Ceres Power Regulatory News (CWR)

20 Mar 2006 07:01

Ceres Power Holdings plc20 March 2006 Ceres Power Holdings plc ("Ceres", "Ceres Power" or "the Group") Interim results for the six months ending 31 December 2005 Highlights • Key milestone achieved with a compact, lightweight 1kW fuel cell • British Gas relationship extended with £2.7 million part-funded programme • Second BOC contract secured and successfully delivered • Income of £562,000, up by 13% compared to the six months ended 31.12.04 • Strong balance sheet with cash and short term investments of £15.4 million • Cash outflow from operating activities during the period of £1.6 million • Management team strengthened through key director appointments • Enhancement of market applications engineering capability • New contract awarded to accelerate mass-manufacturing capability • Prestigious role in the UK Government's Energy Research Partnership Philip Holbeche, Chairman, commented: "I am very pleased with the significant progress Ceres Power has made in thefirst half of the year towards delivering cost-effective, efficient and reliablecommercial solutions using our advanced fuel cell technology. We recentlyachieved a key technical milestone: the delivery of a production engineered 1kWfuel cell, suitable for domestic CHP and many other applications. The £2.7million programme with British Gas reinforces the commercial transformation ofour business. Ceres Power's clear competitive advantage is now becoming moreevident to industry partners, financial backers and Government." 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 David Poutney +44 (0) 207 776 1517Numis Securities Chairman's Statement Introduction Ceres Power made significant progress in the half year ended 31 December 2005towards delivering cost-effective, efficient and reliable commercial solutionsusing its fuel cell technology. Investment in our product engineering andmanufacturing capabilities has enabled achievement of a major technicalmilestone. The Group continues to build commercial partnerships in the UK andinternationally. The energy industry is currently the focus of much debate. Ceres is pleased toparticipate and contribute to the debate at the highest levels, as the only fuelcell company in the UK's Energy Research Partnership, reflecting Governmentinterest in micropower generation as part of a coherent national energy policy. Financial results The Group's balance sheet remains strong, with £15.4 million in cash and shortterm investments allowing the Group to fund immediate growth plans and takeadvantage of emerging opportunities. Income for the six months totalled£562,000, of which interest on cash balances provided £334,000, income fromgovernment contracts was £148,000 and revenue from development contracts was£80,000. In total this represents a 13% increase compared to the six monthsended 31 December 2004. Operating costs increased by 19% over the comparable period last year, due inlarge part to the strengthening of the skill base in line with the Group'scommercialisation plans. Administration overheads decreased to efficient levels,in the absence of the exceptional costs incurred in association with admissionto AIM in November 2004. Capital expenditure during the period totalled £665,000, significantly above the£163,000 during the prior interim period, reflecting investment in the Group'sdesign, testing and manufacturing capabilities, including the building ofcomplete fuel cell systems. The cash outflow from operating activities during the period was £1.6 million,with cash outflows attributable to capital expenditure totalling £596,000. Therewere cash inflows of £173,000 from the exercise of warrants and employee shareoptions, in addition to the £562,000 income highlighted above. Commercial engagement Based on the Group's proven technology and product capability, major newcommercial engagements have been successfully secured. Our relationship with Centrica plc (trading as British Gas) has been furtherenhanced with the announcement of a £2.7 million programme, part funded by theDTI, to design, build and evaluate domestic fuel cell Combined Heat and Power(CHP) units. The Group's products are designed to deliver electricity, heatingand hot water to the home, substantially reducing both energy bills and CO2emissions. British Gas estimates that the Ceres technology is accessible by 14.5million British homes. Ceres has extended its relationship with The BOC Group plc ("BOC"), successfullysecuring and completing a second significant contract. This contract builds onprevious work and focuses on using Ceres fuel cell products to provideelectrical power from LPG and propane fuels, which are distributed by BOC tomillions of customers in over 50 countries. During the period the Group successfully completed an