Last checked at 6 Jul 2009 07:00
6th July 2009
AFC Energy PLC
('AFC Energy' or the 'Company')
Interim Results for the six months ended 30 April 2009
AFC Energy, the low cost fuel cell company, today announces its interim results for the six months ended 30 April 2009.
Highlights
Ian Balchin, AFC Energy's Managing Director, said:
"We have made significant progress since the start of the year on moving towards our first product. Demonstrating our fuel cell system operating in a chlor alkali plant is a notable achievement.
The next significant phase is to bring the fuel cell system to full commercial operation at AkzoNobel's Bitterfeld site. We will install AFC Energy's proprietary low cost electrodes, and then deliver additional fully operational systems. Work will continue both at AFC Energy's headquarters and on site at Bitterfeld to ensure progressive improvements to system performance so as to achieve full design specification. In particular, AFC Energy's work will be concentrating on optimising its proprietary low cost electrodes on an iterative basis.
Alkaline fuel cells are a proven technology, AFC Energy is re-engineering alkaline fuel cells to massively reduce costs by simplifying design and applying low cost technologies and processes already developed for other industries"
For further information please visit www.afcenergy.com or contact:
| AFC Energy plc Tim Yeo, Chairman Ian Balchin, Managing Director | 01483 276726 |
| Astaire Securities Shane Gallwey / Lindsay Mair | 020 7448 4400 |
| Pelham Public Relations Chelsea Hayes | 020 7337 1523 |
CHAIRMAN'S STATEMENT
The Company has made significant progress towards achieving its goal of developing a truly commercial low cost fuel cell system. The completion of a technical review, strengthening of board and progress with AkzoNobel gives the company a strong base from which to move forward.
AKZONOBEL
The Company has continued to work closely with its first commercial customer AkzoNobel. On 16 April 2009, the company announced that AkzoNobel had taken delivery of the 3.5kW fuel cell system at its Bitterfeld site in Germany and was in the process of being installed. On 22 June 2009, following complete installation, the fuel cell system successfully demonstrated production of electricity using industrially produced hydrogen. This first installation has enabled the company to fully test its installation methodology and system integration. The results have been extremely encouraging and clearly endorse the progress made.
The next significant phase is to bring the fuel cell system to full commercial operation at Akzo Nobel's Bitterfeld site, by installing AFC Energy's proprietary low cost electrodes, and then deliver further fully operational systems. Work will continue both at AFC Energy's headquarters and on site at Bitterfeld to ensure progressive improvements to system performance so as to achieve full design specification. In particular, AFC Energy's work will be concentrating on optimising its proprietary low cost electrodes on an iterative basis.
Having successful demonstrated the fuel cell system using industrially produced hydrogen, the company is now in discussions with other Chlor Alkali companies about installing further systems.
TECHNICAL REVIEW AND PROGRESS
Following the extensive technical review that was commenced in November 2008 and overseen by Dr Gene Lewis, the Company has improved processes, simplified the design and reduced the number of components required to manufacture the fuel cell system. The system now utilizes a design capable of manufacture with low-cost injected-moulded plastics and a cartridge system, both of which overcome the significant technical hurdles that other fuel cell developers face in terms of cost, hydrogen sealing, maintainability and heat management.
AFC Energy has invested in its technical infrastructure to accelerate the electrode development and test cycle, improve electrode quality and output power and increase the electrode fabrication capacity to in excess of 1000 electrodes per day. In addition to development, the Company intends to use its own facilities to directly support the beta-test fuel cell systems and the initial commercial requirements for electrodes.
The company expects to be carrying out extended beta-testing of its proprietary electrodes during the fourth quarter of this calendar year in anticipation of the first product launch.
WASTE2TRICITY
On 4th February 2009, the Company announced it had signed an agreement with Waste2Tricity Ltd ("W2T") to supply AFC fuel cells to W2T for integration into its system for the conversation of Municipal Solid Waste ("MSW") to energy.
Conditional upon W2T successfully raising initial funding, AFC Energy will receive a £1m licence fee in return for granting W2T exclusivity for its fuel cells in the UK waste to energy market.
Once AFC Energy's fuel cells are integrated in W2T's gasification system, AFC Energy will also receive follow-on royalty payments.
Waste2Tricity has recently entered an expression of interest for a 250,000 tonnes of waste per year site in the London Waste and Recycling Board auction.
BOARD
The Company's Board has also been strengthened by the appointment of Dr Gene Lewis as Technical Director and David Marson as Finance Director. Gene joined the Company in November 2008 as Chief Technical Officer, having previously worked at Ceres Power where he was instrumental in the development of their solid oxide fuel cell technology. Gene's leadership skills and his background in fuel cell material science and engineering have significantly strengthened the technical team.
