2 June 2016
AFC Energy PLC
("AFC Energy", "AFC" or "the Company")
Interim Results
AFC Energy (AIM: AFC), the industrial fuel cell power company, is pleased to announce its interim results for the six-month period ended 30 April 2016.
Highlights
· Cash balance at 30 April 2016: £2.84 million (30 April 2015: £3.89 million) with a further €1.95 million of EU funding due to be received imminently
· Raised £3.6 million through a placing and offer for subscription
· Commissioning of KORE System and production of power at Stade, Germany
· Heads of Agreement entered with DNR Industries Ltd., part of the Dutco Group of Companies
· Receipt of €1.07 million from EU's FCH JU
· Strategic Partnership Agreement entered with plantIng GmbH
· Issued 2016 Strategic Milestones and Outcomes
· Appointment of Cantor Fitzgerald as Nominated Adviser (NOMAD) and Joint Broker
Adam Bond, CEO of AFC Energy, commented:
"During the period we advanced our alkaline fuel cell technology to demonstrate power output of 204kW, at the Stade industrial facility in Germany. Following this success, we committed to a demanding work program and further milestones in 2016, against which the team is making sound progress in relation to technical/operational targets. In parallel, we are progressing the development of further strategic and technical partnerships for new power projects in our target markets."
For further information, please contact:
AFC Energy plc Adam Bond (Chief Executive Officer) |
+44 (0) 20 3697 1209 |
Cantor Fitzgerald Europe - Nominated Adviser and Joint Broker Andrew Craig Richard Salmond |
+44 (0) 20 7894 7000 |
M C Peat & Co LLP - Joint Broker Charlie Peat |
+44 (0) 20 7104 2334 |
|
|
Lionsgate Communications - Public Relations Jonathan Charles Rachel Rigby |
+44 (0) 20 3697 1209 |
About AFC Energy
AFC Energy plc has developed and successfully operated an alkaline fuel cell system ("KORE"), which converts hydrogen into "clean" electricity. AFC Energy's key project POWER-UP demonstrated the world's largest operational alkaline fuel cell system at Air Products' industrial gas plant in Stade, Germany in January 2016. The Company is now looking to build upon an already established pipeline of commercial opportunities and drive the findings from the development phase of the technology into a technically optimised and commercially relevant fuel cell system. For further information, please visit our website: www.afcenergy.com
Chief Executive Officer's Report
Overview
In the 6 months ended 30 April 2016, AFC Energy has continued to make great strides forward in the development of its alkaline fuel cell technology platform.
Key to this is the progress made in 2015 towards delivery of an ultimate 204kW at the Stade industrial gas facility in Germany in January 2016. The fast tracking of this development has now enabled AFC Energy to conduct a formal review of the individual fuel cell stacks and the whole of system Balance of Plant in an industrial setting to identify areas where the Company can enhance and improve as a precursor to delivery of a robust, reliable and commercially viable fuel cell system. Completion of Milestone 11 in January enabled our team to assess the optimal combination of technical, operational and commercial targets required in order to advance in 2016 towards commercial deployment of the fuel cell system. Our 2016 Milestones were announced in March, and I am pleased to report that the working groups are making excellent progress towards achievement of their respective targets by year end. The aggressive pursuit of our end target has not ceased and we continue to see the fruits of our labour in technical advancement of our fuel cell platform.
The growing opportunity for development of the global hydrogen economy remains abundantly clear - increasing demand for cutting edge technology that efficiently creates clean and sustainable energy. Our belief in this opportunity was vindicated by the support of our loyal shareholders in very volatile and challenging market conditions, during which we raised £3.6 million by way of a subscription and shareholder offer, which was several times oversubscribed, in January. The net proceeds of the offer enabled AFC to complete pre-commissioning activities for the POWER-UP project, in relation to 2015's Milestone 11, as well as support the short-term working capital requirements of the Company.
In support of our commercialisation agenda, AFC Energy, in January 2016, appointed Cantor Fitzgerald as AFC's new NOMAD and Joint Broker. The firm not only provides AFC with vast international reach in its broking and research capabilities, but also a credible understanding of the clean energy industry to support our positioning with existing and prospective strategic and institutional investors. Cantor Fitzgerald has published initiation research on AFC Energy and the Board is working closely with Cantor Fitzgerald to broaden the Company's institutional investor base.
