TIDMCWR

RNS Number : 4611N

Ceres Power Holdings plc

30 September 2021

30 September 2021

Ceres Power Holdings plc

Half-yearly results for the six months ended 30 June 2021

COMMERCIAL partnerships deliver STRONG FIRST HALF GROWTH

Ceres Power Holdings plc ("Ceres Power", "Ceres", the "Company" or the "Group") (AIM: CWR.L), a global leader in fuel cell and electrochemical technology, announces its half-yearly results for the six months ended 30 June 2021.

 
      Financial highlights 
        *    Revenue and other income up 96% to GBP17.4m (H1 2020: 
             GBP8.9m), reflecting strong progress of commercial 
             partnerships 
 
 
        *    Increased gross profit of GBP12.2m (H1 2020: GBP7.1m) 
             at sector-leading gross margin of 72% (H1 2020: 79%) 
 
 
        *    Successfully raised net proceeds of GBP179m in March 
             through an equity fundraising of 17.1 million new 
             ordinary shares to support growth into electrolysis 
             for green hydrogen and further SOFC applications. 
             Weichai (20%) and Bosch (18%) fully supportive of the 
             fundraising and strategy 
 
 
        *    Group had GBP263m of cash and investments at 30 June 
             2021 
 
 
        *    Order book* of GBP42.0m and pipeline* of GBP43.8m as 
             at 30 June 2021 
 
 
 
       Commercial highlights 
        *    New joint development programme for a 30kW stationary 
             power system with Weichai, increasing the commercial 
             scope of the agreement alongside transportation 
 
 
        *    Discussions progressing well with Weichai on the JV 
             and wider strategic relationship. No further update 
             at this time 
 
 
        *    First-of-a-kind solid oxide electrolyser (SOEC) 
             1MW-scale demonstrator to become operational in 2022. 
             Strong commercial interest and discussions now in 
             progress with several commercial partners 
 
 
        *    Bosch to invest EUR400m into its solid oxide fuel 
             cell (SOFC) business between now and 2024. It plans 
             to put up to 100 small-scale stationary fuel cell 
             power plants into operation this year 
 
 
        *    AVL List strategic collaboration progressing well, 
             with three early-stage projects and a strong pipeline 
 
 
        *    Doosan signed a memorandum of understanding with the 
             shipbuilding division of Hyundai Heavy Industries, to 
             develop a marine system based on Ceres' proprietary 
             SOFC stack technology 
 
 
 
       Current Trading and Outlook 
        *    On track to achieve revenue in line with consensus 
             estimates of GBP31.5 million for the 12 months ending 
             30 December 2021, subject to no significant 
             constraints on our operations 
 
 
        *    Doosan announced that it has completed development of 
             its 10kW SOFC system using Ceres' technology. Soft 
             commercial launch is planned for 2022 
 
 
        *    Successful in two separate projects awarded UK grant 
             funding as part of the Clean Maritime Demonstration 
             Competition to explore the use of our technology in 
             marine applications 
 
 
        *    Caroline Hargrove joining the Executive team as Chief 
             Technology Officer and Mark Selby appointed to a new 
             role as Chief Innovation Officer, both with effect 
             from 25(th) October 2021 
 
 
        *    Plan to move up to the London Stock Exchange Main 
             Market Premium Listing is on track for mid-2022 
 

Phil Caldwell, chief executive of Ceres commented: "We are pleased to report a strong performance for the Company in the first half of 2021, including a notable increase in our revenues at sector-leading gross margins. The outlook for clean technology innovation and hydrogen remains strong, buoyed by growth in strategies, regulation and green investment. Our partners continue to announce significant developments in the scale and application of our technology and the high level of interest and early engagement around its use for electrolysis to produce green hydrogen is very promising."

(*Order book refers to confirmed contracted revenue and other income while pipeline is contracted revenue and other income which management estimate is contingent upon options not under the control of Ceres.)

 
 Financial Summary:                       Six months   Six months   18 months 
                                               ended        ended    ended 31 
                                             30 June      30 June    December 
                                                2021         2020        2020 
                                           Unaudited    Unaudited     Audited 
                                             GBP'000      GBP'000     GBP'000 
                                         -----------  -----------  ---------- 
 Total revenue and other operating 
  income, comprising:                         17,436        8,900      32,987 
 Licence fees                                 10,682        3,035      10,519 
 Engineering services revenue                  2,669        3,104      10,866 
 Provision of technology hardware              3,759        2,747      10,297 
 Other operating income                          326           14       1,305 
 Gross margin %                                  72%          79%         67% 
 
 Adjusted EBITDA loss(1) - SOFC(2)             (371)      (4,332)     (9,063) 
 Adjusted EBITDA loss(1) - SOEC(2)           (4,144)        (656)     (2,305) 
                                         -----------  -----------  ---------- 
 Adjusted EBITDA loss(1) - total 
  Group                                      (4,515)      (4,988)    (11,368) 
 
 Operating loss                              (7,602)      (7,172)    (17,634) 
 
 Net cash used in operating activities      (13,170)      (1,862)     (5,824) 
 Net cash and investments                    262,889      107,981     110,186 
 

(1) Adjusted EBITDA loss is an alternative performance measure, as defined and reconciled to operating loss in the non-GAAP section at the end of this report.

(2) Following the Group's decision to invest more heavily into solid oxide electrolysis cell (SOEC) technology, the separate disclosure of SOEC Adjusted EBITDA in addition to the Group's historical solid oxide fuel cell (SOFC) technology Adjusted EBITDA is considered to provide additional useful information to allow readers of the interim results to more fully understand the Group's performance. Adjusted EBITDA by segment is reconciled to operating loss in Note 3.

Analyst presentation

Ceres Power Holdings plc will be hosting a live webcast for analysts and investors on 30 September 2021 at 09.30 BST. To register your interest in participating, please go to: https://www.investormeetcompany.com/ceres-power-holdings-plc/register-investor

For further information please visit www.ceres.tech or contact:

 
 Ceres Power Holdings plc 
   Elizabeth Skerritt                    +44(0)7932 023 283 
 
   Investec Bank PLC (NOMAD & Joint      Tel: +44 (0)207 597 5970 
   Broker) 
   Jeremy Ellis / Patrick Robb / Ben 
   Griffiths 
 
   Berenberg (Joint Broker)              Tel: +44 (0) 203 207 
   Ben Wright / Mark Whitmore            7800 
 
   Madano (Financial PR)                 Tel: +44 (0) 20 7593 
   Michael Evans / Hoda Awad             4000 
 
 About Ceres Power 
  Ceres is a world-leading developer of solid oxide electrochemical 
  technology for applications in fuel cells and hydrogen that 
  enables its partners to deliver clean energy at scale and speed. 
  Its asset-light, licensing model has seen it embed its technology 
  in some of the world's most progressive companies - such as 
  Weichai in China, Bosch in Germany, Miura in Japan, and Doosan 
  in South Korea - to develop systems and products that address 
  climate change and air quality challenges for power generation, 
  transportation and industrial applications. Ceres is listed 
  on the AIM market of the London Stock Exchange ("LSE") (AIM: 
  CWR.L) and was awarded the Green Economy Mark by the LSE, which 
  recognises listed companies that derive more than 50% of their 
  revenues from the green economy. 
 

Chief Executive's Statement

We are pleased to report that Ceres has continued to develop at pace in the first half of 2021.

Firstly, we have focused on building resilient operations, on delivering new and existing product initiatives and programmes and a solid set of financial results. Partner contracts converted to revenue during the period delivered growth of 96% in revenue and other operating income up to GBP17.4 million (H1 2020: GBP8.9m). We have also invested strongly in the business, expanding research, development, test and manufacturing capacity across our two sites.

Secondly, the Board and management have expanded the Company's strategy to ensure we continue to drive sustainability and innovation, enhancing the competitiveness and relevance of our technology across the clean energy market and delivering future value for our shareholders.

To support this strategy, we successfully raised a further net GBP179 million in March through an equity fundraise, which will principally be used to accelerate our investment in the development and potential commercialisation of our technology in electrolysis to produce green hydrogen. It is a market predicted by McKinsey and the Hydrogen Council to be worth as much as US$2.5 trillion for hydrogen gas and electrolysis equipment to meet 2050 targets and we were pleased to secure the full support of our strategic investors, Bosch and Weichai Power, for our fundraise.

