Released: 23/09/2009
com:20090923:RnsW4908Z
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RNS Number : 4908Z
Ceres Power Holdings plc
23 September 2009
23 September 2009
Ceres Power Holdings plc
("Ceres", "Ceres Power", or "the Group")
Preliminary results for the year ended 30 June 2009
Ceres Power Holdings plc, the AIM listed alternative energy company, announces
its preliminary results for the year ended 30 June 2009.
Highlights
* Alpha phase of residential CHP programme with British Gas successfully
completed
* £2 million Alpha phase milestone payment received from British Gas in June
2009
* £2.5 million funded development and trialling programme secured with Calor
Gas for LPG CHP
* Volume call-off order from Calor for 20,000 LPG fuelled CHP products
* 50,000 sq. ft. manufacturing facility secured and fitted out for fuel cell
mass production
* £23 million in net cash and financial assets at 30 June 2009
* Former FTSE 100 Finance Director appointed as Non-Executive Director and
Audit Committee Chairman
Key Achievements
* Grid-connected 1kW CHP products successfully tested on mains natural gas
* Alpha phase trialling and performance tests witnessed and data independently
verified
* Beta phase of CHP programme commenced with design and procurement activities
under way
* Fuel cell mass manufacturing equipment procured and installation under way
* Volume supply agreements for key balance of plant components in place
* Volume CHP assembly agreement entered into with Dutch heating appliance group
Daalderop
Results Summary
2009 2008
£'000 £'000
Revenue 952 722
Other operating income 492 845
Operating loss (9,290) (6,364)
Finance income 967 974
Loss for the financial year (7,978) (4,990)
Loss per share (11.94)p (7.98)p
Net cash and financial assets 23,009 27,476
Dr Brian Count, Chairman, commented:
"I am pleased to report that Ceres Power has successfully completed the Alpha
phase of the CHP programme with British Gas in line with the Company's published
roadmap. Together with the fuel cell mass manufacturing facility being
commissioned in Horsham, this underpins the Group's progress towards
commercialisation of Ceres Power's CHP products in the UK."
For further information contact:
Ceres Power Holdings plc Tel. +44 (0)1293 400 404
Peter Bance, Chief Executive
Rex Vevers, Finance Director
Morgan Stanley Tel. +44 (0)20 7425 8000
Jon Bathard-Smith/Alastair Walmsley
Kreab Gavin Anderson Tel. +44 (0)20 7074 1800
Ken Cronin/Deborah Walter/Robert Speed
Chairman's Statement
Business overview
I am pleased to report on the financial results and achievements of the Group
for what has been another successful year. Over the last twelve months the Group
has achieved the key milestones and priorities that we set out and communicated
to the market last year. In particular, the Group has successfully completed the
Alpha phase of the Combined Heat & Power ('CHP') programme with British Gas,
signed a residential CHP commercial contract with Calor Gas Limited and secured
a facility for the mass manufacture of fuel cells. Together, these represent
major steps forward in the development of a mass manufacturing capability and
progress towards commercialisation of the Ceres Power CHP product.
The successful completion of the Alpha milestone means that we are now
addressing the challenges of the Beta phase, which is focused on engineering
product refinements and validation of the CHP product's performance and
reliability in consumers' homes.
Despite the very challenging global economic climate, the Group has delivered
another year of strong growth in commercial revenues reflecting the successful
completion of key technical milestones in accordance with the Group's
go-to-market roadmap. During the year, the Group made significant investments in
plant and machinery and human resources, increasing the underlying operating
expenditure. This will continue as the Group scales-up operations towards CHP
product launch in volume. As at 30 June 2009, the Group held £23 million in net
cash and financial assets.
Support for cleaner technologies increases
Since I reported to you last year, a number of major economies around the world
have launched significant fiscal incentive programmes designed to stimulate the
development and deployment of low-carbon technologies; in the United States
alone, this programme is expected to be worth in excess of US$60 billion. This
is a very welcome development and recognition that addressing carbon emissions,
especially in the residential sector, is an essential part of the solution to
climate change.