important Governmentprogramme for the DTI, continuing our exemplary delivery record in suchcontracts. The Group's close relationship with Government and other agenciescontinues, highlighted by the recent announcement of a further £0.5 millioncontract with The Carbon Trust to assist development of mass productionprocesses for Ceres fuel cells. Technical review Ceres has recently achieved a key technical milestone: the delivery of aproduction-engineered 1kW fuel cell, suitable for domestic CHP and many otherapplications. This fuel cell successfully passed multiple tests for performanceand fuel flexibility. We continue to expand the Group's engineering resources tosuccessfully integrate fuel cell technology into complete products for a rangeof markets. The Group's innovations in materials and engineering have continued to drive upfuel cell performance to levels required for market applications. Recentinvestment in analytical and testing equipment further supports this importantactivity and enhances our excellent facilities. We have continued to invest to ensure that the newly-established manufacturingteam has the necessary skills to deliver high quality product in large volumes.Recent progress includes successful adoption of proven manufacturing processesfor the deposition of fuel cell layers. The Group is capturing a very rich stream of intellectual property (IP),building a substantial portfolio of patents, trademarks and trade secrets. Tosupport this activity, we have retained the services of a firm of highlyexperienced patent attorneys with an outstanding pedigree in IP protection,commercialisation and litigation. Ceres has continued to receive awards and recognition from major organisations.The Group received the Frost & Sullivan Technology Innovation Award, and took aleading role in the formation of the UK Fuel Cell Industry Association. People During the period the Group recruited 10 new members of staff, increasing ourskill base and depth of experience. Important new directorships also reflect thesuccessful transformation from an R&D focused company to a commercially drivenmarket-led business. Andrew Baker, Operations Director, is appointed to the board of the Group (seeNote A) with responsibility for technology, engineering and manufacturing. Hehas previously held a number of international board-level directorships withinmajor organisations such as Calsonic and Ricardo. Professor Nigel Brandon moves to the newly created role of Chief Scientist,leaving the board of the Group but remaining on the operating company board.Nigel focuses on technology foresight, Government programmes and liaison withacademic research institutions, combining his role at Ceres with the prestigiousposition of Shell Professor of Sustainable Development in Energy at ImperialCollege London. We recently welcomed Bob Flint as Commercial Director of Ceres Power Limited,with responsibility for deal-structuring, partnership negotiation and marketing.He has over 15 years experience in business development, technology licensingand corporate venturing, specialising in building businesses from platformtechnologies. Outlook During the last six months Ceres has put more essential elements of the Group'sdevelopment platform into place. The Group's clear competitive advantage, asdemonstrated by the delivery of a compact, highly engineered 1kW fuel cell, isnow becoming more evident to industry partners, financial backers andGovernment. I am immensely pleased that our relationships with key partners continue tostrengthen, for example through contracts with British Gas and BOC. Ceres nowhas a proven ability to win and deliver contracts in order to achieve keytechnical, commercial and financial goals. I believe this to be an indicator offuture commercial success in other geographic and market sectors. As is usual in high growth companies in emerging industries, there are a numberof significant challenges and hurdles to overcome to reach our ambitious goals.In order to address the execution risks inherent in the Group's strategy, we arecontinuing to build top-class capabilities in all areas of the business.Finally, and as ever, the demands of a rapidly growing company place substantialburdens on all employees and their families. I wish to thank each one of themfor their commitment to making Ceres such a success. Philip HolbecheChairman Note AUnder Schedule 2(g) of the AIM Rules we can confirm that Dr. Andrew RobertBaker, aged 55, is a current director of Ceres Power Limited, a subsidiary ofCeres Power Holdings plc. Dr. Baker has previously been a director of RicardoConsulting Engineers Limited. Consolidated Profit and Loss Accountfor the six months ended 31 December 2005 Six months Six months Year ended ended 31 ended 31 30June 2005 December 2005 December 2004 Unaudited Unaudited