFRS15 'Revenue from Contracts with Customers' - for further
details on the impact of adoption of this standard please refer to
note 2, 'Revenue and direct costs'.
- IFRS9 'Financial Instruments' - IFRS 9 replaces the previous
guidance relating to the recognition, classification and
measurement of financial assets and financial liabilities,
derecognition of financial instruments, impairment of financial
assets and hedge accounting. The adoption of IFRS 9 from 1 July
2018 resulted in no changes in existing accounting policies. The
adoption of IFRS 9 had no impact on the opening balance sheet of
the Group.
Critical accounting estimates and judgements
Revenue from customer contracts - note 2
There are significant management judgements and estimates when
classifying, valuing and recognising revenue in relation to
customer contracts.
Customer contracts typically include engineering services,
access to or sale of technology hardware and licenses. Revenue is
allocated to these key components based on initial cost estimates
to deliver the obligations under the contract and established
margins for the different components. Management has established a
range of margins to apply to contract components where the costs
can be reliably estimated. Given the sometimes complex and
long-term nature of customer contracts, these forecast cost
estimations and margins are considered a significant area of
judgement when valuing and allocating revenue to key
components.
In determining the revenue recognition for license components of
customer contracts, judgements must be made as to the nature of the
licenses (right to access or right to use) and the number and
timing of performance obligations associated with those licences.
These judgements are made based on the interpretation of key
clauses and conditions within each customer contract.
Revenue for engineering services is recognised based on the
percentage of completion method and is measured based on the total
contract costs at each reporting period compared to the estimated
total contract costs to deliver the service over the contract life.
The assessment of the total project costs to deliver the contracted
service are updated during the term of the contract by project
managers and are subject to internal reviews, including comparison
to previous forecasts and past experience.
Material differences in the amount of revenue in any given
period may result if the judgements or estimates prove to be
incorrect or if management's estimates change on the basis of
development of the business or market conditions. To date there
have been no material differences arising from these judgements and
estimates.
Capitalisation and amortisation of development costs - note
5
When determining the criteria for starting, and subsequently
ceasing, the capitalisation of development costs as an internally
generated asset, IAS 38 requires that strict criteria are met; in
particular, that it is probable that future economic benefits will
result from the development asset.
Management's view has always been that this probability
threshold needed to be sufficiently high, such that development
costs would not be capitalised before the Group could demonstrate
the inflow of future economic benefits from significant
"go-to-market" licence contracts with customers.
Following the successful agreement of contracts with Robert
Bosch and Weichai Power in September and December 2018
respectively, management believes that this threshold of
probability has been met. As a result, from 1 January 2019
management has put in place processes to review and assess all
customer and internal development programme expenditure to
ascertain whether it is appropriate to capitalise development costs
under IAS 38.
Determining when capitalisation should commence and cease is a
critical judgement, as is the basis for amortising the capitalised
costs.
Within the Group there is an established Technology and Product
Development Process with gated milestones that assesses the
technology and product viability and maturity. Until a programme
has passed the required milestone gate, all expenditure is deemed
"Research" and expensed as incurred. Expenses incurred after the
milestone gate is passed are capitalised within the parameters set
out in the accounting policy. Once a programme has passed the
milestone gate, confirming a production design version is approved
or development activities are completed, the capitalisation of
costs is stopped and further expenditure is expensed.
Management assess the period of amortisation over the deemed
useful life of each asset to ensure that the amortisation cost is
matched by the inflow of future economic benefits expected to be
received from customers in the form of license and royalty
income.
2. Revenue and direct costs
The Group adopted IFRS 15 with a date of initial application of
1 July 2018. The revenue recognition accounting policy applied in
preparation of the results for the current financial year reflects
the application of IFRS 15 and is detailed below. The Group has
elected to adopt the standard using the cumulative effect
transition method. Under this transition method, the new standard
has been applied as at the date of initial application without
restatement of comparative amounts. There is no cumulative impact
on the opening balance of equity as at 1 July 2018 as a result of
the initial application of the new standard. The comparative
information has not been adjusted and therefore continues to be
reported under IAS 18, 'Revenue Recognition'.
