Proton Mtr Pwr Regulatory News (PPS)

Proton Motor Power Systems plc

("Proton", the "Company" or the "Group")

Final Results

Proton Motor Power Systems plc (AIM: PPS), the designer, developer and producer of fuel cells and fuel cell electric hybrid systems with a zero carbon footprint, announces its audited results for the year ended 31 December 2020.

Highlights - Financial:

- Sales in 2020 of £1.893m, when compared to the 2019 sales figure of £0.769m, saw an annual increase of 146%. Sales performance included deliveries to the stationary, mobile and maritime sectors.

- Excluding the impact of the embedded derivative together with exchange losses, the operating loss in 2020 was £7.128m (2019: £7.151m) which was in line with the Company's budgeted expectations. The movement relating to the embedded derivative is a non-operating, non-cash item, required by IFRS financial reporting, which is based on gauging the potential effects of partial convertible interest on loan financing.

- Cash burn from operating activities decreased during the year to £4.7m (2019: £6.4m) despite the increased level of activities to deliver the sales pipeline. Cash flow is the Company's key financial performance target and the objective remains to achieve a positive cash flow in the shortest time possible. Current contracts are quoted with up-front payments reducing reliance on working capital as the Company continues to invest in its manufacturing capability. The cash position at 31 December 2020 was £2.739m (2019: £1.028m).

- As separately announced today, in aggregate, a further €11.9m loan facility has been agreed with SFN Cleantech Investment Ltd and Mr. Falih Nahab to ensure operational financing for the Company into 2022.

Highlights - Operational:

- In Q1 2020, Proton achieved a record quarterly order intake of £5.8m. Total order intake in 2020 amounted to £7.3m. At the date of this announcement, there is a production backlog at sales value amounting to £6.8m. This backlog will result in deliveries of varying configurations of fuel cell systems to customers both in 2021 and 2022.

- 76% of order intake in 2020 and up to the date of this announcement is derived from the stationary sector with other orders being spread across the mobile, maritime and rail sectors.

- The Company entered into a framework agreement with APEX Energy Teterow GmbH to produce ten containerised 100kW fuel cell systems. Apex is constructing Europe's largest grid connected hydrogen plant, planned to deliver more than 300,000 kg of hydrogen per year. Proton's containerised fuel cell systems will provide electricity from the stored hydrogen in future installations at industrial sites and residential complexes.

- Having implemented from the onset all recommended protective measures at its factory in Puchheim, to date Proton has not been affected by COVID-19 and there have been less than five isolated cases of COVID-19 amongst the Company staff. Whilst our staff have to maintain social distancing and other recommended measures to protect themselves against the virus, our factory in Puchheim remains fully open and our production capacity is unaffected, thus being able to focus on manufacturing and delivering the above mentioned order intake. Other effects such as material supply bottlenecks have not been significantly experienced to date.

- On 7 December 2020, the Company announced that it had received the Green Economy Mark Award from the London Stock Exchange.

Dr. Nahab, CEO of Proton, commented: "Although faced with highly challenging trading conditions in 2020, the Company has made significant progress. In the year ahead, we are focused on further progressing the maturity of the Group's technology offer, ramping up production capacity and exploiting the current potential order intake and sales pipeline.

Furthermore, it is anticipated that the significant strengthening of political commitment to hydrogen, as evident in 2020, will contribute to further accentuating the demand for hydrogen related products, such as the fuel cell."

- Ends -

For further information:

Notice of the Company's annual general meeting to be held on 25 June 2021 as a closed meeting due to COVID-19 was sent to shareholders on 2 June 2021. The Company's audited annual report for the year ended 31 December 2020 will be posted to shareholders on 11 June 2021 and a downloadable version of the annual report will be available on the Company´s website (www.protonpowersystems.com) as from the same day.

Chairman's statement

We are pleased to report our results for the year ended 31 December 2020.

Overview:

Proton Motor Power Systems plc (formerly Proton Power Systems plc) has made further progress this year in proving its technology, building on its strategic co-operations and sales pipeline. We have strengthened our organisation to be able to deliver complete power supply solutions. In spite of the COVID-19 backdrop, a further strengthening of industry and consumer demand for alternative sources of energy was evident in the year. Proton's technology offer continues to mature to remain aligned with this growing demand and supports the continuing commercialisation of the Group. This is evidenced by the record order intake in Q1 2020 and the potential sales order and production pipeline is strong.

