Half-yearly Report
Embargoed Release: 07:00hrs Monday 8th September 2008
Zenergy Power plc
(`Zenergy' or the `Group')
Interim Results
for the Six Month Period Ended 30 June 2008
Zenergy Power plc (AIM:ZEN.L), the specialist manufacturer and developer of
commercial applications for high-temperature superconductive (`HTS') materials,
is pleased to present its Interim Results for the Six Month Period Ended 30
June 2008 (`the Period').
Highlights
* Following the commercial launch of the first of the Group's energy
efficient HTS products in 2007, the Group secured a second commercial order
for an HTS induction heater for copper heating;
* Increase in turnover in the period to €1,043,000 as compared to the first
half of 2007 of €94,000;
* Increased patent protection, notably the receipt of the certification of a
core utility patent relating to the overall design and operating process of
our ground-breaking HTS induction heater;
* Commercial upgrade of the world's first HTS hydro-power generator requested
by E.ON Wasserkraft GmbH (`E.ON WK');
* Promotion of the world's first HTS hydro-power generator from `back-up'
generator to `pole position' generator announced by E.ON WK;
* Commercial contract awarded under a Department of Homeland Security project
to carry out a technology employment study of the Group's Fault Current
Limiter (`FCL') to evaluate its performance in the New York electricity
grid operated by Consolidated Edison;
* Winner of the 2008 Hermes technology award, presented by the German
Minister of Research and Education, Mrs. Schawahn; and
* Winner of the 2008 CleanEquity Monaco award, presented by H.S.H. Prince
Albert II of Monaco.
Since period end
* Successful installation into industrial premises of the world's first HTS
induction heater, which is now fully operational under real-world
conditions for client Weseralu GmbH & Co. (`Weseralu') and available for
demonstration to further potential customers;
* Board of directors is strengthened with the appointment of Chris Nash, a
seasoned environmental sustainability sector figure and Karen Chandler,
chief finance officer, as executive directors; and
* Commencement of extension work to increase the size of the Group's
manufacturing facilities by 50% in anticipation of increased commercial
order flow following the receipt of positive feedback from potential
customers reviewing the Group's HTS induction heater.
Michael Fitzgerald, Chairman, commented:
'One of our key objectives last year was to bring to market the first of our
energy efficient industrial products based around our core HTS technology. We
did this with great success and went on to achieve the commercial order of the
world's first industrial scale HTS device. The speed with which the Group has
been able to convert its technical accomplishments into commercial success has
been extremely encouraging and I was very pleased to see us secure a second
commercial order for our HTS induction heater in the first half of this year.
This rapid transition from development to commercial success confirms the
ability of our HTS equipment to compete with conventional technologies in the
real-world and on commercial terms. We continue to progress the development of
further products based on HTS materials and I look forward to them having a
similar impact in their target markets to that of our induction heater.'
Further information:
Dr. Jens Müller Zenergy Power Plc + 49 22 26 90 60 200
Vikki Krause Hansard Group + 44 207 245 1100
Tom Hulme Landsbanki Securities + 44 207 426 9000
(UK) Limited
Chairman's Statement
It gives me great pleasure to report on a period during which we continued to
achieve significant technical and commercial successes, and for which the
defining achievement must be regarded as securing the second order for our
ground-breaking HTS induction heater just ten months after its initial launch.
INDUCTION HEATERS
Induction heaters are used globally in the metals industry to heat and soften
large quantities of metal bulk so that they can be manipulated and shaped. They
also devour electricity; as much as 1% to 5% of the total annual electricity
consumed in an industrialised country can be directly attributed to their
operation. In the face of increasing global energy costs and diminishing profit
margins, it is thus understandable that our HTS induction heater - which uses
less than half of the energy consumed by conventional machines - is generating
a great deal of commercial interest from global metals producers.
Since installation in July 2008, the HTS induction heater sold to Wesseralu has
been fully operational in real-world conditions and has performed to the
absolute satisfaction of both ourselves and our customer. We thus consider that
we have successfully brought to market the first of our energy efficient
industrial scale machines based on our HTS core technology. The significance of
the technical accomplishments of the HTS induction heater were strongly
endorsed and validated by the receipt of several awards during the first half
of this year, which in turn has led to significant additional potential
customer interest.