One such key green incentive is the feed-in tariff ('FIT') - a per-energy unit
incentive payment for small-scale low-carbon electricity generation. FIT schemes
are already widely used across the European Union where they have been used to
encourage the deployment of small-scale distributed electricity generation,
thereby avoiding the generation, transmission and distribution losses of
centralised power generation. There is also evidence that installation of
small-scale generating assets by consumers results in their greater
understanding and more efficient use of energy.
In July 2009, the UK Government announced that it will implement a FIT for
residential microgeneration devices, including CHP fed by non-renewable fuels
such as natural gas and LPG. The scheme is to be implemented in April 2010 and
has the potential to substantially reduce the energy bills of consumers
installing a Ceres CHP product. If the FIT is capitalised as an upfront payment,
this could reduce or even eliminate the price premium compared to a condensing
boiler, further emphasising the compelling consumer proposition.
Ceres fuel cell CHP is one of the lowest cost ways to reduce the carbon
footprint of homes and utilises the existing installation, service and
maintenance infrastructure. Large-scale deployment of the technology can make a
significant contribution towards meeting the Government's 2020 emissions
reductions targets.
People
The Board was pleased to welcome Jonathan Watkins as Chief Operating Officer,
who joined the Ceres executive management team, bringing considerable experience
in running global, technology-led high volume manufacturing operations. We are
also very pleased to report that Phil Whalen joined Ceres Power as Technology
Director, with extensive experience leading global technology teams across a
variety of technologies, including engineered ceramics and control systems.
Prior to joining Ceres Power, Phil was the Chief Technology Officer of Invensys
plc and previously Director of Technology Strategy at Honeywell. Together with
the recruitment of around 30 new staff, we are confident that we have the
organisation and skills to deliver our plans.
We would like to thank Andrew Baker, who left the Group in December 2008, for
his contribution to the Board, and Nigel Brandon, who steps down from the Ceres
executive management team to take on the role of Chief Scientific Adviser to the
Board.
We were delighted to appoint John Nicholas as Non-Executive Director and
Chairman of the Audit Committee in February 2009. John's broad business
background and previous experience as a FTSE 100 Group Finance Director further
strengthens the Board as the Group scales-up for mass market delivery of its
products. We would also like to congratulate Sir David Brown on his appointment
as Senior Independent Director of Ceres Power.
On behalf of the Board I would like to record our thanks to all of our employees
who, through their hard work and commitment, have enabled the Group to meet its
challenging targets over the past year.
Brian Count
Chairman
Chief Executive's Review
Business review
I am pleased to report that Ceres Power has had another successful year despite
the challenging business environment. The Group has made substantial progress in
key areas and successfully delivered all of the objectives that we set out in
last year's Annual Report.
Residential CHP products
In May 2009, the Group announced the successful design, build and test of 1kW
grid-connected Alpha Combined Heat and Power ('CHP') products meeting all of the
deliverables under the Alpha phase of the residential CHP programme with British
Gas. This important milestone was achieved within the timescale set out in the
roadmap presented to the market in June 2008.
The Alpha CHP products were tested on mains natural gas under representative
operating conditions. During testing, the units produced sufficient electricity
to meet most of a typical UK home's power requirements and demonstrated the
seamless export and import of power to and from the grid, as well as producing
the heat required to meet all of a home's central heating and hot water needs.
Key tests were witnessed and data verified by British Gas and an independent gas
appliance testing company appointed by British Gas. All of the Alpha CHP product
requirements including performance, size, weight and regulatory compliance were
successfully achieved. Completion of the Alpha phase triggered the £2 million
Alpha milestone payment received in June 2009. I would like to thank all of the
employees of Ceres for their hard work and commitment in delivering this
significant milestone.
