Interim results

Ceres Power Holdings plc
28 September 2023
 

28 September 2023

Ceres Power Holdings plc

Interim results for the six months ended 30 June 2023

 

Horsham, UK: Ceres Power Holdings plc ("Ceres", the "Company") (CWR.L), a global leader in fuel cell, electrolysis and electrochemical technology,

 

Financial update

·      Revenue increased by 17% to £11.3 million (H1 2022: £9.7 million)

·      Gross profit of £6.9 million (H1 2022: £4.7 million), maintaining sector-leading gross margin at 61% (H1 2022: restated to 49%)

·      "Investment in the future"1 increased by 19% to £30.6 million (H1 2022: £25.7 million), in line with strategy to expand into electrolysis for green hydrogen and deliver the next generation of fuel cell technology

·      Reduction in equity free cash outflow by 24% to £21.8m from £28.6m

·      Cash and investments of £161.2 million as at 30 June 2023 (31 December 2022: £182.3 million)

 

Strategic highlights

·      Bosch's 'Power Units' have received European funding of ~€160 million as an Important Project of Common European Interest (IPCEI) to support the development and mass production of its solid oxide fuel cell product, utilising Ceres' stack technology

·      Building construction for Doosan's 50MW factory in South Korea is now complete.  All machinery and processes have undergone factory acceptance testing, installation is almost complete, and commissioning is on schedule for completion in H2 2024

·      Our second-generation design of fuel cell stacks has passed Critical Design Review (a key milestone), which offers improvements in performance and cost for SOFC partners

·      The first-of-a-kind megawatt-scale electrolyser is undergoing commissioning and initial testing at AVL in Germany, in preparation for deployment at the end of this year to Shell's R&D centre in Bangalore, India, in line with the timetable set out in the 28 June 2022 announcement

·      A two-year collaboration with Linde Engineering and Bosch has been signed to validate the performance, cost, and operational functionality of Ceres' electrolyser technology, which starts next year

·      Ceres has been announced as the Winner of the Royal Academy of Engineering's 2023 MacRobert Award, widely regarded as the UK's most prestigious prize for engineering innovation

·      Further augmented the Board with Karen Bomba and Caroline Brown joining as Non-Executive Directors

·      As of 18 September 2023, Ceres has joined the FTSE 250 index, following its graduation from AIM to a Premium Listing on the Main Market of the London Stock Exchange

 

Current trading and outlook

·      As previously announced, given the continued delay of signing the China JVs with Bosch and Weichai, as well as taking into account time needed for regulatory clearances, we do not expect revenue associated with these to be recognised this year

·      Full-year growth against the prior year is subject to the timing of securing new licensees

 

Phil Caldwell, Chief Executive Officer of Ceres said: "We are at an important stage of the Company's growth as we support our partners to scale manufacture for our existing fuel cell business, and make rapid progress in the development of our game-changing electrolyser technology, which will enable new partnerships to address the huge market opportunity for green hydrogen. Our recent inclusion in the FTSE250 index and the recognition for engineering innovation of the MacRobert Award have been made possible by the progress of the Company, and the hard work the team has put into maturing the Ceres technology over many years."

 

1. "Investment in the future" comprises R&D costs, capitalised development and capital expenditure.

 

 

Financial Summary:

 

Six months ended

30 June 2023

Unaudited

Six months ended

30 June 2022

Unaudited

Restated1

12 months ended 31 December 2022

Audited


£'000

£'000

£'000

Total revenue, comprising:

11,310

9,687

22,130


 



Licence fees

3,401

3,404

7,711

Engineering services revenue

4,679

4,206

9,039

Provision of technology hardware

3,230

2,077

5,380


 



Gross profit

6,868

4,735

13,051

Gross margin1 %

61%

49%

59%

 

 

 

 

Adjusted EBITDA loss2

(23,769)

(20,808)

(43,230)

Operating loss

(28,482)

(25,516)

(51,522)


 



Net cash used in operating activities

(15,457)

(20,599)

(51,522)

Net cash and investments

161,230

221,625

182,320

 

1 The results for the six months ended 30 June 2022 has been restated (gross margin was previously 55%) to reflect the classification of the RDEC tax credit within other operating income rather than offsetting cost of sales and to reduce the credit by £313,000 following the adjustment of prior year R&D tax credit claims. See Note 1 for details.

2 Adjusted EBITDA loss is an Alternative Performance Measure, as defined and reconciled to operating loss in the non-GAAP section at the end of this report.

 

Analyst presentation

Ceres Power Holdings plc will be hosting a live webcast for analysts and investors on 28 September 2023 at 09.30 BST. To register your interest in participating, please go to: https://www.investormeetcompany.com/ceres-power-holdings-plc/register-investor.

For further information visit www.ceres.tech or contact:

Ceres Power Holdings plc

Elizabeth Skerritt

 

Tel: +44 (0)7932 023 283

FTI Consulting (Financial PR)

Dwight Burden / Ben Brewerton

Tel: +44 (0)203 727 1000

Email: ceres_power@fticonsulting.com

 

About Ceres Power

Ceres is a world-leading developer of electrochemical technologies: fuel cells for power generation, electrolysis for the creation of green hydrogen and energy storage. Its asset-light, licensing model has seen it establish partnerships with some of the world's largest engineering and technology companies, such Bosch, Doosan, Shell, Linde and Weichai, to develop systems and products that address climate change for power generation, transportation, industry, data centres and everyday living.  Ceres is listed on the London Stock Exchange ("LSE") (LSE: CWR) and is classified by the LSE Green Economy Mark, which recognises listed companies that derive more than 50% of their activity from the green economy.

 

 

 

Chief Executive's Statement

 

Over the summer, we have yet again witnessed record high temperatures, flooding across northern China and devastating fires in Canada, southern Europe and Hawaii. It seems nowhere is immune from the effects of climate change, and the need for rapid deployment of technologies that significantly reduce greenhouse gas emissions, whilst continuing to meet our energy and economic demands, is as urgent as ever.

 

Wholesale change of our energy systems is not straightforward, and it is contingent on bold decisions from governments and corporates at a time when we are also seeing rising inflation and higher costs of capital. Nonetheless, many parts of the world including Europe, Asia and North America are pursuing wide-ranging decarbonisation plans.

 

Ceres' licensing business model provides unique and powerful advantages: enabling the adoption of green energy technology at speed and building on the existing capability of global partners to establish localised supply chains, skills, manufacturing and systems and products suited to their end markets and applications. 

 

Strategic update

 

Our aim is to enable multi-gigawatts of capacity producing hydrogen and fuel cell technologies to decarbonise the hard-to-abate sectors of the energy system and in the process build a sustainable business that delivers long-term benefits for our people and shareholders, our communities, and our planet.

 

The strategy is based on three pillars: to enable our licence partners to succeed; to build commercial scale; and to maintain our technology leadership. Our partners are investing significant time and resources into manufacturing Ceres' solid oxide technology, and we have expanded our engineering and specialist teams to ensure these early adopters are supported and successful in deploying new technology into new market opportunities.

 

We create commercial scale by generating more demand through increasing commercial partnerships and licences, growing applications and addressing new markets. This year we have increased the commercial team's presence in several global locations including in the US, Europe and Asia.