Audited £'000 £'000 £'000 --------- --------- --------- Turnover 80 61 71Research and development costs (1,548) (1,032) (2,324)Administrative expenses (656) (816) (1,272)Other operating income 148 299 366 --------- --------- ---------Operating loss (1,976) (1,488) (3,159) Interest receivable and similar income 334 136 508 --------- --------- ---------Loss on ordinary activities beforetaxation (1,642) (1,352) (2,651) Tax on loss on ordinary activities - - - --------- --------- ---------Loss for the financialperiod / year (1,642) (1,352) (2,651) --------- --------- --------- Loss per £0.05 ordinary share- Basic and diluted (2.91)p (3.04)p (5.28)p --------- --------- --------- Weighted average number of shares used to compute loss per £0.05 ordinary share 56,432,218 44,507,813 50,232,830 --------- --------- --------- Consolidated Balance Sheetas at 31 December 2005 31 December 31 December 30 June 2005 2005 2004 Unaudited Unaudited Audited £'000 £'000 £'000 --------- --------- ---------Fixed assetsTangible assets 1,728 1,186 1,302 --------- --------- --------- Current assetsDebtors 397 213 316Short term investments 14,100 14,950 15,600Cash at bank and in hand 1,301 3,391 1,444 --------- --------- --------- 15,798 18,554 17,360 Creditors: amounts falling due within one year (758) (325) (471) --------- --------- ---------Net current assets 15,040 18,229 16,889 --------- --------- ---------Total assets less current liabilities 16,768 19,415 18,191 Creditors: amounts falling due after more than one year (5) (14) (10) --------- --------- ---------Net assets 16,763 19,401 18,181 --------- --------- --------- Capital and reservesCalled up share capital 2,838 2,794 2,804Share premium account 14,386 14,130 14,199Merger reserve 7,463 7,463 7,463Profit and loss account (7,924) (4,986) (6,285) --------- --------- ---------Equity shareholders' funds 16,763 19,401 18,181 --------- --------- --------- Consolidated Cash Flow Statementfor the six months ended 31 December 2005 Six months Six months Year ended ended 31 ended 31 30 June 2005 December 2005 December 2004 Unaudited Unaudited Audited £'000 £'000 £'000 --------- --------- ---------Net cash outflow from operating activities (1,604) (1,129) (2,629) --------- --------- ---------Returns on investments and servicing of financeInterest received 334 134 508 --------- --------- ---------Net cash inflow from returns oninvestments and servicing of finance 334 134 508Taxation - - -Capital expenditurePurchase of tangible fixed assets (596) (157) (338) --------- --------- ---------Net cash outflow for capital expenditure (596) (157) (338) --------- --------- ---------Net cash outflow before use of liquidresources and financing (1,866) (1,152) (2,459)Management of liquid resourcesReduction /(increase) in short termdeposits with banks 1,500 (10,550) (11,200)FinancingIssue of ordinary share capital 173 16,301 16,312Net expenses of share issue 50 (1,399) (1,400) --------- --------- ---------Net cash inflow from financing 223 14,902 14,912 --------- --------- ---------(Decrease)/increase in net cash (143) 3,200 1,253 --------- --------- --------- Reconciliation to net fundsOpening net funds 17,044 4,591 4,591(Decrease) / increase in net cash (143) 3,200 1,253Movements in short term deposits (1,500) 10,550 11,200 --------- --------- ---------Closing net funds 15,401 18,341 17,044 --------- --------- --------- Cash flow from operating activitiesReconciliation of operating loss to net cash outflow from operating activities:Operating loss (1,976) (1,488) (3,159)Depreciation charge 239 158 346Share option compensation charge 3 21 20(Increase) / decrease in debtors (83) 48 (67)Increase in creditors 213 132 231 --------- --------- ---------Net cash outflow from operating activities (1,604) (1,129) (2,629) --------- --------- --------- Notes to the Interim Financial Statementsfor the six months ended 31 December 2005 1. Basis of preparation These interim financial statements do not constitute statutory financialstatements within the meaning of Section 240 of the Companies Act 1985. Resultsfor the six month periods ended 31 December 2005 and 31 December 2004 have notbeen audited. The results for the year ended 30 June 2005 have been extractedfrom the statutory financial statements of Ceres Power Holdings plc that havebeen filed with the Registrar of Companies and upon which the auditors reportedwithout qualification. 