The Beta phase of the British Gas CHP programme is now under way and includes a
sequence of activities relating to the design, procurement, build and trialling
of Beta CHP units. The validation of in-field product performance and
reliability including consistently high quality installation, service and
maintenance, is a critical element of this phase. The refinements identified for
product and manufacture from the Alpha phase testing have been incorporated in
the Beta design phase. The Group is in the process of procuring the necessary
components for testing and incorporation into the build of the initial batch of
Beta field trial units. The Beta units will be manufactured off representative
volume-capable machines and processes and use components sourced from the
Group's global supply chain.
Extensive work has been conducted in conjunction with British Gas engineers to
select a representative sample of homes across the country for inclusion in the
Beta field trials programme. The in-home surveys and site selection have been
completed and work is under way to install the necessary monitoring equipment to
capture and analyse the relevant data from the trials including room
temperature, heat usage, home occupancy and electricity consumption. In addition
to providing valuable in-field product validation data, the trials will enable
the CHP control and electronics operating systems to be optimised using real
world in-home data across a range of housing market segments. The trials will
also be an opportunity to establish and optimise the associated service offering
including the capture of valuable consumer feedback.
Manufacturing
In March 2009, the Group secured a lease on a 50,000 sq. ft. (5,000 m2) factory
for the volume manufacture of fuel cells and assembly of Fuel Cell Modules. The
factory is located in Horsham, South East England, within 10 miles of the
Group's existing facilities in Crawley. The factory fit-out was completed in
July 2009 and it is anticipated that the installation and commissioning of
volume manufacturing machines will be completed during Q3 2009 and initial
manufacturing operations will commence during Q4 2009. As part of the Group's
de-risking strategy, the core mass manufacturing machines and processes being
installed in the Horsham factory have been trialled in the Group's pilot
manufacturing facility in Crawley. The Horsham facility's manufacturing output
will be for low volume Beta units in 2009 and into 2010 for sheltered field
trials under the programme with British Gas. Additional equipment will be
installed from 2010 to deliver the higher volumes required for commercial field
trials and in preparation for volume launch with British Gas in H2 2011.
Ceres has entered into a long-term supply agreement with Daalderop BV, a
well-established domestic heating appliance manufacturer. The company, based in
the Netherlands, has a strong presence in the Benelux region and also supplies
the German and UK markets. The boiler assembly will be manufactured in volume by
Daalderop in accordance with Ceres Power's complete CHP product design.
Daalderop provides Ceres with a cost-effective volume condensing boiler assembly
capability, brings supply chain relationships for the standard boiler
components, extensive gas appliance engineering expertise, a strong brand and
established channels into the European market. We are delighted to have secured
this long-term agreement with Daalderop.
To support the on-going product engineering and manufacturing scale-up
activities, Ceres is continuing to invest significant time and resources across
its global network of supply chain partners for raw materials, engineered
balance of plant components, manufacturing process machinery and test
equipment.
Operations
During the year the Group has made significant investments in both capital
equipment and also human capital. The Group has recruited experienced engineers
to support the scale-up for the Beta and Gamma phases of the British Gas
programme and towards market launch. The Group has recruited approximately 30
new staff in manufacturing, product development, supply chain management and
product testing. This investment will help ensure that the Group delivers a
cost-effective and reliable CHP product.
The Group is also investing in the infrastructure to support the planned growth
of the business. Group-wide Enterprise Resource Planning and Quality systems are
being implemented and we have brought in-house a dedicated personnel function to
support and develop the growing workforce. The Group continues to make
significant investments in the development, capture and management of a
substantial intellectual property ('IP') portfolio including patents, trademarks
and know-how. The Group has unique IP and it is essential that this continues to
be well protected and the Group maximises value through its commercial
exploitation.