Highlights - Financial:

- Sales in 2020 of £1.893m, when compared to the 2019 sales figure of £0.769m, saw an annual increase of 146%. Sales performance included deliveries to the stationary, mobile and maritime sectors.

- Excluding the impact of the embedded derivative together with exchange losses, the operating loss in 2020 was £7.128m (2019: £7.151m) which was in line with the Company's budgeted expectations. The movement relating to the embedded derivative is a non-operating, non-cash item, required by IFRS financial reporting, which is based on gauging the potential effects of partial convertible interest on loan financing.

- Cash burn from operating activities decreased during the year to £4.7m (2019: £6.4m) despite the increased level of activities to deliver the sales pipeline. Cash flow is the Company's key financial performance target and the objective remains to achieve a positive cash flow in the shortest time possible. Current contracts are quoted with up-front payments reducing reliance on working capital as the Company continues to invest in its manufacturing capability. The cash position at 31 December 2020 was £2.739m (2019: £1.028m).

- As separately announced today, in aggregate, a further €11.9m loan facility has been agreed with SFN Cleantech Investment Ltd and Mr. Falih Nahab to ensure operational financing for the Company into 2022.

Highlights - Operational:

- In Q1 2020, Proton achieved a record quarterly order intake of £5.8m. Total order intake in 2020 amounted to £7.3m. At the date of this announcement, there is a production backlog at sales value amounting to £6.8m. This backlog will result in deliveries of varying configurations of fuel cell systems to customers both in 2021 and 2022.

- 76% of order intake in 2020 and up to the date of this announcement is derived from the stationary segment with other orders being spread across the mobile, maritime and rail sectors.

- The Company entered into a framework agreement with APEX Energy Teterow GmbH to produce ten containerised 100kW fuel cell systems. Apex is constructing Europe´s largest grid connected hydrogen plant, planned to deliver more than 300,000 kg of hydrogen per year. Proton's containerised fuel cell systems will provide electricity from the stored hydrogen in future installations at industrial sites and residential complexes.

- Having implemented from the onset all recommended protective measures at its factory in Puchheim, to date Proton has not been affected by COVID-19 and there have been less than five isolated cases of COVID-19 amongst the Company staff. Whilst our staff have to maintain social distancing and other recommended measures to protect themselves against the virus, our factory in Puchheim remains fully open and our production capacity is unaffected, thus being able to focus on manufacturing and delivering the above mentioned order intake. Other effects such as material supply bottlenecks have not been significantly experienced to date.

- On 7 December 2020, the Company announced that it had received the Green Economy Mark Award from the London Stock Exchange.

Board and Governance:

The Proton Motor Power Systems plc Board is functioning well and interacting effectively with executive management contributing a good balance of skills and experience. The corporate governance framework which the Group operates, including board leadership and effectiveness, board remuneration, and internal control, is based upon practices which the Board believes are proportionate to the size, risks, complexity and operations of the business and is reflective of the Group's values. Of the two widely recognised formal codes, the Board decided in 2018 to adhere to the QCA Corporate Governance Code ("QCA Code") for small and mid-size quoted companies (revised in April 2018 to meet the new requirements of AIM Rule 26). Within the context of corporate and social responsibility, the Group has a continuing commitment to act ethically, to comply with all relevant regulations, and to contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. This is continuously monitored by the executive management and evaluated annually by the Chairman, as it is regarded that motivated and committed staff members will provide maximum value to the Group's activities.

Outlook

In the year ahead, the Company is focused on progressing the maturity of the Group's technology offer, ramping up production capacity to match increasing demand and exploiting the current potential order intake pipeline. The current outlook looking into 2021 is more optimistic than was prevalent at the end of 2019.

I personally thank all our customers who believe in us, our team of committed employees and our shareholders who have the vision to invest in our mission.