The Group's revenue is disaggregated by geographical market,
major product/service lines, and timing of revenue recognition:
Geographical market
2019 2018
GBP'000 GBP'000
Europe 10,543 610
Asia 4,451 4,314
North America 306 1,405
--------------- --------- ---------
15,300 6,329
--------------- --------- ---------
Major product/service lines:
2019 2018
GBP'000 GBP'000
Engineering services and provision of technology
hardware 7,888 5,420
Licenses 7,412 909
-------------------------------------------------- --------- ---------
15,300 6,329
-------------------------------------------------- --------- ---------
Timing of transfer of goods and services:
2019 2018
GBP'000 GBP'000
Products and services transferred at a point
in time 7,057 1,229
Products and services transferred over time 8,243 5,100
---------------------------------------------- --------- ---------
15,300 6,329
---------------------------------------------- --------- ---------
The contract assets and liabilities as of 1 July 2018 and 30
June 2019 are as follows:
30 June 2019 1 July 2018
GBP'000 GBP'000
Trade receivables 2,404 1,744
Contract assets - accrued income 306 709
Contract assets - deferred costs 416 625
---------------------------------------- ------------ -----------
3,126 3,078
--------------------------------------- ------------ -----------
Contract liabilities - deferred income (3,061) (933)
Provision for loss making contracts (65) -
Provision for warranties (93) -
---------------------------------------- ------------ -----------
(3,219) (933)
--------------------------------------- ------------ -----------
The contract assets - accrued income - primarily relate to
consideration for work completed but not billed at the reporting
date. The contract assets are transferred to trade receivables when
the rights become unconditional.
The contract assets - deferred costs - relate to the cost to
provide hardware to customers under evaluation agreements. The cost
is deferred and recognised on a straight-line basis over the period
of access as the customers preferred technology performance
attributes are verified under the agreement.
The contract liabilities - deferred income - primarily relate to
the advance consideration received from customers. There are no
significant financing components associated with deferred
income.
Revenue recognised in the current year that was included in the
contract liabilities - deferred income - balance at the beginning
of the period was GBP664,000.
There were no significant amounts of revenue recognised in the
year ended 30 June 2019 arising from performance obligations
satisfied in previous periods.
Significant changes in the contract assets and the contract
liabilities balances during the period are as follows:
Contract assets Contract liabilities
2019 2019
GBP'000 GBP'000
------------------------------------------------------------------------------- --------------- --------------------
Revenue recognised that was included in the contract liability balance at the
beginning of
the period 664
Increases due to cash received, excluding amounts recognised as revenue during
the period (2,792)
Transfers from contract assets recognised at the beginning of the period to
receivables (709)
Increases as a result of changes in the measure of progress 306
------------------------------------------------------------------------------- --------------- --------------------
The revenue expected to be recognised in future years for
evaluation and development, supply and licence agreements in
respect of performance obligations that are unsatisfied (or
partially unsatisfied) at the year end is:
2020 2021 2022
GBP'000 GBP'000 GBP'000
-------------------------------------------------------- -------- -------- --------
Evaluation, development, supply and licence agreements 13,005 4,480 245
-------------------------------------------------------- -------- -------- --------
The above analysis excludes revenue which is contracted but
contingent upon milestones or decision criteria which are at the
customers' discretion.
Changes in accounting policies
The Group adopted IFRS 15 using the cumulative effect transition
method with a date of initial application of 1 July 2018. The
comparative information has not been adjusted and therefore
continues to be reported under IAS 18, 'Revenue Recognition'. There
is no cumulative impact on the opening balance of equity as at 1
July 2018 as a result of the initial application of the new
standard.
