Ceramic Fuel Cells Regulatory News (CFU)

31 Jul 2006 07:00

Ceramic Fuel Cells Limited31 July 2006 31st July 2006 CERAMIC FUEL CELLS LIMITED TRADING UPDATE FOR QUARTER ENDED 30 JUNE 2006 Ceramic Fuel Cells Limited ("CFCL") announces its trading update for the fourthquarter 2006. Key Highlights: • Receipts from customers for the full year up 377% due to increased field trial activity; • Final conversion of convertible notes to shares, reducing the company's debt to zero; • Net cash outflow for the quarter down 5.2% and down 21% for the full year; • Two further patents issued for the company's solid oxide fuel cell (SOFC) technology; • Two senior management appointments. Financials Receipts from customers for the full year were up by 377% to A$953,000(£381,000), compared with A$200,000 (£80,000) for FY05. The increase in receiptsrelates principally to the Company's field trial programme of its Combined Heatand Power (CHP) demonstration units. The Company expects to receive furtherrevenues from these trials, particularly following the announcement on 29th Junewhen the Company signed a further contract with EWE, the fifth-largest Germanmulti-service energy company. Under this agreement, CFCL will supply EWE withten NetGenTM units for further field trials as part of a collaborative projectto develop commercial-ready micro CHP products for the European market. This isCFCL's most significant contract to date, taking the company within strikingdistance of its target of selling 12 NetGenTM units by the end of 2006. During June 2006, the balance of the convertible notes (A$8.2m / £3.28m) issuedin August 2005 were converted into 16.4m shares, reducing the company's debt tozero. This means that the Company can use all of the funds raised at the time ofits flotation on AIM in March 2006 for its commercialisation activities, ratherthan repaying these notes. The net cash outflow for the final quarter was lower by 5.2% (A$2,466,000 /£986,000) compared to the third quarter 2005 (A$2,600,000 / £1,040,000). Higherstaff costs for the final quarter were offset by the interest earned on investedfunds. Net cash outflow for the full year was (A$12,208,000 / £4,883,000), down21% compared with FY05 (A$15,226,000 / £6,090,000). Capital expenditure on assets during the fourth quarter increased significantlyto A$540,000 (£216,000) compared to A$75,000 (£30,000) in the third quarter. TheCompany expects capital expenditure to continue to increase as the companyupgrades its Australian production facilities and invests in its Europeanspecialist ceramics powder manufacturing plant and fuel cell manufacturingplant. Otherwise, underlying operational costs were in line with previousquarters. The Company's cash position at the end of the quarter was A$86m (£34.4m)compared to A$5.3m (£2.1m) on 30 June 2005. Technical The Company is delighted to announce that it has been granted two furtherpatents for its solid oxide fuel cell (SOFC) technology. The first patent has been granted in the USA for a zirconia window frame, astructure which enables anode supported SOFCs (connected by metallic plates) tobe flatter and easier to seal, thereby improving the performance of the cell andmaking them easier and cheaper to manufacture. The Company has already beengranted patents for the same invention in Australia and South Africa and hasapplied for patents in Canada, Europe and Japan. The second patent has been granted in Europe for an electrically conductivemetal surface treatment for a ceramic-metallic SOFC design. The patent hasalready been granted in Australia and the USA and the Company has applied forpatents in five other countries. This technology of coating the stainless steelused in a fuel cell stack with oxide, allows the plates to be more conductiveand hence produce more efficient power. CFCL now has a total of 50 patents in 28 patent families, each familyrepresenting a single invention covered in multiple jurisdictions. These patentfamilies cover inventions relating to SOFC materials, cell and stackconfigurations, fuel processing, stack thermal management and system controltechnologies. These two new patents are examples of the Company's broad experience with arange of fuel cell designs and materials, having successfully designed, builtand operated both all-ceramic and metal-ceramic composite kW-size fuel cellstacks. This broad experience gives the Company a wide range of expertise and backgroundknowledge to continually improve the Company's