Consolidated income statement

for the year ended 31 December 2020

Consolidated statement of comprehensive income

for the year ended 31 December 2020

Group and Company balance sheets

as at 31 December 2020

Group and Company statements of changes in equity

for the year ended 31 December 2020

Statements of changes in equity - Company

Share premium

Costs directly associated with the issue of the new shares have been 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 of Proton Motor Fuel Cell GmbH and represents the difference between the nominal value of the share capital issued by the Company and its fair value at 31 October 2006, the date of the acquisition.

Reverse acquisition reserve

The reverse acquisition reserve (Group only) arises as a result of the method of accounting for the acquisition of Proton Motor Fuel Cell GmbH by the Company. In accordance with IFRS 3 the acquisition has been accounted for as a reverse acquisition.

Share option reserve

The Group operates an equity settled share-based compensation scheme. The fair value of the employee services received for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted. At each balance sheet date the Company revises its estimate of the number of options that are expected to vest. The original expense and revisions of the original estimates are reflected in the income statement with a corresponding adjustment to equity. The share option reserve represents the balance of that equity.

Group and Company statements of cash flows 

for the year ended 31 December 2020

Notes to the financial statements

1. General information

Proton Power Systems plc (the "Company") and its subsidiaries (together the "Group") design, develop, manufacture and test fuel cells and fuel cell hybrid systems as well as the related technical components. The Group's design, research and development and production facilities are located in Germany.

The Company is a public limited liability company incorporated in England and Wales, and domiciled in the UK. The address of its registered office is: St Ann's Wharf, 112 Quayside, Newcastle upon Tyne, NE1 3DX. The Company's initial public offering took place on AIM on 31 October 2006 and its shares are listed on this exchange.

Directors

The Directors who held office during the year and up to the date of approval of this announcement were as follows:

Dr. Faiz Nahab Chief Executive1,3

Helmut Gierse Chairman2

Sebastian Goldner Chief Technical Officer and Chief Operations Officer

Roman Kotlarzewski Chief Financial Officer and Company Secretary4,6

Manfred Limbrunner Director Sales and Marketing5

1 Chairman of the Remuneration Committee.

2 Chairman of the Audit Committee.

3 Chairman of the Nominations Committee.

4 Member of the Remuneration Committee.

5 Member of the Audit Committee.

6 Member of the Nominations Committee.

2. Summary of significant accounting policies

The Board approved this announcement on 09 June 2021. The financial information included in this announcement does not constitute the Group´s statutory accounts for the years ended 31 December 2020 or 31 December 2019. Statutory accounts for the year ended 31 December 2019 have been delivered to Companies House. The statutory accounts for the year ended 31 December 2020 will be delivered to Companies House accordingly.

Basis of preparation

The consolidated financial statements of the Group and the financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to those companies under IFRS.

The consolidated financial statements and the financial statements of the Company have been prepared under the historical cost convention and in accordance with IFRS interpretations (IFRS IC) except for embedded derivatives which are carried at fair value through the income statement and on the basis that the Group continues to be a going concern.

Until such time as the Group achieves operational cash inflows through becoming a volume producer of its products to a receptive market it will remain dependent on its ability to raise cash to fund its operations from existing and potential shareholders and the debt market. The Group has historically been dependent on the continuing financial support of its main investor, SFN Cleantech Investment Ltd to meet its day-to-day working capital requirements. The Group has loans with SFN Cleantech Investment Ltd of €2.4m and €20.2m and also a loan facility with Mr. Falih Nahab of €44.7m. The repayment date for all loans was extended during the year to 31 December 2025. As such, the loans are held as non-current borrowings in the financial statements.

Subsequent to the 2020 year end, it was agreed that the loan facility of €20.2m, of which €18.4m was drawn down at the year end, would be increased by a further €5.9m to €26.1m.

The Group also has a loan facility with Mr. Falih Nahab of €44.7m, of which €43.5m was drawn down at the year end. Subsequent to the 2020 year end, it was agreed that this loan facility would be increased by a further €5.9m to €50.6m.

Cash flow forecasts demonstrate that the committed facilities from Mr Falih Nahab enable the Company and the Group to meet its cash requirements for the period up to at least June 2022. The Company and the Group are also able to defer discretionary spend during this period to provide further cash flow headroom, should this be required.