 

As a licensing company it is imperative that we stay at the leading edge of our technology - and that is why we continue to innovate, from the next generation of our solid oxide technology, continued innovation of our IP for both fuel cell and electrolyser systems, to digitalisation programmes and what further technologies we may need to hit a net zero future.

 

For the first six months of 2023 the group reported revenues of £11.3 million (H1 2022: £9.7 million). The 17% increase when compared with the prior period is primarily driven by both hardware and engineering services revenue relating to ongoing progress being made with Bosch and Doosan as we industrialise our technology in readiness for partner product launch. The improvement of gross margin to 61% (H1 2022: 49%) is partly due to reduced scrap and warranty provisions compared to prior year, and also higher cost absorption from increased hardware revenue.  We expect a long-term trend of high gross margins reflecting Ceres' unique technology and licencing business model.

 

We have continued our investment in future growth, focused on scaling our technology for use in multiple applications and geographies. We have continued the planned development of our fuel cell business (SOFC) with global partners, with the development of a second-generation cell and stack design resulting in a stack focused on cost and manufacturability to enable scale production.  We have also made progress with the expansion of our electrolysis activities (SOEC), and signed new partnerships with Linde Engineering and Bosch in addition to the earlier Shell agreement.  Furthermore, we have strengthened the business development team to address the substantial market opportunities globally that exist for our clean energy technology. 

 

In July, Ceres was very proud to be named as the winner of the Royal Academy of Engineering MacRobert Award, the UK's longest-running and most coveted prize for engineering innovation.  The Company's pioneering and highly differentiated solid oxide stack technology, including fuel cells for power generation and electrolysers for green hydrogen, was hailed by the MacRobert Award judges as a huge breakthrough in the clean energy revolution, enabling low-cost materials, fuel-flexibility, higher efficiency and improved performance.

 

 

Ceres Power - fuel cells

 

The fuel cells business recorded revenues of £10.6 million (H1 2022: £9.7 million) and a gross profit of £6.3 million (H1 2022: £4.7 million), with the year-on-year revenue increase reflecting the progress made with our commercial partners as they work toward scaling manufacture in Germany and South Korea.

 

In July, the stationary power SOFC system being developed by our partner Bosch received European funding of ~€160 million following its designation as an IPCEI aimed at developing an integrated hydrogen economy in Europe. The EU funding is to enable the mass production of Bosch 'Power Units', utilising Ceres' stack technology, with the aim of strengthening innovative capacity, global competitiveness and creating new jobs in Germany.

 

Construction of Doosan's 50MW factory in South Korea is complete.  All machinery and processes have undergone factory acceptance testing, installation on site is underway, and factory commissioning is on track for H2 2024.  Doosan is also pursuing the market for maritime power using SOFC technology, the operation of which meets the International Maritime Organization's regulations to achieve the 2050 GHG reduction goals. It has an ongoing programme with Shell and Korea Shipbuilding & Offshore Engineering for auxiliary propulsion and is seeking to launch its first marine fuel cell (using Ceres' stack technology) in 2025.

 

Ceres Hydrogen - electrolysis

 

Earlier this year, we announced significant initial results from the testing of our first 120kW electrolyser modules, providing confidence that the technology can deliver green hydrogen at <40kWh/kg, around 25% more efficiently than incumbent lower temperature technologies. The team is now working on the next SOEC product concept for a 2-3MW modularised system, which would facilitate larger scale installations. You can hear the team talking about our SOEC technology, programmes and partners from the Technology Teach-in held in June via the investor section of the Ceres website https://www.ceres.tech/investors/presentations/.

 

Meanwhile, the first-of-a-kind megawatt-scale electrolyser is undergoing commissioning and testing at AVL in Germany, in preparation for deployment later in the year to Shell's R&D centre in Bangalore, India, where the hydrogen will be used in industrial processes on site.  The testing programme is intended to run for at least three years, forming the first stage of a collaborative relationship.  Shell and Ceres are building this partnership to utilise SOEC technology to deliver high-efficiency, low-cost green hydrogen, which has a significant role to play in harder-to-decarbonise industrial sectors.  It also allows for future generations of technology to be tested. 

 

In March 2023, we signed contracts with Linde Engineering and Bosch to start a collaboration to validate the performance, cost, and operational functionality of our SOEC technology. The companies are preparing a two-year demonstration of another megawatt class SOEC system, starting in 2024 and to be located at a Bosch site in Stuttgart, Germany. Its aim is to showcase that the technology provides a highly efficient pathway to low-cost green hydrogen.

 

Our electrolysis business has recognised revenues of £0.7m (H1 2022: £nil), which relates to early-stage evaluation contracts with prospective partners.

 

Focused investment for the future

 

The first six months of 2023 saw continued investment into people and capabilities to deliver our technology roadmap and drive future growth. Our highly skilled employee base grew as planned, with 586 people employed as at 30 June 2023 compared to 570 as at 31 December 2022. Recruitment will level off as we reach critical mass and fully resource the core business activities for SOFC and SOEC.  Additional growth will be to support new customer programmes.  Research and development expenditure increased by 27% to £26.7 million as planned progress is made with both the expansion of our SOFC business and development of our SOEC business.

 

Capitalised development costs in the period, which only relate to ongoing SOFC development, increased to £3.4 million compared to £2.9 million for H1 2022.  We have capitalised £16.2 million to 30 June 2023 (31 December 2022: £13.3 million). Amortisation of this to the income statement was in line with the prior period being a charge of £0.5 million (H1 2022: £0.5 million).

 

As planned, we have continued the expansion of our test capability to support demand from our partners, and to cater for additional market opportunities including SOEC, and SOFC applications such as marine and alternative fuels. We have also continued expanding and upgrading our Redhill manufacturing capacity for prototype production of the next generation of our SOFC cell and stack technology. As a result, our committed investment in property, plant and equipment was £4.7 million in H1 2023 (H1 2022: £5.5 million) and depreciation charged increased to £3.4 million compared to £2.6 million in H1 2022.

 

Overall, this focused "investment in the future" (R&D costs, capitalised development and capital expenditure) increased by 19% to £30.6 million (H1 2022: £25.7 million). The £30.6 million comprises £22.5 million (H1 2022: £17.3 million) in R&D (excluding depreciation, amortisation and share-based payments), £4.7 million (H1 2022: £5.5 million) in capital expenditure and £3.4 million (H1 2022: £2.9 million) in capitalised development.

 

As a result of these investments, increased amortisation and depreciation, and other operating income of £1.6 million (H1 2022: £0.5 million) primarily relating to RDEC tax credits, the Group reported an increased operating loss of £28.5 million in H1 2023, up from a loss of £25.5 million in H1 2022.

 

Strong financial position: the foundation for continued development and growth

 

The Group ended the period with a strong cash position of £161.2 million in cash and investments as at 30 June 2023 (31 December 2022: £182.3 million), with the decrease since 31 December 2022 reflecting the investment in the period and is in line with our plans to invest for future growth and further expansion into electrolysis. 

 

Interest income (on an accrual basis) on cash, cash equivalents and investments increased to £2.8 million (H1 2022: £0.7 million) due to improved interest rates on money market funds and short-term investments.