Technical and Operations
Achieving the penultimate Milestone 10 in October 2015 demonstrated for the first time the capability of the KORE fuel cell system in Stade Germany, on a tier level (each of the three tiers comprising eight fuel cell cartridges, for a total of 24 cartridges in the KORE system), at an industrial scale, delivering power into the local grid.
Following this, in January 2016, we completed our final Milestone 11, achieving a gross electrical output of 204kW from the KORE fuel cell system. The accelerated twelve month fuel cell development programme which created this result provided a number of significant technical "firsts" for the Company. This was the first time that all three tiers of the KORE fuel cell system had operated simultaneously, in parallel with each other. While the total power achieved was less than the nameplate 240kW, a maximum output of 11.7kW per stack was achieved, exceeding the 10kW nameplate capacity. The majority of the 24 stacks trialled achieved 10kW or more of power output. In addition, over 1.3MWh of power was generated and sold into the grid under the Power Purchase Agreement which was entered with the local power utility, Stadtwerke Stade.
The trial of the KORE fuel cell system also generated a significant quantity of highly valuable technical and operational data, which has enabled the team to fully assess and identify further areas where enhancements can be made to optimise the fuel cell system. The second generation ("Gen 2") of our fuel cell system will incorporate many enhancements to improve the existing design. Work is now well underway internally and with our third party consultants to further accelerate the delivery of the next generation of fuel cell stack.
The Stade facility will be utilised going forward to further test our technology developments. At the time of writing, incremental testing of several individual stack enhancements is underway at Stade. We plan to operate the plant intermittently during 2016.
Commercial Partnerships
The POWER-UP programme in Stade has been our main point of focus and its success would not have been possible without the involvement of our key partners. The system is located at an industrial plant owned by Air Products in Germany, an important partner of the Company in the POWER-UP programme. Engineering and design work associated with delivering the POWER-UP programme on site was supported by our engineering partners, plantIng and Artelia. The Power Purchase Agreement which we entered with the utility Stadtwerke Stade has enabled us to learn how to integrate and interface our KORE power plant with a modern, established power grid, with the inverter used to dispatch the power developed for AFC Energy by Siemens.
While the market potential exists for AFC Energy's fuel cell systems across a range of different capacity sizes, including smaller scale systems, the Company's immediate focus remains firmly on large stationary systems in markets where positive environmental and fiscal conditions prevail.
In February, following Milestone 11, we entered a long-term strategic engineering partnership and services agreement with German consultancy, plantIng GmbH ("plantIng"). Since plantIng has provided engineering support and Engineering Procurement Construction Management services to AFC's POWER-UP project at Stade for well over a year, the firm already has a deep knowledge and understanding of AFC 's fuel cell technology. This new agreement provides for a significant investment by plantIng of their time and resources in accessing deployment opportunities that exist in Germany, Europe and internationally, for AFC's fuel cell.
The scope of the agreement primarily includes: (1) assistance to AFC Energy in identifying and implementing improvements on the fuel cell Balance of Plant ("BoP"), so as to generate optimised designs, ranging from 240kW to initially 1MW hydrogen fuel cell projects; and, (2) undertaking feasibility studies in conjunction with AFC Energy for commercial fuel cell projects globally. The decision by plantIng to invest their own time into this optimisation exercise further demonstrates the market potential of the technology and the quality of the partners that wish to join us. PlantIng are further working with AFC Energy in the BoP design work for the 10kW and 1MW system currently underway. This work is progressing well with continued evidence of the new designs being available to AFC Energy on schedule.
In addition, we continue to hold extensive discussions with other prospective strategic, technical and project-related partners for the development and international deployment of our fuel cell systems.
2016 Strategic Milestones and Outcomes
While our 2015 milestones focused primarily on technical and project specific developments to support the POWER-UP project at Stade, in 2016 we are focusing on three strategic areas:
1. optimization of the design of our fuel cell stack and BoP;
2. product development of our power plants, ranging from 10kW to 1MW; and
3. secure value added strategic partnerships with recognised industrial and institutional groups, as well as commencing scoping studies and securing contracts for at least two fuel cell projects.
The eight specific milestones which were announced earlier this year are designed to progress AFC Energy to its goal of becoming an industry leading, commercially relevant stationary fuel cell company, focusing on large industrial installations, while recognising the further potential for optimisation of the system capacity necessary to meet the demands of our future customers.
