RNS Number : 2277ACeres Power Holdings plc22 September 2022

CWR.L

22 September 2022

Ceres Power Holdings plc

Interim results for the six months ended 30 June 2022

Continuing investment to enable multi-gigawatt manufacturing capacity globally

Horsham, UK:Ceres Power Holdings plc ("Ceres", the "Company") (AIM: CWR.L), a global leader in fuel cell and electrochemical technology, announces its interim results for the six months ended 30 June 2022.

Financial update

·     Revenue and other operating income £9.9 million (H1 2021: £17.4 million)

·     Gross profit of £5.3 million (H1 2021: £12.2 million) with gross margin at 55% (H1 2021: 72%)

·     Cash and investments of £221.6 million as at 30 June 2022 (31 December 2021: £249.6 million)

·     Increased investment in research and development by 46% including electrolysis technology for green hydrogen

Operational update

·     Heads of Terms signed withWeichai and Bosch to establish a third manufacturing facility for Ceres' solid oxide fuel cell (SOFC) technology in China,worth £30 million to Ceres in near term license fees plus future royalties

·     Partnership established with Shell to utilise solid oxide electrolyser cell (SOEC) technology to deliver high-efficiency, low-cost green hydrogen

·     Strong progress on theSOEC development programme with first electrolyser cell module (ECM) on test

·     Continued expansion of Ceres' highly skilled workforce to 523 employeesat 30 June 2022 (31 December 2021: 489) including thearrival of Eric Lakin as Chief Financial Officer andDeborah Grimason as General Counsel and Company Secretary

Current trading and outlook

·     Signature of definitive China joint venture agreements is expected in Q4 this year.  Establishment of the JV entities will follow regulatory approvals in China and Europe, which are anticipated in early 2023

·     Most of the £30 million licence fee revenue associated with the China JVs will be recognised on establishment of the new JV entities in early 2023, whereas we had previously expected to recognise around half of these fees in 2022.  Based on this expected timing of JV signing and regulatory clearances, it is now expected that revenue in the second half of 2022 will be at similar levels to those in the first half, leading to full-year 2022 revenue lower than 2021 levels

·     Correspondingly, H1 2023 revenue is expected to be at significantly higher levels based on the expected recognition of most of the £30 million licence fee revenue on establishment of the JV entities in early 2023

·     In July, the stationary SOFC system being developed by our partner Bosch was approved by the European Commission as one of the first Important Projects of Common European Interest (IPCEI) aimed at developing an integrated hydrogen economy in Europe, and is now eligible for state funding

·     In August, Doosan Fuel Cell ("Doosan") raised further capital confirming that half of the KRW70 billion (GBP 44 million) would be used to build its plant in South Korea for the mass production of Ceres' SOFCs in 2024, to meet the rising demand from the hydrogen-energy market

·     The Board remains committed to transition from the AIM market to the Premium listing segment of the Main Market of the London Stock Exchange, which is expected to follow signing of the China JV agreements.

Phil Caldwell, Chief Executive Officer of Ceres, said:

"Energy security and the transition to cleaner energy have never been so important to the way we live. Ceres' role as a leading developer of clean energy technology, enabling companies to decarbonise at scale and pace, means we are well-positioned to play our part." 

"The China joint ventures represent an important milestone in our ambitions for Ceres' technology, not only in its mass deployment in systems and products for the significant Chinese market, but also accelerating the delivery of global manufacturing capacity.

"We are also growing the opportunity for Ceres with the investment in SOEC for green hydrogen and our first commercial opportunity for SOEC was announced in our partnership with Shell. These are steps towards our aim of establishing multiple mass manufacturing facilities and generating significant royalty revenue with multi-gigawatts of Ceres technology in production."

Financial Summary:

Six months ended

30 June 2022

Unaudited

Six months ended

30 June 2021

Unaudited

12 months ended 31 December 2021

Audited


£'000

£'000

£'000

Total revenue and other operating income, comprising:

9,854

17,436

31,700

Licence fees

3,404

10,682

16,646

Engineering services revenue

4,206

2,669

6,777

Provision of technology hardware

2,077

3,759

7,353

Other operating income

167

326

924

Gross margin %

55%

72%

66%

Adjusted EBITDA loss1 - Power SOFC2

(10,216)

(371)

(4,492)

Adjusted EBITDA loss1 - Hydrogen SOEC2

(10,279)

(4,144)

(12,183)

Adjusted EBITDA loss1 - total Group

(20,495)

(4,515)

(16,675)

Operating loss

(25,203)

(7,602)

(23,430)


Net cash used in operating activities

(20,599)

(13,170)

(20,342)

Net cash and investments

221,625

262,889

249,584

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. 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 22 September 2022 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 visitwww.ceres.techor contact:

Ceres Power Holdings plc

Elizabeth Skerritt

Tel: +44 (0)7932 023 283

Investec Bank PLC (NOMAD & Joint Broker)

Jeremy Ellis/ Patrick Robb/ Ben Griffiths

Tel: +44 (0)207 597 5970

Berenberg (Joint Broker)

Ben Wright/ Mark Whitmore

Tel: +44 (0)203 207 7800

FTI Consulting (PR Adviser)

Dwight Burden

Tel: +44 (0)203 727 1000

Email:[email protected]

About Ceres Power

Ceres is a world-leading developer of electrochemical technologies: fuel cells for power generation, electrolysis for the creation of green hydrogen and energy storage. Its asset-light, licensing model has seen it establish partnerships with some of the world's largest engineering and technology companies, such as Weichai in China, Bosch in Germany, Miura in Japan, and Doosan in Korea, to develop systems and products that address climate change for power generation, transportation, industry, data centres and everyday living.  Ceres is listed on the AIM market of the London Stock Exchange ("LSE") (AIM: CWR) and is classified by the LSE Green Economy Mark, which recognises listed companies that derive more than 50% of their activity from the green economy.