With the UK due to host the COP26 climate talks in the coming weeks, the focus is squarely on the ambition of countries for decarbonisation and hydrogen technologies. Ceres aims to play a central role in the global energy transition to affordable clean power, supported by our strategic partnerships with some of the world's most progressive companies in those markets leading the global charge on climate change.

Commercial progress and partnerships

As at 30 June 2021 our order book stood at GBP42.0 million and we had a further GBP43.8 million in the pipeline, being a combination of staged licensing payments and engineering services. The high proportion of licence fees continues to support healthy gross margins, which at 71.6% is consistent with the prior 18-month period and differentiated from our peers.

B osch

In its annual update in March, Bosch published significant positive progress on its programme for SOFC development in partnership with Ceres, reiterating its aim for a production capacity of approximately 200MW output per year by 2024. This is the culmination of over two years of work, with the Ceres team supporting technology transfer and initial manufacturing under licence at Bosch's site in Bamberg, Germany.

Once scaled, production will be focused on series manufacturing of decentralised power plants, the equivalent of supplying around 400,000 people with household electricity. Bosch has stated that it will invest EUR400 million into its SOFC business, including manufacturing capacity, between now and 2024. It plans to put up to 100 small-scale fuel cell power stations into operation this year, which will generate electricity for data centres, industrial firms and residential neighbourhoods.

In the period, Bosch also continued to support its corporate relationship with Ceres by maintaining its equity holding at 18%, contributing an additional GBP38.7 million as part of the equity fundraise in in March 2021.

Doosan

In September 2021, Doosan announced that it has completed the development of its 10kW SOFC system, the product of a joint collaboration with Ceres signed in July 2019. Doosan is planning a soft commercial launch of the product in 2022. The combined heat and power (CHP) system, uses two of Ceres' 5kW SOFC stacks and has delivered 40% higher power generation efficiency when compared with Doosan's existing PEM based technology. The 10kW system for use in commercial and residential buildings is similar in size to existing 5kW SOFC products on the market in Korea, saving 50% on installation space and maintaining the equivalent power generation efficiency.

In Korea, the fuel cell power generation market for commercial and residential properties is expanding because of a combination of zero-energy building certification, public institutions' mandatory renewable energy policies, and the local governments' mandatory private building renewable energy policy. Doosan estimates the compound annual growth rate in the Korean market for stationary fuel cells is 24%. Doosan is expanding manufacturing capacity to meet market demand and is targeting 50MW annual capacity of Ceres SteelCell(R) fuel cell stacks by 2024. We believe this could still increase further, given Doosan's plans to develop utility-scale SOFC power stations and marine applications using Ceres' technology.

In March, Doosan announced the signing of a memorandum of understanding with Korea Shipbuilding & Offshore Engineering , a division of the world's largest shipbuilding company Hyundai Heavy Industries, for the joint development of a megawatt class SOFC system for clean energy marine propulsion and power generation . The agreement continues the expansion of Doosan's business into the marine market and reflects the growing interest in Ceres' technology as a differentiated solution to support the decarbonisation of the global shipping industry.

Weichai

In March, Weichai Power supported the Ceres equity fundraising investing a further GBP43.5 million to maintain its shareholding in Ceres at 20%. Positive discussions are progressing on the wider strategic relationship including the establishment of a joint venture in late 2021, to produce Ceres SteelCell(R) SOFC systems .

The pandemic has created challenges in remote working practices and so the commencement of a new programme for a 30kW stationary power module is a welcome development, expanding the scope of our collaboration alongside transportation. We are making good progress with discussions and technology field trials and we will provide further updates to the market in due course.

AVL List

The strategic collaboration with engineering consultancy AVL is progressing well. Formed at the end of 2020, the partnership brings important strategic benefits combining AVL's applications expertise and market presence with Ceres' IP and systems know-how, enabling us to reach into more end-market applications than we could on our own.

Ceres and AVL are working together on customer acquisition and to identify and exploit the growing interest in SOFC technology in new applications and regions. Three early-stage pieces of work have commenced, each in new and different regions, covering both stationary and mobile applications and span a range of ratings up to 250kW. We also have a strong pipeline of future opportunities capitalising on AVL's experience and expertise in large-scale marine and distributed power systems.

SOEC

Work is going well on our first-of-a-kind solid oxide electrolyser (SOEC) 1MW-scale demonstrator to be operational in 2022. Whilst still early days, we have already seen strong interest from commercial partners, seeking to unlock green hydrogen opportunities for close integration with industrial and energy generation processes. We are engaging with a number of global majors across the oil and gas, industrial and clean energy sectors to demonstrate and commercialise our technology.

Deployment of first commercial SOEC plants is expected from 2025. Ceres is targeting a levelised cost of hydrogen production at <$1.50 per kilogram, which enables green hydrogen production to be competitive with blue fossil fuel based hydrogen in time to meet a market projected to more than double in size every decade from 2030 to 2050. Importantly, access to royalty streams in SOEC will be additive and complementary to royalties already enabled in our SOFC business.

Progress in the high-volume manufacturing of Ceres' core SteelCell(R) should support economies of scale and enable bringing both our fuel cell and electrolysis technology to the mass market. We see significant opportunities to further our commercial relationships and the scope of our existing partnerships.

Operations

During 2020 we achieved manufacturing capacity of 2MW at our pilot manufacturing production facility in Redhill in the UK. We also continue to support our manufacturing partners Bosch and Doosan in their progress towards mass market launch. Doosan is targeting annual production capacity of 50MW in 2024 and Bosch is now preparing to scale up to mass manufacture in 2024, targeting annual production capacity of 200MW.

We will continue to supply systems licensees with stacks until our manufacturing partners come onstream and we can migrate them across to this supply. As such, Ceres' initial manufacturing capacity is now being increased to 3MW through the installation of additional equipment to support production of our 1kW and 5kW stacks, which will supply our partners for their testing and trials as well as meeting the demand for our internal R&D activities for both SOFC and SOEC.

In general, electrolysis systems are much larger, going to MW or even GW-scale, versus fuel cell systems running to 100kWs to low MWs. In both use cases, partners are seeking to take our technology into larger arrays, and we are focusing on our 5kW fuel stack as a core module to support this development. Part of the net proceeds of the March fundraise will be used for general working capital purposes, to cover the increased operating cost base of what will be a larger business addressing both SOFC and SOEC uses of our technology, as well as capital to enhance test capability and infrastructure and further expand pilot production.

Technology

Ceres' technology and competencies span applications essential for the energy transition; from fuel cells that deliver energy conversion through storage and the production of green hydrogen and other chemicals utilising solid oxide electrolysis.

The market for electrolysis enables growth for Ceres by building on our fuel cell capability and technology. It is the same core cell and stack technology platform, the same IP portfolio covering SOFC and SOEC, the same manufacturing process and supply chain and continuing the partnering model to deliver scale.

Importantly, electrolysis is a cornerstone technology for decarbonising hard-to-abate sectors, such as steel, ammonia, methanol and shipping. SOEC has an intrinsic thermodynamic advantage over low-temperature electrolysis and, when coupled with industrial heat reclamation, can deliver efficiencies up to 90% thereby unlocking green hydrogen opportunities for close integration with industrial and energy generation processes . Our MW-scale SOEC demonstrator set to be delivered in 2022 will pave the way for commercialisation of the technology.

In addition to the GBP100 million earmarked for development of SOEC, part of the net proceeds of the March fundraise will be used to invest in the core business to accelerate innovation and to maintain technology leadership across both SOFC and SOEC. In addition to expanding research and development, engineering and advanced manufacturing capabilities, the proceeds provide further capital for IP generation and acquisition together with the addition of new team members.

We recruited an additional c.100 employees in the first six months of 2021, around half of whom are scientists and engineers. We also strengthened our industry-academia research collaboration, announcing Profe ssor Stephen Skinner as the Ceres Royal Academy of Engineering Research Chair in Electrochemical Devices for a Zero Carbon Economy, with the intention to establish a world-leading research group in the field of materials engineering.

Financial Review

During the six months to 30 June 2021, the Group reported revenue and other income from the fuel cell business of GBP17.4 million. Licence fee income drove the Group's revenue to grow 93% when compared to the same period in 2020, with a slightly reduced gross margin of 71.6% (H1 2020: 79.5%) reflecting the change in revenue mix. The higher proportion of higher-margin licence fees was offset by a period of lower output of stacks as extra equipment was installed and commissioned to facilitate an increase in plant capacity, which is now largely in place. Consequentially, in the period to 30 June 2021, the absolute gross profit increased 73.4% to GBP12.2 million (H1 2020: GBP7.1 million). As we have stated previously, gross margin percentage will vary period on period based on timing and quantum of licence revenue recognition and revenue mix.