In addition, the Company aims to build upon an already established pipeline of commercial opportunities and drive the findings from the development phase into a technically optimised and relevant fuel cell system. Importantly, we are in dialogue with several new companies where strategic synergies exist to not only grow and improve the core technology platform, but also afford opportunities for new project development opportunities. To this extent, AFC Energy continue to aggressively pursue a number of strategic partnership opportunities and potential commercial projects.
In order to facilitate the acceleration of potential commercial projects, it was decided to design and seek deployment of an entry-level single cartridge 10kW system before the end of 2016 and have available for deployment our larger systems in 2017. The 10kW system provides a lower barrier to a larger scale commercial deal without taking the higher cost associated with an initial larger fuel cell system.
I wish to emphasise that AFC's prime objective continues to centre on the development and deployment of large-scale industrial fuel cell plants, given we expect stationary fuel cell applications to remain the largest sub-sector in a hydrogen economy.
Outlook
AFC now has a fuel cell cartridge capable of operating at or above its nameplate capacity and we are continuing the momentum generated in 2015 to confirm the longevity and availability of our fuel cell system, so as to meet industry demands for commercial deployment.
Following announcement of the 2016 Milestones in March, I am pleased to report that our working groups are making real solid progress towards achievement of their respective targets by year end.
I would like to thank all the staff and contractors working with AFC together with the FCH JU and the Board for their continued support and look forward to reporting back to shareholders as we achieve the 2016 Milestones.
Adam Bond
Chief Executive Officer
2 June 2016
Financial Review
During the six months to 30 April 2016, AFC recorded a post-tax loss of £3.46 million (30 April 2015: £1.73 million profit). In the period, the Company continued to recognise grant income under the European Framework Programme 7 for Laser-cell, POWER-UP and Alkammonia projects. Direct labour and material costs associated with these projects were recognised in cost of sales.
Cost of sales rose by £0.92 million to £2.07 million (30 April 2015: £1.15 million) as work neared completion at the POWER-UP site at Stade in Germany and fuel cell cartridges were manufactured for operations at Stade, but administrative expenses remained static, reflecting tight control of costs. There was a financial loss of £0.15 million (30 April 2015: £4.47 million gain), mainly arising from the final settlements received in respect of the Lanstead equity swap which terminated in April 2016. Over the full life of the equity swap, which commenced in October 2014, a net gain of £2.5m was realised.
The net cash inflow in the six months to 30 April 2016 was £1.08 million (30 April 2015: £0.97 million net outflow) as a result of the Company's careful control of operating and capital costs, the monthly settlements received from Lanstead, and the successful placing and offer for subscription which raised a total of £3.60 million net of costs.
The cash balance at 30 April 2016 was £2.84 million (30 April 2015 £3.89 million).
The Board of AFC Energy does not intend to declare a dividend in respect of this period.
Statement of Comprehensive Income
For the period ended 30 April 2016
|
|
Six months to 30 April |
Six months to 30 April |
Year to 31 October |
|
Note |
2016 |
2015 |
2015 |
|
|
£ |
£ |
£ |
|
|
Unaudited |
Unaudited |
Audited |
|
|
|
|
|
EU Grant income |