 

Equity free cash outflow (defined and reconciled to net cash from operating activities at the end of this report) reduced by 24% at £21.8 million (H1 2022: £28.6 million), being driven by net cash used in operating activities of £15.5 million (H1 2022: £20.6 million) reflecting the Group's operating loss in the period, capital expenditure (net of disposal proceeds) of £4.6 million (H2 2022: £5.5 million), capitalised development of £3.4 million (H1 2022: £2.9 million), net interest receipts of £1.8 million (H1 2022: £0.2 million) and exchange rate movements. Movements in working capital included a £2.0 million decrease in inventories (H1 2022: £4.0 million increase), reflecting stacks shipped in the period and used in internal R&D projects, and a £3.6 million decrease in trade and other receivables (H1 2022: increase of £2.8 million) following the successful receipt of outstanding trade receivable balances in the first half of 2023.

 

Order Backlog as at 30 June 2023 was £61.1 million (31 December 2022: £67.8 million).

 

Main Market and Board

 

In June this year, we graduated to the Main Market of the London Stock Exchange and, as of 18 September, joined the FTSE 250 index. This follows almost 20 years on the Alternative Investment Market ("AIM"). Being on the Main Market with a Premium Listing enables Ceres to access new pools of investment and build greater international appeal.

 

We already operate to high levels of governance and this year we welcomed Karen Bomba and Caroline Brown as Non-Executive Directors. They each possess extensive business and sector knowledge as well as experience in growing teams to support international expansion. Their skills and perspectives are highly relevant to Ceres as we mature the business and continue to scale our partnership model globally.

 

Professor Dame Julia King, Baroness Brown of Cambridge, also assumed the position of Senior Independent Director succeeding Steve Callaghan who stepped down from the Board after 11 years' service.  Julia has served on the Ceres Board since June 2021. She brings huge experience across industry, academia and government and a focus on climate change and the low carbon economy, which has been hugely valuable in the progression of the Company's sustainability strategy as Chair of the ESG Committee.

 

The company would like to thank Steve for his outstanding contribution over many years seeing the company through a difficult turnaround in 2012 to positioning it to the FTSE 250 and to whom we owe a great deal.

 

Outlook

 

The business is continuing to make strong progress in award-winning green hydrogen technology following the significant investment we have made in this area over the past two years and our first demonstration at a megawatt-scale will be a major proof point for the business. We expect SOEC will grow to become the largest part of the business in the second half of this decade and we are building our technical and commercial offering to address this market.

 

As flagged in our recent trading update, the timing of the establishment of the China JVs with Bosch and Weichai, and the associated revenue, remains uncertain. We continue to make good progress in other areas of the SOFC business particularly in our partnerships with Bosch and Doosan.

 

The revenue for the full year will be impacted by the China JVs as already flagged in our recent trading update, and full-year numbers will depend on the timing of securing new licence partners.

 

Despite what has been a challenging market backdrop over the past 12 months, we are approaching an important time for the business as we scale manufacturing and new developments in our first megawatt-scale deployment of SOEC, and our core cell, stack and systems come to fruition.  I have confidence that the investments we have made in the business, and the level of interest we are now seeing from new and existing partners, position us well to exploit the significant future global market for clean power and green hydrogen.

 

Responsibility Statement

 

The directors confirm that to the best of their knowledge:

 

·      the condensed set of financial statements has been prepared in accordance with UK adopted IAS 34 'Interim Financial Reporting'; and

·      the interim management report includes a fair review of the information required by DTR 4.2.7 (indication of important events and their impact, and a description of principal risks and uncertainties for the remaining six months of the financial year) and DTR 4.2.8 (disclosure of related parties' transactions and changes therein).

 

The full list of current Directors can be found on the Ceres website at https://www.ceres.tech

 

Philip Caldwell

Chief Executive Officer

 

 

CONDENSED CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2023

 



6 months ended

30 June 2023

Unaudited

6 months ended

30 June 2022 Unaudited

Restated1

Year ended

31 December 2022

Audited


Note

£'000

£'000

£'000



 

 

 

Revenue

2

11,310

9,687

22,130

Cost of sales


(4,442)

(4,952)

(9,079)

Gross profit

 

6,868

4,735

13,051

Other operating income2


1,583

464

1,332

Operating costs

4

(36,933)

(30,715)

(65,905)

Operating loss

 

(28,482)

(25,516)

(51,522)

Finance income

5

2,834

1,153

2,830

Finance expense

5

(724)

(143)

(304)

Loss before taxation


(26,372)

(24,506)

(48,996)

Taxation (charge)/credit

6

(68)

1,908

3,872

Loss for the financial period and total comprehensive loss


(26,440)

(22,598)

(45,124)



 

 

 



 



Loss per £0.10 ordinary share expressed in pence per share:


 



Basic and diluted loss per share

7

(13.74)p

(11.83)p

(23.58)p



 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

1 The results for the 6 months ended 30 June 2022 have been re-presented to reflect the re-classification of the Group's RDEC tax credit of £610,000 to align to the change in presentation applied for the Group's 2022 full year results. This was previously disclosed within cost of sales but is now presented within other operating income. The Group's RDEC tax credit for the 6 months results to 30 June 2022 has also been restated to decrease the credit by £313,000 following the adjustment of prior year R&D tax credit claims. See Note 1 for details.

2 Other operating income relates to grant income and the Group's RDEC tax credit.

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2023

 


 

30 June 2023

Unaudited

30 June 2022

Unaudited

Restated1

31 Dec 2022

Audited


Note

£'000

£'000

£'000

Assets





Non-current assets





Property, plant and equipment

8

25,599

21,092

25,964

Right-of-use assets

9

2,411

2,167

2,647

Intangible assets

10

16,218

10,882

13,278

Investment in associate


2,398

460

2,460

Other receivables

12

741

741

741

Total non-current assets


47,367

35,342

45,090



 

 

 

Current assets


 



Inventories

11

3,719

7,149

5,714

Contract assets

2

5,316

5,314

3,309

Other current assets

13

1,180

1,024

957

Derivative financial instruments

17

508

703

54

Current tax receivable


7,553

3,386

7,396

Trade and other receivables1

12

13,022

8,915

17,153

Short-term investments

14

117,088

114,177

119,011

Cash and cash equivalents

14

44,142

107,448

63,309

Total current assets


192,528

248,116

216,903

 


 

 

 

Liabilities


 



Current liabilities


 



Trade and other payables

15

(4,718)

(4,857)

(4,933)

Contract liabilities

2

(9,043)

(5,004)

(6,387)

Other current liabilities

16

(8,479)

(7,660)

(7,286)

Derivative financial instruments

17

(5)

Lease liabilities

18

(664)

(655)

(610)

Provisions

19

(449)

(1,495)

(929)

Total current liabilities


(23,353)

(19,676)

(20,145)

Net current assets


169,175

228,440

196,758

 


 

 

 

Non-current liabilities


 



Lease liabilities

18

(2,243)

(1,971)

(2,514)

Provisions

19

(1,926)

(1,910)

(1,933)

Total non-current liabilities


(4,169)

(3,881)

(4,447)

Net assets


212,373

259,901

237,401

 


 

 

 

Equity attributable to the owners of the parent


 



Share capital

20

19,272

19,157

19,209

Share premium


406,076

405,272

405,463

Capital redemption reserve


3,449

3,449

3,449

Merger reserve


7,463

7,463

7,463

Accumulated losses1


(223,887)

(175,440)

(198,183)

Total equity


212,373

259,901

237,401

 


 

 

 

 

1Trade and other receivables and accumulated losses as at 30 June 2022 have been restated to reflect an adjustment to prior year R&D tax claims. See Note 1 for details

The accompanying notes are an integral part of these consolidated financial statements. 

