Proton Mtr Pwr Regulatory News (PPS)

25 Jun 2007 07:01

Proton Power Systems PLC25 June 2007 PROTON POWER SYSTEMS ANNOUNCES ITS RESULTS FOR YEAR ENDED 31 DECEMBER 2006 The board of Proton Power Systems (PPS) are pleased to announce the preliminaryresults for the year ended 31 December 2006. The Company floated on AIM on 31stOctober 2006 and was formerly known as Future Power Systems plc. Highlights for year ended 31 December 2006: • Successful listing on AIM on 31 October 2006 raising £4.9m • Loss £1.8 million, as the company disbursed the new funding in the commercialisation of the business and after paying the costs of the listing (2005: loss of £833k) • Entered into key OEM relationships, broadening the application of its fuel cell technology. Of note are the agreements for the supply of : • joint development Agreement with US military applications developer • a demonstration UPS electric fuel cell system Highlights Post Listing • Post listing order intake 30% higher than forecast •first contract under a €2.5 million purchase and procurement agreement with L-3 Communications •development of a street cleaning vehicle in Switzerland •first fuel cell bus in the Czech Republic •the first fuel cell driven harbour ferry in Hamburg, Germany •extension to a purchase and cooperation agreement to provide fuel cell stacks to a leading international energy systems manufacturer •Relocating the Company to an integrated single site facility which will achieve significant scale of production Commenting on the results, Bernard Robinson, Chairman said, "The Group has made good progress over the last year and is ahead of where weanticipated. We have established a number of strategic OEM partnerships thatwill broaden the application of our hybrid system and fuel the Group's growth.The forthcoming strengthening of our operational infrastructure with the move tonew premises will provide the structure we need to move towards significantscale production." "Our progress is highlighted by the recent order for the volume supply of fuelcell modules for Auxiliary Power Units (APUs). This is a major achievement forthe Group and a major event in the fuel cell market, as we believe it is thefirst volume order scaling up to hundreds of units." Notes to Editors PPS, through its subsidiary Proton Motor Fuel Cell GmbH ("PM") has developed andproduced a standard fuel cell module, fuelled by hydrogen integrated with anenergy storage system to create a hybrid electric fuel cell system capable ofproviding power during peak demand situations. The market focus is on industrialapplications where 'back-to-base' refueling occurs, on site, at the end of eachshift or work period. The Group has identified opportunities to replace lead-acid batteries with theirPEM fuel cell systems and has identified niche markets in the materials handlingand mass-transportation sectors where hybrid electric fuel cell systems offerconsiderable advantages over conventional engine technology and fuel cell onlydrive systems. The Group has identified two initial market segments in which theDirectors believe the advantages of hybrid electric fuel cell systems will leadto economic benefits for the end user - forklift trucks and buses. In mostcases, vehicles operate within a defined radius or return to central points ofoperation. The many advantages over current commercial alternatives include lower fuelconsumption, longer periods between refueling, shorter refueling, consistentlevels of power delivery and zero harmful emissions. PM's technology development has been undertaken with the key objectives ofmultiple applications and volume production. PPS was admitted to trading on AIM on October 31, For further Information contact: Proton Power Systems +49 8151 26 86 422Joachim Kroemer j.kroemer@proton-motor.deCompany website: www.protonpowersystems.com Media:Gavin Anderson & Company +44 207 554 1400Ken Cronin/Marie Cairney Nomad Bell Lawrie A division of Brewin Dolphin Securities +44 141 221 7733Alan Stewart Chairman and Chief Executive's report Strategy The Group aims, through its wholly owned subsidiary, Proton Motor, to become thehighest quality and lowest attainable cost, designer, developer and producer ofhigh volume, environmentally friendly, zero CO2 emission fuel cells and fuelcell hybrid systems to a wide range of customers in the niche "back to base"refuelling transportation and commercial and industrial stationary applicationsmarket sectors and to satisfy customer needs at a price/value relationshipunmatched by competitors. Overview We are pleased to report our results for the year ended 31 December 2006 whichincorporate two months post listing on the Alternative Investment Market of theLondon Stock Exchange ("AIM") and hence, the first part-year of Proton PowerSystems operating as a public company. From a customer and supplier standpoint, the transition from private company toplc and subsequent listing on AIM and re-launch of the Company has givenexisting and potential customers and suppliers the comfort and confidencenecessary for them to recognise the Company as a major and serious player in theniche "back to base" refuelling transportation and commercial and industrialstationary equipment fuel cell markets and to both place and receive furtherorders with/from the Company. Post-listing major focus and priority has been given to the location of suitablepremises within the Starnberg/Munich, Germany travel to work area in which toconsolidate and integrate the five existing small workshops, research anddevelopment, test laboratories and offices and which is capable of futuremodular expansion with minimum disruption to ongoing