Ceres Power Regulatory News (CWR)

25 Sep 2006 07:02

Ceres Power Holdings plc25 September 2006 For immediate release 07:00, 25 September 2006 Ceres Power Holdings plc ("Ceres", "Ceres Power" or "the Group") Preliminary results for the twelve months ended 30 June 2006 Highlights: A year of progress • Income from private and public sector contracts up 71% • 1kW Compact lightweight fuel cell stack demonstrated • Residential CHP programme secured with British Gas • Third contract with BOC targeting off-grid applications • New facility secured for assembly of complete products • Plans for new 'mother plant' to mass manufacture core fuel cell components • Prestigious role in UK Government's Energy Review • Board and senior management team strengthened • £14 million in cash and short term investments at 30 June 2006 Philip Holbeche, Chairman, commented: "I am very pleased with the significant progress Ceres Power has made towardsdelivering cost-effective, efficient and reliable commercial solutions using ouradvanced fuel cell technology. Further to our success in delivering a productionengineered 1kW fuel cell, the Company has continued to make significantprogress, both technically and commercially. Today's announcement regarding thescale-up of our manufacturing capacity reinforces our confidence in our fuelcell technology and the potential markets for our products." For further information contact: Philip Holbeche, ChairmanPeter Bance, Chief Executive +44 (0) 1293 400 404Ceres Power Patrick d'Ancona / Charlotte Kirkham +44 (0) 207 153 1533M: Communications Alisdair Gayne +44 (0) 207 677 5044Morgan Stanley Chairman's Statement Significant progress has been achieved across several key areas of the businessduring the year ended 30 June 2006. The Group has extended its commercialrelationships with important partners, developed its platform technology for arange of market applications, and grown its manufacturing capabilities. In the past year we have had a number of important successes: • The Group has successfully demonstrated a 1kW fuel cell stack, a fundamental building block of micro-power generation products aimed at a variety of uses ranging from domestic Combined Heat and Power (CHP) to off-grid applications and auxiliary power units (APU) in the transport sector. This compact, lightweight stack design represents a critical milestone in the commercialisation of Ceres Power's technology. • A £2.7 million programme with Centrica (trading as "British Gas"), part funded by the Department of Trade and Industry (DTI), was announced to develop CHP units for the UK residential market. Excellent progress has already been made on a wall-mountable design with mass market potential. • A third contract with BOC was secured to target off-grid applications internationally using fuels including liquefied petroleum gas (LPG). This new contract followed successful technical feasibility work. • Developing partnerships with Original Equipment Manufacturers (OEMs) with expertise in boiler and genset manufacturing that will be important in the assembly of final products utilising Ceres designed and manufactured fuel cells. We have also established a strong set of supply chain partnerships to deliver materials, components and process equipment on time and at competitive costs for volume production. • Continued expansion of our engineering resources to enable the successful integration of our fuel cell technology into complete products. The Group has also made a considerable investment in its manufacturingcapabilities to maximise value, and retain control over its core technology.Facilities have been commissioned for pilot-scale manufacture of fuel cells andstacks. We have also separately announced today that a new facility has beensecured to design, build and test complete products. This new facility isanticipated to be operational by mid-2007 and will be used to develop productsfor the CHP, off-grid and APU markets. In addition, design work is underway forthe construction of a 'mother plant' for the mass production of core fuel cellcomponents. It is anticipated that this plant will be commissioned in the secondhalf of 2008. Industry LeadershipCeres Power has established a leading position in the fuel cell industry. Thisposition has been reinforced by its high profile with Government, its key rolesin the fuel cell community, its global supply chain partnerships, and thebacking of major financial institutions. Ceres Power has played a significant role in putting fuel cells and micro-powergeneration onto the UK's energy agenda. In the year of the UK's Energy Review,Ceres