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 June 2023

 


Note

6 months ended

 30 June 2023

Unaudited

6 months ended

 30 June 2022

Unaudited

Restated1

12 months ended

 31 December 2022

Audited


 

£'000

£'000

£'000

Cash flows from operating activities

 

 

 

 

Loss before taxation

 

(26,372)

(24,506)

(48,996)


 

 



Adjustments for:

 

 



Finance income

 

(2,834)

(1,153)

(2,830)

Finance expense

 

724

143

304

Depreciation of property, plant and equipment


3,371

2,578

5,486

Depreciation of right-of-use assets


303

271

620

Amortisation of intangible assets


475

542

1,032

Net foreign exchange losses/(gains)


282

153

(690)

Net change in fair value of financial instruments


(454)

375

1,020

Profit on disposal of property, plant and equipment


(21)

Share-based payments charge


736

1,214

997

Operating cash flows before movements in working capital

 

(23,790)

(20,383)

(43,057)

Decrease/(increase) in trade and other receivables 1


3,634

(2,804)

(12,693)

Decrease/(increase) in inventories


1,995

(4,004)

(2,569)

Increase in trade and other payables


2,581

3,900

2,655

(Increase)/decrease in contract assets


(2,007)

2,017

4,022

Increase in contract liabilities


2,656

714

1,137

Decrease in provisions


(526)

(39)

(637)

Net cash used in operations

 

(15,457)

(20,599)

(51,142)

Taxation received


(380)

Net cash used in operating activities

 

(15,457)

(20,599)

(51,522)



 

 

 

Investing activities


 



Investment in associate


(1,000)

Purchase of property, plant and equipment


(4,725)

(5,529)

(12,347)

Proceeds received on disposal of property, plant and equipment


137

Capitalised development expenditure


(3,415)

(2,946)

(5,832)

Repayment of long-term investments


5,000

5,000

Acquisition of short-term investments


(37,470)

(70,998)

(99,618)

Repayment of short-term investments


39,444

49,950

74,950

Finance income received


2,227

730

1,443

Net cash used in investing activities

 

(3,802)

(23,793)

(37,404)



 

 

 

Financing activities


 



Proceeds from issuance of ordinary shares


676

630

873

Repayment of lease liabilities


(284)

(413)

(744)

Interest paid


(128)

(103)

(212)

Net cash generated from/(used by) financing activities

 

264

114

(83)

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(18,995)

(44,278)

(89,009)

Exchange (losses)/gains on cash and cash equivalents


(172)

271

863

Cash and cash equivalents at beginning of period


63,309

151,455

151,455

Cash and cash equivalents at end of period

14

44,142

107,448

63,309

 

1 Loss before taxation and other receivables as at 30 June 2022 have been restated to reflect the adjustment of prior year R&D tax claims. See Note 1 for details.

The accompanying notes are an integral part of these consolidated financial statements.

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2023

 

 


Share

capital

Share

premium

Capital redemption reserve

Merger

reserve

Accumulated losses

Total

 


£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2022 (audited)


19,073

404,726

3,449

7,463

(154,056)

280,655



 

 

 

 

 

 

Comprehensive income








Loss for the financial year


(45,124)

(45,124)

Total comprehensive loss


(45,124)

(45,124)



 

 

 

 

 

 

Transactions with owners








Issue of shares, net of costs


136

737

873

Share-based payments charge


997

997

Total transactions with owners


136

737

997

1,870

At 31 December 2022 (audited)

 

19,209

405,463

3,449

7,463

(198,183)

237,401



 

 

 

 

 

 

Comprehensive income







 

Loss for the financial period


(26,440)

(26,440)

Total comprehensive loss


(26,440)

(26,440)



 

 

 

 

 

 

Transactions with owners


 

 

 

 

 

 

Issue of shares


63

613

676

Share-based payments charge


736

736

Total transactions with owners

 

63

613

736

1,412

At 30 June 2023 (unaudited)


19,272

406,076

3,449

7,463

(223,887)

212,373

 


 

 

 

 

 

 

 

Comparatives for the six months ended 30 June 2022 are provided separately below:

 



Share

capital

Share

premium

Capital redemption reserve

Merger

reserve

Accumulated losses

Total



£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2022 (audited) - restated1


19,073

404,726

3,449

7,463

(154,056)

280,655



 

 

 

 

 

 

Comprehensive income








Loss for the financial period1


(22,598)

(22,598)

Total comprehensive loss


(22,598)

(22,598)



 

 

 

 

 

 

Transactions with owners








Issue of shares


84

546

630

Share-based payments charge


1,214

1,214

Total transactions with owners


84

546

1,214

1,844

At 30 June 2022 (unaudited)


19,157

405,272

3,449

7,463

(175,440)

259,901

 

 

 

 

 

 

 

 

 

12021 results have been restated to reflect an adjustment to prior year R&D tax claims and as a result the accumulated losses have increased by £968,000 from £153,088,000 to £154,056,000. See Note 1 for details.

 

1.     Basis of preparation

The unaudited condensed consolidated interim financial statements have been prepared in accordance with UK-adopted International Accounting Standard 34 'Interim financial reporting' (IAS 34). They do not include all of the information required for full annual financial statements and should be read in conjunction with the annual financial statements for the year ended 31 December 2022 which were prepared in accordance with UK adopted international accounting standards. The interim financial statements have been prepared on a historical cost basis except derivative financial instruments, which are stated at their fair value.

 

The interim financial information has been prepared in accordance with the recognition and measurement requirements of UK adopted international accounting standards and applicable law and regulations. The same accounting policies, presentation and methods of computation are followed in the interim financial statements as were applied in the Group's latest annual audited financial statements. The consolidated interim financial statements are presented on a condensed basis as permitted by IAS 34 and therefore do not include all disclosures that would otherwise be required in a full set of financial statements.

 

The financial information contained in the interim financial statements is unaudited and does not constitute statutory financial statements as defined by in Section 434 of the Companies Act 2006. The financial statements for the year ended 31 December 2022, on which the auditors gave an unqualified audit opinion, and did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006, have been filed with the Registrar of Companies.

 

The consolidated interim financial information for the six months ended 30 June 2023 has been reviewed by the Company's Auditor, BDO LLP in accordance with International Standard of Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity.

To reflect the presentation adopted by the Group in the preparation of the 2022 consolidated financial statements, the Research and Development Expenditure Credit ("RDEC") tax credit within the consolidated statement of profit and loss has been re-classified. The RDEC tax credit was previously presented within cost of sales and is now presented within other operating income. Prior year comparatives have been re-presented accordingly. The impact of this change was to increase cost of sales and other operating income for the six months ended 30 June 2022 by £0.6m.