From this period onwards, we will disclose the key financial metrics of our nascent electrolysis business separate from the core fuel cell business, in line with internal reporting, in order to help show progress and where we are making investment into the business.

Investing in the future: people and technology

We continued to invest in building the business for the opportunities we see ahead. Operating costs for the business in the six-month period were GBP20.2 million (H1 2020: GBP14.2 million), the bulk of the increase being additional R&D investment. Throughout the period we increased the team size as planned, employing 432 people as at 30 June 2021 (325 as at 31 December 2020). We have added people across all aspects of the business, including in manufacturing and mechanical engineering and the testing teams to support existing and expected commercial projects, as well as in core Energy Materials to continue to drive innovation.

As a result of an increased gross profit, the SOFC (or Power) part of the business reduced its adjusted EBITDA loss from GBP4.3 million in the 6 months to 30 June 2020 to GBP0.4 million. Due to the impact of the continued investment across the business as described above and depending on revenue mix and progress, we expect the SOFC part of the business to remain adjusted EBITDA loss-making in the short term.

Our SOEC (or Hydrogen) business showed an adjusted EBITDA loss of GBP4.1 million (H1 2020: GBP0.7 million), reflecting the initial set up, focus on activities and the initial investment there.

Solid financial position: the foundation for continued progressive growth

The Group ends the period with a strong position of GBP263 million in cash and investments as at 30 June 2021 (31 December 2020: GBP110 million) as a result of the equity fundraising in the period, and we have begun to put these funds to good use already, as shown by our equity free cash outflow in the period increasing to GBP18.7 million from GBP6.1m in the six months ended 30 June 2020.

We invested GBP3.6 million in property, plant and equipment in the period (H1 2020: GBP3.0 million) on manufacturing improvement and capacity expansion, as well as the start of building out our test infrastructure to accommodate new products including the Green Hydrogen electrolysis programme. We capitalised GBP1.6 million of eligible development and related costs in the period (H1 2020: GBP1.5 million), with GBP5.9 million capitalised to date (31 December 2020: GBP4.9 million).

The other significant movements in the balance sheet included the recognition of net contract assets of GBP1.9 million at the period end, compared with net contract liabilities of GBP6.6m as at 31 December 2020, reflecting timing differences between invoicing customers and recognising revenue on contracts. Finally, trade and other payables reduced to GBP2.5 million

(31 December 2020: GBP9.1 million) reflecting the payment of receipts received in December 2020 which related to the exercise of certain share options.

Board and Management Changes

During the first six months of the year we welcomed two new Non-executive Directors to the plc Board - namely Tudor Brown, formerly of ARM Holdings, and Professor Dame Julia King, Baroness Brown of Cambridge. We welcome their perspective and their depth of knowledge and experience as we continue to grow and diversify.

At the executive level, we recently announced that Caroline Hargrove has been appointed as CTO and that Mark Selby, the current Chief Technology Officer (CTO), will move to a newly created position as Chief Innovation Officer (CIO), both effective from 25(th) October 2021. Caroline will step down from her current position as a non-executive Director of Ceres to take up this full time executive position and her unique skills and experience in leading digitalisation and managing high-growth technology teams will be invaluable for the next chapter of Ceres' development. The new CIO role provides the opportunity for Mark to use his considerable knowledge to focus on establishing future innovative technology for Ceres.

Outlook

Ceres is committed to clean energy innovation in everything it does. We have an established and growing business in fuel cell power and through the successful equity fundraising we are now addressing the potentially even greater market for electrolysis for green hydrogen. Above all, it is consistent with Ceres's purpose of embedding our unique technology in the products of world-class companies to address climate change and to create significant shareholder value.

I would like to thank our shareholders, partners and suppliers for their continued interest and support for the business and all our employees for their dedicated commitment and hard work through this exciting period in the Company's growth.

Philip Caldwell

Chief Executive Officer

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2021

 
 
 
 
                                                                             18 months 
                                             Six months      Six months          ended 
                                                  ended           ended    31 December 
                                           30 June 2021    30 June 2020           2020 
                                              Unaudited       Unaudited        Audited 
                                    Note        GBP'000         GBP'000        GBP'000 
 
 
 Revenue                             2           17,110           8,886         31,682 
 
 Cost of sales                                  (4,866)         (1,825)       (10,355) 
 
 Gross profit                                    12,244           7,061         21,327 
 
 Other operating income 
  (1)                                               326              14          1,305 
 
 Operating costs                     4         (20,172)        (14,247)       (40,266) 
 
 Operating loss                                 (7,602)         (7,172)       (17,634) 
 
 Finance income                      5              243             556            989 
 
 Finance expense                     5            (352)           (287)          (664) 
 
 Loss before taxation                           (7,711)         (6,903)       (17,309) 
 
 Taxation credit                     6            1,166           1,278          2,493 
 
 Loss for the financial 
  period and total comprehensive 
  loss                                          (6,545)         (5,625)       (14,816) 
                                          =============  ==============  ============= 
 
 
 Loss per GBP0.10 ordinary 
  share expressed in pence 
  per share: 
 
 Basic and diluted loss 
  per share                          7          (3.62)p         (3.47)p        (9.12)p 
 
 

The accompanying notes are an integral part of these consolidated financial statements.

   (1)   (Other operating income relates to grant income.) 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2021

 
 
                                               30 June      30 June   31 December 
                                                  2021         2020          2020 
                                             Unaudited    Unaudited       Audited 
                                     Note      GBP'000      GBP'000       GBP'000 
 
 Assets 
 Non-current assets 
 Property, plant and equipment        8         16,688       12,970        14,979 
 Right-of-use assets                  9          2,714        4,232         3,971 
 Intangible assets                    10         5,939        3,800         4,909 
 Long-term investments                14         2,000                      8,000 
 Other receivables                    12           741          741           741 
                                                        ----------- 
 Total non-current assets                       28,082       21,743        32,600 
 
 Current assets 
 Inventories                          11         2,988        2,055         2,107 
 Contract assets                      2          5,626        1,821           864 
 Other current assets                 13           975          987         1,002 
 Derivative financial instruments     17           845            2            59 
 Current tax receivable                          4,659        2,450         3,124 
 Trade and other receivables          12         7,159        4,643         5,570 
 Short-term investments               14        95,733       90,782        69,231 
 Cash and cash equivalents            14       165,156       17,199        32,955 
                                           -----------  -----------  ------------ 
 Total current assets                          283,141      119,939       114,912 
 
 Liabilities 
 Current liabilities 
 Trade and other payables             15       (2,502)      (2,560)       (9,112) 
 Contract liabilities                 2        (3,773)      (1,014)       (7,505) 
 Other current liabilities            16       (3,959)      (3,667)       (2,675) 
 Derivative financial instruments                               (1)          (43) 
 Lease liabilities                    18         (622)      (1,026)         (823) 
 Provisions                           19       (1,112)        (308)         (612) 
                                                        ----------- 
 Total current liabilities                    (11,968)      (8,576)      (20,770) 
                                           -----------  -----------  ------------ 
 Net current assets                            271,173      111,363        94,142 
 
 Non-current liabilities 
 Lease liabilities                    18       (2,616)      (3,823)       (3,622) 
 Provisions                           19       (1,642)      (1,117)       (1,610) 
                                                        ----------- 
 Total non-current liabilities                 (4,258)      (4,940)       (5,232) 
                                                        ----------- 
 Net assets                                    294,997      128,166       121,510 
                                           ===========  ===========  ============ 
 
 Equity attributable to 
  the owners of the parent 
 Share capital                        20        19,041       17,082        17,217 
 Share premium                                 404,788      227,430       227,682 
 Capital redemption reserve                      3,449        3,449         3,449 
 Merger reserve                                  7,463        7,463         7,463 
 Accumulated losses                          (139,744)    (127,258)     (134,301) 
                                                        ----------- 
 Total equity                                  294,997      128,166       121,510 
                                           ===========  ===========  ============ 
 

