Interim Results

Ceres Power Holdings plc
15 March 2005






Ceres Power Holdings plc

Interim Report 31 December 2004








                                                              www.cerespower.com






Markets and Products



Ceres Power is a developer and manufacturer of fuel cells and integrated product
systems which can be applied to deliver substantial economic and environmental
benefits for a range of global market applications:



•   Combined Heat and Power (CHP) - providing heat and power for homes and
    small businesses

•   Off-grid Power - power at point of use from commercially available
    bottled gases

•   Auxiliary Power Units (APU) - satisfying the electrical demand for
    on-board vehicle applications

•   Uninterruptible Power Supplies (UPS) - security of energy supply for
    critical applications



The proven ability of the technology to perform well on both hydrocarbon gases
and hydrogen allows the fuel cells to run on existing fuel infrastructures and
the future hydrogen economy.



The group is thus ideally placed to exploit near term opportunities and deliver
long term growth from existing and emerging markets.








Highlights


•   Admission to AIM on 25 November 2004 with blue chip institutional
    backing

•   15 million funds raised from IPO

•   £18.3 million cash and short term investments at 31 December 2004

•   First commercial revenues from customer partnerships

•   Major investment in fuel cell manufacturing facilities

•   Successfully completed grant funded development programmes with Carbon
    Trust and DTI

•   Core technology patent granted in the US

•   Recognition as a leader in low carbon technology and energy efficiency
    by Prime Minister Tony Blair in his Climate Change Speech






Chairman's Statement



Prime Minister Tony Blair referred to Ceres Power as a 'world leader' in his
Climate Change Speech.



The Energy Minister Mike O'Brien described Ceres Power as 'being at the
forefront in the race to make fuel cells commercially viable'.



The group has achieved major progress in its research and development activities
during the past year.



I am pleased to report on the substantial progress achieved by the group in the
six months to 31 December 2004.



Admission to AIM

Ceres Power Holdings plc was admitted to the Alternative Investment Market (AIM)
of the London Stock Exchange, with trading of the shares commencing on 25
November 2004. It was particularly pleasing that we were able to attract a
significant number of prestigious financial institutions as new shareholders.
The funds raised will allow the group to take advantage of the very substantial
opportunities open to it and to negotiate partnership agreements from a position
of strength. High quality staff have been, and will continue to be, recruited.
New equipment has been purchased to accelerate technical progress towards
commerciality and to provide the basis for future growth.



Financial results

The group received its first commercial revenues during the six months to 31
December 2004, providing in excess of £60,000 from development and testing
arrangements with two global companies. During the period the group successfully
completed grant funded projects sponsored by both the Carbon Trust and the DTI.
These projects, and one further project, generated operating income of almost
£300,000 for the six month period. These income streams provide a significant
endorsement of the group's technology and have contributed to the progress
achieved in 2004.



Research and development costs increased by 44% to £1.03 million for the six
months, compared with the same period last year, reflecting increased headcount,
R&D contract and materials costs. Expansion into the adjoining facility has
increased establishment costs and depreciation on associated capital
expenditure. Administration costs increased in the period, reflecting the
demands of a high growth company preparing for a stock market listing.



Interest income of £136,000 was greater than the prior year as a result of both
the second private round and IPO fundraisings. The loss for the six months was
£1.35 million, compared with £766,000 in the latter half of 2003, reflecting
growth in the group's operations and associated expenses.



As at 31 December 2004, the group had cash and short term investments amounting
to £18.3 million, having raised some £15 million net of expenses in November
2004. Thus, the group is well financed to undertake the next phase of its
development over the coming years.



Review

The group has achieved major progress in its research and development activities
during the past year and is now focusing on product engineering for market
applications. Concurrently, we are developing strong supply chain partnerships
as the basis for generating commercial revenue streams. The effective doubling
of the facilities in Crawley to include a cell manufacturing facility and
extensive testing facilities, as well as a substantial increase in technical
staff, are measures of the transformation of the group.



Significant milestones achieved during the past six months include:



• Testing agreement signed with BOC



• Official opening of fuel cell manufacturing facility



• Fuel cell robustness and planar stack integrity demonstrated



• Multiple stack durability tests and design of complete system



• Demonstration of fuel cell operation on LPG, natural gas and hydrogen



Commercial supply chain relationships have been established with several major
international energy supply and power generation companies. The unique fuel cell
technology of Ceres Power has been endorsed by the UK government, with Prime
Minister Tony Blair citing Ceres Power as a 'world leader' in his Climate Change
Speech. In addition the Energy Minister Mike O'Brien described Ceres Power as '
being at the forefront in the race to make fuel cells commercially viable'.



People

We have attracted a number of high calibre personnel vital to the group's
progress. The new Head of Product Development, Dr. Andrew Baker, brings a wealth
of experience in transforming technology into world leading mass-manufactured
products in a variety of relevant industries. In addition, Mr. Harry Fitzgibbons
joined the board as a non-executive director. He brings extensive experience in
corporate finance, venture capital, and technology commercialisation, as well as
fuel cell industry insight, having been on the Johnson Matthey board for 11
years.