 

Further, the June 2022 results have been restated to reflect an adjustment to R&D tax credit claims for certain costs which were inadvertently claimed in 2019 and 2020 under the Small and Medium-sized Enterprise (SME) R&D tax credit schemes, whereas they should have been claimed at a lower claim rate under the RDEC scheme. As a result, accumulated losses as at 1 January 2022 have been restated accordingly resulting in an increase from £153,088,000 to £154,056,000. At 30 June 2022 the taxation credit and other operating income has also been restated to increase the tax credit from £896,000 to £1,908,000 and reduce other operating income by £313,000. Further details are set out in Note 6. Other receivables as at 30 June 2022 have been restated from £3,503,000 to £4,264,000, and current tax receivable as at 30 June 2022 has been restated from £4,416,000 to £3,386,000 to reflect the adjustments of prior year R&D tax claims.  

 

Going Concern

The Group has reported a loss after tax for the six months period ended 30 June 2023 of £26.4m (six months ended 30 June 2022: £22.6m) and net cash used in operating activities of £15.5m (six months ended 30 June 2022: £20.6m).  At 30 June 2023, the Group held cash and cash equivalents and investments of £161.2m (31 December 2022: £182.3m).  The directors have prepared annual budgets and cash flow projections that extend 15 months from the date of approval of this report. These projections include management's expectations of the cash flows associated with the Group's continued investment in R&D projects and further expansion of our manufacturing and testing capacity, together with contracted and anticipated customer contracts and the planned investment in the China collaboration with Bosch and Weichai which is not expected to occur until 2024. The projections were stress tested by applying different scenarios including the loss of significant future revenue and continued adverse macroeconomic factors as well as a scenario where the Chinese JV does not progress at all. In each case the projections demonstrated that the Group would have sufficient cash reserves to meet its liabilities as they fall due and to continue as a going concern. For the above reasons, the directors continue to adopt the going concern basis in preparing the financial statements.

Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources.

 

In preparing the interim consolidated financial statements, the areas where judgement has been exercised remain consistent with those applied to the annual report and accounts for the year ended 31 December 2022.

 

New standards and amendments applicable for the reporting period

The Group has adopted all standards, interpretations amended or newly issued by the IASB that were effective in the period. Their adoption has not had any material effect on the consolidated financial statements.

 

2. Revenue

The Group's revenue is disaggregated by geographical market, major product/service lines, and timing of revenue recognition:

Geographical market

 


6 months ended

30 June 2023

Unaudited


6 months ended

30 June 2022

Unaudited


12 months ended

 31 December 2022

Audited

 

£'000

 

£'000


£'000

Europe

6,801


4,051


8,460

Asia

4,318


5,404


13,253

North America

191

 

211


394

Rest of World

 

21


23

 

11,310

 

9,687


22,130

 

For the six months ended 30 June 2023, the Group has identified two major customers (defined as customers that individually contributed more than 10% of the Group's total revenue) that accounted for approximately 56% and 38% of the Group's total revenue recognised in the period (6 months ended 30 June 2022 two major customers that accounted for approximately 44% and 39% of the Group's total revenue recognised in the period and 12 months ended 31 December 2022: two major customers that accounted for approximately 51% and 36% of the Group's total revenue recognised for that year).

Major product/service lines

 


6 months ended

30 June 2023

Unaudited


6 months ended

30 June 2022

Unaudited


12 months ended

 31 December 2022

Audited

 

£'000

 

£'000


£'000

Engineering services

4,679


4,206


9,039

Provision of technology hardware

3,230


2,077


5,380

Licenses

3,401

 

3,404


7,711

 

11,310

 

9,687


22,130

 

Timing of transfer of goods and services

 


6 months ended

30 June 2023

Unaudited


6 months ended

30 June 2022

Unaudited


12 months ended

 31 December 2022

Audited


£'000


£'000


£'000

Products and services transferred at a point in time

4,155


1,887


4,760

Products and services transferred over time

7,155


7,800


17,370


11,310


9,687


22,130

 

The contract-related assets and liabilities are as follows:

 


 


30 June 2023

Unaudited


30 June 2022

Unaudited


31 December 2022

Audited


 


£'000

 

£'000


£'000

Trade receivables

12


7,309


4,651


11,825




 





Contract assets - accrued income



5,316


5,314


3,309


 


 





Contract liabilities - deferred income

 


(9,043)


(5,004)


(6,387)

 

3. Segmental analysis

In accordance with IFRS 8 the method applied to identify reporting segments is based on internal management reporting information that is regularly reviewed by the chief operating decision maker, which the Group considers to be the Executive team. The Group's internal segmental reporting has changed and now only separately presents results down to gross profit level from its Power (SOFC) and Hydrogen (SOEC) divisions where previously presented to adjusted EBITDA.

 


Power - SOFC

 

Hydrogen - SOEC

 

Consolidated

Six months ended 30 June 2023 (unaudited)

£'000

 

£'000

 

£'000


 

 

 

 

 


 

 

 

 

 

Revenue (external)

10,569

 

741

 

11,310

Cost of sales

(4,271)

 

(171)

 

(4,442)

Gross profit

6,298

 

570

 

6,868

 


Power - SOFC


Hydrogen - SOEC


Consolidated

Six months ended 30 June 2022 (unaudited)

£'000


£'000


£'000

Restated1












Revenue (external)

9,687



9,687

Cost of sales1

(4,952)



(4,952)

Gross profit

4,735



4,735

 


 

 

 

 

 


Power - SOFC


Hydrogen - SOEC


Consolidated

12 months ended 31 December 2022 (audited)

£'000


£'000


£'000













Revenue (external)

21,950


180


22,130

Cost of sales

(9,070)


(9)


(9,079)

Gross profit

12,880


171


13,051

 

1 The results for the 6 months to 30 June 2022 have been restated as a result of prior year R&D tax credit claims and further re-presented to reflect the re-classification of the Group's RDEC tax credit from within cost of sales now within other operating income.

 

4. Operating costs

 

Operating costs can be analysed as follows:

 


 


 


6 months ended

30 June 2023

Unaudited


6 months ended

30 June 2022

Unaudited


12 months ended

 31 December 2022

Audited


£'000


£'000


£'000

Research and development costs

26,656


20,997


48,348

Administrative expenses

8,821


7,695


15,165

Commercial

1,456


2,023


2,392


36,933


30,715


65,905

 

5. Finance income and expenses

 


6 months ended

30 June 2023

Unaudited


6 months ended

30 June 2022

Unaudited


12 months ended

 31 December 2022

Audited


£'000


£'000


£'000

Interest income on cash, cash equivalents and investments

2,834


730

 

2,657

Foreign exchange gain on cash, cash equivalents and short-term deposits


423

 

173

Finance income

2,834


1,153


2,830


 






 





Interest on lease liability

(128)


(103)


(212)

Unwinding of discount on provisions

(39)


(37)


(87)

Other finance costs


(3)


(5)

Foreign exchange loss on cash, cash equivalents and short-term deposits

(557)



Interest expense

(724)


(143)


(304)

 

6. Taxation

No corporation tax liability has arisen during the period (6 months ended 30 June 2022 and 12 months ended 31 December 2022: £nil) due to the losses incurred. A tax charge has arisen as a result of foreign withholding taxes suffered and an overprovisions of R&D tax credit for 2022 under the SME R&D regime. The SME R&D tax credit regime is no longer accessible to the Group. The RDEC regime continues to be accessible and has been recognised within other operating income.