Consolidated statement of financial position
The impact of adopting IFRS 15 on the consolidated statement of
financial position for the year ended 30 June 2019 compared to the
revenue determined in accordance with IAS 18 is as follows:
Impact of changes in accounting policies
As reported Adjustments Balances without adoption of IFRS 15
GBP'000 GBP'000 GBP'000
--------------------------------- ----------- ----------- ------------------------------------
Current assets
Inventories 1,403 416 1,819
Contract assets 722 (722) -
Other assets 1,497 306 1,803
Derivative financial instruments 28 - 28
Current tax receivable 2,292 - 2,292
Trade and other receivables 4,204 - 4,204
Short-term investments 63,700 - 63,700
Cash and cash equivalents 7,567 - 7,567
--------------------------------- ----------- ----------- ------------------------------------
Total current assets 81,413 - 81,413
--------------------------------- ----------- ----------- ------------------------------------
Liabilities
Current liabilities
Trade and other payables (2,365) (2,365)
Contract liabilities (3,061) 3,061 -
Other liabilities (1,838) (3,061) (4,899)
Derivative financial instruments (66) - (66)
Provisions (158) - (158)
--------------------------------- ----------- ----------- ------------------------------------
Total current liabilities (7,488) (7,488)
--------------------------------- ----------- ----------- ------------------------------------
Other than the impact noted above on adopting IFRS 15, there
were no further changes to the consolidated statement of financial
position for the year ended 30 June 2019.
Consolidated statement of profit and loss and other
comprehensive income
There is no impact on the consolidated statement of profit and
loss and other comprehensive income as a result of the adoption of
IFRS 15 for the year ended 30 June 2019 compared to the revenue
determined in accordance with IAS 18.
Consolidated cash flow statement
The impact of adopting IFRS 15 on the consolidated cash flow
statement for the year ended 30 June 2019 compared to the revenue
determined in accordance with IAS 18 is as follows:
Impact of changes in accounting policies
As reported Adjustments Balances without adoption of IFRS 15
GBP'000 GBP'000 GBP'000
------------------------------------------------------ ----------- ----------- ------------------------------------
Operating cash flows before movements in working
capital and provisions (5,868) - (5,868)
Increase in trade, other receivables and assets (1,412) (306) (1,718)
Increase in inventories (3) (416) (419)
(Decrease)/increase in trade, other payables and
liabilities (559) 3,061 2,502
Decrease in contract assets (722) 722 -
Increase in contract liabilities 3,061 (3,061) -
Increase in provisions 299 - 299
------------------------------------------------------ ----------- ----------- ------------------------------------
Net cash used in operations (5,204) - (5,204)
Other than the impact noted above on adopting IFRS 15, there
were no further changes to the consolidated cash flow statement for
the year ended 30 June 2019.
3. Loss before taxation
2019 2018
GBP'000 GBP'000
-------------------------------------- -------- --------
Operating costs are split as follows:
Research and development costs 13,799 11,422
Administrative expenses 4,618 3,430
Commercial expenses 2,068 1,002
-------------------------------------- -------- --------
20,485 15,854
-------------------------------------- -------- --------
4. Loss per share
On 7 August 2018 Ceres Power Holdings plc completed a 1-for-10
share consolidation, where every ten existing ordinary shares of
GBP0.01 each in the Company were consolidated into one ordinary
share of GBP0.10 each. The basic and diluted loss per share for the
prior year has been adjusted to represent the GBP0.10 ordinary
share capital structure so it is comparable to the current year
share capital.
Basic and diluted loss per GBP0.10 ordinary share of 3.43p for
the financial year ended 30 June 2019 (2018: 9.78p (adjusted)) is
calculated by dividing the loss for the financial year attributable
to ordinary shareholders by the weighted average number of ordinary
shares in issue during the year. Given the losses during the year,
there is no dilution of losses per share in the year ended 30 June
2019 or in the previous year.
The loss for the financial year ended 30 June 2019 was
GBP4,834,000 (2018: GBP9,924,000) and the weighted average number
of GBP0.10 ordinary shares in issue during the year ended 30 June
2019 was 140,956,490 (2018: 101,483,381 (adjusted)).
5. Intangible assets
Research and development
Expenditure incurred on research and development is
distinguished as relating to a research phase or development phase
with reference to the Group's technology and product development
process.