production. Significant focus and priority has also been given to researching the cost andavailability of suitable research, development test and production facilitiesand equipment which will enable the company to drive down unit costs and improvecompetitiveness. Finance The out-turn for the year was a loss of £1.8m which was marginally better thananticipated and also reflects the write off of the fees associated with the AIMlisting together with the repayment of debt and the commencement of investmentin production and other facilities. It is worth noting that the financial statements have been prepared usingInternational Financial Reporting Standards ("IFRS"), which requires thecombination of Proton Power Systems plc and Proton Motor Fuel Cell GmbH to berecognised as a "reverse acquisition". This has the effect of eliminating thegoodwill which would otherwise arise on acquisition such that the net assets ofthe Group are £2.185m compared to £21.056m net assets of the Company. Whilst theaccounting treatment is correct it does not, in the Board's view, reflect thecommercial reality of the Group's market capitalisation of £25m on Admission toAIM as it does not reflect the value of the goodwill within the Group. Outlook The market for the Company's products is steadily but surely moving from "supplypush" to "demand pull". Post listing, the rate of order intake was some 30% higher than was forecast andthis trend has continued. The Company recently received its first order and letter of intent for thevolume supply of fuel cell modules for Auxiliary Power Units (APUs) which is amajor achievement for the Company and a major event in the fuel cell market, asthe Company believes it is the first volume order scaling up to hundreds ofunits. Customer confidentiality prevents further disclosure at this stage. Unit costs and hence price are absolutely key to the up-scaling of volume andthe Company's strategy of upfront investment in research, development,production and test facilities and people are key to improving costcompetitiveness and achieving cost leadership. On behalf of the Board we would take this opportunity to thank the Proton Motorteam and our advisors for their hard work and effort and our customers andsuppliers for their confidence and support throughout the year. Operating and financial review Group activities The Group has developed a standard hydrogen fuel cell module which is designedto enable it to provide customers with complete hydrogen fuel cells and fuelcell hybrid systems that can be integrated into their product range. The Group'sfuel cell modules can been combined into stacks to meet the power needs ofparticular applications from 5kW to 150kW. 2006 overview 2006 saw the creation of the Company as the holding company of Proton Motor FuelCell GmbH ("Proton Motor") and its listing on the Alternative Investment Marketof the London Stock Exchange. During that process the Company raised £4.9m ofnew finance. In February 2006 Proton Motor entered into a licensing and joint developmentagreement with a US military applications developer in respect of a perpetual,world-wide license for the use of Proton Motor's fuel cell system in militaryapplications. Proton Motor has also entered into other key OEM relationships which arebroadening the application of its fuel cell technology. Of particular note arethe agreements for the supply of: • the first fuel cell bus in the Czech Republic; • a demonstration UPS electric fuel cell system; and • the first fuel cell driven harbour ferry in Hamburg, Germany. The Board has already identified that the future economic exploitation of ProtonMotor's technology is dependent upon improving the process and increasing thescale of production of fuel cells and fuel cell hybrid systems and steps havealready been taken to relocate the Company to premises with sufficient space tointegrate its existing small workshops and R&D and offices under one roof on asingle site capable of modular expansion with minimum/no disruption toproduction. Such a move is the cornerstone for future expansion and reducing thecost of Proton Motor's fuel cells and fuel cell hybrid systems and is imperativeto gain competitive advantage. Strategy Sales strategy Although Proton Motor has been historically reliant on a small number of keycustomers, it has established strong relationships with key OEMs in its targetmarket. The Group anticipates expanding this customer base as volumemanufacturing capability increases. The Directors believe that effectiveexecution with their OEM partners should enable Proton to be recognised as aglobal fuel cell technology platform. Attractive primary markets and applications for the Group's fuel cell system,identified by the Group, generally display the following characteristics: • potential material volume sales;• 'back-to-base' refuelling or stationary applications;• existing power generation technology applications with notable disadvantages, for example: •slow recharge time of battery technology as well as additional working capital infrastructure where continuous battery use is required; •combustion engines emit harmful emissions and noise pollution; and •external electric power is generally delivered by overhead cables, for example trolley buses, and has geographical and logistical limitations; and • need to reduce industrial emissions; Manufacturing strategy To date, the Group's fuel cell modules and fuel cell hybrid systems have beenproduced in relatively small volumes, on a project-by-project basis, largelyutilising a combination of semi-automated processes and manual assembly.However, Proton Motor's technology development has been undertaken with the