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 June 2021

 
                                                  Six months   Six months      18 months 
                                                       ended        ended          ended 
                                                     30 June      30 June    31 December 
                                                        2021         2020           2020 
                                           Note    Unaudited    Unaudited        Audited 
                                                     GBP'000      GBP'000        GBP'000 
                                                 -----------  ----------- 
 Cash flows from operating activities 
 Loss before taxation                                (7,711)      (6,903)       (17,309) 
 
 Adjustments for: 
 Finance income                                        (243)        (556)          (989) 
 Finance expense                                         352          287            664 
 Depreciation of property, plant 
  and equipment                                        1,930        1,433          3,820 
 Depreciation of right-of-use assets                     265          256            776 
 Amortisation of intangible assets                       556           55            208 
 Net foreign exchange losses/(gains)                      63         (64)            139 
 Net change in fair value of financial 
  instruments                                          (829)           66           (55) 
 Share-based payments charge                           1,102          437          1,378 
                                                 -----------  -----------  ------------- 
 Operating cash flows before movements 
  in working capital                                 (4,515)      (4,989)       (11,368) 
 (Increase)/decrease in trade and 
  other receivables                                  (1,944)          629        (2,338) 
 Increase in inventories                               (881)        (411)          (704) 
 Increase in trade and other payables                  2,164        3,181            752 
 (Increase)/decrease in contract 
  assets                                             (4,762)        1,541          (142) 
 (Decrease)/increase in contract 
  liabilities                                        (3,732)      (4,350)          4,444 
 Increase in provisions                                  500           77          1,072 
                                                 -----------  -----------  ------------- 
 Net cash used in operations                        (13,170)      (4,322)        (8,284) 
                                                 -----------  -----------  ------------- 
 Taxation received                                                  2,460          2,460 
                                                 -----------  -----------  ------------- 
 Net cash used in operating activities              (13,170)      (1,862)        (5,824) 
                                                 -----------  -----------  ------------- 
 
 Investing activities 
 Purchase of property, plant and 
  equipment                                          (3,639)      (2,954)        (9,256) 
 Capitalised development expenditure                 (1,586)      (1,457)        (3,795) 
 Decrease/(increase) in long-term 
  investments                                          6,000                     (8,000) 
 Increase in short-term investments                 (52,502)     (82,782)       (74,380) 
 Repayment of short-term investments                  26,000       32,000         68,849 
 Finance income received                                 243          289          1,123 
                                                 -----------  -----------  ------------- 
 Net cash used in investing activities              (25,484)     (54,904)       (25,459) 
                                                 -----------  -----------  ------------- 
 
 Financing activities 
 Proceeds from issuance of ordinary 
  shares                                             181,502       49,860         50,851 
 Net expenses from issuance of ordinary 
  shares                                             (2,572)        (344)          (344) 
 Cash (paid)/received on behalf 
  of employees on the sale of share 
  options                                            (7,490)                       7,490 
 Repayment of lease liabilities                        (207)                       (523) 
 Interest paid                                         (315)        (221)          (664) 
                                                 -----------  -----------  ------------- 
 Net cash generated from financing 
  activities                                         170,918       49,295         56,810 
                                                 -----------  -----------  ------------- 
 Net increase/(decrease) in cash 
  and cash equivalents                               132,264      (7,471)         25,527 
                                                 -----------  -----------  ------------- 
 Exchange (losses)/gains on cash 
  and cash equivalents                                  (63)           64          (139) 
 Cash and cash equivalents at beginning 
  of period                                           32,955       24,606          7,567 
                                                 -----------  -----------  ------------- 
 Cash and cash equivalents at end 
  of period                                 14       165,156       17,199         32,955 
                                                 ===========  ===========  ============= 
 

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2021

 
                                                                   Capital 
                                                                redemption    Merger  Accumulated 
                                 Share capital  Share premium      reserve   reserve       losses     Total 
                                       GBP'000        GBP'000      GBP'000   GBP'000      GBP'000   GBP'000 
                                 -------------  -------------  -----------  --------  -----------  -------- 
At 1 July 2019 (audited)                15,277        179,116        3,449     7,463    (120,863)    84,442 
 
Comprehensive income 
Loss for the financial 
 period                                                                                  (14,816)  (14,816) 
Total comprehensive loss                                                                 (14,816)  (14,816) 
 
Transactions with owners 
Issue of shares, net of 
 costs                                   1,940         48,566                                        50,506 
Share-based payments charge                                                                 1,378     1,378 
Total transactions with 
 owners                                  1,940         48,566                               1,378    51,884 
                                 -------------  -------------  -----------  --------  -----------  -------- 
At 31 December 2020 (audited)           17,217        227,682        3,449     7,463    (134,301)   121,510 
                                 -------------  -------------  -----------  --------  -----------  -------- 
 
Comprehensive income 
Loss for the financial 
 period                                                                                   (6,545)   (6,545) 
Total comprehensive loss                                                                  (6,545)   (6,545) 
 
Transactions with owners 
Issue of shares, net of 
 costs                                   1,824        177,106                                       178,930 
Share-based payments charge                                                                 1,102     1,102 
                                                               ----------- 
Total transactions with 
 owners                                  1,824        177,106                               1,102   180,032 
                                 -------------  -------------  -----------  --------  -----------  -------- 
At 30 June 2021 (unaudited)             19,041        404,788        3,449     7,463    (139,744)   294,997 
                                 =============  =============  ===========  ========  ===========  ======== 
 

Comparatives for the six months ended 30 June 2020 are provided separately below:

 
                                                                 Capital 
                                                              redemption    Merger  Accumulated 
                               Share capital  Share premium      reserve   reserve       losses    Total 
                                     GBP'000        GBP'000      GBP'000   GBP'000      GBP'000  GBP'000 
                               -------------  -------------  -----------  --------  -----------  ------- 
At 1 January 2020 (audited)           15,277        179,601        3,449     7,463    (122,072)   83,836 
 
Comprehensive income 
Loss for the financial 
 period                                                                                 (5,623)  (5,623) 
Total comprehensive loss                                                                (5,623)  (5,623) 
 
Transactions with owners 
Issue of shares, net of 
 costs                                 1,687         47,829                                       49,516 
Share-based payments charge                                                                 437      437 
Total transactions with 
 owners                                1,687         47,829                                 437   49,953 
                               -------------  -------------  -----------  --------  -----------  ------- 
At 30 June 2020 (unaudited)           17,082        227,430        3,449     7,463    (127,258)  128,166 
                               -------------  -------------  -----------  --------  -----------  ------- 
 

Notes to the financial statements for the six months ended 30 June 2021

1. Basis of preparation

The condensed interim financial statements have been prepared in accordance with the requirements of the AIM Rules for Companies. They do not include all of the information required for full annual financial statements and should be read in conjunction with the annual financial statements for the 18 months ended 31 December 2020 which were prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The interim financial statements have been prepared on a historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments and financial instruments classified as fair value through the profit or loss.

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted international accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. Ceres Power Holdings plc transitioned to UK-adopted international accounting standards in its consolidated financial statements on 1 January 2021. There was no impact or changes in accounting policies from the transition.

The interim financial information has been prepared in accordance with the recognition and measurement requirements of UK adopted international accounting standards and applicable law and regulations. This report is not prepared in accordance with IAS 34.

The principal accounting policies adopted in the preparation of the interim financial statements are unchanged from those applied in the Group's financial statements for the 18 months ended 31 December 2020. The accounting policies applied are consistent with those expected to be applied in the financial statements for the year ended 31 December 2021.

The financial information contained in the condensed interim financial statements is unaudited and does not constitute statutory financial statements as defined by in Section 434 of the Companies Act 2006. The financial statements for the 18 months ended 31 December 2020, on which the auditors gave an unqualified audit opinion, and did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006, have been filed with the Registrar of Companies.

The consolidated interim financial information for the six months ended 30 June 2021 has been reviewed by the Company's Auditor, BDO LLP in accordance with International Standard of Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity.

Going Concern

The Group has reported a loss after tax for the six-month period ended 30 June 2021 of GBP6.5m and net cash used in operating activities of GBP13.2m. At 30 June 2021, following the receipt of c.GBP179m of funds from the equity placement in March 2021, it held cash and cash equivalents and investments of GBP263m. The directors have prepared annual budgets and cash flow projections that extend 14 months from the date of approval of this report. These projections were supported by stress testing forecast cash flows considering the impact of different scenarios including the Group's expectation of the ongoing impact of Covid-19 on the business. In each case the projections demonstrated that the Group would have sufficient cash reserves to meet its liabilities as they fall due and to continue as a going concern. For the above reasons, the directors continue to adopt the going concern basis in preparing the financial statements.

Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources.

In preparing the interim condensed consolidated financial statements, the areas where judgement has been exercised remain consistent with these applied to the annual report and accounts for the period ended 31 December 2020.

New standards and amendments applicable for the reporting period

The Group has adopted all standards, interpretations amended or newly issued by the IASB that were effective in the period. Their adoption has not had any material effect on the condensed consolidated financial statements

2. Revenue

The Group's revenue is disaggregated by geographical market, major product/service lines, and timing of revenue recognition:

Geographical market

 
                                                     18 months 
                     Six months      Six months          ended 
                          ended           ended    31 December 
                   30 June 2021    30 June 2020           2020 
                      Unaudited       Unaudited        Audited 
                        GBP'000         GBP'000        GBP'000 
                 --------------  --------------  ------------- 
 Europe                   3,855           4,284         14,228 
 Asia                    12,995           4,501         16,613 
 North America               20             101            841 
 Rest of World              240 
                 --------------  --------------  ------------- 
                         17,110           8,886         31,682 
                 --------------  --------------  ------------- 
 

For the six months ended 30 June 2021, the Group has identified two major customers (defined as customers that individually contributed more than 10% of the Group's total revenue) that accounted for approximately 65% and 23% of the Group's total revenue recognised in the period (six months ended 30 June 2020: three customers that accounted for approximately 51%, 19% and 17% of the Group's total revenue for that period).

Major product/service lines

 
                                                                        18 months 
                                        Six months      Six months          ended 
                                             ended           ended    31 December 
                                      30 June 2021    30 June 2020           2020 
                                         Unaudited       Unaudited        Audited 
                                           GBP'000         GBP'000        GBP'000 
                                    --------------  --------------  ------------- 
 Engineering services                        2,669           3,104         10,866 
 Provision of technology hardware            3,759           2,747         10,297 
 Licenses                                   10,682           3,035         10,519 
                                            17,110           8,886         31,682 
                                    --------------  --------------  ------------- 
 

Timing of transfer of goods and services

 
                                                                         18 months 
                                         Six months      Six months          ended 
                                              ended           ended    31 December 
                                       30 June 2021    30 June 2020           2020 
                                          Unaudited       Unaudited        Audited 
                                            GBP'000         GBP'000        GBP'000 
                                     --------------  --------------  ------------- 
 Products and services transferred 
  at a point in time                         11,732           4,305         15,280 
 Products and services transferred 
  over time                                   5,378           4,581         16,402 
                                     --------------  --------------  ------------- 
                                             17,110           8,886         31,682 
                                     --------------  --------------  ------------- 
 

Amounts transferred at a point in time during the current period mostly related to the recognition of license income for a major contract.

The contract-related assets and liabilities are as follows:

 
                                                                  31 December 
                                    30 June 2021   30 June 2020          2020 
                                       Unaudited      Unaudited       Audited 
                                         GBP'000        GBP'000       GBP'000 
                                   -------------  -------------  ------------ 
 Trade receivables             12          3,618          3,787         3,328 
                                                  -------------  ------------ 
 
 Contract assets - accrued 
  income                                   5,626          1,559           837 
 Contract assets - deferred 
  costs                                                     262            27 
                                                  -------------  ------------ 
 Total contract assets                     5,626          1,821           864 
                                   -------------  -------------  ------------ 
 
 Contract liabilities 
  - deferred income                      (3,773)        (1,014)       (7,505) 
                                   -------------  -------------  ------------ 
 

3. Segmental analysis

In accordance with IFRS 8 the method applied to identify reporting segments is based on internal management reporting information that is regularly reviewed by the chief operating decision maker, which the Group considers to be the Executive team.

Historically the Group has reported its performance in a single segment, primarily reflecting the Group's solid oxide fuel cell (SOFC) technology. For the current period, following increased investment in and development of the Group's solid oxide electrolysis cell (SOEC) technology over the past six months, the Group has introduced segmental reporting internally that separately discloses the results of the two segments, down to adjusted EBITDA level, to the Executive team.

Following the change of segmental reporting in the period, comparatives for the six months ended 30 June 2020 have been restated accordingly.

 
                                      SOFC      SOEC   Consolidated 
 Six months ended 30 June                                   GBP'000 
  2021 (unaudited)                 GBP'000   GBP'000 
 
 
 Revenue                            17,110         -         17,110 
 Cost of sales                     (4,866)         -        (4,866) 
 Gross profit                       12,244         -         12,244 
 Other operating income                326         -            326 
 Operating costs (excluding 
  adjusting items)                (12,941)   (4,144)       (17,085) 
                                 ---------  --------  ------------- 
 Adjusted EBITDA(1)                  (371)   (4,144)        (4,515) 
                                 ---------  --------  ------------- 
 Adjusting items: 
 Depreciation & amortisation                                (2,751) 
 Share-based payment charge                                 (1,102) 
 Unrealised foreign exchange 
  losses                                                       (63) 
 Fair value adjustment                                          829 
                                                      ------------- 
 Operating loss                                             (7,602) 
 Finance income                                                 243 
 Finance expense                                              (352) 
 Loss before taxation                                       (7,711) 
 Taxation credit                                              1,166 
 Loss for the financial period                              (6,545) 
                                                      ============= 
 
 
                                          SOFC      SOEC   Consolidated 
 Six months ended 30 June                                       GBP'000 
  2020 (unaudited)                     GBP'000   GBP'000 
 
 
 Revenue                                 8,886         -          8,886 
 Cost of sales                         (1,825)         -        (1,825) 
 Gross profit                            7,061         -          7,061 
 Other operating income                     14         -             14 
 Operating costs (excluding 
  adjusting items)                    (11,407)     (656)       (12,063) 
                                     ---------  --------  ------------- 
 Adjusted EBITDA(1)                    (4,332)     (656)        (4,988) 
                                     ---------  --------  ------------- 
 Adjusting items: 
 Depreciation & amortisation                                    (1,745) 
 Share-based payment charge                                       (437) 
 Unrealised foreign exchange 
  losses                                                             64 
 Fair value adjustment                                             (66) 
                                                          ------------- 
 Operating loss                                                 (7,172) 
 Finance income                                                     556 
 Finance expense                                                  (287) 
 Loss before taxation                                           (6,903) 
 Taxation credit                                                  1,278 
 Loss for the financial period                                  (5,625) 
                                                          ============= 
 3. Segmental analysis (continued) 
                                          SOFC      SOEC   Consolidated 
 18 months ended 31 December                                    GBP'000 
  2020 (audited)                       GBP'000   GBP'000 
 
 
 Revenue                                31,682         -         31,682 
 Cost of sales                        (10,355)         -       (10,355) 
 Gross profit                           21,327         -         21,327 
 Other operating income                  1,305         -          1,305 
 Operating costs (excluding 
  adjusting items)                    (31,695)   (2,305)       (34,000) 
                                     ---------  --------  ------------- 
 Adjusted EBITDA(1)                    (9,063)   (2,305)       (11,368) 
                                     ---------  --------  ------------- 
 Adjusting items: 
 Depreciation & amortisation                                    (4,804) 
 Share-based payment charge                                     (1,378) 
 Unrealised foreign exchange 
  losses                                                          (139) 
 Fair value adjustment                                               55 
                                                          ------------- 
 Operating loss                                                (17,634) 
 Finance income                                                     989 
 Finance expense                                                  (664) 
 Loss before taxation                                          (17,309) 
 Taxation credit                                                  2,493 
 Loss for the financial period                                 (14,816) 
                                                          ============= 
 

(1) Adjusted EBITDA is an alternative performance measure, as defined in the Non-GAAP section at the end of this report.