KEY DRIVERS FOR SUCCESS
The speed with which the Group has been able to convert its technical
accomplishments into commercial success has largely been brought about by two
main factors:
The first is the way in which the Group has positioned itself within its target
markets; we work closely with potential customers during the development of all
our products creating a burgeoning sales pipeline and a strengthening market
presence.
The second is the appetite being generated within these markets for the type of
energy efficient industrial devices being developed by the Group as a
consequence of a number of extraneous factors. In particular, as global metals
producers experience continued growth in the demand for their products in an
environment of escalating commodity and energy prices, downward pressure on
profit margins of those producers is strikingly evident. This has manifested
itself in a number of high profile merger and acquisition scenarios as the
industry seeks to protect margins whilst reducing underlying operating costs.
These compelling operational objectives are having a positive impact on our
marketing and sales efforts, particularly in relation to the energy
efficiencies of the HTS induction heater.
Beyond the metals industry, issues of energy production, distribution and
consumption continue to dominate the decision making processes of a growing
number of corporations, governments and consumers alike. Thus, throughout the
first half of this year, we witnessed continued regulatory change, high-profile
business energy commitments, new government targets and an overall increasing
focus on an extensive number of the energy issues which are directly addressed
by our HTS technology. When combined with the pragmatic combination of
increasing energy prices and long-term pressure to lower carbon emissions,
prevailing market trends have been integral in fostering favourable trading
conditions for our energy efficient products.
DEEPENING OUR INTERACTION WITH CUSTOMERS AND PARTNERS
Throughout the period we extended the level of engagement enjoyed with our
customers and collaborative partners alike, sustaining the increasing
visibility of our brand and the knowledge of the importance and potential of
our HTS development activities.
At the heart of our commercial proposition rests a group of materials capable
of conducting electricity without offering any electrical resistance to its
flow. The physical properties of HTS materials and their power density, confers
exceptional utility for the carrying of electrical energy and makes them 100
times more efficient than their copper equivalents. The commercial appeal of
the conceptual properties of HTS materials cannot be questioned; the challenge
for us - and others in this sector - has always been to take these materials
and to develop industrial scale commercial devices around them. We have done
this with great success and are very proud that we were able to announce the
world's first commercial order of an industrial scale device employing HTS
materials last year. Building on this commercial landmark we went on to achieve
a second order during the first half of this year. We also achieved another
world first when we completed the installation of the first machine into the
commercial premises of our industrial customer, Weseralu.
Looking forward we are well advanced in the development and bringing to market
a range of industrial devices which exploit these attributes to substantially
improve the production, distribution and consumption of electrical energy.
As with the development of our HTS induction heater, we are encouraged by the
level of co-operation, commercial interest and commitment which we are
receiving from a number of potential customers and collaborative partners
alike. Coupled with growing support and interest from a number of government
bodies in Europe and the USA, this leads the Board to share a high degree of
confidence in the Group's ability to commercialise products which present
Zenergy with multibillion Euro opportunities in markets where we face very
little competition and enjoy the protection of significant barriers to entry
for potential competitors.
As we move into the second half of the year, I feel that we can look to the
future with great confidence. To date, we have seen the successful launch of
the first of our commercial products, received growing commercial interest from
customers and potential collaborative partners alike, we progressed the
development of further HTS products and have secured adequate cash resources to
fund the commercialisation of our technologies through to reaching anticipated
positive operational cash flow in 2010.
Michael Fitzgerald
Chairman
5 September 2008
Chief Executive's operating report
I take pleasure in updating shareholders on what has been a progressive first
half of the year for both Zenergy in particular and the high-temperature
superconductivity industry as a whole. Throughout the period, we continued our
technical developments on schedule and to our complete satisfaction. We also
made further and significant inroads in developing and maturing the commercial
relationships we enjoy with current and prospective commercial partners and
customers of the Group, from whom we have received keen interest in all three
of our initial HTS products. Most importantly, we have continued to demonstrate
the incredible potential that HTS materials have to improve the efficiency with
which electricity is generated, distributed and consumed. I am thrilled that
all our efforts have been met with growing recognition and acknowledgement from
all those with whom we have been engaged in our target markets.
