AFC Energy Regulatory News (AFC)

25 Jul 2007 07:00

AFC Energy Plc25 July 2007 AFC Energy plc ("AFC Energy" or "the Company") Unaudited Interim results to 30 April 2007 AFC Energy, the low-cost alkaline fuel cell company with a clear route tocommercialisation, is pleased to announce its unaudited interim results for thesix months ended 30 April 2007. HIGHLIGHTS • Successful admission to AIM, raising net proceeds of £2.4 million • Received contractual purchase order from Akzo Nobel Base Chemicals B.V. ("Akzo Nobel") for the supply of fuel cells • Shareholders' funds of £3.909 million Post-period events • First technological milestone achieved with the operation for 500 hours of a small-scale single cell unit, within the projected timescale described in the Admission Document • Intended delivery of fuel cells to Akzo Nobel on schedule • Signed a Memorandum of understanding to supply fuel cells to the Indonesian government Gerard Sauer, Chief Executive, AFC Energy said: "The successful admission of AFC Energy to AIM has significantly increased ourvisibility among potential customers and given us the capital we need to takeour fuel cell through to commercialisation. "The applications for AFC Energy's technology continue to grow as we identifymore locations with hydrogen sources combined with a need for lower cost, cleanenergy. "Our project with the Indonesian government is an excellent example of whereclean energy can be produced cost effectively and we look forward to workingclosely with our partners in Asia. "As we continue to drive down the cost of our components and streamline ourmanufacturing processes for mass scale production, we will capitalise on theincreasing demand for commercially viable clean energy." For further information please visit www.afcenergy.com or contact: AFC Energy plc 01483 276726Gerard Sauer, Chief Executive Nabarro Wells & Co. Limited 020 7710 7400Richard Swindells / Anthony Rowland Madano Partnership 020 7593 4000Mark Way / Graham Moonie CHAIRMAN'S STATEMENT I am pleased to welcome all new AFC Energy shareholders and to introduce our interim report for the six months ended 30 April 2007 - the first report since the Company became quoted on AIM. AIM listing In April 2007 the Company's shares were successfully admitted to trading on the London Stock Exchange's Alternative Investment Market ("AIM") to secure the working capital necessary to continue preparing for commercialisation of its low-cost alkaline fuel cells. This generated a net funding inflow of £2.4 million. Company strategy AFC Energy is engaged in the design and development of alkaline fuel cells andimproving the processes and reducing the costs and number of components requiredfor their manufacture. AFC Energy has identified industries that produce hydrogen as waste orby-product as the markets with the most immediate potential for our technology. The Company's proprietary technology, which has been under development for oversix years, has already achieved some important milestones in its development,including the proof of concept on the operation of its electrode. Akzo Nobel contract The company signed its first contract with Akzo Nobel in March 2007 to supplyalkaline fuel cells to its chlor-alkali (chlorine production) business. AkzoNobel is the fourth-largest chlorine producer in Europe. AFC Energy will receive payments for the supply of its technology and it isintended that delivery of AFC Energy's first fuel cells to Akzo Nobel will beginduring the first quarter of 2008. Following successful installation and trialing of these initial 10kW units atAkzo Nobel's Bitterfeld site in Germany, a system expansion study towardsdeveloping a 200kW system is due to be completed by the second quarter of 2009in collaboration with Akzo Nobel personnel. The Directors of AFC Energyanticipate entering into further collaboration agreements with Akzo Nobel, forlarger systems, as the project moves forward. The excess hydrogen produced by Akzo Nobel will support several Megawatts ofgreen electricity and the Directors anticipate that the AFC Energy businessmodel will offer a capital payback within three years with effective zero costelectricity thereafter. Post-period events - since 1 May 2007 Successful performance of single cell unit The company achieved its first technological milestone, the operation for 500hours of a small-scale single cell unit, within the projected timescaledescribed in the Admission Document. The cell was tested successfully under specific high corrosion conditions,designed to demonstrate operation and corrosion resistance of the system. Thetrial demonstrated a consistent output with minimum degradation and littleevidence of corrosion. The successful test of the single cell unit is an important part of thecontinued progress towards AFC Energy's goal of delivery of functional systemsduring 2008 in preparation for full commercialisation