Power represented the industry in the development of national energypolicy through membership of the Chancellor's Energy Research Partnership andChairmanship of the newly formed UK Fuel Cell Industry Association. Ceres Powerhas also received direct support from national and regional bodies including theDTI, the Carbon Trust and the South East England Development Agency (SEEDA). The necessary relationships for getting products to global mass markets arebeing forged with channel partners, including major utilities and OEMs. Leadinginternational companies have also been attracted into supply chain partnershipswith Ceres Power in which they are committing significant resources to delivercommercial solutions. Ceres Power's developing relationships with Centrica and BOC illustrate thebreadth of market opportunities being addressed by the Group and the calibre ofour supply chain partners. These opportunities span residential and industrialsectors, the use of mains natural gas and packaged fuels, and on-grid andoff-grid applications. Building on initial commercial engagements, majorprogrammes have been secured targeting specific market applications. FinancialThe financial performance of the Group for the year was in line with ourforecasts. Income for the year ended 30 June 2006 totalled £1.4 million, of which intereston cash balances provided £630,000, income from development contracts, financedby the public sector, was £636,000, and revenue from commercial contracts was£110,000. This represents a 71% increase in income from public and privatesector contracts compared to the prior year. The Group's commitment to investing in the business to extend its capabilitiesis clear from the 34% increase in research and development costs to £3.1million. This is due to the recruitment of further experienced personnel and thedepreciation of additional equipment associated with the expansion of existingfacilities. Administrative expenses rose by 21% to £1.5 million, due primarilyto costs associated with our growing intellectual property (IP) portfolio andcommercial staff. Capital expenditure of £1.1 million represents an increase of 127% over theprior year, a significant investment in the Group's in-house product engineeringand manufacturing capabilities. The Group's liquidity position continues to be robust with £14.0 million in cashand short term investments as at 30 June 2006. The net cash outflow for the yearwas £3.0 million, the result of operating activities, interest received, capitalexpenditure, and the exercise of warrants and options. PeopleCeres Power is proud to have assembled a group of talented, highly motivatedpeople.The appointment of Bob Flint as the company's new Commercial Director reflects agrowing pipeline of opportunities. Rex Vevers has recently joined the businessas Finance Director and brings extensive international deal-making experience inaddition to financial expertise. Every one of our employees is a valued member of the team and has a stake in thebusiness. I would like to thank each of them for their important contributionsto our continuing success. Philip Holbeche Chairman Chief Executive's Review Alternative energy is a developing worldwide industry with major commercialpotential and is attracting strong government backing. Since the formation ofCeres Power in 2001, we have consistently focused on developing compellingsolutions to meet real market needs. Ceres Power has used its technologyleadership and operational excellence to develop a unique platform technologywhich can satisfy a range of market applications. Simultaneously we havedeveloped and established partnerships with multinational corporations thatprovide us with invaluable insight into end-user requirements and direct accessto mass markets. With the successful demonstration of the 1kW stack the Group is now focused onrefining product designs and validating manufacturing processes and assemblymethods ahead of transfer to volume manufacturing to accelerate thecommercialisation of the technology. Business Model The Group's value stems from its wealth of intellectual property (IP) and itsability to exploit this commercially across a range of market sectors. Thedeveloping IP portfolio covers materials, product designs and manufacturingprocesses. The Group continues to place great emphasis on the protection,exploitation and management of its rapidly expanding IP portfolio. Considerabletime and resources have been expended in developing a set of capabilities andassets that are well protected, difficult to replicate, and represent asubstantial competitive barrier to entry. The Group's