|
763,204 |
736,145 |
2,262,506 |
|
|
|
|
|
Cost of sales |
|
(2,072,480) |
(1,145,404) |
(4,846,933) |
|
|
|
|
|
Gross (loss) |
|
(1,309,276) |
(409,259) |
(2,584,427) |
|
|
|
|
|
Other Income |
|
80,164 |
7,881 |
51,080 |
Administrative expenses |
|
(2,583,185) |
(2,536,944) |
(6,112,856) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) |
|
(3,812,297) |
(2,938,322) |
(8,646,203) |
|
|
|
|
|
Financial (loss)/income |
1g |
(148,787) |
4,472,563 |
3,294,272 |
(Loss)/profit before taxation |
|
(3,961,084) |
1,534,241 |
(5,351,931) |
|
|
|
|
|
Taxation |
3 |
500,429 |
198,242 |
569,706 |
|
|
|
|
|
(Loss)/profit for the period and total comprehensive loss attributable to owners of the Company |
|
(3,460,655) |
1,732,483 |
(4,782,225) |
|
|
|
|
|
|
|
|
|
|
Basic and diluted (loss)/earnings per share |
4 |
(1.15) p |
0.60 p |
(1.66)p |
|
|
|
|
|
All amounts relate to continuing operations. |
|
|
|
, |
Statement of Financial Position
As at 30 April 2016
|
|
Note |
Six months to 30 April |
Six months to 30 April |
Year to 31 October |
|
|
|
2016 |
2015 |
2015 |
|
|
|
£ |
£ |
£ |
|
Assets |
|
Unaudited |
Unaudited |
Audited |
|
Non-current assets |
|
|
|
|
|
Intangible assets |
5 |
360,524 |
330,281 |
338,176 |
|
Property, plant and equipment |
6 |
99,596 |
507,858 |
116,328 |
|
Investment in associate |
|
- |
52,500 |
- |
|
|
|
|
|
|
|
|
|
460,120 |
890,639 |
454,504 |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Inventory and work in progress |
|
- |
144,809 |
219,421 |
|
Derivative financial instrument |
|
- |
4,796,571 |
1,308,859 |
|
Trade and other receivables |
7 |
3,812,294 |
2,556,958 |
3,458,340 |
|
Cash and cash equivalents |
|
2,837,130 |
3,889,830 |
1,756,445 |
|
Restricted cash |
|
91,105 |
- |
91,105 |
|
|
|
6,740,529 |
11,388,168 |
6,834,170 |
|
|
|
|
|
|
|
Total assets |
|
7,200,649 |
12,278,807 |
7,288,674 |
|
Capital and reserves attributable to owners of the Company |
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to shareholders |
|
|
|
|
|
Share capital |
8 |
308,344 |
289,012 |
289,904 |
|
Share premium |
|
37,604,267 |
33,640,089 |
33,947,857 |
|
Other reserves |
|
2,772,061 |
1,992,145 |
2,207,441 |
|
Retained deficit |
|
(34,290,742) |
(24,217,962) |
(30,830,087) |
|
Total equity |
|
6,393,930 |
11,703,284 |
5,615,115 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
9 |
806,719 |
575,523 |
1,673,559 |
|
Total equity and liabilities |
|
7,200,649 |
12,278,807 |
7,288,674 |
Cash flow statement
For the period ended 30 April 2016
|
Six months to 30 April |
Six months to 30 April |
Year to 31 October |
|
2016 |
2015 |
2015 |
|
£ |
£ |
£ |
|
Unaudited |
Unaudited |
Audited |
Cash flows from operating activities |
|
|
|
Profit/(loss) before tax for the period |
(3,961,084) |
1,534,241 |
(5,351,931) |
Adjustments for: |
|
|
|
Depreciation and amortisation |
72,577 |
125,850 |
278,291 |
Impairment of intangible asset investment |
- |
- |
52,500 |
Loss on disposal of tangible assets |
- |
- |
286,743 |
Equity-settled share-based payment expenses |
564,620 |
98,323 |
216,202 |
Payment of shares in lieu of cash |
85,850 |
310,939 |
331,000 |
Finance income |
(900) |
(2,702) |
(5,775) |
R&D tax credits receivable |
|
- |
(174,937) |
(Gain)/loss on derivative financial instrument |
149,687 |
(4,469,861) |
(3,288,497) |
|
|
|
|
Cash flows from operating activities before changes in working capital and provisions |
(3,089,250) |
(2,403,210) |
(7,656,404) |
R&D tax credits received |
- |
366,039 |
813,696 |
(Increase) in restricted cash |
- |
|
(91,105) |
(Increase)/decrease in inventory and work in progress |
219,421 |
12,239 |
(62,373) |
(Increase)/decrease in trade and other receivables |
146,475 |
778,137 |
(24,500) |
(Decrease)/increase in trade and other payables |