during 2009. The nextexpected milestone is the operation of the first scaled single cell scheduledfor August 2007. AFC Energy's Proposed Technological ''Milestones'' The new milestones that the Company is aiming to achieve, and to haveindependently verified by the team at Surrey University, are as follows: +------------+-----------------------------------+--------------------+|Milestone |Description |Target Completion |+------------+-----------------------------------+--------------------+|1 |Small scale single cell 500 hours |May 2007 - ACHIEVED || |operation | |+------------+-----------------------------------+--------------------+|2 |First scaled single cell operation |August 2007 |+------------+-----------------------------------+--------------------+|3 |Scaled single cell 500 hours |October 2007 || |operation | |+------------+-----------------------------------+--------------------+|4 |First prototype system operation |January 2008 |+------------+-----------------------------------+--------------------+|5 |System operation 500 hours |February 2008 |+------------+-----------------------------------+--------------------+|6 |Delivery of multiple systems to |August 2008 || |customer | |+------------+-----------------------------------+--------------------+ Source: AFC Energy development programme. MOU with the government of Indonesia In June 2007 AFC Energy entered into a Memorandum of Understanding ("M.O.U.")with the Government of Indonesia, and specifically with the State Ministry forDevelopment of Disadvantaged Areas of the Republic of Indonesia. The M.O.U. relates to the CIUP (Community Integrated Utility Program) projectthat aims to provide 32 million households with the ability to produceelectricity and potable drinking water over the next ten years. AFC Energy hasbeen appointed as the exclusive fuel cell supplier to this program, whether withAFC Energy proprietary fuel cells or as an agent for third-party fuel cells. The M.O.U. contains an initial order totalling US$13.5 million for threethousand 3.5kW systems at US$4,500 per system. Supplies are scheduled to beginaround the fourth quarter of 2008. The primary trial of 3,000 units will be inthe Nabire-Papua region. The M.O.U. also confirms that both parties undertake to enter into a jointventure to establish, within 18 months, a manufacturing facility in partnershipwith a number of interested Indonesian corporations. The intention is that overthe following 8 - 10 years up to six million 5kW units could be manufactured. Financial highlights to 30th April 2007 The Company incurred costs of £599,000 in the period, as it built up a team of technical experts and support staff tasked with the development and testing of the company's products and their commercialisation. Monthly payments are being received on account from Akzo Nobel, our first customer, and we are delighted to have met the various milestones agreed with Akzo at the outset of the project. As the relationship with Akzo Nobel develops, AFC Energy will be committing further capital as detailed in the Admission Document to develop manufacturing processes and the overall scaling up of the project. The Company's net assets and shareholder funds at the April balance sheet date were £3.909 million. Tim Yeo, Chairman Interim financial statements for the six months to 30 April 2007 Income statement Six 9 January months to 2006 to 31 30 April October 2007 2006 Note £ £ Unaudited Audited Revenue - - Cost of sales (32,785) - Gross loss (32,785) - Administrative expenses (566,173) (617,158)Operating loss (598,958) (617,158) Financial income 16,280 14,013Financial expenses - (27)Net financing costs 16,280 13,986 Loss before tax (582,678) (603,172) Taxation 2 58,667 60,679 Loss for the period attributable to equity (524,011) (542,493)shareholders Basic loss per share 3 (0.7p) (1.2p) All amounts relate to continuing operations. Balance sheet Note 30 April 31 October 2007 2006 £ £ Unaudited Audited Non-current assets Intangible assets 4 303,132 287,051 Property, plant and equipment 5 255,680 152,184 558,812 439,235 Current assets Trade and other receivables 6 349,083 114,735 Cash and cash equivalents 3,245,129 96,244 3,594,212 510,979 Total assets 4,153,024 950,214 Equity and liabilities Equity attributable to shareholders Share capital 7 87,683 70,000 Share premium 4,821,412 1,334,935 Other reserves 66,602 11,546 Retained earnings (1,066,504) (542,493) Total equity 3,909,193 873,988 Current liabilities Trade and other payables 8 243,831 76,226 Total equity and liabilities 4,153,024 950,214 Cash flow statement Six months 9 January to 30 2006 to 31 April October 2007 2006 £ £ Unaudited AuditedCash flows from operating activities Loss before tax for the period (582,678) (603,172)Adjustments for:Depreciation of property, plant and equipment 43,673 32,023Amortisation of intangible assets 5,085 12,131Equity-settled share-based