Chief Executive's Statement

Ceres' purpose is to develop the technologies that the world needs to decarbonise and bring them to market at the scale and pace needed to help global energy systems transition to a net zero carbon future.

We are proud to be a British business that exports technology globally through collaborations with some of the world's most progressive companies building manufacturing facilities in Germany, South Korea and now a third planned factory in China. Our aim is to enable multi-gigawatts of capacity producing hydrogen and fuel cell technologies to decarbonise the hard-to-abate sectors of the energy system and in the process build a sustainable business that delivers long-term benefits for our people and shareholders, our communities, and our planet.

I am pleased to report that in the first half of 2022 we have continued to invest capital focused on scaling our technology for use in multiple applications and geographies. We have accelerated the development of our fuel cell business (SOFC) with global partners, enabling major expansion of our electrolysis activities (SOEC) by signing a new partner in Shell, and strengthening the management and wider Ceres team to address the substantial market opportunities that exist for our clean energy technology. 

The Group reported revenues and other income of £9.9 million for the first six months of 2022 (H1 2021: £17.4 million), all related to the fuel cell business. The decrease when compared with the prior period primarily reflects the significant licence revenue recognised in H1 2021 on our contract with Doosan and accordingly gross margins reduced to 55% (H1 2021: 72%), also impacted by the higher proportion of licence fee revenue recognised in the prior period.  As we have stated in previous results announcements, gross margin percentage will vary period on period based on timing and quantum of licence revenue recognition within the overall revenue mix.

As noted in our recent Trading Update, the phasing of revenue in 2022 and early 2023 is highly sensitive to the timing of the establishment of the China JVs, where Ceres, Bosch and Weichai are making good progress towards definitive agreements. The collaboration represents an important milestone in Ceres' ambitions for the Chinese market and it is a critical part of delivering global manufacturing capacity for our technology, with the potential to establish one of the strongest partnerships in the global fuel cell industry. We are confident that the JV agreements will be signed in Q4 but because of the various approvals required before the JVs themselves can be established, it is therefore expected that initial licence fee revenue recognition will be in the first half of 2023.

The world around us continues to transition towards a sustainable green economy, driving increasing demand for clean energy technologies. The current geopolitical instability in Europe has only served to push energy security firmly up the political agenda and the rising costs of fossil fuels is adding another tailwind to the urgency for decarbonisation of our energy system. 

In July, thestationary powerSOFC systembeingdeveloped by our partner Bosch wasapprovedby the European Commission asoneof thefirst Important ProjectsofCommonEuropeanInterest (IPCEI) aimed at developingan integrated hydrogen economyin Europe.  Bosch's SOFC programme is now eligible for state funding on the basis of this approval under state aid law aimed at strengthening innovative capacity, global competitiveness and creating new jobs in Germany. In Germany, more than eight billion euros in funding is available for the development of hydrogen and other green technologies.

In South Korea, the market has received a further boost from a new Clean Hydrogen Portfolio Standards bill that passed in May 2022, stipulating that a certain percentage of electricity provided by electric companies must be produced from hydrogen.  The existing portfolio standard has also been amended so that by 2026, 25% of energy supplied in South Korea must derive from renewable energy, with incremental increases every year thereafter.

Over the summer, President Biden signed into law the Inflation Reduction Act, which includes $369 billion of funding over 10 years to promote the transition to cleaner energy.  The largest investment commitment in clean energy in US history, it includes various elements that specifically support hydrogen and fuel cell businesses including tax credits for green hydrogen, credits for renewable energy and biogas production, and financial support for companies demonstrating technologies that can help decarbonise heavy industry, agriculture, and shipping.  These are all areas of the energy system where Ceres' technology can play an important role, and we have seen an increase in enquiries from the US and continue to explore opportunities with potential US partners.

Ceres Power - fuel cells

Ceres has established a leading position in solid oxide fuel cell technology that is being demonstrated in several applications through global partners. Our focus now is meeting growing demand for higher-power systems and broadening applications for use in hard-to-decarbonise sectors such as marine.

All revenues in the first half of the year are derived from the SOFC part of the business.  This recorded a gross profit of £5.3 million (H1 2021: £12.2 million), reflecting lower revenue following the significant revenue recognised on the Doosan contract in the comparative period, and an increase in adjusted EBITDA loss to £10.2 million (H1 2021: £0.4 million).  Investment in research and development for SOFC increased by 26% to £13.2 million (H1 2021: £10.5 million).

We continued to accelerate investment in the first half of the year in areas such as research and development, capability of our CP2 pilot production facility, and test stand capacity including signing and outsource agreement with Horiba Mira.  In line with our strategy, there will be continued investment in SOFC to support future expansion.  The level of losses or future profitability of this part of the business will continue to be highly influenced by the level of SOFC licence fee revenue recognised in each period, until royalty revenue streams become material.

Our partners Bosch and Doosan are both targeting 2024 for the scale up of manufacturing capabilities to 200MW and 50MW of SOFC capacity, respectively. In August, Doosan raised approximately £44 million and confirmed that half would be used to build a new plant in South Korea for the mass production of solid oxide fuel cells to meet the rising demand from the hydrogen-energy market.

The three-way collaboration in China with Weichai and Bosch would represent our third manufacturing location following Germany and South Korea, and another major step towards enabling multi-gigawatt capacity of our technology globally.

Ceres Hydrogen - electrolysis

In SOEC, we are now investing in a potentially even larger addressable market for electrolysis through a differentiated offering for hydrogen with distinct advantages in efficiency, coupling with industrial processes that are high emitters of carbon dioxide today. Our SOEC business showed an adjusted EBITDA loss of £10.3 million (H1 2021: £4.1 million), reflecting increased research and development activities, including the initial costs of producing our first 1MW demonstration unit.  Investment in research and development for the SOEC segment increased by 100% to £7.8 million (H1 2021: £3.9 million).