Commercial
In January 2009, the Group secured a major new development, supply and
distribution agreement with Calor Gas Limited ('Calor'). Under this agreement,
Calor is paying £2.5 million towards the costs of developing and trialling
residential CHP products operating on liquefied petroleum gas ('LPG'). Calor
will make milestone payments to Ceres during the development and trialling
phase, and has already made an up-front payment of £1 million. Ceres has also
secured a volume call-off order from Calor for 20,000 Ceres LPG CHP products in
aggregate over a five-year period for the UK market. Subject to successful
completion of the development and trialling phase, and agreeing standard
commercial terms, Ceres Power will sell the Ceres LPG CHP product to Calor for
the UK market on an exclusive basis for a five-year period, anticipated to begin
in 2012.
Ceres and Calor intend to maximise sales of the Ceres LPG CHP product by
addressing both the existing LPG customer base and also the substantial number
of homes and small businesses using oil, solid fuel or conventional electrical
heating (more than two million in the UK alone). Calor is the UK's leading LPG
supplier with over 70 years experience and its parent company, SHV Gas, is the
world's largest distributor of LPG with operations spanning 27 countries over
three continents. Ceres Power retains the right to supply and distribute Ceres
LPG CHP products anywhere in the world outside the UK and the right to exploit
its innovative fuel cell technology in other applications globally, including in
the UK. There are more than 100 million properties without access to mains gas
across Europe, representing a substantial growth opportunity for Ceres.
Ceres Power's unique fuel cell technology provides significant opportunities for
residential CHP products globally including Europe, Asia and North America. The
Group is exploring options in all these geographies, with particular near-term
focus on Europe given the potential synergies and similarities with the CHP
product developed for the UK market.
Financial
During the last 12 months the global financial system has been under extreme
pressure. As we reported in the interim results, the Group's Board-approved
treasury policy has focused on preserving the Group's capital base by investing
in low-risk, high quality investments. I am pleased to report that this risk
management policy has enabled the Group to avoid any financial investment
losses.
Commercial revenue for the year increased by 32% to £1.0 million (2008: £0.7
million) due to the successful completion of the Alpha phase of the CHP
programme with British Gas and the completion of the contract with EDF Energy
Networks. As noted in the interim results, the first milestone payment of £1.0
million from British Gas in February 2008 has been recognised as revenue spread
over the Alpha phase.
In June 2009, following the completion of the Alpha phase with British Gas, the
Group received the second milestone payment of £2.0 million. During the year the
Group also received the first milestone payment of £1.0 million under the new
commercial contract with Calor. In accordance with the Group's accounting
policy, these up-front cash payments are being recognised as revenue spread
forward over the development and trialling phases of each contract based on the
costs incurred. Other operating income arising from public sector contracts fell
to £0.5 million (2008: £0.8 million).
Operating costs for the year increased by 35% to £10.7 million (2008: £7.9
million). This increase reflects the recruitment of experienced staff in product
engineering, manufacturing and procurement and the expenditure in the supply
chain to co-develop and procure CHP components. Included in operating costs is a
non-cash share-based payments charge of £0.6 million (2008: £0.6 million) which
includes the effect of the new medium-term incentive schemes approved by
shareholders at the AGM in December 2008. Finance income of £1.0 million (2008:
£1.0 million) was in line with the prior year, with the fall in interest
receivable of £0.1 million offset by the increase in fair value of the Company's
investment in short-dated UK Government gilts.
The loss for the financial year rose by 60% to £8.0 million (2008: £5.0 million)
reflecting the costs of the Alpha phase and the investment in scaling-up the
Group's engineering and manufacturing operations ahead of the Beta phase.