4. Operating costs

 
 
   Operating costs can be analysed 
   as follows: 
                                                                         18 months 
                                         Six months      Six months          ended 
                                              ended           ended    31 December 
                                       30 June 2021    30 June 2020           2020 
                                          Unaudited       Unaudited        Audited 
                                            GBP'000         GBP'000        GBP'000 
                                     --------------  --------------  ------------- 
 Research and development 
  costs                                      14,402          10,002         27,820 
 Administrative expenses                      4,775           3,638         10,060 
 Commercial                                     995             607          2,386 
                                             20,172          14,247         40,266 
                                     --------------  --------------  ------------- 
 

5. Finance income and expenses

 
                                                                   18 months 
                                   Six months      Six months          ended 
                                        ended           ended    31 December 
                                 30 June 2021    30 June 2020           2020 
                                    Unaudited       Unaudited        Audited 
                                      GBP'000         GBP'000        GBP'000 
                               --------------  --------------  ------------- 
 Interest received                        243             356            989 
 Foreign exchange gain on 
  cash, cash equivalents and 
  short-term deposits                                     200 
                               --------------  --------------  ------------- 
 Finance income                           243             556            989 
 
 
 Interest on lease liability            (204)           (221)          (664) 
 Unwinding of provisions                 (32) 
 Impairment of investment                 (5)            (66) 
 Foreign exchange loss on 
  cash, cash equivalents and 
  short-term deposits                   (111) 
                               --------------  --------------  ------------- 
 Interest expense                       (352)           (287)          (664) 
                               --------------  --------------  ------------- 
 

6. Taxation

No corporation tax liability has arisen during the year (period ending 31 December 2020: GBPnil) due to the losses incurred. A tax credit has arisen as a result of the tax losses being surrendered in respect of research and development expenditure.

 
                                                                18 months 
                                Six months      Six months          ended 
                                     ended           ended    31 December 
                              30 June 2021    30 June 2020           2020 
                                 Unaudited       Unaudited        Audited 
                                   GBP'000         GBP'000        GBP'000 
                            --------------  --------------  ------------- 
 UK corporation tax                (1,535)         (1,111)        (3,124) 
 Foreign tax suffered                  369                            798 
 Adjustment in respect of 
  prior periods                                      (167)          (167) 
                            --------------  -------------- 
                                   (1,166)         (1,278)        (2,493) 
                            --------------  --------------  ------------- 
 

7. Loss per share

 
                                                                     18 months 
                                     Six months      Six months          ended 
                                          ended           ended    31 December 
                                   30 June 2021    30 June 2020           2020 
                                      Unaudited       Unaudited        Audited 
                                        GBP'000         GBP'000        GBP'000 
                                 --------------  --------------  ------------- 
 
 Loss for the financial period 
  attributable to shareholders          (6,545)         (5,625)       (14,816) 
                                 --------------  --------------  ------------- 
 
 Weighted average number of 
  shares in issue                   180,783,345     162,059,660    162,474,146 
                                 --------------  --------------  ------------- 
 
 Loss per GBP0.10 ordinary 
  share (basic and diluted)             (3.62)p         (3.47)p        (9.12)p 
 
 

8. Property, plant and equipment

 
                                                                                         Assets 
                      Leasehold            Plant     Computer        Fixtures             under       Motor 
                   improvements    and machinery    equipment    and fittings      construction    vehicles      Total 
                        GBP'000          GBP'000      GBP'000         GBP'000           GBP'000     GBP'000    GBP'000 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
Cost 
 
At 1 July 2019            2,222           10,846        1,458              69             6,803          12     21,410 
Additions                   708            5,904          603              35             1,780                  9,030 
Transfers                 2,958            4,659                          210           (7,827) 
Disposals                   (5)                                                                                    (5) 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
At 31 December 
 2020                     5,883           21,409        2,061             314               756          12     30,435 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
 
Additions                   863            1,466          316              28               966                  3,639 
Transfers                                    572                                          (572) 
At 30 June 2021           6,746           23,447        2,377             342             1,150          12     34,074 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
 
 
Accumulated 
depreciation 
 
At 1 July 2019            2,096            8,478          998              69                                   11,641 
Charge for the 
 period                     621            2,718          400              80                             1      3,820 
Disposals                   (5)                                                                                    (5) 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
At 31 December 
 2020                     2,712           11,196        1,398             149                             1     15,456 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
 
Charge for the 
 period                     268            1,444          169              46                             3      1,930 
At 30 June 2021           2,980           12,640        1,567             195                             4     17,386 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
 
Net book value 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
At 30 June 2021           3,766           10,807          810             147             1,150           8     16,688 
At 31 December 
 2020                     3,171           10,213          663             165               756          11     14,979 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
 

'Assets under construction' represents the cost of purchasing, constructing and installing property, plant and equipment ahead of their productive use. The category is temporary, pending completion of the assets and their transfer to the appropriate and permanent category of property, plant and equipment. As such, no depreciation is charged on assets under construction.

Assets under construction consist entirely of plant and machinery that will be used in the manufacturing, development and testing of fuel cells.

8. Property, plant and equipment (continued)

Comparatives for the six months ended 30 June 2020 are provided separately below:

 
                                                                                         Assets 
                      Leasehold            Plant     Computer        Fixtures             under       Motor 
                   improvements    and machinery    equipment    and fittings      construction    vehicles      Total 
                        GBP'000          GBP'000      GBP'000         GBP'000           GBP'000     GBP'000    GBP'000 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
Cost 
 
At 1 January 
 2020                     5,091           12,311        1,499              69             5,159          12     24,141 
Additions                   361            1,853          279              34               110                  2,637 
Transfers                   270            4,659                          210           (5,139) 
Disposals                   (5)                                                                                    (5) 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
At 30 June 2020           5,717           18,823        1,778             313               130          12     26,773 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
 
Accumulated 
depreciation 
 
At 1 January 
 2020                     2,214            8,985        1,105              69                             1     12,374 
Charge for the 
 period                     257            1,013          120              42                             2      1,434 
Disposals                   (5)                                                                                    (5) 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
At 30 June 2020           2,466            9,998        1,225             111                             3     13,803 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
 
Net book value 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
At 30 June 2020           3,251            8,825          553             202               130           9     12,970 
                  -------------  ---------------  -----------  --------------  ----------------  ----------  --------- 
 

9. Right of use assets

 
                                      Land and     Computer 
                                     Buildings    equipment     Total 
                                       GBP'000      GBP'000   GBP'000 
                                   -----------  -----------  -------- 
 Cost 
 
 At 1 July 2019 
 Additions on adoption of IFRS16         4,729           18     4,747 
                                   -----------  -----------  -------- 
 At 31 December 2020                     4,729           18     4,747 
 
 Additions                                               43        43 
 Adjustment of lease term              (1,035)                (1,035) 
 Disposals                                             (18)      (18) 
                                   -----------  -----------  -------- 
 At 30 June 2021                         3,694           43     3,737 
 
 Accumulated depreciation 
 
 At 1 July 2019 
 Charge for the period                     766           10       776 
                                   -----------  -----------  -------- 
 At 31 December 2020                       766           10       776 
 
 Charge for the period                     254           11       265 
 Disposals                                             (18)      (18) 
                                   -----------  -----------  -------- 
 At 30 June 2021                         1,020            3     1,023 
 
 Net book value 
                                   -----------  -----------  -------- 
 At 30 June 2021                         2,674           40     2,714 
 At 31 December 2020                     3,963            8     3,971 
                                   -----------  -----------  -------- 
 

9. Right of use assets (continued)

During the period, the Group revised the expected term on one of its property leases, recognising an adjustment of GBP1,035,000 to reduce the right of use asset.

Comparatives for the six months ended 30 June 2020 are provided separately below:

 
                                    Land and     Computer 
                                   Buildings    equipment     Total 
                                     GBP'000      GBP'000   GBP'000 
                                 -----------  -----------  -------- 
 Cost 
 
 At 1 January 2020 and 30 June 
  2020                                 4,729           18     4,747 
                                 -----------  -----------  -------- 
 
 Accumulated depreciation 
 
 At 1 January 2020                       255            3       258 
 Charge for the period                   253            4       257 
                                 -----------  -----------  -------- 
 At 30 June 2020                         508            7       515 
                                 -----------  -----------  -------- 
 
 Net book value 
                                 -----------  -----------  -------- 
 At 30 June 2020                       4,221           11     4,232 
                                 -----------  -----------  -------- 
 

10. Intangible assets

 
                                    Internal 
                                developments       Customer 
                                 in relation   and internal 
                            to manufacturing    development 
                                        site     programmes  Patent costs      Total 
                                     GBP'000        GBP'000       GBP'000    GBP'000 
                           -----------------  -------------  ------------  --------- 
Cost 
At 1 July 2019                           234          1,101                    1,335 
Additions                                177          3,323           295      3,795 
                           -----------------  -------------  ------------  --------- 
At 31 December 2020                      411          4,424           295      5,130 
 
Additions                                             1,403           183      1,586 
                           -----------------  -------------  ------------  --------- 
At 30 June 2021                          411          5,827           478      6,716 
                           -----------------  -------------  ------------  --------- 
 
Accumulated depreciation 
At 1 July 2019                                           13                       13 
Charge for the period                     82            126                      208 
                           -----------------  -------------  ------------  --------- 
At 31 December 2020                       82            139                      221 
 
Charge for the period                     41            515                      556 
                           -----------------  -------------  ------------  --------- 
At 30 June 2021                          123            654                      777 
                           -----------------  -------------  ------------  --------- 
 
Net book value 
                           -----------------  -------------  ------------  --------- 
At 30 June 2021                          288          5,173           478      5,939 
At 31 December 2020                      329          4,285           295      4,909 
                           -----------------  -------------  ------------  --------- 
 

Capitalised intangible assets are amortised over their useful economic lives, as follows:

Capitalised development costs - 2 to 7 years

Capitalised patent costs - 3 to 10 years

10. Intangible assets (continued)

The customer and internal development intangible primarily relates to the design, development and configuration of the Company's core fuel cell and system technology. Amortisation of capitalised development commences once the development is complete and is available for use.