2. Principal accounting policies These interim financial statements for the six months ended 31 December 2005have been prepared in accordance with the accounting policies set out in thestatutory financial statements of Ceres Power Holdings plc for the year ended 30June 2005. These accounting policies include: (a) Basis of consolidation The consolidated financial statements of Ceres Power Holdings plc have beenpresented under merger accounting rules. This means that the financialstatements of Ceres Power Holdings plc and its wholly owned subsidiary, CeresPower Limited, have been aggregated and presented as if the two companies havealways formed a group. Accordingly, although Ceres Power Holdings plc acquiredthe entire issued share capital of Ceres Power Limited on 3 September 2004, theresults for both companies are reflected in the group financial statements forthe period to 31 December 2004. (b) Turnover Revenue, which excludes value added tax and other sales taxes, represents theinvoiced value of services supplied. Amounts received or receivable under development agreements are recognised asrevenue when earned. Amounts received or receivable in respect of milestonepayments under agreements are recognised as revenue when the specific conditionsin the agreement have been met. All costs relating to these developmentprogrammes are recorded as research and development expenditure. As revenuerepresents contributions towards costs incurred, no amounts have been allocatedto cost of sales. 3. Called up share capital Ceres Power Holdings plc had called up share capital totalling 56,076,293ordinary shares of £0.05 each at 30 June 2005 as disclosed in the statutoryfinancial statements of Ceres Power Holdings plc for the year ended 30 June2005. Between 13 July 2005 and 21 December 2005, 664,582 ordinary shares of £0.05 eachwere issued on the exercise of employee share options for cash consideration of£167,929. On 25 November 2005, the Company issued 3,340 ordinary shares of £0.05 each onthe exercise of warrants for cash consideration of £2,338. On 2 December 2005, the Company issued 3,900 ordinary shares of £0.05 each onthe exercise of warrants for cash consideration of £2,730. 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 six months to 31 December 2005 relating to shareissue costs in prior periods. 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£2,520 (six months ended 31 December 2004: £20,770; year ended 30 June 2005:£20,020) has been charged to the profit and loss account and credited to theprofit and loss reserve. Independent review report to Ceres Power Holdings plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 31 December 2005 which comprises the consolidated profitand loss account, the consolidated balance sheet, the consolidated cash flowstatement and the related notes. We have read the other information contained inthe interim report and considered whether it contains any apparent misstatementsor material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report and the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditand therefore provides a lower level of assurance. Accordingly we do not expressan audit opinion on the financial information. This report, including theconclusion, has been prepared for and only for the Company and for no otherpurpose. We do not, in producing this report, accept or assume responsibilityfor any other purpose or to any other person to whom this report is shown orinto whose hands it may come save where expressly agreed by our prior consent inwriting. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 December 2005. PricewaterhouseCoopers LLPChartered AccountantsCambridge 17 March 2006 Notes: (a) The maintenance and integrity of the Ceres Power Holdingsplc website is the responsibility of the directors; the work carried out by theauditors does not involve consideration of these matters and, accordingly, theauditors accept no responsibility for any changes that may have occurred to theinterim report since it was initially presented on the website. (b) Legislation in the United Kingdom governing the preparationand dissemination of financial information may differ from legislation in otherjurisdictions. Directors Philip Holbeche (Chairman) 1,2Peter Bance (Chief Executive Officer) 1,2Andrew Baker (Operations Director) 1,2Nigel Brandon (Chief Scientist) 2Robert Flint (Commercial Director) 2Harry Fitzgibbons (Non Executive Director) 1John Gunn (Non Executive Director) 1 Company Secretary Matthew Stride Company Registered Number 5174075 Registered Office Unit 18, Denvale Trade ParkHaslett Avenue EastCrawley RH10 1SS Solicitors Taylor WessingCarmelite50 Victoria EmbankmentBlackfriarsLondon EC4Y 0DX Registered Auditors PricewaterhouseCoopers LLPAbacus HouseCastle ParkCambridge CB3 0AN Bankers National Westminster Bank plcSouth Kensington Station BranchPO Box 59218 Cromwell PlaceLondon SW7 2LB Brokers Numis Securities LtdCheapside House138 CheapsideLondon EC2V 6LH Registrar Computershare Investor Services PLCPO Box 82, The PavilionsBridgwater RoadBristol BS99 7NH 1 Ceres Power Holdings plc2 Ceres Power Limited This information is provided by RNS The company news service from the London Stock Exchange