All research phase expenditure is recognised in the Consolidated
Statement of Profit and Loss and Other Comprehensive Income as an
expense when incurred (see note 3).
Development phase expenditure is capitalised from the point that
all of the following conditions are met:
-- the product or process under development is technically and commercially feasible;
-- the Group intends to and has the technical ability and
sufficient resources to complete the development;
-- future economic benefits are probable; and
-- the Group can measure reliably the expenditure attributable
to the asset during its development.
Development phase activities involve a plan or design for the
production of new or substantially improved products or processes
in relation to the Group's core fuel cell and system technology and
intellectual property. The expenditure capitalised includes the
cost of materials, direct labour and an appropriate proportion of
overheads and capitalised borrowing costs, if appropriate.
Capitalisation of development phase activities continues until
the point at which the product or process under development meets
its originally mandated technical specification. For product and
process development, this is at the point where the production
design version is approved or the development is completed.
Subsequent expenditure is capitalised where it enhances the
functionality of the asset and demonstrably generates an enhanced
economic benefit to the Group. All other subsequent expenditure on
the product or process is expensed as incurred.
Where development activities are funded through Government
Grants and the cost of those activities is capitalised under this
policy, the grants received are considered Capital Grants and are
presented as deferred income and recognised in the Consolidated
Statement of Profit and Loss and Other Comprehensive Income as
other operating income on a basis consistent with the depreciation
or amortisation of the asset over its estimated useful life.
Subsequent to recognition, internally generated intangible
assets are reported at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is recognised on a
straight-line basis over their estimated useful lives and the
estimated useful lives are reviewed and adjusted as appropriate, at
each balance sheet date. Intangible assets which are not yet
available for use are tested for impairment at each balance sheet
date.
2019 2018
GBP'000 GBP'000
----------------------------------------------------------------------- -------- --------
Cost
At 1 July 47 -
Additions from internal developments in relation to manufacturing site 187 47
Additions from customer and internal development programmes 1,101 -
----------------------------------------------------------------------- -------- --------
At 30 June 1,335 47
----------------------------------------------------------------------- -------- --------
Accumulated amortisation
At 1 July - -
Charge for the year 13 -
----------------------------------------------------------------------- -------- --------
At 30 June 13 -
----------------------------------------------------------------------- -------- --------
Net book value 13 -
----------------------------------------------------------------------- -------- --------
At 30 June 1,322 47
----------------------------------------------------------------------- -------- --------
The following useful lives are used in the calculation of
amortisation:
Capitalised development 2 - 7 years
The capitalised development intangible relates to the design,
development and configuration of the Company's core fuel cell and
system technology and manufacturing processes. Amortisation of
capitalised development commences once the development is complete
and is available for use.
6. Cash, cash equivalents and short-term investments
Cash and cash equivalents
Cash and cash equivalents includes cash at bank and in hand,
pooled money market funds and short-term deposits with an original
maturity of less than or equal to one month, reduced by overdrafts
to the extent that there is a right of offset against other cash
balances.
Short-term investments
These include short-term bank deposits with an original maturity
greater than one month and less than or equal to 12 months.
2019 2018
GBP'000 GBP'000
------------------------------------------------ -------- --------
Cash at bank and in hand 1,502 3,828
Money market funds 6,065 2,567
------------------------------------------------ -------- --------
Cash and cash equivalents 7,567 6,395
Short-term bank deposits greater than one month 63,700 -
------------------------------------------------ -------- --------
71,267 6,395
------------------------------------------------ -------- --------
The Group places surplus funds of no more than GBP8 million per
institution into pooled money market funds and bank deposits with
durations of up to 12 months. During the year the Group's treasury
policy restricted investments in short-term sterling money market
funds to those which carry short-term credit ratings of at least
two of AAAm (Standard & Poor's), Aaa/MR1+ (Moody's) and AAA V1+
(Fitch) and deposits with banks with minimum long-term rating of
A/A-/A3 and short-term rating of F-1/A-2/P-2 for banks which the UK
Government holds less than 10% ordinary equity.