Ceres has committed £100 million for the further development of its SOEC technology - with the aim of producing highly efficient, low-cost green hydrogen.   According to BloombergNEF's recent report, "Ukraine War Makes Green Hydrogen Competitive", grey hydrogen produced from fossil fuels has reached a levelised cost of $6.71/kg in the EMEA compared to $4.84-6.68/kg for green hydrogen - nearly removing the premium for newer, cleaner technologies. The International Energy Agency estimates the capacity of electrolysers needed by 2050 at 3,585GW, compared to cumulative installations today of just 1GW. It is no longer a question of credibility of the technology, but more a question about the scale and pace of deployment.

Ceres aims to produce hydrogen at efficiencies around 20% greater than other technologies, in the range of 85 - 90% where it is possible to make use of waste heat in industrial processes to drive this higher efficiency.  We are making progress with our SOEC development programme and have our first Electrolyser Cell Module (ECM) on test. We are making good progress on the "first-of-a-kind" system build and will integrate the ECMs into the container system to start testing in the early part of 2023.

In June 2022, we signed an agreement with Shell to deliver a megawatt scale SOEC demonstrator in 2023.  The system will be installed at Shell's research and development technology centre in Bangalore, India, where the hydrogen will be used in industrial processes on site. The testing programme is intended to run for at least three years, forming the first stage of a collaborative relationship.  Shell and Ceres are building this partnership to utilise SOEC technology to deliver high-efficiency, low-cost green hydrogen; now widely viewed as a credible route to decarbonise hard-to-abate parts of the energy system that rely on fossil fuels today.

Focused investment for the future

The underlying theme across both segments of the business for the first six months of 2022 continues to be investing to drive innovation and future mass market uptake for these technologies. Consistent with the capital raise in 2021, the investments we are making include both capital investments and investment in strategic resources in both SOFC and SOEC capabilities. Overall, our employee base grew as planned, with 523 people employed as at 30 June 2022 compared to 489 people as at 31 December 2021. Research and development costs increased by 46% to £21.0 million compared to H1 2021 largely due to the additional investment in SOEC. 

Capitalised development costs in the period, which only relate to ongoing SOFC development, increased to £2.9 million compared to £1.6 million for H1 2021 and we have capitalised a net £10.9 million to date (31 December 2021: £8.5 million). Amortisation of this to the income statement was consistent with the prior period, with a charge of £0.5 million recorded (H1 2021: £0.6 million).

As planned, we have continued the expansion of our test capability to support demand from our partners, and to cater for additional market opportunities including SOEC and SOFC applications such as marine and alternative fuels. We have also invested in expanding our manufacturing capacity for prototypes and demonstrators for both SOFC and SOEC products. As a result, our investment in property, plant and equipment increased to £5.5 million in H1 2022 (H1 2021: £3.6 million) and depreciation charged increased to £2.6 million, compared to £1.9 million in H1 2021. We expect this capital investment to accelerate in the second half of 2022.

Overall, this focused "investment in the future" (R&D costs, capitalised development and capital expenditure) increased by 56% to £25.7 million (H1 2021: £16.5 million). The £25.7 million comprises £17.3 million (H1 2021: £11.3 million) in R&D (excluding depreciation, amortisation and share-based payments), £5.5 million (H1 2021: £3.6 million) in capital expenditure and £2.9 million (H1 2021: £1.6 million) in capitalised development.

As a result of these investments and increased amortisation and depreciation, the Group reported an increased operating loss of £25.2 million in H1 2022, up from a loss of £7.6 million in H1 2021.

Strong financial position: the foundation for continued development and growth

The Group ended the period with a strong cash position of £221.6 million in cash and investments as at 30 June 2022 (31 December 2021: £249.6 million), with the decrease since 31 December 2021 reflecting the investment in the period and is in line with our plans to invest for future growth following last year's capital raise. 

Equity free cash outflow (defined and reconciled to net cash from operating activities at the end of this report) was £28.6 million (H1 2021: £18.7 million), being driven by net cash used in operating activities of £20.6 million (H1 2021: £13.2 million) reflecting the Group's operating loss in the period, capital expenditure of £5.5 million (H1 2021: £3.6 million), capitalised development of £2.9 million (H1 2021: £1.6 million) with the balance from interest payments and exchange rate movements. Movements in working capital included a £4.0 million increase in inventories (H1 2021: £0.9 million) primarily reflecting a higher balance of fuel cell stacks being held at the period end to satisfy customer demand for our technology hardware.  

Order Backlog (combining what was previously described as "Order book" and "Pipeline") as at 30 June 2022 was £76.2 million (31 December 2021: £79.8 million).

Board and Management Changes

In early 2022 we strengthened our management team with the arrival of Eric Lakin as Chief Financial Officer andDeborah Grimason as General Counsel and Company Secretary. Both bring fresh perspective to our existing, talented team and important experience from much larger listed businesses as we look to transition from the AIM listing to the Premium listing segment of the Main Market of the London Stock Exchange, which is expected to follow the signing of the China joint venture agreements.

On the Board, we welcomed Trine Borum Bojsen as Non-executive Director who brings over 25 years of experience from the renewable energy space. Trine joins another of our Board Directors Julia King, Baroness Brown of Cambridge, in supporting the ESG Committee as an adviser.

Strategic update

Ceres is a technology business, and our purpose is to develop the technologies that the world needs to decarbonise and bring them to market at the scale and pace needed to help global energy systems transition to a net zero carbon future. We are making good progress in enabling scale production of our technology globally with partners building manufacturing facilities in Germany, South Korea and now a third planned factory in China. Our investment in SOEC for green hydrogen and continued growth in SOFC for power systems enables us to significantly increase the addressable market for our technology and significantly grow the value of the business through future licenses and royalties. Our aim is to enable multi-gigawatts of electrolysis and fuel cell technologies to decarbonise the hard-to-abate sectors of the energy system and in the process to build a sustainable business that delivers long-term benefits for our people,shareholders, communities, and our planet.