David Marson has been working with the Company since November 2008 as financial management consultant helping to improve its financial systems and business processes. He has an extensive track record in the financial and operational management of small and medium sized technology based businesses, having worked at AEA Technology plc where he held various senior roles as a divisional General Manager and as divisional Finance Director.
OUTLOOK
The Company is focused on being an Energy Supply Company ("ESCO") whereby a customer supplies AFC Energy with hydrogen and AFC Energy sells electricity back to the customer or to the grid. The Company intends to initiate commercial discussions with interested parties for the joint development of ESCO models within the chlor-alkali industry where favourable subsidies in Europe and rising electricity prices are enabling the construction of business models with the potential for rapid payback of capital.
The Chlor-alkali industry provides significant levels of near term commercial opportunity, however there are other industries, such as waste to energy and wind power where the AFC Energy fuel cell system will be able to significantly increase energy output.
I am grateful to all the Company's employees for their continued efforts on behalf of shareholders and customers alike.
FINANCIAL REVIEW
During the six months to 30 April 2009, post-tax losses were £1.04 million (30 April 2008: £1.14 million), reflecting the success of the company in reducing overall costs despite maintaining a team of 24 staff to successfully deliver a working fuel cell system to Akzo Nobel.
The company strengthened its processes for evaluating capital investment and continued its investment in the facilities necessary for rapid evaluation of electrode materials and production of electrodes. During the period this included the acquisition of a scanning electron microscope. The net cash outflow in the six months to 30 April 2009 was £1.06 million (30 April 2008: £1.18 million). The cash balance as at 30 April 2009 was £2,549,040.
Further investment in capabilities is anticipated during the current financial year.
On 16 April 2009 the Board of AFC Energy agreed to grant options over a total of 6,600,000 ordinary shares in the Company, and to grant warrants over a total of 4,750,000 ordinary shares in the Company. The purpose of the options and warrants is to incentivize employees and directors during a key phase in the development of the company during which many will not receive pay increases.
The Board is not recommending payment of a dividend, in accordance with the dividend policy stated at the time of the float.
AFC Energy PLC
Interim financial statements for the six months to
30 April 2009
| Income statement | Six months to 30 April | Six months to 30 April | Year to 31 October | |
| Note | 2009 | 2008 | 2008 | |
| £ | £ | £ | ||
| Unaudited | Unaudited | Audited | ||
| Revenue | - | - | - | |
| Cost of sales | - | (90,492) | (303,035) | |
| Gross loss | - | (90,492) | (303,035) | |
| Administrative expenses | (1,233,748) | (1,231,670) | (2,807,480) | |
| Operating loss | (1,233,748) | (1,322,162) | (3,110,515) | |
| Financial income | 56,158 | 43,741 | 150,320 | |
| Loss before taxation | (1,177,590) | (1,278,421) | (2,960,195) | |
| Taxation | 3 | 133,359 | 137,068 | 308,427 |
| Loss for the period attributable to equity shareholders | (1,044,231) | (1,141,353) | (2,651,768) | |
| Basic loss per share | 4 | (0.8)p | (1.3)p | (2.5)p |
| All amounts relate to continuing operations. |
| Balance sheet | Note | 30 April | 30 April | 31 October | |
| 2009 | 2008 | 2008 | |||
| Non-current assets | £ | £ | £ | ||
| Unaudited | Unaudited | Audited | |||
| Intangible assets | 5 | 309,683 | 292,285 | 307,852 | |
| Property, plant and equipment | 6 | 385,811 | 514,231 | 504,458 | |
| 695,494 | 806,516 | 812,310 | |||
| Current assets |
| ||||
| Work in progress | 123,740 | - | 123,740 | ||
| Trade and other receivables | 7 | 693,475 | 523,957 | 592,055 | |
| Cash and cash equivalents | 2,549,040 | 952,442 | 3,610,204 | ||