 


6 months ended

30 June 2023

Unaudited


6 months ended

30 June 2022

Unaudited

Restated1


12 months ended

 31 December 2022

Audited


£'000


£'000


£'000

UK corporation tax


(2,148)


(4,470)

Foreign tax suffered

2


240


828

Adjustment in respect of prior periods

66



  (230)


68


(1,908)


(3,872)

 

1 The June 2022 taxation credit has been restated to increase the tax credit from £896,000 to £1,908,000 relating to a prior year correction to the R&D tax treatment of costs. This correction resulted from certain costs that were inadvertently claimed in 2019 and 2020 under the Small and Medium-sized Enterprise (SME) R&D tax credit schemes, whereas they should have been claimed at a lower claim rate under the RDEC scheme. The restatement has increased the June 2022 SME R&D tax credit by £126,000 from £2,022,000 to £2,148,000 and has reversed the movement in R&D tax credit provision in respect of prior periods from £886,000 to £nil since this has now been recognised in the restated opening balance sheet position at 1 January 2022.

 

7. Loss per share

 


6 months ended

30 June 2023

Unaudited

6 months ended

30 June 2022

Unaudited

12 months ended

 31 December 2022

Audited


£'000

£'000

£'000

Loss for the financial period attributable to shareholders

(26,440)

(22,598)

(45,124)


 

 

 

Weighted average number of shares in issue

192,442,672

190,972,969

191,385,618


 

 

 

Loss per £0.10 ordinary share (basic and diluted)

(13.74)p

(11.83)p

(23.58)p

 

 

 

 

 

8. Property, plant and equipment

 


Leasehold improvements

 £'000

 

Plant and machinery
£'000

 

Computer equipment
£'000

 

Fixtures and fittings

£'000

Assets under construction

 £'000

 

Motor vehicles

£'000

 

 

Total

£'000

Cost








At 1 January 2022 

7,412

25,502

2,563

348

1,975

12

37,812

Additions

1,111

5,147

203

6,848

13,309

Transfers

71

893

(964)

Disposal

(1,621)

(6,669)

(831)

(72)

(9,193)

At 31 December 2022 (audited)

6,973

24,873

1,935

276

7,859

12

41,928









Additions

489

1,614

134

90

795

3,122

Disposal

(225)

(225)

Transfers

419

833

(1,252)

At 30 June 2023 (unaudited)

27,095

2,069

366

7,402

12

44,825

 








Accumulated depreciation








At 1 January 2022 

3,358

14,285

1,790

232

6

19,671

Charge for the year

936

4,030

444

73

3

5,486

Depreciation on disposals

(1,621)

(6,669)

(831)

(72)

(9,193)

At 31 December 2022 (audited)

2,673

11,646

1,403

233

9

15,964









Charge for the period

663

2,487

209

11

1

3,371

Depreciation on disposals

(109)

(109)

At 30 June 2023 (unaudited)

14,024

1,612

244

10

19,226

 








Net book value








At 30 June 2023 (unaudited)

4,545

13,071

457

122

7,402

2

25,599

At 31 December 2022 (audited)

4,300

13,227

532

43

7,859

3

25,964

 

'Assets under construction' represents the cost of purchasing, constructing and installing property, plant and equipment ahead of their productive use. The category is temporary, pending completion of the assets and their transfer to the appropriate and permanent category of property, plant and equipment. As such, no depreciation is charged on assets under construction.

Assets under construction consist entirely of plant and machinery that will be used in the manufacturing, development and testing of fuel cells.

 

Comparatives for the six months ended 30 June 2022 are provided separately below:

 

Unaudited

Leasehold improvements

 £'000

 

Plant and machinery
£'000

 

Computer equipment
£'000

 

Fixtures and fittings

£'000

Assets under construction

 £'000

 

Motor vehicles

£'000

 

 

Total

£'000

Cost








At 1 January 2022

7,412

25,502

2,563

348

1,975

12

37,812

Additions

238

2,437

169

2,685

5,529

Transfers

22

264

(286)

At 30 June 2022

28,203

2,732

348

4,374

12

43,341









Accumulated depreciation








At 1 January 2022

3,358

14,285

1,790

232

6

19,671

Charge for the period

442

1,872

226

37

1

2,578

At 30 June 2022

16,157

2,016

269

7

22,249









Net book value








At 30 June 2022

3,872

12,046

716

79

4,374

5

21,092

 

9. Right of use assets

 


Land and Buildings

 

Computer equipment

 

Total


£'000


£'000

 

£'000

Cost

 





At 1 January 2022

3,694


43


3,737

Adjustment to lease term

829



829

At 31 December 2022 (audited)

4,523


43


4,566

 

 


 


 

Additions

67



67

At 30 June 2023 (unaudited)

4,590


43


4,633


 


 



Accumulated depreciation

 


 



At 1 January 2022

1,289


10


1,299

Charge for the year

606


14


620

At 31 December 2022 (audited)

1,895


24


1,919

 

 

 

 

 

 

Charge for the period

296

 

7

 

303

At 30 June 2023 (unaudited)

2,191


31


2,222


 





Net book value

 





At 30 June 2023 (unaudited)

2,399


12


2,411

At 31 December 2022 (audited)

2,628


19


2,647

 

The lease liabilities are detailed in Note 18.

 

Comparatives for the six months ended 30 June 2022 are provided separately below:

 

Unaudited

Land and Buildings


Computer equipment


Total


£'000


£'000


£'000

Cost

 






 





At 1 January 2022

3,694


43


3,737

At 30 June 2022

3,694


43


3,737


 





Accumulated depreciation

 





At 1 January 2022

1,289


10


1,299

Charge for the period

264


7


271

At 30 June 2022

1,553


17


1,570







Net book value

 





At 30 June 2022

2,141


26


2,167







 

10. Intangible assets

 


Internal developments in relation to manufacturing site

 £'000

Customer and internal development programmes

£'000

 

 

 

Perpetual

software licences

£'000

Patent costs
£'000

 

Total

£'000

Cost






At 1 January 2022

411

8,407

252

633

9,703

Additions

5,340

273

219

5,832

At 31 December 2022 (audited)

411

13,747

525

852

15,535







Additions

3,236

8

171

3,415

At 30 June 2023 (unaudited)

411

16,983

533

1,023

18,950







Accumulated amortisation






At 1 January 2022

164

1,038

23

1,225

Charge for the year

82

748

125

77

1,032

At 31 December 2022 (audited)

246

1,786

148

77

2,257







Charge for the period

41

359

70

5

475

At 30 June 2023 (unaudited)

287

2,145

218

82

2,732







Net book value






At 30 June 2023 (unaudited)

124

14,838

315

941

16,218

At 31 December 2022 (audited)

165

11,961

377

775

13,278

 

The customer and internal development intangible primarily relates to the design, development and configuration of the Company's core fuel cell and system technology. Amortisation of capitalised development commences once the development is complete and is available for use.