payment expenses 55,056 11,546Interest paid - 27Interest received (16,280) (14,013) Cash flows from operating activities before changes (495,144) (561,458)in working capital and provisions Increase in trade and other receivables (175,681) (54,056)Increase in trade and other payables 167,605 76,226 Cash generated absorbed by operating activities (503,220) (539,288) Cash flows from investing activitiesAcquisition of patents (21,166) (299,182)Acquisition of property, plant and equipment (147,169) (184,207)Net cash from investing activities (168,335) (483,389) Cash flows from financing activitiesProceeds from the issue of share capital 4,035,558 1,404,935Share issue costs (531,398) -Interest paid - (27)Interest received 16,280 14,013Net cash from financing activities 3,520,440 1,418,921 Net increase in cash and cash equivalents 2,848,885 396,244Cash and cash equivalents at 1 November 2006 396,244 -Cash and cash equivalents at 30 April 2007 3,245,129 396,224 Statement of Changes in Equity Share Share Other Retained Total Capital Premium Reserve Earnings £ £ £ £ £ Audited Audited Audited Audited Audited Balance at 9 January 2006 - - - - -Loss after tax for the period - - - (542,493) (542,493)Total recognised income and - - - (542,493) (542,493)expense for the periodEquity-settled share-based - - 11,546 - 11,546paymentsIssue of equity shares 7,000 1,397,935 - - 1,404,935Bonus issue of shares 63,000 (63,000) - - -Balance at 31 October 2006 70,000 1,334,935 11,546 (542,493) 873,988 Unaudited Unaudited Unaudited Unaudited Unaudited Balance at 1 November 2006 70,000 1,334,935 11,546 (542,493) 873,988Loss after tax for the period - - - (524,011) (524,011)Total recognised income and - - - (524,011) (524,011)expense for the periodEquity-settled share-based - - 55,056 - 55,056paymentsIssue of equity shares 17,683 4,017,875 - - 4,035,558Share issue costs - (531,398) - - (531,398)Balance at 30 April 2007 87,683 4,821,412 66,602 (1,066,504) 3,909,193 Share capital is the amount subscribed for shares at nominal value. Share premium represents the excess of the amount subscribed for share capitalover the nominal value of these shares net of share issue expenses. Other reserves represent amounts credited to revenue reserves in respect ofshare-based payments charged to the income statement. This reserve is a realisedprofit and is distributable. Retained earnings represent the cumulative loss of the Company attributable tothe equity shareholders. Notes forming part of the interim financial statements 1 Significant accounting policies a. Basis of accounting The financial statements for the six month period ended 30 April 2007 were prepared on the basis of the accounting policies adopted within the financial statements of the Company for the period ended 31 October 2006. The financial statements of the Company for the period ended 31 October 2006 were prepared in accordance with International Financial Reporting Standards (IFRSs). The accounting policies set out below have, unless otherwise stated, been applied consistently in these financial statements. b. Measurement convention The financial statements are prepared on the historical cost basis. c. Intangible assets Patents are valued at cost less accumulated amortisation and impairment charges. Amortisation is provided to write off the cost less estimated residual value of each asset over its expected useful life, as follows: Patents 5% per annum straight line d. Property, plant and equipment Property, plant and equipment are stated at cost less depreciation and impairment charges. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each assets over its expected useful life, as follows: Leasehold improvements Over the life of the lease Fixtures, fittings and Over one to three years on a straight equipment line basis. e. Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. f. Deferred taxation Deferred tax is accounted for using the liability method and as such all timing differences between the Company's profits chargeable to tax and its results shown in the financial statements are recognised. These timing differences arise from the inclusion of gains and losses for tax purposes in different periods to those in which they are recognised in the financial statements. Deferred tax assets are only recognised to the extent that it is probable that future taxable profits will be available against which any temporary differences can be utilised. Deferred tax is measured on a non-discounted basis at rates of tax expected to apply in the periods in which the timing differences are expected to reverse. g. Equity-settled share-based payments The Company issues equity-settled share-based payments to certain employees which are measured at fair value and recognised as an expense in the income statement with a corresponding increase in equity. The fair values of these payments are measured at the date of