keyobjective of designing and manufacturing fuel cells and fuel cell hybrid systemsfor volume production. In order to seek to achieve this, the Directors have: • identified target markets and commercial applications; • established key commercial partnerships within these target markets; • designed the Group's fuel cells and fuel cell hybrid systems to meet the engineering requirements for volume manufacturing; • established quality control procedures; • reviewed, risk assessed and secured supplier and component manufacturing relationships; • identified and assessed major commercial factors, such as cost, availability, robustness and durability of components; and •secured and properly documented necessary regulatory and operational approvals for each application. Market and competitive environment The Board believes the growth in the fuel cell market will be determined by thefollowing factors: • the ongoing depletion of fossil fuel reserves; • current and future air quality regulation; • growing industry and consumer demand for alternative sources of energy; • the potential long term competitiveness of the auto and transportation industries; and • energy security concerns. Two initial market segments (forklift trucks and buses) have been identified,which the Board believes, would benefit from the advantages of fuel cell hybridsystems. Forklift trucks In 2003, batteries for use in battery powered mobile manufacturing, warehousingand other ground handling equipment, primarily electric industrial forklifttrucks generated more than US$1.5 billion in worldwide sales. In 2004, theglobal market for sales of material handling vehicles was in excess ofapproximately 700,000 units and it is anticipated that battery poweredforklifts' share of the material handling market will steadily increase. TheDirectors believe that fuel cell conversion could be applicable to approximately20 per cent of this market. The Directors also believe that this battery-poweredsegment offers an immediately addressable market for hybrid electric fuel cellsystems. Buses Global bus production has reached approximately 240,000 units per annum. TheDirectors believe that one of the first markets where a fuel cell hybrid systemcould achieve significant penetration is the local bus sector - those busesoperating in built up areas and moving relatively short distances from base. TheDirectors have estimated that approximately 25 per cent of this market could beaddressed by a fuel cell solution with an average cost per application ofapproximately €25,000 and a total market value of approximately €1.5 billion perannum. Competitive advantages The Directors are confident that Proton's technology brings the followingdistinct combination of characteristics to the power systems market: • zero harmful emissions; • lower fuel consumption than comparable commercial alternatives; • no recharge requirement, unlike batteries; • silent operation; • a standard fuel cell module for use in multiple applications; and • a reliable, robust and durable technology. Future prospects The Group's principal objective is to establish a volume manufacturing facilitybased upon solid sales orders. This will enable the Group to achieve aneconomically viable unit cost for its fuel cells and fuel cell hybrid systems.Initially, the Group will invest in increased operational and salesinfrastructure appropriate to its ongoing growth. The Directors believe that theadvanced stage of commercialisation of the Group's technology, coupled with theGroup's existing partnerships, will enable the business to firmly establishitself as a leading, global, fuel cell and fuel cell hybrid system provider as aresult of: • the standard design of the Group's modular technology, designed to be suitable for a variety of commercial/industrial applications; • a focused strategy on niche industrial applications for market entry with flexibility to allow further access to secondary markets; • over 160 man years of combined experience and application in fuel cell and fuel cell hybrid system technology presently in the Group; • production processes to be developed in parallel with the development of the Group's technology; and • the Group's established quality control processes. Consolidated income statementfor the year ended 31 December 2006 2006 2005 £'000 £'000Continuing operationsRevenue 1,057 264Cost of sales (1,030) (842) -------------------Gross profit/(loss) 27 (578)Other operating income 12 195Administrative expenses (1,836) (436) --------------------Operating loss (1,797) (819)Finance income 8 1Finance costs (11) (15) -------------------Loss for the year attributable to equity holders of theCompany (1,800) (833) =================== Loss per share (expressed as pence per share)Basic (6.8) (3.3) ===================Diluted (6.8) (3.3) =================== Consolidated balance sheetas at 31 December 2006 2006 2005 £'000 £'000Non-current assetsIntangible assets 99 7Property, plant and equipment 55 87Investment in subsidiary - - ------------------------ 154 94Current assetsInventories 21 -Trade and other receivables 956 30Cash and cash equivalents 1,886 17 ------------------------ 2,863 47 ------------------------Total assets 3,017 141 ======================== Capital and reservesOrdinary shares 1,570 93Share premium 4,735 3,153Merger reserve 15,656 -Reverse acquisition reserve (13,862) -Share based payments reserve 147 -Foreign translation reserve 30 -Capital contributions 916 936Retained earnings (7,007) (5,269) ------------------------Total equity 2,185 (1,087) ========================Current liabilitiesTrade and other payables 832 1,228 ------------------------Total liabilities 