TIDMIEH
RNS Number : 9497A
Intelligent Energy Holdings PLC
30 March 2017
30 March 2017
INTELLIGENT ENERGY HOLDINGS PLC: TRADING UPDATE
Intelligent Energy Holdings plc, the energy technology group
("Intelligent Energy", "IE", the "Group" or the "Company"),
provides the following update with respect to trading for the half
year ending 31 March 2017, including the Company's high level
financial estimates for the period. This announcement contains
inside information.
Financial KPI 2016/17 H1 2015/16 H1
Forecast Actual
Unaudited Unaudited
GBPm GBPm
--------------------- ------------ -----------
Revenue(1) c. 19 43.9
--------------------- ------------ -----------
Adjusted EBITDA(2) c. (9) (21.6)
--------------------- ------------ -----------
Loss after tax(3) c. (12) (67.3)
--------------------- ------------ -----------
Cash(4) c. 13 9.7
--------------------- ------------ -----------
(1) The revenue estimate includes GBP16.6m (2015/16 H1 GBP40.9m)
from the Indian GTL interim contract, which ceased at 30 November
2016
(2) EBITDA is a non-statutory measure often used by investors as
a proxy for cash and to calculate the value of a business. The
Company uses adjusted EBITDA (Earnings before Interest, impairment
charges, Tax, Depreciation, Amortisation, share of joint venture
results, equity fund raising costs and IFRS2 share-based payment
charges) as an indicator of trading profitability and a proxy for
operating cashflow, before any cash movements relating to
investment, tax, funding and changes in working capital. It is not
an IFRS measure, and therefore not shown in the Group income
statement
(3) Loss after tax in H1 2015/16 is after GBP23.9m of
impairments and inventory write downs and the derecognition of a
GBP21.9m deferred tax asset
(4) Cash is defined as cash and cash equivalents and short term deposits
Key updates for the half year
-- Restructuring activities in the business are now complete.
These have met the originally announced objectives of focusing the
business on what the Directors believe to be the material growth
opportunities, whilst substantially reducing the Company's cost
base and cash burn and maintaining core capabilities. In
particular:
o Product led commercial opportunities are now focused on the
air cooled fuel cell platform in the 10W to 20kW range, with
capability maintained in respect to evaporatively cooled technology
in the 20kW to 100kW+ power range
o Indian based activities have been restructured during the half
year to support fuel cell product sales on the same commercial
model as the rest of the Group following the cessation of the
interim energy management agreement with GTL at 30 November
2016
-- The interim contract contributed revenue of GBP16.6m in H1
(2015/16 H1 GBP40.9m) at a low gross margin
o Headcount has been reduced to 158 at 28 February 2017, from
381 at 31 March 2016
o EBITDA losses have more than halved from GBP21.6m in H1
2015/16 to an estimated GBP9m in H1 2016/17
o H1 2016/17 cash burn, including operating losses, working
capital movements, loan interest and tax is estimated at an average
of GBP1.3m per month, or GBP1.6m a month adjusting for the impact
of R&D tax credits received in January 2017
-- A contract was signed in February 2017 with US-based
Luxfer-GTM Technologies for the supply of up to 600 1kW fuel cell
modules for use in their portable, zero-emission lighting towers as
part of a growing strategic relationship in the development of a
line of integrated fuel cell products
-- Showcase demonstrators of stationary power related fuel cell
modules and systems have been deployed in Japan, China, India and
the US
-- It was announced in the first half that the Group's fuel cell
stacks will be used for a trial of Suzuki Burgman scooters with the
Metropolitan Police in London in the summer of 2017
-- Paid for demonstrators of the Group's lightweight stack
technologies have been delivered to drone market participants,
including an announced relationship with PINC, the US-based supply
chain management company. This segment is considered to have the
ability to scale significantly for the Company
-- Continued improvement has been delivered in H1 with respect
to the stack life, durability and efficiency of the Group's
proprietary air cooled fuel cells, which are protected by c. 1,800
patents and patents pending. The Group's fuel cells continue to be
considered as industry leading with respect to power output per
unit volume and power output per unit weight
-- Standardised product is now available for sale including:
o AC 10 stack, up to 320w
o AC 64 stack, up to 2.7kW
o AC Fuel Cell module, up to 2kW
o AC Fuel Cell Power Unit, up to 4kW
Outlook
The Group continues to focus on progressing fuel cell product
sales from the conversion of global pipeline opportunities. This is
focused on a variety of segments relating to stationary power
applications, as well as building on market traction for drones.