Every one of our employees, as a stakeholder in the business with shareholdings
and/or share options, has made a significant contribution to the success of the
group. I would like to thank all of them for their part in our continuing
success.



Intellectual property

The group recognises the need to protect and grow its intellectual property
portfolio. Nine patent applications have been filed to date. Our core fuel cell
patent has been granted in the UK, and was recently granted in the US, unaltered
and unopposed. Further patents and trademarks continue to be filed in order to
ensure that the core technology is well protected and to help build the group's
brand value.



Outlook

The group is continuing to build on its fuel cell, stack and systems innovations
as the basis for revenue growth and value creation from customer trials and
partnership agreements. The funding raised at the time of the Initial Public
Offering is enabling the group to strengthen its team, commission customised
facilities and establish key channels to market in order to help achieve the
ambitious goals set by the board. I look forward to reporting to you on our
continuing progress.



Philip Holbeche

Chairman










Consolidated Profit and Loss Account

for the six months ended 31 December 2004






                                       Six months    Six months     11 month
                                            Ended         Ended period ended
                                      31 Dec 2004   31 Dec 2003 30 June 2004       
                                        unaudited     unaudited      audited
                                            £'000         £'000        £'000
                                                                       
Turnover                                       61             -            -
Research & development costs              (1,032)         (715)      (1,455)
Administrative expenses                     (816)         (240)        (699)
Other operating income                        299             -          382
Operating loss                            (1,488)         (955)      (1,772)


Interest receivable & similar income          136            17          110
Loss on ordinary activities before        (1,352)         (938)      (1,662)
taxation


Tax credit on loss on ordinary                  -           172            -
activities
Loss for the financial period             (1,352)         (766)      (1,662)


Loss per £0.05 ordinary share

Basic & diluted                           (3.04p)       (1.83p)      (3.98p)
Weighted average number of shares      44,507,813    41,763,060   41,763,060
used to compute loss per £0.05
ordinary share




Consolidated Balance Sheet
as at 31 December 2004


                                       31 Dec 2004 31 Dec 2003 30 June 2004
                                         unaudited   unaudited      audited
                                             £'000       £'000        £'000
Fixed assets
Tangible assets                              1,186         663        1,181


Current assets
Debtors                                        213         327          247
Short term investments                      14,950       5,200        4,400
Cash at bank & in hand                       3,391         138          191
                                            18,554       5,665        4,838
Creditors: amounts falling due within        (325)        (84)        (108)
one year
Net current assets                          18,229       5,581        4,730
Total assets less current liabilities       19,415       6,244        5,911
Creditors: amounts falling due after          (14)        (10)         (14)
more than one year
Net assets                                  19,401       6,234        5,897


Capital & reserves                           2,794       2,088        2,088

Called up share capital (note 3)            14,130           -            -

Share premium account                        7,463       6,897        7,463

Merger reserve Profit & loss account       (4,986)     (2,751)      (3,654)
(note 4)
Equity shareholders' funds                  19,401       6,234        5,897






Consolidated Cash Flow Statement
for the six months ended 31 December 2004


                                              Six months  Six months     11 month
                                                   ended       ended period ended      
                                             31 Dec 2004 31 Dec 2003 30 June 2004
                                               unaudited   unaudited      audited
                                                   £'000       £'000        £'000

Net cash outflow from operating activities       (1,129)       (801)      (1,673)
Returns on investments & servicing of              
Interest received                                    134          12          110

Net cash inflow from returns on investments        
& servicing of finance                               134          12          110
Taxation                                               -         172          172
Capital expenditure                                (157)        (62)        (664)
Purchase of tangible fixed assets

Net cash outflow for capital expenditure           (157)        (62)        (664)

Net cash outflow before use of liquid           
resources & financing                            (1,152)       (679)      (2,055)

Management of liquid resources
(Increase) in short term deposits with banks    (10,550)     (4,200)      (3,400)
Financing
Issue of ordinary share capital                   16,301       4,885        5,633
Expenses of share issue                          (1,399)       (147)        (147)

Net cash inflow from financing                    14,902       4,738        5,486

Increase/(decrease) in net cash                    3,200       (141)           31

Reconciliation to net funds
Opening net funds                                  4,591       1,279        1,160
Increase/(decrease) in net cash                    3,200       (141)           31
Movement in deposits                              10,550       4,200        3,400

Closing net funds                                 18,341       5,338        4,591

Cash flow from operating activities

Reconciliation of operating loss to net cash
outflow from operating activities:

Operating loss                                    (1,488)       (955)      (1,772)
Depreciation                                         158          78          155
Share option compensation charge                      21          16           26
Decrease/(increase) in debtors                        48        (13)        (153)
Increase in creditors                                132          73           71
                                             
Net cash outflow from operating activities       (1,129)       (801)      (1,673)





Notes to the Interim Financial Statements

for the six months ended 31 December 2004



1. Basis of preparation

These interim financial statements do not constitute statutory financial
statements within the meaning of Section 240 of the Companies Act 1985. Results
for the six month periods ended 31 December 2004 and 31 December 2003 have not
been audited. The results for the eleven month period to 30 June 2004 have been
extracted from the statutory financial statements of Ceres Power Limited that
have been filed with the Registrar of Companies and upon which the auditors
reported without qualification.