832 1,228 ========================Total equity and liabilities 3,017 141 ======================== Statement of changes in equity Attributable to equity holders of the Company Share Reverse Based Capital Share Share Merger Acquisition Payments Translation Contribution Retained Total Capital Premium Reserve Reserve Reserve Reserve Reserve Earnings Equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Balance at1 January 57 2,692 - - - - 963 (4,563) (851) 2005 Loss for the - - - - - - - (833) (833)yearCurrencytranslationdifference (1) (71) - - - 23 (27) 99 23 Proceedsfrom share issues 37 537 - - - - - - 574 --------------------------------------------------------------------------------------------------------Balance at31 December2005 93 3,158 - - - 23 936 (5,297) (1,087) --------------------------------------------------------------------------------------------------------- Balance at1 January 2006 93 3,158 - - - 23 936 (5,297) (1,087) Loss forthe year - - - - - - - (1,800) (1,800) Currencytranslationdifferences (2) (68) - - - 7 (20) 90 7 Share basedpaymentscredit - - - - 147 - - - 147 Proceedsfrom share issues 329 4,924 - - - - - - 5,253 Share issue costs - (335) - - - - - - (335)Reverseacquisition(see below) 1,150 (2,944) 15,656 (13,862) - - - - - -------------------------------------------------------------------------------------------------------- Balance at31 December 2006 1,57 4,735 15,656 (13,862) 147 30 916 (7,007) 2,185 ======================================================================================================== Share premium account On Admission to the Alternative Investment Market of the London Stock Exchangethe Company issued 6,190,863 shares at 80p, generating £4,952,690. Costsdirectly associated with the issue of the new shares totalled £335,000 and havebeen set off against the premium generated on issue of new shares. Merger reserve The merger reserve of £15,656,000 arises as a result of the acquisition ofProton Motor Fuel Cell GmbH during the year. The merger reserve represents thedifference between the nominal value of the share capital issued by the Companyand their fair value at 31 October 2006, the date of the acquisition. Reverse acquisition reserve The reverse acquisition reserve arises as a result of the method of accountingfor the acquisition of Proton Motor Fuel Cell GmbH by the Company. In accordancewith IFRSs the acquisition has been accounted for as a reverse acquisition. Cash flow statementfor the year ended 31 December 2006 2006 2005 £'000 £'000Cash flows from operating activitiesNet cash used in operations (2,299) (844)Interest received 6 -Interest paid (60) (13) --------------------Net cash used in operating activities (2,353) (857) ====================Cash flows from investing activitiesCapital contribution to subsidiary - -Cost of acquisition of subsidiary (138) -Purchase of intangible assets (98) -Purchase of tangible assets (9) (55) --------------------Net cash used in investing activities (245) (55) ====================Cash flows from financing activitiesProceeds from issue of share capital 3,644 574Increase in loan balances 1,195 249Loan repayments (372) -Reduction in other financial assets - 75 --------------------Net cash generated from financing activities 4,467 898 =====================Net increase/ (decrease) in cash and cash equivalents 1,869 (14)Opening cash and cash equivalents 17 31 --------------------Closing cash and cash equivalents 1,886 17 ==================== Cash generated from operating activities 2006 2005 £'000 £'000 Loss for the period (1,800) (833)Adjustments for:Depreciation and amortisation 44 115Negative goodwill credit (198) -Interest income including loan waivers (57) (189)Interest expenses 60 13Share based payment 147 - --------------------Operating loss before changes in net working capital (1,804) (894)Inventories (21) -Receivables (454) 88Payables (20) (38) --------------------Net cash used in operations (2,299) (844) ==================== Loans were received during the year of £1.195 million. On 31 October 2006,£1.045 million of the loans outstanding was converted into ordinary shares at80p per share and the balance was repaid. Notes to the financial statements 1. Basis of preparation The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS) as adopted by the EuropeanUnion, International Financial Reporting Interpretations Committee (IFRIC)interpretations and those parts of the Companies Act 1985 applicable tocompanies reporting under IFRS. The accounting policies are set out in the full annual financial statements andare consistent with those included in the Admission Document. The financial information included in this document does not constitutestatutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial information is derived from the consolidated financial statementsfor the year ended 31 December 2006. Proton Power Systems Plc has not previouslyprepared statutory financial statements. The financial statements for 2006 onwhich the auditors issued an unqualified report which did not contain astatement under Section 237 (2) or (3) of the Companies Act 1985 were approvedby the Board of Directors on 19 June 2007, subject to clarification of oneaccounting issue resolved on 22 June2007, and will be delivered to the Registrarof Companies in due course. The comparative figures for 2005 represent theaccounts of the legal subsidiary and have been included in these financialstatements on a proforma basis. The Board of Proton Power Systems plc approved the release of this preliminaryannouncement on 22 June 2007. This information is provided by RNS The company news service from the London Stock Exchange