The Group's net cash and financial assets fell by £4.5 million (2008: £16.3
million increase) during the year to £23.0 million (2008: £27.5 million). This
reduction primarily arose due to the loss for the financial year of £8.0 million
(2008: £5.0 million), adjusted for non-cash items of £1.5 million (2008: £1.4
million), and the cash investment in property, plant and equipment of £2.1
million (2008: £1.1 million) partly offset by the decrease in working capital of
£3.9 million (2008: £1.2 million). The reduction in working capital has been
driven by the increase in deferred income due to the receipt of milestone
payments of £2.0 million and £1.0 million from British Gas and Calor
respectively and the increase in trade payables relating to the procurement of
plant and machinery due for delivery after the year end.
The Group's liquidity position remains sound with £23.0 million in net cash and
financial assets. All surplus funds are invested in UK Government gilts,
short-term low-risk 'AAA'-rated money market funds and short-term bank
deposits.
Outlook
The Board and senior management are focused on the delivery of our core
residential CHP programmes and on investing in the operational capabilities that
will underpin our future growth. To achieve the Group's core objectives our
priorities for the next 12 months are to:
* commence initial manufacturing operations in the Horsham fuel cell mass
manufacturing facility;
* complete design, procure and build stages of the Beta phase of the CHP
programme with British Gas including formal regulatory certification of the CHP
product;
* conduct testing of mains natural gas Beta CHP units in both sheltered field
trials and initial commercial trials in consumers' homes; and
* secure additional commercial relationships with go-to-market channel partners
internationally.
I look forward to reporting on the delivery of our stated priorities and other
progress over the next 12 months.
Peter Bance
Chief Executive Officer
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2009
2009 2008
Note £'000 £'000
Revenue 952 722
Operating costs (10,734) (7,931)
Other operating income 492 845
Operating loss (9,290) (6,364)
Finance income 967 974
Loss before income tax (8,323) (5,390)
Income tax credit 345 400
Loss for the financial year (7,978) (4,990)
Loss per £0.05 ordinary share expressed in pence per
share:
- basic and diluted 2 (11.94)p (7.98)p
CONSOLIDATED BALANCE SHEET
as at 30 June 2009
2009 2008
Note £'000 £'000
Assets
Non-current assets
Property, plant and equipment 3,243 2,034
Other receivables 81 53
Total non-current assets 3,324 2,087
Current assets
Trade and other receivables 428 492
Current tax receivable 320 400
Financial assets at fair value through profit or loss 5 9,803 -
Cash and cash equivalents 5 13,206 27,476
Total current assets 23,757 28,368
Liabilities
Current liabilities
Trade and other payables (3,664) (1,735)
Derivative financial instruments (28) -
Total current liabilities (3,692) (1,735)
Net current assets 20,065 26,633
Non-current liabilities
Other payables (1,966) (77)
Provisions for other liabilities and charges (30) (13)
Total non-current liabilities (1,996) (90)
Net assets 21,393 28,630
Equity
Share capital 3 3,344 3,337
Share premium account 35,551 35,465
Other reserve 7,463 7,463
Profit and loss account (deficit) (24,965) (17,635)
Total shareholders' equity 21,393 28,630
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2009
2009 2008
Cash flows from operating activities Note £'000 £'000
Cash used in operations 4 (3,900) (3,735)
Income tax received 425 -
Net cash used in operating activities (3,475) (3,735)
Cashflows from investing activities
Purchase of property, plant and equipment (2,088) (1,095)
Purchase of financial assets at fair value through profit (10,000) -
or loss
Finance income received 1,216 923
Net cash used ininvesting activities (10,872) (172)
Cashflows from financing activities
Proceeds from issuance of ordinary shares 93 20,301
Net expenses of shares issued - (81)
Net cash generated from financing activities 93 20,220
Net (decrease) / increase in cash and cash equivalents (14,254) 16,313
Exchange (losses) / gains on cash and cash equivalents (16) 21
(14,270) 16,334
Cash and cash equivalents at beginning of year 27,476 11,142