Outlook

As explained in the "Current trading and outlook" section above, the expected timing of the recognition of the up-front licence fee revenue in relation to the establishment of the China JVs means that revenue in the second half of 2022 is expected to be at similar levels to the first half.  However, we expect strong revenue growth in 2023 as most of the £30 million licence fee revenue would be recognised on establishment of the JVs. 

We will continue to make use of our strong financial position in order to make targeted investments in SOFC and SOEC capability in line with our plans to grow the business and support the significant future demand for leading fuel cell and electrolysis clean energy technology.

Philip Caldwell

Chief Executive Officer


CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2022



6 months ended

30 June 2022

Unaudited

6 months ended

30 June 2021

Unaudited

12 months ended

31 December 2021

Audited











Note

£'000

£'000

£'000

















Revenue

2


9,687


17,110


30,776









Cost of sales



(4,342)


(4,866)


(10,427)









Gross profit

5,345

12,244

20,349









Other operating income1



167


326


924









Operating costs

4


(30,715)


(20,172)


(44,703)









Operating loss

(25,203)

(7,602)

(23,430)









Finance income

5


1,153


243


438









Finance expense

5


(143)


(352)


(380)


Loss before taxation


(24,193)

(7,711)

(23,372)









Taxation credit

6


896


1,166


1,970









Loss for the financial period and total comprehensive loss


(23,297)

(6,545)

(21,402)

















Lossper £0.10 ordinary share expressed in pence per share:
















Basic and diluted loss per share

7


(12.20)p


(3.62)p


(11.53)p









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

1Other operating income relates to grant income.



CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2022




30 June

2022

Unaudited

30 June

2021

Unaudited

31 December

2021

Audited





Note


£'000

£'000

£'000









Assets








Non-current assets








Property, plant and equipment

8


21,092


16,688


18,141

Right-of-use assets

9


2,167


2,714


2,438

Intangible assets

10


10,882


5,939


8,478

Long-term investments

14



2,000


5,000

Investment in associate



460



500

Other receivables

12


741


741


741

Total non-current assets


35,342

28,082

35,298









Current assets








Inventories

11


7,149


2,988


3,145

Contract assets

2


5,314


5,626


7,331

Other current assets

13


1,024


975


1,133

Derivative financial instruments

17


703


845


1,073

Current tax receivable



4,416


4,659


3,531

Trade and other receivables

12


8,154


7,159


4,865

Short-term investments

14


114,177


95,733


93,129

Cash and cash equivalents

14


107,448


165,156


151,455

Total current assets



248,385


283,141

265,662


Liabilities








Current liabilities








Trade and other payables

15


(4,857)


(2,502)


(2,783)

Contract liabilities

2


(5,004)


(3,773)


(4,290)

Other current liabilities

16


(7,660)


(3,959)


(5,818)

Derivative financial instruments

17


(5)



Lease liabilities

18


(655)


(622)


(754)

Provisions

19


(1,495)


(1,112)


(1,579)

Total current liabilities



(19,676)


(11,968)

(15,224)

Net current assets


228,709

271,173

250,438


Non-current liabilities








Lease liabilities

18


(1,971)


(2,616)


(2,285)

Provisions

19


(1,910)


(1,642)


(1,828)

Total non-current liabilities



(3,881)


(4,258)

(4,113)

Net assets


260,170

294,997

281,623



Equity attributable to the owners of the parent








Share capital

20


19,157


19,041


19,073

Share premium



405,272


404,788


404,726

Capital redemption reserve



3,449


3,449


3,449

Merger reserve



7,463


7,463


7,463

Accumulated losses



(175,171)


(139,744)


(153,088)

Total equity



260,170


294,997


281,623

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

CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 June 2022


Note

6 months ended

 30 June 2022

Unaudited

6 months ended

 30 June 2021

Unaudited

12 months ended

 31 December 2021

Audited


£'000

£'000

£'000

Cash flows from operating activities




Loss before taxation

(24,193)

(7,711)

(23,372)





Adjustments for:




Finance income

(1,153)

(243)

(438)

Finance expense

143

352

380

Depreciation of property, plant and equipment


2,578

1,930

4,215

Depreciation of right-of-use assets


271

265

541

Amortisation of intangible assets


542

556

1,004

Net foreign exchange losses/(gains)


153

63

(563)

Net change in fair value of financial instruments


375

(829)

(1,057)

Share-based payments charge


1,214

1,102

2,615

Operating cash flows before movements in working capital

(20,070)

(4,515)

(16,675)

(Increase)/decrease in trade and other receivables


(3,117)

(1,944)

22

Increase in inventories


(4,004)

(881)

(1,038)

Increase in trade and other payables


3,900

2,164

2,832

Decrease/(increase) in contract assets


2,017

(4,762)

(6,467)

Increase/(decrease) in contract liabilities


714

(3,732)

(3,215)

(Decrease)/increase in provisions


(39)

500

1,121

Net cash used in operations

(20,599)

(13,170)

(23,420)

Taxation received


3,078

Net cash used in operating activities

(20,599)

(13,170)

(20,342)






Investing activities





Purchase of property, plant and equipment


(5,529)

(3,639)

(7,377)

Capitalised development expenditure


(2,946)

(1,586)

(4,573)

Repayment of long-term investments


5,000

6,000

3,000

Acquisition of short-term investments


(70,998)

(52,502)

(62,898)

Repayment of short-term investments


49,950

26,000

39,000

Finance income received


730

243

438

Net cash used in investing activities

(23,793)

(25,484)

(32,410)