2. Principal accounting policies

These interim financial statements for the six months ended 31 December 2004
have been prepared in accordance with the accounting policies set out in the
statutory financial statements of Ceres Power Limited for the eleven month
period ended 30 June 2004. The following additional accounting policies are
applicable to the interim financial statements for the six months ended 31
December 2004:



(a) Basis of consolidation

The consolidated financial statements of Ceres Power Holdings plc have been
presented under merger accounting rules. This means that the financial
statements of Ceres Power Holdings plc and its wholly owned subsidiary, Ceres
Power Limited, have been aggregated and presented as if the two companies have
always formed a group. Accordingly, although Ceres Power Holdings plc acquired
the entire issued share capital of Ceres Power Limited on 3 September 2004, the
results for both companies are reflected in the group financial statements for
the period to 31 December 2004 and the comparative amounts are presented on the
same basis.



(b) Turnover

Revenue, which excludes value added tax and other sales taxes, represents the
invoiced value of services supplied. Amounts received or receivable under
development agreements are recognised as revenue when earned. Amounts received
or receivable in respect of milestone payments under agreements are recognised
as revenue when the specific conditions in the agreement have been met. All
costs relating to these development programmes are recorded as research and
development expenditure. As revenue represents contributions towards costs
incurred, no amounts have been allocated to cost of sales.



3. Called up share capital

Ceres Power Holdings plc was incorporated with an authorised share capital of
£1,000 comprising 1,000 ordinary shares of £1 each. One ordinary share was
allotted nil paid on incorporation.



On 13 July 2004, Ceres Power Holdings plc sub-divided its existing issued and
authorised share capital into ordinary shares of £0.05 each and increased its
authorised share capital by 99,980,000 ordinary shares of £0.05 each.



On 3 September 2004, Ceres Power Holdings plc issued 41,763,040 ordinary shares
of £0.05 each to the shareholders of Ceres Power Limited in consideration for
the transfer of the entire issued share capital in Ceres Power Limited.



On 25 November 2004, Ceres Power Holdings plc issued 13,333,333 ordinary shares
of £0.05 each on admission to the Alternative Investment Market of the London
Stock Exchange for cash consideration of £16,000,000.



Between 2 December 2004 and 22 December 2004, 773,854 ordinary shares of £0.05
each were issued on the exercise of employee share options for cash
consideration of £234,726.



4. Profit and loss account

In accordance with the provisions of Urgent Issues Task Force Abstract 17, '
Employee Share Schemes', the share option compensation charge in the period of
£20,770 (six months ended 31 December 2003: £16,401; 11 month period ended 30
June 2004: £25,760) has been charged to the profit and loss account and credited
to the profit and loss reserve.







Independent Review Report to

Ceres Power Holdings plc



Introduction

We have been instructed by the company to review the financial information which
comprises the consolidated profit and loss account, the consolidated balance
sheet, the consolidated cash flow statement and the related notes. We have read
the other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.



Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report and the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.



Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information. This report, including the
conclusion, has been prepared for and only for the company and for no other
purpose. We do not, in producing this report, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our prior consent in
writing.



Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 December 2004.



PricewaterhouseCoopers LLP

Chartered Accountants

Cambridge

9 March 2005



Notes:

(a) The maintenance and integrity of the Ceres Power Holdings plc website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the website.

(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.




Company Information



Directors

Mr. Philip Holbeche

(Chairman)

Dr. Peter Bance

(Chief Executive Officer)

Prof. Nigel Brandon

(Chief Technology Officer)

Mr. John Gunn

(Non Executive Director)

Mr. Harry Fitzgibbons

(Non Executive Director)



Company Secretary

Mr. Matthew Stride



Company Registered Number

5174075



Registered Office

Unit 18, Denvale Trade Park

Haslett Avenue East

Crawley

RH10 1SS



Solicitors

Taylor Wessing

Carmelite

50 Victoria Embankment

Blackfriars

London

EC4Y 0DX



Registered Auditors

PricewaterhouseCoopers LLP

Abacus House

Castle Park

Cambridge

CB3 0AN



Bankers

National Westminster Bank plc

South Kensington Station Branch

PO Box 592

18 Cromwell Place

London

SW7 2LB



Brokers

Numis Securities Ltd

Cheapside House

138 Cheapside

London

EC2V 6LH



Registrar

Computershare Investor Services PLC

PO Box 82, The Pavilions

Bridgwater Road

Bristol

BS99 7NH








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