Cash and cash equivalents at end of year 13,206 27,476
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2009
Share capital Share premium Other reserve Profit and loss account Total
£'000 account £'000 (deficit) £'000
£'000 £'000
At 1 July 2007 2,981 15,594 7,463 (13,250) 12,788
Issue of shares (net of costs) 356 19,864 - - 20,220
Loss for the financial year - - - (4,990) (4,990)
Share-based payments charge - - - 605 605
Share-based remuneration for services - 7 - - 7
At 30 June 2008 3,337 35,465 7,463 (17,635) 28,630
Issue of shares (net of costs) 7 86 - - 93
Loss for the financial year - - - (7,978) (7,978)
Share-based payments charge - - - 648 648
At 30 June 2009 3,344 35,551 7,463 (24,965) 21,393
Notes to the Preliminary Announcement
1 Basis of Preparation
The preliminary announcement for the year ended 30 June 2009 has been prepared
in accordance with International Financial Reporting Standards (IFRS) as adopted
by the European Union as at 30 June 2009. The financial information contained in
this preliminary announcement does not constitute statutory accounts as defined
in Section 434 of the Companies Act 2006. The financial information has been
extracted from the financial statements for the year ended 30 June 2009, which
have been approved by the Board of Directors and on which the auditors have
reported without qualification. The financial statements will be delivered to
the Registrar of Companies after the AnnualGeneral Meeting. The financial
statements for the year ended 30 June 2008, upon which the auditors reported
without qualification, have been delivered to the Registrar of companies.
2 Loss per share
Basic and diluted loss per £0.05 ordinary share are calculated by dividing the
loss for the financial year attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the year. Given the
losses during the year, there is no dilution of losses per share in the year
ended 30 June 2009 or in the previous year.
The loss for the financial year ended 30 June 2009 was £7,978,000 (2008:
£4,990,000) and the weighted average number of £0.05 ordinary shares in issue
during the year ended 30 June 2009 was 66,813,275 (2008: 62,548,262).
3 Share capital
2009 2008
Number £'000 Number £'000
Authorised
Ordinary shares of £0.05 each 100,000,000 5,000 100,000,000 5,000
Allotted, called up and fully paid
Ordinary shares of £0.05 each 66,874,075 3,344 66,740,675 3,337
During the year the Company issued 7,700 ordinary shares of £0.05 each on the
exercise of employee share-options for cash consideration of £5,088, and 125,700
ordinary shares of £0.05 each on the exercise of warrants for cash consideration
of £87,990.
4 Cash used in operations
2009 2008
£'000 £'000
Loss before income tax (8,323) (5,390)
Adjustments for:
Fair value gain on UK Government gilts (119) -
Other finance income (848) (974)
Depreciation of property, plant and equipment 879 770
Share-based payments charge 648 605
Share-based remuneration for services - 7
Operating cash flows before movements in working capital (7,763) (4,982)
Decrease in trade and other receivables 28 167
Increase in trade and other payables 3,818 1,075
Increase in provisions 17 5
Decrease in working capital 3,863 1,247
Cash used in operations (3,900) (3,735)
5 Net cash and financial assets
2009 2008
£'000 £'000
Cash at bank and in hand(1) 688 (70)
Financial institutions - Money Market Funds 9,518 27,546
Financial institutions - Short Term Bank Deposits 3,000 -
13,206 27,476
UK Government gilts (financial assets at fair value 9,803 -
through profit or loss)
23,009 27,476
(1) The negative cash at bank and in hand balance at 30 June 2008 was due to
timing differences relating to unpresented cheques.
The Group typically places surplus funds into bank deposits of durations of up
to three months, pooled money market funds and UK Government gilts of durations
of up to twelve months. The Group's credit policy limits investments to short
term sterling money market funds which carry short-term credit ratings of at
least two of AAAm (Standard & Poor's), Aaa/MR1+ (Moody's) and AAA V1+ (Fitch)
and money market deposits with long term rating of AA/AA/Aaa or short term
rating of F1+/A-1/P-1.
This information is provided by RNS
The company news service from the London Stock Exchange
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