Financing activities





Proceeds from issuance of ordinary shares


630

181,502

181,472

Net expenses from issuance of ordinary shares


(2,572)

(2,572)

Cash paid on behalf of employees on the sale of share options


(7,490)

(7,490)

Repayment of lease liabilities


(413)

(207)

(405)

Interest paid


(103)

(315)

(316)

Net cash generated from financing activities

114

170,918

170,689

Net (decrease)/increase in cash and cash equivalents

(44,278)

132,264

117,937

Exchange gains/(losses) on cash and cash equivalents


271

(63)

563

Cash and cash equivalents at beginning of period


151,455

32,955

32,955

Cash and cash equivalents at end of period

14

107,448

165,156

151,455

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 2022


Share capital

Share premium

Capital redemption reserve

Merger reserve

Accumulated losses

Total


£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2021 (audited)


17,217

227,682

3,449

7,463

(134,301)

121,510








Comprehensive income







Loss for the financial year


(21,402)

(21,402)

Total comprehensive loss






(21,402)

(21,402)








Transactions with owners







Issue of shares, net of costs


1,856

177,044

178,900

Share-based payments charge


2,615

2,615

Total transactions with owners


1,856

177,044

2,615

181,515

At 31 December 2021 (audited)

19,073

404,726

3,449

7,463

(153,088)

281,623








Comprehensive income







Loss for the financial period


(23,297)

(23,297)

Total comprehensive loss


(23,297)

(23,297)








Transactions with owners







Issue of shares, net of costs


84

546

630

Share-based payments charge


1,214

1,214

Total transactions with owners

84

546

1,214

1,844

At 30 June 2022 (Unaudited)


19,157

405,272

3,449

7,463

(175,171)

260,170

Comparatives for the six months ended 30 June 2021 are provided separately below:


Share capital

Share premium

Capital redemption reserve

Merger reserve

Accumulated losses

Total


£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2021 (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




Notes to the financial statements for the six months ended 30 June 2022

1. Basis of preparation

The 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 year ended 31 December 2021 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 derivative financial instruments, which are stated at their fair value.

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. The same accounting policies, presentation and methods of computation are followed in the interim financial statements as were applied in the Group's latest annual audited financial statements. While the financial figures included in this half-yearly report have been computed in accordance with international accounting standards applicable to interim periods, this half-yearly report does not contain sufficient information to constitute an interim financial report as that term is defined in IAS 34.

The financial information contained in the 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 year ended 31 December 2021, 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 2022 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 months period ended 30 June 2022 of £23.3m (six months ended 30 June 2021: £6.5m) and net cash used in operating activities of £20.6m (six months ended 30 June 2021: £13.2m).  At 30 June 2022, the Group held cash and cash equivalents and investments of £221.6m (31 December 2021: £249.6m).  The directors have prepared annual budgets and cash flow projections that extend 15 months from the date of approval of this report. These projections include management's expectations of the cash flows associated with the Group's future investment in R&D projects and expansion of manufacturing and testing capacity, together with contracted and anticipated customer contracts and the planned investment in the China collaboration with Bosch and Weichai. The projections were stress tested by applying different scenarios including the loss of significant future revenue and continued adverse macroeconomic factors. 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 consolidated financial statements, the areas where judgement has been exercised remain consistent with those applied to the annual report and accounts for the year ended 31 December 2021.

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 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


6 months ended

30 June 2022

Unaudited


6 months ended

30 June 2021

Unaudited


12 months ended

 31 December 2021

Audited

£'000

£'000

£'000

Europe

4,051


3,855


7,676

Asia

5,404


12,995


22,748

North America

211

20


109

Rest of World

21

240


243

9,687

17,110


30,776

For the six months ended 30 June 2022, 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 44% and 39% of the Group's total revenue recognised in the period (6 months ended 30 June 2021: two major customers that accounted for approximately 65% and 23% of the Group's total revenue for that period and 12 months ended 31 December 2021: three major customers that accounted for approximately 59%, 25% and 11% of the Group's total revenue recognised for that year).

Major product/service lines


6 months ended

30 June 2022

Unaudited


6 months ended

30 June 2021

Unaudited


12 months ended

 31 December 2021

Audited

£'000

£'000

£'000

Engineering services

4,206


2,669


6,777

Provision of technology hardware

2,077


3,759


7,353

Licenses

3,404

10,682


16,646

9,687

17,110


30,776

Timing of transfer of goods and services


6 months ended

30 June 2022

Unaudited


6 months ended

30 June 2021

Unaudited


12 months ended

 31 December 2021

Audited


£'000


£'000

£'000

Products and services transferred at a point in time

1,887


11,732


15,326

Products and services transferred over time

7,800


5,378


15,450


9,687


17,110


30,776



2. Revenue (continued)

Amounts transferred at a point in time during the prior periods included the recognition of significant license income in the first half of 2021 related to a major contract.

The contract-related assets and liabilities are as follows:



30 June 2022

Unaudited


30 June 2021

Unaudited

31 December 2021

Audited



£'000

£'000

£'000

Trade receivables

12


4,651


3,618


2,612








Contract assets - accrued income



5,314


5,626


7,010

Contract assets - deferred costs




321

Total contract assets


5,314


5,626


7,331







Contract liabilities - deferred income


(5,004)


(3,773)


(4,290)

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. The Group's internal segmental reporting continues to separately reflect results down to adjusted EBITDA level from its Power (SOFC) and Hydrogen (SOEC) divisions.