 

 

Comparatives for the six months ended 30 June 2022 are provided separately below:

 

Unaudited

Internal developments in relation to manufacturing site

 £'000

Customer and internal

development programmes

£'000

 

 

 

Perpetual

software licences

£'000

 

 

 

 

Patent costs
£'000

 

Total

£'000

Cost






At 1 January 2022

411

8,407

252

633

9,703

Additions

2,709

151

86

2,946

At 30 June 2022

411

11,116

403

719

12,649







Accumulated amortisation






At 1 January 2022

164

1,038

23

1,225

Charge for the period

41

377

56

68

542

At 30 June 2022

205

1,415

79

68

1,767







Net book value






At 30 June 2022

206

9,701

324

651

10,882

 

11. Inventories

 


30 June 2023

Unaudited


30 June 2022

Unaudited


31 December 2022

Audited


£'000


£'000


£'000

Raw materials

975


1,381


1,566

Work in progress

1,423


1,186


1,477

Finished goods

1,321


4,582


2,671

Total inventory

3,719


7,149


5,714

 

Inventories have reduced which reflects the stacks shipped to customers and the use of stacks for internal R&D projects, particularly the SOEC demonstrator.

 

12. Trade and other receivables

 


30 June 2023

Unaudited


30 June 2022

Unaudited

Restated1


31 December 2022

Audited

Current:

£'000


£'000


£'000

Trade receivables

7,309


4,651


11,825

Other receivables

5,713


4,264


5,328


13,022


8,915


17,153

Non-current:

 





Other receivables

741


741


741

 

1 Other receivables as at 30 June 2022 have been restated to reflect the adjustment of prior year R&D tax claims. See Note 1 for details.

 

Of the £7.3m trade receivables due at 30 June 2023, c£6.3m was received in the first two months after the reporting period.

 

Included within other current receivables is the research and development tax credit of £4,822,000 (30 June 2022: £1,551,000; 31 December 2022: £2,084,000). All of which has been received in H2 2023.

 

13. Other current assets

 


30 June 2023

Unaudited

30 June 2022

Unaudited

31 December 2022

Audited

 

£'000

£'000

£'000

Prepayments

1,180

880

869

Accrued grant income

144

88


1,180

1,024

957


 

 

 

 

14. Net cash and cash equivalents, short-term and long-term investments

 


30 June 2023

Unaudited


30 June 2022

Unaudited


31 December 2022

Audited


£'000


£'000


£'000

Cash at bank and in hand

4,969


6,601


7,837

Money market funds

39,173


100,847


55,472

Cash and cash equivalents

44,142


107,448


63,309


 





Short-term investments1

117,088


114,177


119,011

Cash and cash equivalents and investments

161,230


221,625


182,320

 

1 Short-term investments comprise bank deposits with a maturity greater than 3 months but less than 12 months.

 

The Group typically places surplus funds into pooled money market funds with same day access and bank deposits with durations of up to 24 months. The Group's treasury policy restricts investments in short-term sterling money market funds to those which carry short-term credit ratings of at least two of AAAm (Standard & Poor's), Aaa-mf (Moody's) and AAAmmf (Fitch) and deposits with banks with minimum long-term rating of A-/A3/A and short-term rating of A-2/P-2/F-1 for banks which the UK Government holds less than 10% ordinary equity.

 

15. Trade and other payables

 


30 June 2023

Unaudited


30 June 2022

Unaudited


31 December 2022

Audited

Current:

£'000


£'000


£'000

Trade payables

4,349


4,537


4,795

Other payables

369


320


138


4,718


4,857


4,933

 

16. Other current liabilities

 


30 June 2023

Unaudited


30 June 2022

Unaudited


31 December 2022

Audited

 

£'000


£'000


£'000

Accruals

7,829


6,767


6,515

Deferred grant income

650


893


771


8,479


7,660


7,286

 

17. Derivative financial instruments

 


Fair value

hierarchy

Carrying amount

30 June 2023

Unaudited

£'000

Fair value

30 June 2023

Unaudited

£'000

Carrying amount

31 December 2022

Audited

£'000

Fair value

31 December 2022

Audited

£'000

Financial assets measured at fair value through profit or loss


 

 



Forward exchange contracts

Level 2

80

80

26

26

Non-deliverable forward contracts

Level 2

428

428

28

28

Total derivative assets


508

508

54

54



 

 

 

 

Financial liabilities measured at fair value through profit or loss


 

 



Forward exchange contracts


Total derivative liabilities




 

 

 

 

 

Comparatives for the six months ended 30 June 2022 are provided separately below:

 


Fair value

hierarchy

 

 

Carrying amount

30 June 2022

Unaudited

£'000

Fair value

30 June 2022

Unaudited

£'000

Financial assets measured at fair value through profit or loss


 

 



Forward exchange contracts

Level 2

 

 

241

241

Non-deliverable forward contracts

Level 2

 

 

462

462

Total derivative assets


 

 

703

703



 

 

 

 

Financial liabilities measured at fair value through profit or loss


 

 



Forward exchange contracts



 

(5)

(5)

Total derivative liabilities


 

 

(5)

(5)



 

 

 

 

 

In 2020, the Group entered into a non-deliverable forward (NDF) to hedge its exposure to Korean Won (KRW) with respect to a major customer contract. As at 30 June 2023, the unrealised fair value gain was £428,000 (31 December 2022: £28,000). The Group also had a number of forward exchange contracts in place to hedge expected transactions in other currencies including EUR and CAD, with an unrealised total gain of £80,000 as at 30 June 2023 (31 December 2022: £25,000). All derivative financial instruments are measured using techniques consistent with level 2 of the fair value hierarchy.

 

18.  Lease liabilities

 



30 June 2023

Unaudited

30 June 2022

Unaudited

31 December 2022

Audited



£'000

£'000

£'000



 

 

 

At the start of the period


3,124

3,039

3,039

New finance leases recognised


67

Lease payments


(412)

(516)

(956)

Interest expense


128

103

212

Adjustment to lease term


829

At the end of the period

 

2,907

2,626

3,124



 



Current


664

655

610

Non-current


2,243

1,971

2,514

Total at the end of the period


2,907

2,626

3,124

 


 

 

 

 

19.  Provisions

 


 

Property Dilapidations

 

 

Warranties

 

 

Contract Losses

 

Total


 

£'000


£'000

 

£'000

 

£'000

At 1 January 2022

 

1,828


1,253


326


3,407

Movements in the Consolidated Statement of Profit and Loss:

 








Amounts used

 



(137)


(137)

Unused amounts reversed

 


(707)


(135)


(842)

Unwinding of discount

 

87




87

Increase in provision

 

18


329



347

At 31 December 2022 (audited)

 

1,933


875


54


2,862

Movements in the Consolidated Statement of Profit and Loss:

 








Unused amounts reversed

 

 

(567)

 

 

(567)

Unwinding of discount

 

39

 

 

 

39

Change in provision

 

(46)

 

87

 

 

41

At 30 June 2023 (unaudited)

 

1,926

 

395

 

54

 

2,375


 

 

 

 

 

 

 

 

Current

 

 

395

 

54

 

449

Non-current

 

1,926

 

 

 

1,926

At 30 June 2023 (unaudited)

 

1,926

 

395

 

54

 

2,375

 

 

 

 

 

 

 

 

 

Current

 


875


54


929

Non-current

 

1,933




1,933

At 31 December 2022 (audited)

 

1,933


875


54


2,862

 

Following further progress on contracts and no new warranty issues identified in the period, £0.5m of the warranty provision was released to the Consolidated Statement of Profit or Loss. As at 30 June 2023 the Group has recorded a contingent liability of approximately £0.4m (30 June 2022: £nil, 31 December 2022: £0.3m) to reflect the lower possibility of the Group paying out on any potential failures for certain additional stacks that may still be running where the contracts have concluded.