At this point in time, there has been no indication of circumstances which would lead to Mr Falih Nahab withdrawing this support. Mr Falih Nahab, is a private individual based in Jordan and as such is unable to produce financial information to support his ability to fund the debt facility. Mr Falih Nahab is a related party.

Due to the lack of available financial information, the Directors are unable to confirm that Falih Nahab has the ability to provide such support. This condition indicates the existence of a material uncertainty which may cast significant doubt upon the Group and the Company's ability to continue as a going concern. However, the Directors firmly believe that the Group and the Company remain a going concern on the grounds that Falih Nahab has supported the Group and the Company in recent years and that funding has been agreed by Falih Nahab for at least the next 12 months.

The financial statements do not include the adjustments that would result if the Group or the Company was unable to continue as a going concern.

3. Critical accounting estimates and judgements

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below.

Recognition of development costs

Self developed intangible assets are recognised where the Group can estimate that it is probable that future economic benefits will flow to the entity. See Note 12.

Impairment of goodwill

The carrying value of goodwill must be assessed for impairment annually, or more frequently if there are indications that goodwill might be impaired. This requires an estimation of the value in use of the cash generating units to which goodwill is allocated. Value in use is dependent on estimations of future cash flows from the cash generating unit and the use of an appropriate discount rate to discount those cash flows to their present value.

Classification and fair value of financial instruments

The Group uses judgement to determine the classification of certain financial instruments, in particular convertible loans advanced during the year. Judgement is applied to determine whether the instrument is a debt, equity or compound instrument and whether any embedded derivatives exist within the contracts.

Judgements have been made regarding whether the conversion feature meets the "fixed for fixed" test in each instrument. In the case of each instrument it is deemed it is not met on the basis that the loan is in Euros and shares are in Sterling.

The Group uses valuation techniques to measure the fair value of these financial instruments. In applying these valuation techniques, management use estimates and assumptions that are, as far as possible, consistent with observable market data. Where applicable market data is not observable, management uses its best estimate about the assumptions that market participants would make. These

estimates may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

The Group uses judgement to determine the classification of certain financial instruments, in particular convertible loans advanced during the year. Judgement is applied to determine whether the instrument is a debt, equity or compound instrument and whether any embedded derivatives exist within the contracts.

Judgements have been made regarding whether the conversion feature meets the "fixed for fixed" test in each instrument. In the case of each instrument it is deemed it is not met on the basis that the loan is in Euros and shares are in Sterling.

The Group uses valuation techniques to measure the fair value of these financial instruments. In applying these valuation techniques, management use estimates and assumptions that are, as far as possible, consistent with observable market data. Where applicable market data is not observable, management uses its best estimate about the assumptions that market participants would make. These

estimates may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

Determining residual values and useful economic lives of intangible fixed assets and property, plant & equipment

The Group depreciates property, plant & equipment and amortises intangible fixed assets over their estimated useful lives. The estimation of the useful lives of assets is based on historic performance as well as expectations about future use and therefore requires estimates and assumptions to be applied by management.

Judgement is applied by management when determining the residual values of property, plant & equipment and intangible fixed assets. When determining the residual value management aim to assess the amount that the Group would currently obtain for the disposal of the asset, if it were already of the condition expected at the end of its useful economic life.

The carrying amount of group intangible fixed assets at the reporting date was £64k (2019: £31k) and the carrying amount of group property, plant & equipment at the reporting date was £1,484k (2019: £1,406k).

Inventory provisions

In accordance with IAS 2 the Group regularly reviews its inventory to ensure it is carried at the lower of cost or net realisable value. The management constantly reviews slow moving and obsolete items arising from changes in the product mix demanded by customers, reductions in overall volumes, supplier failures and strategic resourcing decisions. Obsolescence provisions are calculated based on current market values and future sales of inventories. If this review identifies significant levels of obsolete inventory, this obsolescence is charged to the income statement as an impairment. The total inventory provision included in the balance sheet at the reporting date was £12k (2019: £266k).