Power - SOFC

Hydrogen - SOEC

Consolidated

Six months ended 30 June 2022 (Unaudited)

£'000

£'000

£'000













Revenue (external)

9,687



9,687

Cost of sales

(4,342)



(4,342)

Gross profit

5,345

5,345

Other operating income

167



167

Operating costs (excluding adjusting items)

(15,728)


(10,279)


(26,007)

Adjusted EBITDA1

(10,216)


(10,279)


(20,495)

Adjusting items:






Depreciation & amortisation





(3,391)

Share-based payment charge





(1,214)

Unrealised foreign exchange losses





271

Fair value adjustment





(374)

Operating loss

(25,203)

Finance income





1,153

Finance expense





(143)

Loss before taxation

(24,193)

Taxation credit





896

Loss for the financial period

(23,297)



3. Segmental analysis (continued)

Power - SOFC

Hydrogen - SOEC

Consolidated

Six months ended 30 June 2021 (unaudited)

£'000

£'000

£'000













Revenue (external)

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 EBITDA1

(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)



Power - SOFC

Hydrogen - SOEC

Consolidated

12 months ended 31 December 2021 (audited)

£'000

£'000

£'000













Revenue (external)

30,776



30,776

Cost of sales

(10,427)



(10,427)

Gross profit

20,349

20,349

Other operating income

924



924

Operating costs (excluding adjusting items)

(25,765)


(12,183)


(37,948)

Adjusted EBITDA1

(4,492)


(12,183)


(16,675)

Adjusting items:






Depreciation & amortisation





(5,760)

Share-based payment charge





(2,615)

Unrealised foreign exchange losses





563

Fair value adjustment





1,057

Operating loss

(23,430)

Finance income





438

Finance expense





(380)

Loss before taxation

(23,372)

Taxation credit





1,970

Loss for the financial period

(21,402)

1Adjusted EBITDAis an alternative performance measure, as defined at the end of this report.



4. Operating costs

Operating costs can be analysed as follows:




6 months ended

30 June 2022

Unaudited


6 months ended

30 June 2021

Unaudited


12 months ended

 31 December 2021

Audited


£'000


£'000

£'000

Research and development costs

20,997


14,402


31,290

Administrative expenses

7,695


4,775


11,245

Commercial

2,023


995


2,168


30,715


20,172


44,703

5. Finance income and expenses


6 months ended

30 June 2022

Unaudited


6 months ended

30 June 2021

Unaudited


12 months ended

 31 December 2021

Audited


£'000


£'000

£'000

Interest received

730


243

438

Foreign exchange gain on cash, cash equivalents and short-term deposits

423


Finance income

1,153


243


438











Interest on lease liability

(103)


(204)


(316)

Unwinding of discount on provisions

(37)


(32)


(64)

Other finance costs

(3)


(5)


Foreign exchange loss on cash, cash equivalents and short-term deposits


(111)


Interest expense

(143)


(352)


(380)

6. Taxation

No corporation tax liability has arisen during the period (6 months ended 30 June 2021 and 12 months ended 31 December 2021: £nil) 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.


6 months ended

30 June 2022

Unaudited


6 months ended

30 June 2021

Unaudited


12 months ended

 31 December 2021

Audited


£'000


£'000

£'000

UK corporation tax

(2,022)


(1,535)


(2,917)

Foreign tax suffered

240


369


973

Adjustment in respect of prior periods

886



(26)


(896)


(1,166)


(1,970)



7. Loss per share


6 months ended

30 June 2022

Unaudited


6 months ended

30 June 2021

Unaudited


12 months ended

 31 December 2021

Audited


£'000


£'000

£'000






Loss for the financial period attributable to shareholders

(23,297)


(6,545)


(21,402)






Weighted average number of shares in issue

190,972,969


180,783,345


185,689,432





Loss per £0.10 ordinary share (basic and diluted)

(12.20)p


(3.62)p


(11.53)p




8. Property, plant and equipment


Leasehold improvements

 £'000

Plant and machinery
£'000

Computer equipment
£'000

Fixtures and fittings

£'000

Assets under construction

 £'000

Motor vehicles

£'000

Total

£'000

Cost
















At 1 January 2021 

5,883

21,409

2,061

314

756

12

30,435

Additions

1,529

3,521

502

34

1,791

7,377

Transfers

572

(572)

At 31 December 2021 (audited)

7,412

25,502

2,563

348

1,975

12

37,812









Additions

238

2,437

169

2,685

5,529

Transfers

22

264

(286)

At 30 June 2022 (unaudited)

7,672

28,203

2,732

348

4,374

12

43,341















Accumulated depreciation
















At 1 January 2021 

2,712

11,196

1,398

149

1

15,456

Charge for the year

646

3,089

392

83

5

4,215

At 31 December 2021 (audited)

3,358

14,285

1,790

232

6

19,671









Charge for the period

442

1,872

226

37

1

2,578

At 30 June 2022 (unaudited)

3,800

16,157

2,016

269

7

22,249








Net book value








At 30 June 2022 (unaudited)

3,872

12,046

716

79

4,374

5

21,092

At 31 December 2021 (audited)

4,054

11,217

773

116

1,975

6

18,141

'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 2021 are provided separately below:

Unaudited

Leasehold improvements

 £'000

Plant and machinery
£'000

Computer equipment
£'000

Fixtures and fittings

£'000

Assets under construction

 £'000

Motor vehicles

£'000

Total

£'000

Cost
















At 1 January 2021

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 January 2021

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

9. Right of use assets


Land and Buildings

Computer equipment

Total


£'000


£'000

£'000

Cost










At 1 January 2021

4,729


18


4,747

Additions


43


43

Adjustment to lease term

(1,035)



(1,035)

Disposals


(18)


(18)

At 31 December 2021 (audited)

3,694

43

3,737

At 30 June 2022 (unaudited)

3,694


43


3,737





Accumulated depreciation








At 1 January 2021

766


10


776

Charge for the year

523


18


541

Disposals


(18)


(18)

At 31 December 2021 (audited)

1,289

10

1,299

Charge for the period

264


7


271

At 30 June 2022 (unaudited)

1,553


17


1,570






Net book value





At 30 June 2022 (unaudited)

2,141


26


2,167

At 31 December 2021 (audited)

2,405


33


2,438



9. Right of use assets (continued)

Comparatives for the six months ended 30 June 2021 are provided separately below:

Unaudited

Land and Buildings

Computer equipment

Total


£'000


£'000

£'000

Cost










At 1 January 2021

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 January 2021

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

During the six-month period ended 30 June 2021, the Group revised the expected term on one of its property leases, recognising an adjustment of £1,035,000 to reduce the right of use asset.