 

 

Comparatives for the six months ended 30 June 2022 are provided separately below:

 

Unaudited

 

Property Dilapidations


 

Warranties


 

Contract Losses


Total


 

£'000


£'000


£'000


£'000

At 1 January 2022

 

1,828


1,253


326


3,407

Movements in the Consolidated Statement of Profit and Loss:

 








Amounts used

 



(138)


(138)

Unused amounts reversed

 



(124)


(124)

Unwinding of the discount

 

37




37

Increase in provision

 

45


178



223

At 30 June 2022 (unaudited)

 

1,910


1,431


64


3,405

 

 








Current

 


1,431


64


1,495

Non-current

 

1,910




1,910

At 30 June 2022 (unaudited)

 

1,910


1,431


64


3,405

 

20. Share capital

 


 

30 June 2023 (unaudited)

 

31 December 2022 (audited)


 

Number of £0.10
Ordinary
shares

£'000

 

Number of £0.10
Ordinary
shares

 

£'000

Allotted and fully paid







At 1 January


192,086,775

19,209


190,729,638

19,073

Allotted £0.10 Ordinary shares on exercise of employee share options


630,205

63


1,357,137

136

At 30 June 2023 / 31 December 2022

 

192,716,980

19,272

 

192,086,775

19,209

 

During the six months ended 30 June 2023, 630,205 ordinary £0.10 shares were allotted for cash consideration of £676,359 on the exercise of employee share options (six months ended 30 June 2022: 844,978 ordinary £0.10 shares were allotted for cash consideration of £627,427; year ended 31 December 2022: 1,357,137 ordinary £0.10 shares were allotted for cash consideration of £866,717).

Comparatives for the six months ended 30 June 2022 are provided separately below:

 


 

 

30 June 2022 (unaudited)


 

 

Number of £0.10
Ordinary
shares

 

£'000

Allotted and fully paid





At 1 January 2022



190,729,638

19,073

Allotted £0.10 Ordinary shares on exercise of employee share options



844,978

84

Allotted £0.10 Ordinary shares on cash placing



At 30 June 2022

 

 

191,574,616

19,157

 

Reserves

The Consolidated Statement of Financial Position includes a merger reserve and a capital redemption reserve. The merger reserve represents a reserve arising on consolidation using book value accounting for the acquisition of Ceres Power Limited at 1 July 2004. The reserve represents the difference between the book value and the nominal value of the shares issued by the Company to acquire Ceres Power Limited. The capital redemption reserve was created in the year ended 30 June 2014 when 86,215,662 deferred ordinary shares of £0.04 each were cancelled.

 

21. Capital commitments

Capital expenditure that has been contracted for but has not been provided for in the financial statements amounts to £7,710,000 as at 30 June 2023 (as at 30 June 2022: £8,131,000 and as at 31 December 2022: £8,679,000), in respect of the acquisition of property, plant and equipment.

 

22. Related party transactions

As at 30 June 2023, as at 30 June 2022 and as at 31 December 2022, the Group's related parties were its Directors and RFC Power Limited.

During the six months ended 30 June 2023, one Director exercised and retained 200,000 share options under the Company's Long Term Incentive Plan and also exercised and retained 4,610 share options under the Company's employee share save scheme. There were no other transactions between the Company and the Directors during the period.

During the year ended 31 December 2022 and period ending 30 June 2022 one Director exercised and retained 7,109 share options under the Company's employee share save scheme and one Director exercised and sold 14,218 share options under the Company's employee share save scheme. There were no other transactions between the Company and the Directors during the year ended 31 December 2022.

Transactions in H1 2023 between the Group and RFC Power Limited, being an associated entity of the Group, comprised engineering consultancy services provided by the Group to RFC Power Limited for the value of £0.3m (6 months ended 30 June 2022: £0.3m and 12 months ended 31 December 2022: £0.4m).

 

Reconciliation between operating loss and Adjusted EBITDA

Management believes that presenting Adjusted EBITDA loss allows for a more direct comparison of the Group's performance against its peers and provides a better understanding of the underlying performance of the Group by excluding non-recurring, irregular and one-off costs. The Group currently defines Adjusted EBITDA loss as the operating loss for the period excluding depreciation and amortisation charges, share-based payment charges, unrealised losses on forward contracts and exchange gains/losses.

 


6 months ended

30 June 2023

£'000

6 months ended

30 June 2022

Restated1

£'000

12 months ended

 31 Dec 2022

£'000

Operating loss

(28,482)

(25,516)

(51,522)

Depreciation and amortisation

4,149

3,391

7,138

Share-based payment charges

736

1,214

997

Unrealised (gains)/losses on forward contracts

(454)

374

1,020

Exchange losses/(gains)

282

(271)

(863)

Adjusted EBITDA

(23,769)

(20,808)

(43,230)




 

 

1The Group's operating loss has been restated due to the adjustment of prior year R&D tax claims which has decreased the RDEC tax credit by £313,000.

Reconciliation between net cash used in operating activities and equity free cash flow

The Group defines equity free cash flow as net cash from operating activities plus capital expenditure and adjusted for interest payments and receipts and exchange rate movements. The table below reconciles net cash from operating activities to equity free cash flow for each period.

 


6 months ended

30 June 2023

£'000

6 months ended

30 June 2022

£'000

12 months ended

 31 Dec 2022

£'000

Net cash from operating activities

(15,457)

(20,599)

(51,522)

Capital expenditure (total)

(8,003)

(8,475)

(18,179)

Interest and lease receipts (net)

1,815

214

487

Exchange rate movements

(172)

271

863

Equity free cash flow

(21,817)

(28,589)

(68,351)

 

INDEPENDENT REVIEW REPORT TO Ceres power holdings plc

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2023 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2023 which comprises Condensed Consolidated Statement of Profit and Loss and Other Comprehensive Income, Condensed Consolidated Statement of Financial Position, Condensed Consolidated Cash Flow Statement and the Condensed Consolidated Statement of Changes in Equity and the Notes to the financial statements for the six months ended 30 June 2023.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note one, the annual financial statements of the group are prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410, however future events or conditions may cause the group to cease to continue as a going concern.

Responsibilities of directors

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statement in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose.  No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent.  Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

 

BDO LLP

Chartered Accountants

Gatwick, UK

Date

 

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

 

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