Comparatives for the six months ended 30 June 2020 are provided separately below:

 
                           Internal developments 
                                     in relation           Customer and 
                                to manufacturing   internal development 
                                            site             programmes      Total 
                                         GBP'000                GBP'000    GBP'000 
                           ---------------------  ---------------------  --------- 
Cost 
At 1 January 2020                            411                  2,000      2,411 
Additions                                                         1,456      1,456 
                           ---------------------  ---------------------  --------- 
At 30 June 2020                              411                  3,456      3,867 
 
Accumulated depreciation 
At 1 January 2020                                                    13         13 
Charge for the period                         41                     13         54 
                           ---------------------  ---------------------  --------- 
At 30 June 2020                               41                     26         67 
 
Net book value 
                           ---------------------  ---------------------  --------- 
At 30 June 2020                              370                  3,430      3,800 
                           ---------------------  ---------------------  --------- 
 

11. Inventories

 
                                 30 June      30 June   31 December 
                                    2021         2020          2020 
                               Unaudited    Unaudited       Audited 
                                 GBP'000      GBP'000       GBP'000 
                    --------------------  -----------  ------------ 
 Raw materials                     1,162          554         1,016 
 Work in progress                    977        1,410           838 
 Finished goods                      849           91           253 
                    --------------------  -----------  ------------ 
 Total inventory                   2,988        2,055         2,107 
                    --------------------  -----------  ------------ 
 

Inventories have increased in line with the Group's increased manufacturing capacity in the period.

12. Trade and other receivables

 
                         30 June      30 June   31 December 
                            2021         2020          2020 
                       Unaudited    Unaudited       Audited 
 Current:                GBP'000      GBP'000       GBP'000 
                     -----------  -----------  ------------ 
 Trade receivables         3,618        3,787         3,328 
 Other receivables         3,541          856         2,242 
                     -----------  -----------  ------------ 
                           7,159        4,643         5,570 
                     -----------  -----------  ------------ 
 Non-current: 
 Other receivables           741          741           741 
                     -----------  -----------  ------------ 
 

Included within other current receivables is the research and development tax credit of GBP1,767,000 (31 December 2020: GBP1,265,000).

13. Other current assets

 
                            30 June      30 June   31 December 
                               2021         2020          2020 
                          Unaudited    Unaudited       Audited 
                            GBP'000      GBP'000       GBP'000 
                        -----------  -----------  ------------ 
 Prepayments                    651          548           648 
 Accrued interest               232          261           129 
 Accrued grant income            92          178           225 
                        -----------  -----------  ------------ 
                                975          987         1,002 
                        -----------  -----------  ------------ 
 

14. Net cash and cash equivalents, short-term and long-term investments

 
                                     30 June      30 June   31 December 
                                        2021         2020          2020 
                                   Unaudited    Unaudited       Audited 
                                     GBP'000      GBP'000       GBP'000 
                                 -----------  -----------  ------------ 
 Cash at bank and in hand              3,424        5,431        20,684 
 Money market funds                  161,732       11,768        12,271 
                                 -----------  -----------  ------------ 
 Cash and cash equivalents           165,156       17,199        32,955 
 
 Short-term investments(1)            95,733       90,782        69,231 
 Long-term investments                 2,000                      8,000 
                                 -----------  -----------  ------------ 
 Cash and cash equivalents and 
  investments                        262,889      107,981       110,186 
                                 -----------  -----------  ------------ 
 

(1) Short-term investments comprise bank deposits with a maturity greater than 3 months but less than 12 months.

The Group typically places surplus funds into pooled money market funds with same day access and bank deposits with durations of up to 24 months. The Group's treasury policy restricts investments in short-term sterling money market funds to those which carry short-term credit ratings of at least two of AAAm (Standard & Poor's), Aaa-mf (Moody's) and AAAmmf (Fitch) and deposits with banks with minimum long-term rating of A-/A3/A and short-term rating of A-2/P-2/F-1 for banks which the UK Government holds less than 10% ordinary equity.

15. Trade and other payables

 
                                    30 June      30 June   31 December 
                                       2021         2020          2020 
                                  Unaudited    Unaudited       Audited 
 Current:                           GBP'000      GBP'000       GBP'000 
                                -----------  -----------  ------------ 
 Trade payables                       2,334        2,332         1,752 
 Taxation and social security                         16           713 
 Other payables                         168          212         6,647 
                                -----------  -----------  ------------ 
                                      2,502        2,560         9,112 
                                -----------  -----------  ------------ 
 

As at 31 December 2020, other payables included timing differences on payments relating to the exercise of certain share options in December 2020. These amounts were paid in January 2021.

16. Other current liabilities

 
                                       30 June      30 June   31 December 
                                          2021         2020          2020 
                                     Unaudited    Unaudited       Audited 
                                       GBP'000      GBP'000       GBP'000 
                         ---------------------  -----------  ------------ 
 Accruals                                2,822        2,546         1,464 
 Deferred grant income                   1,137        1,121         1,211 
                         ---------------------  -----------  ------------ 
                                         3,959        3,667         2,675 
                         ---------------------  -----------  ------------ 
 

17. Derivative financial instruments

 
                                         30 June      30 June   31 December 
                                            2021         2020          2020 
                                       Unaudited    Unaudited       Audited 
                                         GBP'000      GBP'000       GBP'000 
 Financial assets measured at 
  fair value through profit or 
  loss 
 Forward exchange contracts                  230            2            55 
 Non-deliverable forward contracts           615 
 Currency options                                                         4 
                                     -----------  -----------  ------------ 
 Total derivative assets                     845            2            59 
                                     -----------  -----------  ------------ 
 
 

In the previous period the Group entered into a non-deliverable forward (NDF) to hedge its exposure to Korean Won (KRW) with respect to a major customer contract. As at 30 June 2021, the unrealised fair value gain was GBP615,000 (31 December 2020: loss of GBP31,000). The Group also had a number of forward exchange contracts in place to hedge expected transactions in other currencies including EUR and CAD, with an unrealised total gain of GBP230,000 as at 30 June 2021 (31 December 2020: GBP55,000). All derivative financial instruments are measured using techniques consistent with level 2 of the fair value hierarchy.