10. Intangible assets


Internal developments in relation to manufacturing site

 £'000

Customer and internal development programmes

£'000

Perpetual software licences

£'000

Patent costs
£'000

Total

£'000

Cost






At 1 January 2021

411

4,424

295

5,130

Additions

3,983

252

338

4,573

At 31 December 2021 (audited)

411

8,407

252

633

9,703







Additions

2,709

151

86

2,946

At 30 June 2022 (unaudited)

411

11,116

403

719

12,649







Accumulated amortisation






At 1 January 2021

82

139

221

Charge for the year

82

899

23

1,004

At 31 December 2021 (audited)

164

1,038

23

1,225







Charge for the period

41

377

56

68

542

At 30 June 2022 (unaudited)

205

1,415

79

68

1,767







Net book value






At 30 June 2022 (unaudited)

206

9,701

324

651

10,882

At 31 December 2021 (audited)

247

7,369

229

633

8,478

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 2021 are provided separately below:

Unaudited

Internal developments in relation to manufacturing site

 £'000

Customer and internal development programmes

£'000

Patent costs
£'000

Total

£'000

Cost





At 1 January 2021

411

4,424

295

5,130

Additions

1,403

183

1,586

At 30 June 2021

411

5,827

478

6,716






Accumulated amortisation





At 1 January 2021

82

139

211

Charge for the period

41

515

566

At 30 June 2021

123

654

777






Net book value





At 30 June 2021

288

5,173

478

5,939



11. Inventories


30 June 2022

Unaudited


30 June 2021

Unaudited


31 December 2021

Audited


£'000


£'000

£'000

Raw materials

1,381


                1,162


1,299

Work in progress

1,186


977


969

Finished goods

4,582


849


877

Total inventory

7,149


2,988


3,145

Inventories have increased in line with the continued improvement in manufacturing capacity in the period and to ensure the Group can satisfy existing and anticipated customer demand for technology hardware.

12. Trade and other receivables


30 June 2022

Unaudited


30 June 2021

Unaudited


31 December 2021

Audited

Current:

£'000


£'000

£'000

Trade receivables

4,651


3,618


2,612

Other receivables

3,503


3,541


2,253


8,154


7,159


4,865

Non-current:





Other receivables

741


741


741

Included within other current receivables is the research and development tax credit of £1,551,000 (30 June 2021: £502,000; 31 December 2021: £1,304,000).

13. Other current assets



30 June 2022

Unaudited

30 June 2021

Unaudited


31 December 2021

Audited


£'000

£'000

£'000

Prepayments


880

651


673

Accrued interest


232


322

Accrued grant income


144

92


138



1,024

975


1,133



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


30 June 2022

Unaudited


30 June 2021

Unaudited


31 December 2021

Audited


£'000


£'000

£'000

Cash at bank and in hand

6,601


3,424


4,957

Money market funds

100,847


161,732


146,498

Cash and cash equivalents

107,448


165,156


151,455






Short-term investments1

114,177


95,733


93,129

Long-term investments


2,000


5,000

Cash and cash equivalents and investments

221,625


262,889


249,584

1Short-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 2022

Unaudited


30 June 2021

Unaudited


31 December 2021

Audited

Current:

£'000


£'000

£'000

Trade payables

4,537


2,334


2,425

Other payables

320


168


358


4,857


2,502


2,783

16. Other current liabilities


30 June 2022

Unaudited


30 June 2021

Unaudited


31 December 2021

Audited

£'000


£'000

£'000

Accruals

6,767


2,822


4,803

Deferred grant income

893


1,137


1,015


7,660


                3,959


5,818




17. Derivative financial instruments


30 June 2022

Unaudited


30 June 2021

Unaudited


31 December 2021

Audited


£'000


£'000


£'000

Financial assets measured at fair value through profit or loss



Forward exchange contracts

241


230


321

Non-deliverable forward contracts

462


615


752

Total derivative assets

703


845


1,073







30 June 2022

Unaudited


30 June 2021

Unaudited


31 December 2021

Audited


£'000


£'000


£'000

Financial liabilities measured at fair value through profit or loss



Forward exchange contracts

(5)



Total derivative liabilities

(5)













In 2020, 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 2022, the unrealised fair value gain was £462,000 (31 December 2021: £752,000). 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 £236,000 as at 30 June 2022 (31 December 2021: £321,000). All derivative financial instruments are measured using techniques consistent with level 2 of the fair value hierarchy.

18.  Lease liabilities



30 June 2022

Unaudited

30 June 2021

Unaudited

31 December 2021

Audited



£'000

£'000

£'000



At the start of the period


3,039

4,445

4,445

New finance leases recognised


42

41

Lease payments


(516)

(411)

(721)

Interest expense


103

204

316

Early settlement


(7)

Adjustment to lease term


(1,035)

(1,042)

At the end of the period

2,626

3,238

3,039





Current


655

622

754

Non-current


1,971

2,616

2,285

Total at the end of the period


2,626

3,238

3,039



19.  Provisions


Property Dilapidations

Warranties

Contract Losses

Total


£'000


£'000

£'000

£'000

At 1 January 2021

1,610


418


194


2,222

Movements in the Consolidated Statement of Profit and Loss:








Amounts used


(404)


(175)


(579)

Unwinding of discount

64




64

Increase in provision

154


1,239


307


1,700

At 31 December 2021 (audited)