fuel cells rather thanspecialising in just metal-ceramic or all-ceramic designs. The Company looks forward to announcing further technical improvements over thecoming months. Management Appointments In July 2006, two senior managers joined CFCL's UK office, a reflection of theCompany's increased focus on commercialising its technology and scaling upproduction, particularly in the European market. Mike Atkinson joined the Company in a new position of Manager, Capital Projectsand will report to Brendan Dow, Chief Executive Officer. He will also form partof the Executive Management Team. Mike will be responsible for managing CFCL'scapital works projects, in particular its new powder plant and the fuel cellmanufacturing plant. Mike has had extensive international commercial andengineering experience in managing major capital projects in high technologyindustries. He joins CFCL from six years at Johnson Matthey where he wasresponsible for managing the construction and commissioning of Johnson Matthey'sdedicated fuel cell manufacturing facility in the UK, from site selection andfactory construction, through to equipment procurement and commissioning andfactory operations. Simon Howard joins the Company as Powder Manufacturing Engineer. Simon is aspecialist ceramics engineer with 17 years experience in engineering andtechnologist roles in ceramic manufacturing companies, including Morgan ElectroCeramics, Fairey Industrial Ceramics, Wedgwood, and Twyfords Bathrooms. ENDS For further information please contact: Andrew Neilson +61 419 950 771Brendan Bilton +44 (0) 7798 554 191Ceramic Fuel Cells investor@cfcl.com.au Nick Denton / Vanessa Orr +44 (0) 20 7357 9477Hogarth Partnership Aamir Quraishi / Charles Goodfellow +44 (0) 20 7569 9650Libertas Capital NOTES TO EDITORS About Ceramic Fuel Cells Limited Ceramic Fuel Cells Limited (CFCL, www.cfcl.com.au) is a world leader indeveloping solid oxide fuel cell (SOFC) technology which can provide reliable,energy efficient, high-quality, and low-emission electricity from widelyavailable natural gas and renewable fuels. CFCL is developing SOFC products forsmall-scale on-site micro combined heat and power (m-CHP) and distributedgeneration units that co-generate electricity and heat for domestic use. CFCL is now at an advanced stage of development, and is moving swiftly towardscommercialization. Since 1992, CFCL has developed its own fuel cells andcomplete fuel cell 'stacks', and has also succeeded in creating the highlyengineered "balance of plant" that surrounds the fuel cell stack and controlsthe inputs (fuel, air and water), outputs (heat and electricity), timing, andtemperature controls. CFCL is currently demonstrating prototype units in field trials with EWE (thefifth-largest German multi-service energy company) and Powerco (New Zealand'ssecond largest electricity and gas distribution company). In June 2006, CFCLsigned a contract with EWE to supply ten CFCL NetGenTM units for further fieldtrials as part of a collaborative project to develop commercial-ready m-CHPproducts for the European market. CFCL has extensive R&D, testing and manufacturing facilities in Melbourne,Australia. CFCL will build a fuel cell manufacturing facility in Europe, withplans to begin large scale production in 2008-09, making CFCL a leader inpreparing for volume manufacturing. The Company will also construct a plant inEurope to produce high quality ceramic powders, which are a key component ofsolid oxide fuel cells, using the Company's patented technology. The powderplant is scheduled to be commissioned in Q1 2007. With over 100 skilled staff and extensive patented technology (50 patents in 28patent 'families' to date), CFCL is pursuing partnerships for manufacture,production and use of its fuel cells in delivering electricity to the domesticEuropean and Asian markets. CFCL was formed in 1992 by Australia's CSIRO (Commonwealth Science and IndustryResearch Organisation) and a consortium of leading energy and industrialcompanies. A UK subsidiary was established in 2004. The Company is based inMelbourne, Australia and Chester, United Kingdom. It is publicly listed on boththe AIM Stock Exchange, London (floated March 2006), and on the Australian StockExchange (floated July 2004). The company's code on both exchanges is CFU. Rule 4.7B Appendix 4C Quarterly report for entities admitted on the basis of commitments Introduced 31/3/2000. Amended 30/9/2001 Name of entityCERAMIC FUEL CELLS LIMITED ABN