| 3,366,255 | 1,476,399 | 4,325,999 | |||
| Total assets | 4,061,749 | 2,282,915 | 5,138,309 | ||
| Equity and liabilities | |||||
| Equity attributable to shareholders | |||||
| Share capital | 8 | 127,683 | 87,683 | 127,683 | |
| Share premium | 8,940,379 | 4,825,189 | 8,940,379 | ||
| Other reserves | 568,763 | 425,050 | 537,388 | ||
| Retained loss | (5,950,070) | (3,395,424) | (4,905,839) | ||
| Total equity | 3,686,755 | 1,942,498 | 4,699,611 | ||
| Current liabilities | |||||
| Trade and other payables | 9 | 374,994 | 340,417 | 438,698 | |
| Total equity and liabilities | 4,061,749 | 2,282,915 | 5,138,309 |
| Cash flow statement | Six months to 30 April | Six months to 30 April | Year to 31 October |
| 2009 | 2008 | 2008 | |
| Cash flows from operating activities | £ | £ | £ |
| Unaudited | Unaudited | Audited | |
| Loss before tax for the period | (1,177,590) | (1,278,421) | (2,960,195) |
| Adjustments for: | |||
| Depreciation of property, plant and equipment | 185,295 | 125,289 | 293,473 |
| Amortisation of intangible assets | 9033 | 8,119 | |
| Equity-settled share-based payment expenses | 31,375 | 135,000 | 247,338 |
| Interest receivable | (56,158) | (43,741) | (150,320) |
| Cash flows from operating activities before changes in working capital and provisions | (1,008,045) | (1,053,754) | (2,261,277) |
| Decrease/(increase) in trade and other receivables | 31,940 | 74,678 | 54,198 |
| (Decrease)/increase in trade and other payables | (63,704) | (72,124) | 26,157 |
| Cash absorbed by operating activities | (1,039,809) | (1,051,200) | (2,489,349) |
| Cash flows from investing activities | |||
| Acquisition of property, plant and equipment | (66,649) | (166,919) | (308,829) |
| Acquisition of patents | (10,864) | (1,530) | (25,478) |
| Net cash flow from investing activities | (77,513) | (168,449) | (334,307) |
| Cash flows from financing activities | |||
| Proceeds from the issue of share capital | - | - | 4,400,000 |
| Share issue costs | - | - | (244,810) |
| Interest received | 56,158 | 43,741 | 150,320 |
| Net cash flow from financing activities | 56,158 | 43,741 | 4,305,510 |
| Net (decrease)/increase in cash and cash equivalents | (1,061,164) | (1,175,908) | 1,481,854 |
| Cash and cash equivalents at the beginning of the period | 3,610,204 | 2,128,350 | 2,128,350 |
| Cash and cash equivalents at the end of the period | 2,549,040 | 952,442 | 3,610,204 |
| Statement of Changes in Equity | |||||
| Share capital | Share premium | Other reserve | Retained loss
| Total | |
| £ | £ | £ | £ | £ | |
| Audited | Audited | Audited | Audited | Audited | |
| Balance at 1 November 2007 | 87,683 | 4,825,189 | 290,050 | (2,254,071) | 2,948,851 |
| Loss after tax for the six months ended 30 April 2008 | - | - | - | (1,141,353) | (1,141,353) |
| Total recognised income and expense for the period | - | - | - | (1,141,353) | (1,141,353) |
| Equity-settled share-based payments | - | - | 135,000 | - | 135,000 |
| Balance at 30 April 2008 | 87,683 | 4,825,189 | 425,050 | (3,395,424) | 1,942,498 |
| Share capital | Share premium | Other reserve | Retained loss | Total | |
| £ | £ | £ | £ | £ | |
| Unaudited | Unaudited | Unaudited | Unaudited | Unaudited | |
| Balance at 1 November 2008 | 127,683 | 8,940,379 | 537,388 | (4,905,839) | 4,699,611 |
| Loss after tax for the six months ended 30 April 2009 | - | - | - | (1,044,231) | (1,044,231) |
| Total recognised income and expense for the period | - | - | - | (1,044,231) | (1,044,231) |
| Equity-settled share-based payments | - | - | 31,375 | - | 31,375 |
| Balance at 30 April 2009 | 127,683 | 8,940,379 | 568,763 | (5,950,070) | 3,686,755 |
Share capital is the amount subscribed for shares at their nominal value.
Share premium represents the excess of the amount subscribed for share capital over the nominal value of these shares net of share issue expenses.
Other reserve represents the credit to equity in respect of equity-settled share-based payments.
Retained loss represents the cumulative loss of the Company attributable to equity shareholders.