Share-based payments

Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

4. Segmental information

The Group has adopted the requirements of IFRS8 'Operating segments'. The standard requires operating segments to be identified on the basis of internal financial information about components of the Group that are regularly reviewed by the Chief Operating Decision Maker ('CODM') to allocate resources to the segments and to assess their performance. The CODM has been identified as the Board of Directors. The Board considers the business from a product/services perspective.

Based on an analysis of risks and returns, the Directors consider that the Group has only one identifiable operating segment: green energy. All property, plant and equipment is located in Germany.

Revenue from external customers

Sales to Apex and E-Trucks Europe represented 42.5% of the Group's revenue in 2020 (2019: Alitkan and Danmedics 46.1%).

The results as reviewed by the CODM for the only identified segment are as presented in the financial statements with the exception of the 2020 revaluation loss (2019 loss) on the fair value of the embedded derivative of £386,870k (2019: £183,899k) and the associated impact on the balance sheet.

5. Loss for the year before tax

6. Auditors' remuneration

7. Staff numbers and costs

The monthly average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:

The aggregate payroll costs of these persons were as follows:

There are no staff, or direct wages specific to the Company. Share based payments charge to the non-executive and executive Directors of the Company is £188k (2019: £27k).

Share based payments

The Group has incurred an expense in respect of shares and share options during the year issued to employees as follows:

The cost of the share options granted during 2020 to the Group is being charged over a two year period from the date of grant at which point they become exercisable.

At 31 December 2020 the Group operated a single share option scheme ("SOS"). The SOS allows the Company to grant options to acquire shares to eligible employees. Options granted under the SOS are unapproved by HM Revenue & Customs. The maximum number of shares over which options may be granted under the SOS may not be greater than 15 per cent of the Company's issued share capital at the date of grant when added to options or awards granted in the previous 10 years. The exercise of options can take place at any time after the second anniversary of the date of grant. Options cannot, in any event, be exercised after the tenth anniversary of the date of grant.

All share-based employee remuneration will be settled in equity. The Group has no legal or constructive obligation to repurchase or settle options. Share options and weighted average exercise price are as follows for the reporting periods presented:

The fair values of options granted were determined using the Black-Scholes valuation model. Significant inputs into the calculation include a weighted average share price and exercise prices. Furthermore, the calculation takes into account future dividends of nil and volatility rates of between 50% and 98%, based on expected share price. Risk-free interest rate was determined between 0.640% and 5.125% for the various grants of options. It is assumed that options granted under the SOS have an average remaining life of 5 months (2019:5 months).

The underlying expected volatility was determined by reference to the historical data, of the Company. No special features inherent to the options granted were incorporated into measurement of fair value.

8. Tax

9. Finance income

10. Finance costs

11. Loss per share

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of Ordinary shares in issue during the year.

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary shares, share options and convertible debt; however, these have not been included in the calculation of loss per share because they are anti-dilutive for these periods. 

Self-developed intangible assets in the amount of £56,000 (2019: £4,000) are recognised in the reporting year, because the prerequisites of IAS 38 have been fulfilled.

Amortisation and impairment charges are recognised within administrative expenses.

As self-developed intangible assets are not material to the Group financial statements no impairment test has been performed.

There are no individually significant intangible assets.

The company does not hold any intangible assets.

13. Property, plant and equipment - Group

The company does not hold any property, plant and equipment.

14. Right-of-use assets - Group

The company does not hold any right-of-use assets.

15. Fixed asset investments

In Q3 2019 Proton signed a joint venture agreement to establish Nexus-e GmbH, a company registered in Achern, Germany. Proton owns 50.00% of the share capital of Nexus-e GmbH.

On 31 October 2006 the Company acquired the entire share capital of Proton Motor Fuel Cell GmbH, a company incorporated in Germany. The cost of investment comprises shares issued to acquire the Company valued at the listing price of 80p per share, together with costs relating to the acquisition and subsequent capital contributions made to the subsidiary.

Following a review of the Company's assets the Board has concluded that there are sufficient grounds for its investment in the subsidiary undertakings to be subject to an impairment review under IAS 36. In arriving at the charge in the year of £6,622,000 (2018: £6,257,000) the Board has determined the recoverable amount on a value in use basis using a discounted cash flow model.

16. Inventories