Automotive related JDA activity is also continuing with Suzuki, and
discussions are taking place with respect to potential JDAs with
other parties. The strengthening of the commercial team on a
regional basis is allowing the Company in particular to concentrate
its efforts in the US, Japan, China and India, and further
developments are expected. The exact scale, timing and margin
profile of opportunities that are converted to signed contracts is,
however, by its nature, uncertain.
Overall, IE believes that it possesses the technology and
capability to produce product at the required price points to scale
the business. The presence of its in house manufacturing capacity
also means that IE can produce at volume without necessarily
incurring significant incremental capex, with the target of scaling
the business in this manner through to free cashflow positive. This
is envisaged to take place within the next few years, subject to
additional funding. . Critically, IE also believes that the
requisite level of demand exists for its products, although it has
taken longer for IE to deploy standardised product than first
thought. Now that a series of standardised products are available,
sales are expected to scale more rapidly.
Future Financing
The Group's challenge is to move an estimated cashburn of
GBP1.6m per month after interest on the convertible loan notes, to
a positive cashflow position over the next few years, from
profitably growing the revenue line through product sales. While
the prospect of further JDAs and license deals could shorten the
period required, the time taken to secure such arrangements and
their uncertain nature means that the Group must continue to plan
its strategy on the core assumption that its cashflow will derive
mainly from product sales. Consequently, additional funds will be
required to bridge the period to the Group reaching a positive
cashflow position from trading activities, notwithstanding the
current pipeline activities, given the likely time taken for
conversion.
In the context of raising additional funds, the Board, in
consultation with advisors, has concluded that it is unlikely for
the Company to be able to access capital markets in the usual
manner to bridge the gap between the current cash position of the
Company and growing profitable sales to the level where the Company
is generating free cash flow.
It is also considered not possible to achieve cash generation
through further cost reduction alone, or to materially reduce the
R&D and operating cost base further without negatively
impacting core capability. A major non-operating cost, of c.
GBP1.2m per annum, or 7% of total non-financing cash costs, relates
to being a listed company and complying with best practice
corporate governance and Board structure. The Board believes that
with restructuring complete and access to public market funding
uncertain, this position should be subject to urgent review.
Consequently, the Board recognises that discussions are
appropriate with the principal holders of the Convertible Loan
Notes, who are also significant shareholders in the Company, as to
their intent with respect to their current equity stakes and their
loan note positions, as well as to their appetite and ability to
participate in a further financing for the Company.
As part of these discussions, the Board and advisors will be
urgently reviewing all other options available to the Company and
the Group, whilst recognising the circumstances that the Company
faces. It should be noted that constraints exist which include the
security granted over the Group's intellectual property portfolio
(as part of the refinancing of the Company in 2016) in favour of
the holders of the Convertible Loan Notes and the need to obtain
the consent of a majority (by value) of the holders of the
Convertible Loan Notes before further debt is taken on by the
Company that ranks ahead of (or pari passu with) the Company's
obligations to the holders of the Convertible Loan Notes.
Whilst there are positive developments in the business, there
can be no certainty over the outcome of these future funding
discussions, or of the review of the options available to the
Company and the Group, and further announcements will be made as
appropriate in due course.
Enquiries:
Intelligent Energy Holdings plc +44 (0)1509 271271
Martin Bloom Group Chief Executive Officer
John Maguire Chief Financial Officer
Forward-looking statements
Certain statements made in this announcement are, or may be,
forward-looking statements. These represent expectations for the
Company's business, and involve risks and uncertainties. The
Company has based these forward-looking statements on current
expectations and projections about future events. However, because
they involve known and unknown risks, uncertainties and other
factors, which in some cases are beyond the Company's control,
actual results or performance may differ materially from those
expressed or implied by such statements. No reliance should be
placed on such forward-looking statements. Without limitation to
the foregoing, nothing in this announcement is intended to
constitute (or should be construed as) a profit forecast.
About Intelligent Energy
Intelligent Energy Holdings plc delivers clean energy solutions
for the distributed energy, diesel replacement, automotive and
aerial drone markets. Working with international companies,
Intelligent Energy aims to embed its fuel cell stack technology
into applications across its target market sectors.
With its principal facility and headquarters in Loughborough,
UK, the Company also operates in Japan, India, China, Singapore,
France and the US. Intelligent Energy Holdings plc is listed on the
London Stock Exchange (LSE: IEH.L).
More information on Intelligent Energy is available at Twitter,
YouTube and LinkedIn. Or visit
http://www.intelligent-energy.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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