(866,840) |
(555,765) |
542,271 |
Cash absorbed by operating activities |
(3,590,194) |
(1,802,560) |
(6,478,415) |
|
|
|
|
Cash flows from investing activities |
|
|
|
(Purchase) of plant and equipment |
(35,901) |
(13,234) |
(36,845) |
Additions to intangible assets |
(42,292) |
(62,241) |
(98,980) |
Proceeds of disposal of tangible assets |
- |
- |
4,800 |
Interest received |
900 |
2,702 |
5,775 |
Net cash absorbed by investing activities |
(77,293) |
(72,773) |
(125,250) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Proceeds from the issue of share capital |
3,600,000 |
- |
288,599 |
Cost of issue of share capital |
(11,000) |
- |
- |
Derivative financial asset |
1,159,172 |
906,960 |
3,213,308 |
Net cash from financing activities |
4,748,172 |
906,960 |
3,501,907 |
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
1,080,685 |
(968,373) |
(3,101,758) |
Cash and cash equivalents at start of period |
1,756,445 |
4,858,203 |
4,858,203 |
Cash and cash equivalents at end of period |
2,837,130 |
3,889,830 |
1,756,445 |
Statement of Changes in Equity
As at 30 April 2016
|
|
|
|
|
|
|
Share capital |
Share premium |
Other reserve |
Retained loss |
Total |
|
£ |
£ |
£ |
£ |
£ |
|
Audited |
Audited |
Audited |
Audited |
Audited |
|
|
|
|
|
|
Balance at 1 November 2014 |
285,684 |
33,332,478 |
3,032,472 |
(27,089,095) |
9,561,539 |
Loss after tax for the period |
- |
- |
- |
(4,782,225) |
(4,782,225) |
Total comprehensive (loss) for the period |
- |
- |
- |
(4,782,225) |
(4,782,225) |
Issue of equity shares |
4,220 |
615,379 |
- |
- |
619,599 |
Equity-settled share-based payments |
- |
- |
(825,031) |
1,041,233 |
216,202 |
Transactions with owners |
4,220 |
615,379 |
(825,031) |
1,041,233 |
835,801 |
Balance at 31 October 2015 |
289,904 |
33,947,857 |
2,207,441 |
(30,830,087) |
5,615,115 |
|
Share capital |
Share premium |
Other reserve |
Retained loss |
Total |
|
£ |
£ |
£ |
£ |
£ |
|
Unaudited |
Unaudited |
Unaudited |
Unaudited |
Unaudited |
|
|
|
|
|
|
Balance at 1 November 2015 |
289,904 |
33,947,857 |
2,207,441 |
(30,830,087) |
5,615,115 |
Loss after tax for the period |
- |
- |
- |
(3,460,655) |
(3,460,655) |
Total comprehensive (loss) for the period |
- |
- |
- |
(3,460,655) |
(3,460,655) |
|
Issue of equity shares |
18,440 |
3,656,410 |
- |
- |
3,674,850 |
|
Equity-settled share-based payments |
- |
- |
564,620 |
- |
564,620 |
|
Transactions with owners |
18,440 |
3,656,410 |
564,620 |
- |
4,239,470 |
|
Balance at 30 April 2016 |
308,344 |
37,604,267 |
2,772,061 |
(34,290,742) |
6,393,930 |
| |
|
|
|
|
|
|
|
Share capital |
Share premium |
Other reserve |
Retained loss |
Total |
|
£ |
£ |
£ |
£ |
£ |
|
Unaudited |
Unaudited |
Unaudited |
Unaudited |
Unaudited |
|
|
|
|
|
|
Balance at 1 November 2014 |
285,684 |
33,332,478 |
3,032,472 |
(27,089,095) |
9,561,539 |
Profit after tax for the period |
- |
- |
- |
1,732,483 |
1,732,483 |
Total comprehensive income for the period |
- |
- |
- |
1,732,483 |
1,732,483 |
|
Issue of equity shares |
3,328 |
307,611 |
- |
- |
310,939 |
|
Equity-settled share-based payments |
- |
- |
(1,040,327) |
1,138,650 |
98,323 |
|
Transactions with owners |
3,328 |
307,611 |
(1,040,327) |
1,138,650 |
409,262 |
|
Balance at 30 April 2015 |
289,012 |
33,640,089 |
1,992,145 |
(24,217,962) |
11,703,284 |
| |
|
|
|
|
|
|
Share capital is the amount subscribed for shares at their nominal value.
Share premium represents the excess of the amount subscribed for share capital over the nominal value of these shares net of share issue expenses.
Other reserve represents the credit/debit to equity in respect of equity-settled share-based payments.
Retained loss represents the cumulative loss of the Company attributable to equity shareholders.