| Notes forming part of the interim financial statements | |
| 1 | Significant accounting policies |
| Details of the significant accounting policies are set out below: | |
| a | Basis of preparation |
| The interim results for the six months ended 30 April 2009 are unaudited. The interim results have been drawn up using the accounting policies and presentation consistent with those disclosed and applied in the annual report and accounts for the year ended 31 October 2008. The comparative information contained in the report does not constitute the accounts within the meaning of S240 of the Companies Act 1985 and section 435 of the Companies Act 2006. The accounting policies used in the interim statement are consistent with those used in the financial statements for the year ended 31 October 2008 and are in accordance with International Financial Reporting Standards. | |
| b | Development costs |
| Development expenditure does not meet the strict criteria for capitalisation under IAS38 and has been recognised as an expense. | |
| b | 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 Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in profit and loss in the period in which the expenditure is incurred. | |
| c | Property, plant and equipment |
| Property, plant and equipment are stated at cost less accumulated depreciation and impairment charges. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows: Leasehold improvements Over the life of the lease Fixtures, fittings and equipment Over one to three years on a straight line basis Vehicles Over three to four years on a straight line basis | |
| d | Leases |
| Finance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are reflected in profit or loss. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term. Operating lease rentals are charged to income in equal annual amounts over the lease term. | |
| e | Deferred Taxation |
| Deferred tax assets are not recognised due to the uncertainty of the period over which they will be recovered | |
| f | Equity-settled share-based payments |
| The Company awards share options and warrants to certain Directors and employees to acquire shares of the Company. The fair value of options and warrants granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the Directors and employees become unconditionally entitled to the options or warrants. The fair value of the options and warrants granted is measured using a binomial option valuation model, taking into account the terms and conditions upon which the options and warrants were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options and warrants that vest only where vesting is dependent upon the satisfaction of service and non-market vesting conditions or where the vesting periods themselves are amended by the introduction of new schemes and the absorption of earlier schemes by agreement between the Company and the relevant Directors and employees. Where options or warrants granted are cancelled, all future charges arising in respect of the grant are charged to the income statement on the date of cancellation. | |
| g | Financial Assets |
| All of the company's financial assets are loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets and comprise trade and other receivables and cash and cash equivalents. | |
| 2 | Segmental Analysis |
| The Company operated in the period in one segment, the development of fuel cells, and in one geographic area, the United Kingdom. |
| 3 | Taxation | Six months to 30 April | Six months to 30 April | Year to 31 October |
| 2009 | 2008 | 2008 | ||
| £ | £ | £ | ||
| Recognised in the income statement: | Unaudited | Unaudited | Audited | |
| Research and development tax credit - current year | 133,258 | 137,068 | 301,942 | |
| Research and development credit - additional receipt | 101 | - | 6,485 | |
| Total Tax Credit | 133,359 | 137,068 | 308,427 | |
| Reconciliation of effective tax rates | ||||
| Loss before tax | (1,105,348) | (1,278,421) | (2,960,195) | |
| Domestic rate of corporation tax | 28% | 30% | 30% | |
| Tax using domestic rates of corporation tax | 309,497 | 383,526 | 888,058 | |
| Effect of: | ||||
| Expenses not deductible for tax purposes | 8,785 | 6,133 | 76,295 | |
| Research and development allowance | (74,625) | (66,465) | (217,214) | |
| Research and development tax credit | 133,258 | 130,583 | 301,942 | |
| Depreciation in excess of capital allowances | 10,947 | (35,000) | 23,174 | |
| Losses surrendered for research and development | 233,201 | 244,843 | 592,164 | |
| Other adjustments | - | - | 4,060 | |
| Unutilised losses carried forward | 131,189 | 240,500 | 409,579 | |
| 133,258 | 137,068 | 301,942 |
| 4 | Loss per share | Six months to 30 April | Six months to 30 April | Year to 31 October |
| 2009 | 2008 | 2008 | ||
| Unaudited | Unaudited | Audited | ||