grant using option-pricing models, taking into account the terms and conditions upon which the awards are granted. The fair value of the awards is recognised as an expense over the period during which employees become unconditionally entitled to the awards, subject to the Company's estimate of the number of awards which will lapse, due to employees leaving the Company prior to vesting. The total amount recognised in the income statement as an expense is adjusted to reflect the number of awards that vest. 2 Taxation Six months 9 January to 30 to 31 April October Recognised in the income statement 2007 2006 £ £ Unaudited Audited Research and development tax credit 58,667 60,679 Reconciliation of effective tax rates £ £ The reasons for the difference between the actual tax charge for the period and the rate of 30% applied to the loss for the period are as follows: Loss before tax (582,678) (603,172) Tax using domestic rates of corporation tax of 30% 174,803 180,952 Effect of: Effect of expenses not deductible for tax purposes (5,787) (8,667) Research and development allowance 110,000 37,924 Research and development tax credit (36,667) (53,095) Depreciation in excess of capital allowances (4,272) 6,248 Losses carried forward (179,410) (102,683) 58,667 60,679 3 Loss per share The calculation of the loss per share is based upon the net loss after tax attributable to the ordinary shareholders of £524,011 (31 October 2006: a loss of £542,493) and a weighted average number of shares in issue, for the period 1 November 2006 to 30 April 2007 of 72,077,825 (9 January 2006 to 31 October 2006: 45,144,125). Six months 9 January to 30 April 2006 to 31 2007 October 2006 Unaudited Audited Loss per share (0.7p) (1.2p) Diluted loss per share No diluted loss per share has been presented as the Company is loss making. 4 Intangible assets Patents £ Cost Balance at 9 January 2006 - Additions 319,986 Amount attributed to tangible non-current assets (20,804) Balance at 31 October 2006 299,182 Additions 21,166 Balance at 30 April 2007 320,348 Amortisation Balance at 9 January 2006 - Charge for the period 12,131 Balance at 31 October 2006 12,131 Charge for the period 5,085 Balance at 30 April 2007 17,216 Net book value At 30 April 2007 303,132 At 31 October 2006 287,051 5 Property, plant and equipment Leasehold Fixtures, Total Improvements fittings and equipment £ £ £ Cost Balance at 9 January 2006 - - - Acquisitions (note 4) - 20,804 20,804 Additions 62,208 101,195 163,403 Balance at 31 October 2006 62,208 121,999 184,207 Additions 83,450 63,719 147,169 Balance at 30 April 2007 145,658 185,718 331,376 Cost Balance at 9 January 2006 - - - Charge for the period 9,090 22,933 32,023 Balance at 31 October 2006 9,090 22,933 32,023 Charge for the period 1,439 42,234 43,673 Balance at 30 April 2007 10,529 5,167 75,696 Net book value At 30 April 2007 135,129 120,551 255,680 At 31 October 2006 53,118 99,066 152,184 6 Trade and other receivables 30 April 31 October 2007 2006 £ £ Unaudited Audited Other receivables 349,083 114,735 7 Share capital Authorised share capital £ Authorised At 31 October 2006 - 70,000,000 Ordinary shares of 1p each(1) 700,000 At 30 April 2007 - 700,000,000 Ordinary shares of 0.01p each(1) 700,000 (1)On 23 March 2007 the authorised share capital of the Company was changed from 70,000,000 ordinary shares of 1p to 700,000,000 ordinary shares of 0.01p. Issued Issued share share capital capital Number £ Issued At 31 October 2007 - ordinary shares of 1p each 7,000,000 70,000 Issued on 13 February 2007 - ordinary shares of 1p each 449,982 4,500 Total at 23 March 2007 pre-conversion 7,449,982 74,500 Converted to ordinary shares of 0.01p each on 23 March 2007 74,499,820 74,500 Issued on 24 April 2007(2) 13,183,034 13,183 At 30 April 2007 87,682,854 87,683 (2)Issued pursuant to a placing arrangement and the listing of all of the Company's ordinary shares on the Alternative Investment Market of the London Stock Exchange. 8 Trade and other payables 30 April 31 October 2007 2006 £ £ Unaudited Audited Trade payables 98,089 40,976 Taxation and social security payable 37,515 12,333 Accruals 108,227 22,917 243,831 76,226 Publication of non-statutory accounts The financial information contained in this interim statement does notconstitute accounts as defined by section 240 of the Companies Act 1985. Thefinancial information for the preceding period is based on the statutoryaccounts for the financial period ended 31 October 2006. Those accounts, uponwhich the auditors issued an unqualified opinion, have been delivered to theRegistrar of Companies. Copies of the interim statement may be obtained from the Company Secretary, AFC Energy plc, Unit 71.4 Dunsfold Park,Cranleigh, Surrey GU6 8TB and can be accessed from the company's website at www.afcenergy.com. - ends - This information is provided by RNS The company news service from the London Stock Exchange