Quarter ended ("current quarter") 82 055 736 671 30 JUNE 2006 Consolidated statement of cash flows -----------------------------Cash flows related to operating activities Current quarter Year to date $A'000 (12 months) $A'000 ----------------------------- 1.1 Receipts from customers 13 953 1.2 Payments for (a) staff costs 1 (2,575) (8,828) (b) advertising and marketing 2 (298) (919) (c) research and development 3 (750) (2,859) (d) leased assets - - (e) other working capital (628) (3,346) 1.3 Dividends received - - 1.4 Interest and other items of a similar nature received 1,179 1,682 1.5 Interest and other costs of finance paid - - 1.6 Income taxes paid - - 1.7 Other - Net GST Received / (Paid) 342 823 - Export Market Development Grant received 150 150 - Sundry income received 101 136 ------------ ------------ Net operating cash flows (2,466) (12,208) ----------------------- ------------ ------------ Notes 1. 'Staff costs' includes all company labour and associated headcount costs, and therefore incorporates all Research & Development (R&D) staff, Sales & Marketing (S&M) staff and General & Administrative (G&A) staff. 2. 'Advertising and marketing' excludes all S&M staff costs (as per note 1 above). 3. 'Research and development' costs includes all R&D costs as defined in Note 1(e) to the Financial Statements for the half-year ended 31 December 2005, but excludes all R&D staff costs (as per note 1 above). ----------------------------- Current quarter Year to date $A'000 (12 months) $A'000 ----------------------------- 1.8 Net operating cash flows (carried (2,466) (12,208) forward) -------------------------------------------------------------------------------- Cash flows related to investing activities 1.9 Payment for acquisition of: (a) businesses (item 5) - - (b) equity investments - - (c) intellectual property - - (d) physical non-current assets (540) (706) (e) other non-current assets - - 1.10 Proceeds from disposal of: (a) businesses (item 5) - - (b) equity investments - - (c) intellectual property - - (d) physical non-current assets 7 72 (e) other non-current assets - - 1.11 Loans to other entities - - 1.12 Loans repaid by other entities - - 1.13 Other - - ------------ ------------ Net investing cash flows (533) (634) ------------ ------------ 1.14 Total operating and investing cash flows (2,999) (12,842)-------------------------------------------------------------------------------- Cash flows related to financing activities 1.15 Proceeds from issues of shares, options, - 91,367 etc. 1.16 Proceeds from sale of forfeited shares - - 1.17 Proceeds from borrowings (convertible - 8,200 notes) 1.18 Repayment of borrowings (insurance (97) (284) premiums) 1.19 Dividends paid - - ------------ ------------ 1.20 Other - Convertible notes issue costs - (532) Other - Interest paid on convertible (63) (516) notes Other - Interest paid on insurance (2) (12) premiums funding Other - Share issue costs (354) (7,594) ------------ ------------ Net financing cash flows (516) 90,629-------------------------------------------------------------------------------- Net increase (decrease) in cash held (3,515) 77,787 1.21 Cash at beginning of quarter/year to date * 89,511 5,301 IFRS adjustment to opening cash balance * - 169 1.22 Exchange rate adjustments on foreign 120 2,859 currency cash balances ------------ ------------ 1.23 Cash at end of quarter 86,116 86,116-------------------------------------------------------------------------------- * For reporting purposes, prior to 1 July 2005 security deposits were notdefined as cash. However, under Australian equivalents to InternationalFinancial Reporting Standards (AIFRS), security deposits are now included withinthe definition of cash and cash equivalents. Hence, under AIFRS, 'Cash atbeginning of quarter' has been increased by $169k (being the value of securitydeposits as at 30 June 2005) to reflect this revised definition. Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the relatedentities Current quarter $A'000 ------------- 1.24 Aggregate amount of payments to the parties included in 111 item 1.2 ------------- 1.25 Aggregate amount of loans to the parties included in - item 1.11 -------------------------------------------------------------------------------- 1.26 Explanation necessary for an understanding of the transactions-------------------------------------------------------------------------------- Directors' Fees Cash payments for directors' fees totalled $111k for the quarter ($297k for the year to date). Share issue costs Share issue costs at item 1.20 includes year to date cash payments of $249k to a director-related entity.