1,828


1,253


326


3,407

Movements in the Consolidated Statement of Profit and Loss:








Amounts used



(138)


(138)

Unused amounts reversed



(124)


(124)

Unwinding of discount

37




37

Increase in provision

45


178



223

At 30 June 2022 (unaudited)

1,910

1,431

64

3,405








Current


1,431


64


1,495

Non-current

1,910




1,910

At 30 June 2022 (unaudited)

1,910

1,431

64

3,405

Current


1,253


326


1,579

Non-current

1,828




1,828

At 31 December 2021 (audited)

1,828


1,253


326


3,407

Comparatives for the six months ended 30 June 2021 are provided separately below:

Unaudited

Property Dilapidations

Warranties

Contract Losses

Total


£'000


£'000

£'000

£'000

At 1 January 2021

1,610


418


194


2,222

Movements in the Consolidated Statement of Profit and Loss:








Amounts used


(13)


(75)


(88)

Unwinding of the discount

32




32

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



20. Share capital


2022 (unaudited)

2021 (audited)


Number of £0.10
Ordinary
shares

£'000

Number of £0.10
Ordinary
shares

£'000

Allotted and fully paid







At 1 January 2022 / 1 January 2021


190,729,638

19,073


172,171,527

17,217

Allotted £0.10 Ordinary shares on exercise of employee share options


844,978

84


1,490,531

149

Allotted £0.10 Ordinary shares on cash placing (see below)



17,067,580

1,707

At 30 June 2022 / 31 December 2021

191,574,616

19,157

190,729,638

19,073

On 17 March 2021 the Group announced a fundraise that would allot 17,067,580 new ordinary shares of £0.10 each in the Company, for a total gross cash consideration of £180,916,340. 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.

During the six months ended 30 June 2022, 844,978 ordinary £0.10 shares were allotted for cash consideration of £627,427 on the exercise of employee share options (six months ended 30 June 2021: 1,172,153 ordinary £0.10 shares were allotted for cash consideration of £585,762; year ended 31 December 2021: 1,490,531 ordinary £0.10 shares were allotted for cash consideration of £705,636).

Comparatives for the six months ended 30 June 2021 are provided separately below:


2021 (unaudited)


Number of £0.10
Ordinary
shares

£'000

Allotted and fully paid





At 1 January 2021



172,171,527

17,217

Allotted £0.10 Ordinary shares on exercise of employee share options



1,172,153

117

Allotted £0.10 Ordinary shares on cash placing



17,067,580

1,707

At 30 June 2021

190,411,260

19,041

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 £0.04 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 £8,131,000 as at 30 June 2022 (as at 30 June 2021: £1,232,000 and as at 31 December 2021: £8,086,000), in respect of the acquisition of property, plant and equipment.



22. Related party transactions

As at 30 June 2022 and as at 31 December 2021, the Group's related parties were its Directors and RFC Power Ltd. As at 30 June 2021, the Group's related parties were its Directors.

During the six months ended 30 June 2022, one Director exercised and retained 7,109 share options under the Company's employee share save scheme and one Director exercised and sold 14,218 share options under the Company's employee share save scheme. There were no other transactions between the Company and the Directors during the period.

During the year ended 31 December 2021 and period ending 30 June 2021 one Director exercised and retained 8,491 share options under the Company's employee share save scheme. There were no other transactions between the Company and the Directors during the year ended 31 December 2021.

Transactions between the Group and RFC Power Ltd, being an associated entity of the Group, comprised engineering consultancy services provided by the Group to RFC Power for the value of £0.3m (12 months ended 31 December 2021: £0.1m) in return for equity share capital.




Non-GAAP Alternative Performance Measures (unaudited)

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.


6 months ended

30 June 2022

£'000

6 months ended

30 June 2022

£'000

12 months ended

 31 Dec 2021

£'000

Operating loss

(25,203)

(7,602)

(23,430)

Depreciation and amortisation

3,391

2,751

5,760

Share-based payment charges

1,214

1,102

2,615

Unrealised losses/(gains) on forward contracts

374

(829)

(1,057)

Exchange (gains)/losses

(271)

63

(563)

Adjusted EBITDA

(20,495)

(4,515)

(16,675)




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.


6 months ended

30 June 2022

£'000

6 months ended

30 June 2022

£'000

12 months ended

 31 Dec 2021

£'000

Net cash from operating activities

(20,599)

(13,170)

(20,342)

Capital expenditure (total)

(8,475)

(5,225)

(11,950)

Interest and lease payments (net)

214

(279)

(283)

Exchange rate movements

271

(63)

563

Equity-free cash flow

(28,589)

(18,737)

(32,012)


INDEPENDENT REVIEW REPORT TOCeres power holdings plc

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that interim financial statements in the half-yearly financial report for the six months ended 30 June 2022 is not prepared, in all material respects, in accordance with the requirements of the London Stock Exchange AIM Rules for Companies.

We have been engaged by the company to review the interim financial statements in the half-yearly financial report for the six months ended 30 June 2022 which comprises the Consolidated Statement of Profit and Loss and Other Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Cash Flow Statement and the Consolidated Statement of Changes in Equity and the Notes to the financial statements for the six months ended 30 June 2022.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410"). 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.

As disclosed in note one, the annual financial statements of the Group are prepared in accordance with UK adopted international accounting standards. The interim financial statements included in this half-yearly financial report has been prepared in accordance with the requirements of the London Stock Exchange AIM Rules for Companies.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410, however future events or conditions may cause the Group to cease to continue as a going concern.

Responsibilities of directors

The directors are responsible for preparing the half-yearly financial report in accordance with the requirements of the London Stock Exchange AIM Rules for Companies which require that the half-yearly 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.

In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the interim financial statements in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

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 AIM Rules for Companies 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, UK

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

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