 
                                          30 June       30 June   31 December 
                                             2021          2020          2020 
                                        Unaudited     Unaudited       Audited 
                                          GBP'000       GBP'000       GBP'000 
 Financial liabilities measured 
  at fair value through profit 
  or loss 
 Forward exchange contracts                                   1            10 
 Non-deliverable forward contracts                                         31 
 Currency options                                                           2 
                                                    -----------  ------------ 
 Total derivative assets                                      1            43 
                                                    -----------  ------------ 
 
 
 

18. Lease liabilities

 
                                         30 June      30 June   31 December 
                                            2021         2020          2020 
                                       Unaudited    Unaudited       Audited 
                                         GBP'000      GBP'000       GBP'000 
                                     -----------  -----------  ------------ 
 
 At the start of the period                4,445        4,836 
 Leases recognised on adoption of 
  IFRS 16                                                             4,971 
 New finance leases recognised                42 
 Lease payments                            (411)        (208)       (1,190) 
 Interest expense                            204          221           664 
 Early settlement                            (7) 
 Adjustment to lease term                (1,035) 
                                     -----------  -----------  ------------ 
 At the end of the period                  3,238        4,849         4,445 
                                     -----------  -----------  ------------ 
 
 Current                                     622        1,026           823 
 Non-current                               2,616        3,823         3,622 
                                     -----------  -----------  ------------ 
 Total at the end of the period            3,238        4,849         4,445 
                                     -----------  -----------  ------------ 
 

19. Provisions

 
 
                                         Property                    Contract 
                                    Dilapidations     Warranties       Losses     Total 
                                          GBP'000        GBP'000      GBP'000   GBP'000 
                                  ---------------  -------------  -----------  -------- 
 At 1 July 2019                               992             93           65     1,150 
 Movements in the Consolidated 
  Statement of Profit and 
  Loss: 
 Amounts used                                                            (65)      (65) 
 Increase in provision                        618            325          194     1,137 
                                  ---------------  -------------  -----------  -------- 
 At 31 December 2020                        1,610            418          194     2,222 
 Movements in the Consolidated 
  Statement of Profit and 
  Loss: 
 Unwinding of the discount                     32                                    32 
 Amounts used                                               (13)         (75)      (88) 
 Increase in provision                                       371          217       588 
                                  ---------------  -------------  -----------  -------- 
 At 30 June 2021                            1,642            776          336     2,754 
 
 Current                                                     776          336     1,112 
 Non-current                                1,642                                 1,642 
                                  ---------------  -------------  -----------  -------- 
 At 30 June 2021                            1,642            776          336     2,754 
                                  ---------------  -------------  -----------  -------- 
 
 Current                                                     418          194       612 
 Non-current                                1,610                                 1,610 
                                  ---------------  -------------  -----------  -------- 
 At 31 December 2020                        1,610            418          194     2,222 
                                  ---------------  -------------  -----------  -------- 
 

19. Provisions (continued)

Comparatives for the six months ended 30 June 2020 are provided separately below:

 
 
                                         Property                    Contract 
                                    Dilapidations     Warranties       Losses     Total 
                                          GBP'000        GBP'000      GBP'000   GBP'000 
                                  ---------------  -------------  -----------  -------- 
 At 1 January 2020                          1,054            122          171     1,347 
 Movements in the Consolidated 
  Statement of Profit and 
  Loss: 
 Amounts used                                                            (38)      (38) 
 Decrease in provision                                                   (47)      (47) 
 Increase in provision                         63            100                    163 
                                  ---------------  -------------  -----------  -------- 
 At 30 June 2020                            1,117            222           86     1,425 
                                  ---------------  -------------  -----------  -------- 
 
 Current                                                     222           86       308 
 Non-current                                1,117                                 1,117 
                                  ---------------  -------------  -----------  -------- 
 At 30 June 2020                            1,117            222           86     1,425 
                                  ---------------  -------------  -----------  -------- 
 

20. Share capital

 
                                       2021 (unaudited)          2020 (audited) 
                                    ----------------------  ------------------------ 
                                          Number                  Number 
                                      of GBP0.10              of GBP0.10 
                                        Ordinary                Ordinary 
                                          shares   GBP'000        shares     GBP'000 
                                    ------------  --------  ------------  ---------- 
 Allotted and fully paid 
 At 1 January 2021 / 1 July 
  2019                               172,171,527    17,217   152,769,812      15,277 
 Allotted GBP0.10 Ordinary 
  shares on exercise of employee 
  share options                        1,172,153       117     4,024,665         402 
 Allotted GBP0.10 Ordinary 
  shares on cash placing (see 
  below)                              17,067,580     1,707    15,377,050       1,538 
                                    ------------  --------  ------------  ---------- 
 At 30 June 2021 / 31 December 
  2020                               190,411,260    19,041   172,171,527      17,217 
                                    ------------  --------  ------------  ---------- 
 

On 17 March 2021 the Group announced a fundraise that would allot 17,067,580 new ordinary shares of GBP0.10 each in the Company, for a total gross cash consideration of GBP180,916,340. In conjunction with the placing, 12,967,629 shares were allotted on 17 March 2021 which included Bosch and certain Directors of the Company subscribing for 3,649,150 and 24,376 shares respectively. On 19 May 2021 Weichai subscribed for and were allotted the remaining 4,099,951 shares.

Comparatives for the six months ended 30 June 2020 are provided separately below:

 
                                                      2020 (unaudited) 
                                                  ------------------------ 
                                                        Number 
                                                    of GBP0.10 
                                                      Ordinary 
                                                        shares     GBP'000 
                                                  ------------  ---------- 
 Allotted and fully paid 
 At 1 January 2020                                 153,949,521      15,395 
 Allotted GBP0.10 Ordinary shares on exercise 
  of employee share options                          1,488,871         149 
 Allotted GBP0.10 Ordinary shares on cash 
  placing                                           15,377,050       1,538 
                                                  ------------  ---------- 
 At 30 June 2020                                   170,815,442      17,082 
                                                  ------------  ---------- 
 

20. Share capital (continued)

Reserves

The Consolidated Statement of Financial Position includes a merger reserve and a capital redemption reserve. The merger reserve represents a reserve arising on consolidation using book value accounting for the acquisition of Ceres Power Limited at 1 July 2004. The reserve represents the difference between the book value and the nominal value of the shares issued by the Company to acquire Ceres Power Limited. The capital redemption reserve was created in the year ended 30 June 2014 when 86,215,662 deferred ordinary shares of GBP0.04 each were cancelled.

21. Capital commitments

Capital expenditure that has been contracted for but has not been provided for in the financial statements amounts to GBP1,232,000 as at 30 June 2021 (31 December 2020: GBP1,142,000), in respect of the acquisition of property, plant and equipment.

22. Related party transactions

As at 30 June 2021 the Group's related parties were its Directors. During the period one Director exercised and retained 8,490 share options under the Company's employee share save scheme. There were no other transactions between the Company and the Directors during the period.

Reconciliation between operating loss and Adjusted EBITDA

Management believes that presenting Adjusted EBITDA loss allows for a more direct comparison of the Group's performance against its peers and provides a better understanding of the underlying performance of the Group by excluding non-recurring, irregular and one-off costs. The Group currently defines Adjusted EBITDA loss as the operating loss for the period excluding depreciation and amortisation charges, share-based payment charges, unrealised losses on forward contracts and exchange gains/losses.

 
 
                                         Six months   Six months   18 months 
                                              ended        ended       ended 
                                            30 June      30 June      31 Dec 
                                               2021         2020        2020 
                                            GBP'000      GBP'000     GBP'000 
--------------------------------------  -----------  -----------  ---------- 
 Operating loss                             (7,602)      (7,172)    (17,634) 
 Depreciation and amortisation                2,751        1,745       4,804 
 Share-based payment charges                  1,102          437       1,378 
 Unrealised losses/(gains) on forward 
  contracts                                   (829)         (64)         139 
 Exchange (gains)/losses                         63           66        (55) 
--------------------------------------  -----------  -----------  ---------- 
 Adjusted EBITDA                            (4,515)      (4,988)    (11,368) 
--------------------------------------  -----------  -----------  ---------- 
 
 

Reconciliation between net cash from operating activities and equity-free cash flow

The Group defines equity-free cash flow as net cash from operating activities plus capital expenditure and adjusted for interest payments and receipts and exchange rate movements. The table below reconciles net cash from operating activities to equity-free cash flow for each period.

 
 
                                       Six months   Six months   18 months 
                                            ended        ended       ended 
                                          30 June      30 June      31 Dec 
                                             2021         2020        2020 
                                          GBP'000      GBP'000     GBP'000 
------------------------------------  -----------  -----------  ---------- 
 Net cash from operating activities      (13,170)      (1,875)     (5,824) 
 Capital expenditure (total)              (5,225)      (4,411)    (13,051) 
 Interest and lease payments (net)          (279)           81        (64) 
 Exchange rate movements                     (63)           64       (139) 
------------------------------------  -----------  -----------  ---------- 
 Equity-free cash flow                   (18,737)      (6,141)    (19,078) 
------------------------------------  -----------  -----------  ---------- 
 
 

INDEPENT REVIEW REPORT TO Ceres power holdings plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the six months ended 30 June 2021 which comprises the Consolidated Statement of Profit and Loss and Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Cash Flow Statement and the Consolidated Statement of Changes in Equity.

We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the interim report be presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the six months ended 30 June 2021 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability

BDO LLP

Chartered Accountants

Guildford

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

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IR DZGZLLLRGMZM

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September 30, 2021 02:00 ET (06:00 GMT)

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