-------------------------------------------------------------------------------- Non-cash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows-------------------------------------------------------------------------------- Convertible Notes During the quarter convertible notes with a value of $4,070,000 were converted into equity, thereby reducing the Company's liabilities by the same amount. These conversions resulted in the issue of a further 8,140,000 ordinary shares.-------------------------------------------------------------------------------- 2.2 Details of outlays made by other entities to establish or increase their share in businesses in which the reporting entity has an interest-------------------------------------------------------------------------------- NIL-------------------------------------------------------------------------------- Financing facilities available Add notes as necessary for an understanding of the position. (See AASB 1026paragraph 12.2). ------------- ------------- Amount available Amount used $A'000 $A'000 ------------- ------------- 3.1 Loan facilities - - ------------- ------------- 3.2 Credit standby arrangements - --------------------------------------------------------------------------------- Reconciliation of cash--------------------------------------------------------------------------------Reconciliation of cash at the end of the Current quarter Previous quarterquarter (as shown in the consolidatedstatement of cash flows) to the related itemsin the accounts is as follows. $A'000 $A'000-------------------------------------------------------------------------------- 4.1 Cash on hand and at bank 159 472 ------------ ------------- 4.2 Deposits at call 11,025 21,032 ------------ ------------- 4.3 Bank overdraft - - ------------ ------------- 4.4 Other - Investments 74,749 67,838 - Security deposits 183 169-------------------------------------------------------------------------------- Total: cash at end of quarter (item 86,116 89,511 1.23) -------------------------------------------------------------------------------- * Refer above comment regarding security deposits now being included within thedefinition of cash and cash equivalents. Acquisitions and disposals of business entities ----------------- ------------------ Acquisitions Disposals (Item 1.9(a)) (Item 1.10(a)) ----------------- ------------------ 5.1 Name of entity Not applicable Not applicable ----------------- ------------------ 5.2 Place of incorporation or registration ----------------- ------------------ 5.3 Consideration for acquisition or disposal ----------------- ------------------ 5.4 Total net assets ----------------- ------------------ 5.5 Nature of business ----------------- ------------------ Compliance statement 1 This statement has been prepared under accounting policies which comply withaccounting standards as defined in the Corporations Act (except to the extentthat information is not required because of note 2) or other standardsacceptable to ASX. 2 This statement does give a true and fair view of the matters disclosed. Sign here: ....................................... Date: July 2006 Print name: David Carruthers Director Notes 1. The quarterly report provides a basis for informing the market how theentity's activities have been financed for the past quarter and the effect onits cash position. An entity wanting to disclose additional information isencouraged to do so, in a note or notes attached to this report. 2. The definitions in, and provisions of, AASB 1026: Statement of Cash Flowsapply to this report except for the paragraphs of the Standard set out below. • 6.2 - reconciliation of cash flows arising from operating activities to operating profit or loss • 9.2 - itemised disclosure relating to acquisitions • 9.4 - itemised disclosure relating to disposals • 12.1(a) - policy for classification of cash items • 12.3 - disclosure of restrictions on use of cash • 13.1 - comparative information 3. Accounting Standards. ASX will accept, for example, the use of InternationalAccounting Standards for foreign entities. If the standards used do not addressa topic, the Australian standard on that topic (if any) must be complied with. This information is provided by RNS The company news service from the London Stock Exchange