2019 2018
Interest rate type GBP'000 GBP'000
------------------------------------------------------------ ------------------- -------- --------
Interest rate risk profile of the Group's financial assets:
Cash at bank and in hand Floating 1,502 3,828
Money market funds Floating 6,065 2,567
Short-term bank deposits greater than one month Fixed and floating 63,700 -
------------------------------------------------------------ ------------------- -------- --------
71,267 6,395
-------------------------------------------------------------------------------- -------- --------
During the year the fixed rate short-term bank deposits in
pounds sterling had terms of between 32 days and 12 months and
earned interest of between 0.75% and 1.28%. Floating rate cash
deposits, money market funds and other bank deposits earned
interest based on relevant UK LIBID-related equivalents. The credit
quality of financial assets has been assessed by reference to
external credit ratings.
7. Share capital
2019 2018
Number Number
Number GBP0.01 GBP0.10 GBP0.01
Ordinary Ordinary Ordinary
shares shares GBP'000 shares GBP'000
--------------------------- ---------------- ------------ -------- -------------- --------
Allotted and fully paid
At 1 July 1,016,269,193 - 10,163 1,012,419,929 10,124
Allotted GBP0.01 Ordinary
shares on exercise of
employee share options 6,041,441 - 60 3,849,264 39
27 July 2018 - Allotted
GBP0.01 Ordinary
shares on cash placing 260,952,296 - 2,609 - -
7 August 2018 - 1-for-10
share
consolidation (1,283,262,930) 128,326,293 - - -
Allotted GBP0.10 Ordinary
shares on
exercise of employee
share options - 926,155 93 - -
Allotted GBP0.10 Ordinary
shares on cash
placing (see below) - 23,517,364 2,352 - -
--------------------------- ---------------- ------------ -------- -------------- --------
At 30 June - 152,769,812 15,277 1,016,269,193 10,163
--------------------------- ---------------- ------------ -------- -------------- --------
On 27 July 2018, the Company completed the allotment of
260,952,269 ordinary GBP0.01 shares for gross cash consideration of
GBP39,352,000. The allotment was in respect of the Weichai Power
strategic investment, announced via the Regulatory News Service
(RNS) on the 16 May 2019, for 128,326,275 ordinary GBP0.01 shares,
and the placing of 132,625,994 ordinary GBP0.01 shares to existing
and new institutional investors.
On 20 July 2018, at a General Meeting of the Company, the
shareholders approved the issue of an option to Weichai Power,
subject to the previously described subscription being completed,
allowing it to subscribe for up to an additional 182,115,100
ordinary GBP0.01 shares in the Company, but not more than 20% of
the issued share capital of the Company, at a price of GBP0.1645
per share and subject to certain commercial documents being signed
and conditions being met.
On 7 August 2018, Ceres Power Holdings plc completed a 1-for-10
share consolidation, where every ten existing ordinary shares of 1p
each in the Company were consolidated into one ordinary share of
10p each. All outstanding equity instruments, including employee
share options and the aforementioned Weichai Power option, were
amended as a result of this consolidation.
Following the share consolidation, the Company completed the
following allotments:
-- 5,973,660 ordinary GBP0.10 shares to Robert Bosch GmbH for
cash consideration of GBP9,008,279 on 25 September 2018;
-- 663,740 ordinary GBP0.10 shares to Weichai Power for cash
consideration of GBP1,000,920 on 5 October 2018; and
-- The exercise of the option issued to Weichai Power,
16,879,964 ordinary GBP0.10 shares for cash consideration of
GBP27,767,541 on 14 December 2018.
During the year 6,041,441 ordinary GBP0.01 shares were allotted
for cash consideration of GBP308,000 and 926,155 ordinary GBP0.10
shares for cash consideration of GBP489,000 on the exercise of
employee share options (2018: 3,849,264 ordinary GBP0.01 shares for
cash consideration of GBP135,000).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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