| The calculation of the basic loss per share is based on the net loss after tax attributable to the ordinary shareholders of £1,044,231 (30 April 2008: loss of £1,141,353; 31 October 2008: loss of £2,651,768) and a weighted average number of shares in issue for the period 1 November 2008 to 30 April 2009 of 127,682,854 (six months to 31 October 2008: 87,682,854; year to 31 October 2008: 105,545,868). | ||||
| Loss per share | (0.82)p | (1.3)p) | (2.51)p | |
| Diluted loss per share | ||||
| The diluted loss per share is the same as the basic loss per share, as the loss for the six months ended 30 April 2009 has an anti-dilutive effect. | ||||
| 5 | Intangible assets | Patents | |||
| £ | |||||
| Cost | |||||
| At 1 November 2007 | 324,105 | ||||
| Additions | 1,530 | ||||
| At 30 April 2008 | 325,635 | ||||
| Additions | 23,948 | ||||
| At 31 October 2008 | 349,583 | ||||
| Additions | 10,864 | ||||
| At 30 April 2009 | 360,447 | ||||
| Amortisation | |||||
| At 1 November 2007 | 25,231 | ||||
| Charge for the period | 8,119 | ||||
| At 30 April 2008 | 33,350 | ||||
| Charge for the period | 8,381 | ||||
| At 31 October 2008 | 41,731 | ||||
| Charge for the period | 9,033 | ||||
| At 30 April 2009 | 50,764 | ||||
| Net book value | |||||
| At 30 April 2009 | 309,683 | ||||
| At 30 April 2008 | 292,285 | ||||
| At 31 October 2008 | 307,852 | ||||
| 6 | Property, plant and equipment | Leasehold improvements | Fixtures, fittings and equipment | Total | |
| £ | £ | £ | |||
| Cost | |||||
| At 31 October 2007 | 126,592 | 510,207 | 636,799 | ||
| Additions | - | 166,919 | 166,919 | ||
| At 30 April 2008 | 126,592 | 677,126 | 803,718 | ||
| Additions | 20,400 | 121,510 | 141,910 | ||
| Disposals | (61,000) | (61,000) | |||
| At 31 October 2008 | 146,992 | 737,636 | 884,628 | ||
| Additions | 3,160 | 63,489 | 66,649 | ||
| Disposals | - | (100,289) | (100,289) | ||
| At 30 April 2009 | 150,152 | 700,836 | 850,988 | ||
| Depreciation | |||||
| At 31 October 2007 | 50,175 | 114,023 | 164,198 | ||
| Charge for the period | 1,505 | 123,784 | 125,289 | ||
| At 30 April 2008 | 51,680 | 237,807 | 289,487 | ||
| Charge for the period | 42,465 | 109,218 | 151,683 | ||
| Disposals | (61,000) | (61,000) | |||
| At 31 October 2008 | 94,145 | 286,025 | 380,170 | ||
| Charge for the period | 24,339 | 160,956 | 185,295 | ||
| Disposals | (100,289) | (100,289) | |||
| At 30 April 2009 | 118,484 | 346,692 | 465,176 | ||
| Net book value | |||||
| At 30 April 2009 | 31,668 | 354,143 | 385,811 | ||
| At 30 April 2008 | 12,705 | 501,526 | 514,231 | ||
| At 31 October 2008 | 52,847 | 451,611 | 504,458 | ||
| 7 | Trade and other receivables | 30 April | 30 April | 31 October |
| 2009 | 2008 | 2008 | ||
| £ | £ | £ | ||
| Unaudited | Unaudited | Audited | ||
| Trade receivables | - | - | - | |
| Other receivables | 622,485 | 463,953 | 524,917 | |
| Prepayments | 70,990 | 60,004 | 67,138 | |
| 693,475 | 523,957 | 592,055 |
| 8 | Share capital | 30 April | 30 April | 31 October |
| 2009 | 2008 | 2008 | ||
| £ | £ | £ | ||
| Authorised | Unaudited | Unaudited | Audited | |
| Ordinary shares of 0.1p each | 700,000 | 700,000 | 700,000 | |
| Issued | ||||
| Ordinary shares of 0.1p each | 127,683 | 87,683 | 127,683 |
| 9 | Trade and other payables | 30 April | 30 April | 31 October |
| 2009 | 2008 | 2008 | ||
| £ | £ | £ | ||
| Unaudited | Unaudited | Audited | ||
| Trade payables | 180,691 | 148,977 | 151,511 | |
| Deferred income | 123,740 | - | 123,740 | |
| Other payables | 33,976 | 28,614 | 38,461 | |
| Accruals | 36,587 | 162,826 | 124,986 | |
| 374,994 | 340,417 | 438,698 |
Related Party Transactions
During the six months ended 30 April 2009, £22,338 (plus VAT) was invoiced by FD Solutions, the trading name of DFM Ltd (a company registered in England & Wales) for services including Simon Walters as a Director of AFC Energy plc.
Mr Walters is also a Director and shareholder of DFM Ltd.
During the six months ended 30 April 2009, AFC Energy plc provided Waste2Tricity (a company registered in England and Wales) with an interest bearing loan of £150,000 repayable in full by December 2010, under the terms of an agreement to supply AFC fuel cells to W2T for integration into its system for the conversion of Municipal Solid Waste. In addition, AFC incurred costs of £1,835 on behalf of W2T for which it was reimbursed. Tim Yeo and Terry Walsh joined the board of W2T in December 2008, when AFC Energy was exploring collaborative opportunities with W2T in the UK waste to energy market. Both directors also serve on the board of AFC Energy. In addition, shareholders in W2T include Howard White, whose family trust is a substantial shareholder in AFC Energy.
Publication of non-statutory accounts
The financial information contained in this interim statement does not constitute accounts as defined by section 240 of the Companies Act 1985. The financial information for the preceding period is based on the statutory accounts for the year ended 31 October 2008. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar 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.