IP extends well beyond legally protected patents and trademarks, andincludes know-how surrounding materials formulations, proprietary productdesigns and manufacturing processes. We are also building brand value throughincreasing awareness of the benefits derived from micro-power generationsolutions 'Powered by Ceres'TM. Our IP supports three complementary income streams to maximise the Group's valuepotential over the short, medium and long term. Engineering Services: These services, offered as project-based contracts,include feasibility studies, turnkey product developments, and subsequentproduct lifecycle management. They provide Ceres with business developmentopportunities to secure IP deals and product sales, whilst generating revenuesin their own right. A growing pipeline of opportunities across market segmentsand geographies has now been established to allow the Group to pursue a balancedportfolio and drive growth. Products: Sales will be generated for mass market applications under commercialagreements with channel partners and established OEMs. Ceres Power will have theability to manufacture fuel cell components and supply complete systems.Component standardisation across many market applications allows rapid revenuegrowth whilst minimising internal costs. IP Rights: The strength of the Group's IP portfolio should allow it to offerpreferred market positions to channel partners in return for a combination ofup-front payment, ongoing revenues and equity participation in joint ventures.IP Rights are likely to be bounded by territory, market application and time. The Group's revenue profile is likely to be characterised initially byengineering services contracts, with subsequent product sales increasing andultimately dominating. The income from IP rights may be significant in value inthe short, medium and long term. In the medium term we would envisage that themajority of the Group's income will stem from the successful commercialisationof the technology and sale of products in the CHP, off-grid and APU sectors. In anticipation of expected product volumes, Ceres Power has commenced planningof manufacturing scale-up involving materials, process equipment, and qualitysystems. The in-house capability to manufacture fuel cell components in largenumbers will be matched with a capacity for product assembly by OEM partners. Outlook Our focus over the next twelve months is to: • Commission the new facility by mid 2007 to design, build and test complete products for mass field trials. • Complete the design and determine the location of a 'mother plant' to enable mass production of core fuel cell components in financial year 2008/ 9. • Progress the delivery of programmes with existing partners and develop further relationships with key OEMs and supply chain partners. I look forward to reporting during the coming year on further developments andcontinuing progress. Peter Bance Chief Executive Officer CONSOLIDATED PROFIT AND LOSS ACCOUNTfor the year ended 30 June 2006 2006 2005 Note £'000 £'000 Turnover 110 71Research and development costs (3,104) (2,324)Administrative expenses (1,534) (1,272)Other operating income 636 366Operating loss (3,892) (3,159)Interest receivable and similar income 630 508Loss on ordinary activities before taxation (3,262) (2,651)Tax credit on loss on ordinary activities 78 -Loss for the financial year 6 (3,184) (2,651) Loss per £0.05 ordinary share- basic and diluted 3 (5.58)p (5.28)p CONSOLIDATED BALANCE SHEETas at 30 June 2006 2006 2005 Note £'000 £'000Fixed assetsTangible assets 1,870 1,302 Current assetsDebtors: amounts falling due after more than one year 53 53Debtors: amounts falling due within one year 554 263Short term investments 11,900 15,600Cash at bank and in hand 2,121 1,444 14,628 17,360Creditors: amounts falling due within one year (438) (471)Net current assets 14,190 16,889Total assets less current liabilities 16,060 18,191Creditors: amounts falling due after more than one year - (10)Net assets 16,060 18,181 Capital and reservesCalled up share capital 4 2,925 2,804Share premium account 15,137 14,199Other reserve 7,463 7,463Profit and loss account (9,465) (6,285)Equity shareholders' funds 6 16,060 18,181 CONSOLIDATED CASH FLOW STATEMENTfor the year ended 30 June 2006 2006 2005 Note £'000 £'000Net cash outflow from operating activities 5 (3,613) (2,629)Returns on investments and servicing of financeInterest received 630 508Net cash inflow from returns on investments andservicing 630 508of financeTaxation - - Capital expenditurePurchase of tangible fixed assets (1,099) (338)Net cash outflow for capital expenditure (1,099) (338)Net cash outflow before use of liquid resources andfinancing (4,082) (2,459)Management of liquid resourcesDecrease / (increase) in short term deposits with 3,700 (11,200)banksFinancingIssue of ordinary share capital 1,009 16,312Net expenses of share issue 4 50 (1,400)Net cash inflow from financing 1,059 14,912Increase in net cash 677 1,253 Reconciliation to net fundsOpening net funds 17,044 4,591Increase in net cash 677 1,253Movement in short term deposits (3,700) 11,200Closing net funds 14,021 17,044 Notes to the preliminary announcement 1. Basis of preparation These preliminary results do not constitute statutory financial statementswithin the meaning of Section 240 of the Companies Act 1985. The results for the year to 30 June 2005 have been extracted from the statutoryfinancial statements for that year, that have been filed with the Registrar ofCompanies and upon which the auditors have reported without qualification. Thepreliminary results have been drawn from the statutory financial statements forthe year to 30 June 2006, which have been approved by the Board of Directors andon which the auditors have reported without qualification, and which have notyet been delivered to the Registrar of Companies. The financial statements willbe delivered to the Registrar of Companies following the Annual General Meeting. 2. Principal accounting policies These preliminary results for the year ended 30 June 2006 have been prepared inaccordance with the accounting policies set out in the statutory financialstatements for the year ended 30 June 2005 except as set out below. Government grantsRevenue grants are credited to the profit and loss account (as other operatingincome) on a case-by-case basis. Previously, grant income was only recognisedwhen the cash had been received, the associated expenditure had been incurredand the Directors believed that it was remote that the amounts would need to berepaid. However, the accounting policy has been amended to remove therequirement for the cash to be received on those grants where recovery isassured and where there are no technical milestones, in order to match theassociated expenditure with the grant income, as the Directors consider thistreatment to be more appropriate for those grants. The effect on the prior yearis not material and therefore no prior year adjustment has been made. 3. Loss per share Basic and diluted loss per £0.05 ordinary share are calculated by dividing theloss for the financial year attributable to ordinary shareholders by theweighted average number of ordinary shares in issue during the year. The loss for the financial year ended 30 June 2006 is £3,183,874 (2005:£2,650,602) and the weighted average number of £0.05 ordinary shares in issueduring the year ended 30 June 2006 is 57,039,938 (2005: 50,232,830). 4. Called up share capital 2006 2005 Number £'000 Number £'000AuthorisedOrdinary shares of £0.05 each 100,000,000 5,000 100,000,000 5,000Allotted, called up and not paidOrdinary shares of £0.05 each - - 4,000 -Allotted, called up and fully paidOrdinary shares of £0.05 each 58,504,885 2,925 56,072,293 2,804 58,504,885 2,925 56,076,293 2,804 Between 13 July 2005 and 26 June 2006, the Company issued 1,378,240 ordinaryshares of £0.05 each on the exercise of employee share options for cashconsideration of £441,465. Between 25 November 2005 and 2 June 2006, the Company issued 1,050,352 ordinaryshares of £0.05 each on the exercise of warrants for cash consideration of£567,302. No issue costs have been incurred with respect to the above transactions.However, an amount of £49,806 has been credited to the share premium account inrespect of VAT reclaimed in the period relating to share issue costs in priorperiods. 5. Net cash outflow from operating activities Reconciliation of operating loss to net cash outflow from operating activities: 2006 2005 £'000 £'000Operating loss (3,892) (3,159)Depreciation charge 494 346Loss on disposal of fixed assets 1 -Share option compensation charge 4 20(Increase) in debtors (213) (67)(Decrease) / increase in creditors (7) 231Net cash outflow from operating activities (3,613) (2,629) 6. Reconciliation of movements in shareholders' funds 2006 2005 £'000 £'000Loss for the financial year (3,184) (2,651)Proceeds of issue of ordinary share capital 1,009 16,315Share issue costs 50 (1,400)Share option compensation charge 4 20 -------- --------Net change in shareholders' funds (2,121) 12,284Opening shareholders' funds 18,181 5,897Closing shareholders' funds 16,060 18,181 This information is provided by RNS The company news service from the London Stock Exchange