HTS Induction Heaters
It will be recalled that in May of last year, we completed the development and
testing of our first industrial scale commercial device employing HTS
materials; the HTS induction heater. Shortly after, we secured the world's
first commercial order for a full scale industrial HTS unit from the German
based aluminium producer, Weseralu.
Building from this, we intensified our commercial activities during the first
half of this year and quickly secured the order for the sale of a second
industrial scale HTS induction heater, which we were retained to commercially
adapt by one of our customers - a multibillion Euro global metals producer - to
enable it to undertake large-scale, volume intensive industrial heating of a
range of copper and copper metal billets. Having succeeded in this exercise we
are now able to serve customers in both the aluminium and copper processing
industries. The order of a second unit signifies a remarkable success for our
ground-breaking HTS induction heater technology, which enables the accelerated
heating and softening of large quantities of metal bulk in readiness for their
shaping into various products including installation pipes and profile shells
for the automotive, aerospace and machine building industries.
Our engineering team recently completed the installation of an HTS induction
heater into the commercial premises of our industrial customer Wesseralu;
another world first for the Group. I can report with great pleasure that, since
installation, the HTS induction heater has been fully operational and has
exceeded expectations and is operating to the client's complete satisfaction
under extremely demanding industrial conditions. To be the first company in the
world to have taken HTS technology through its design, engineering and
commercialisation stages and into real-world operating conditions is a landmark
achievement and I congratulate our engineering team on their incredible effort,
expertise and professionalism that made this possible.
From an operational perspective, I am also particularly pleased to report that
the installation proved extremely straightforward, successful and timely.
Specifically, we were able to complete the installation several days quicker
than is usual for the installation of a conventional heater. This is of
particular importance to our customers as it eliminates the need to shut down
industrial extrusion lines for extended periods of time which is a very costly
expense for them. Our ability to install the HTS induction heater so quickly is
testament to the simplicity of its design and the keen attention to customer
concerns that we adopt in designing our products.
Initial feedback following the installation is that the unit has been well
received and its ease of use has been highly commended. Dramatic improvements
in productivity have been demonstrated from its first operation; scrap rates
are lowered, the extrusion process has speeded up and significant energy
savings are being made - power consumption is reduced by 63% when compared to
conventional machines.
Further to these performance characteristics, the HTS induction heater benefits
from far less costly maintenance requirements than conventional machines and
each machine reduces CO2 emissions by up to 300 tonnes each year - the
equivalent of 150 households.
We also continued through the period to diligently expand our patent portfolio
to protect our technical and commercial achievements. In May of this year, for
example, we received final certification for the core utility patent relating
to the overall design and operating process of our HTS induction heater, which
now enjoys sufficient protection over several core design specifications that
are key to the high efficiency and productivity levels of the machine.
Strengthening the order book and securing sales outside Europe are now the key
focus points for the coming year and these will define the broader
commercialisation of our HTS induction heater technology. The widespread
interest shown by the more than 20-plus customers that are testing the HTS
induction heater, including market leaders, gives me huge confidence that we
will soon become a major player in this global €2bn per annum market.
In order to capitalise on our ground-breaking technology and to grow the order
book we have augmented our sales teams in our initially targeted geographic
locations and now have a team of two in Germany, two in the USA and a sales
consultant in Australia.
HTS Fault Current Limiters
During the period, the development and commercialisation work on the second of
our industrial products based around HTS technology - the HTS FCL - progressed
well. Importantly, we continued to work closely with the engineering and design
teams of both Southern California Edison (`SCE') and the Consolidated Edison
Company of New York (`ConEd') on two ground-breaking commercial projects.
Accordingly, we continued our rapid development of the HTS FCL device and are
on schedule to become the world's first installer of an industrial scale HTS
FCL directly into the United States electricity grid.
The Group's proprietary HTS FCL is designed to protect electrical grid
equipment in national grid systems and is capable of absorbing huge amounts of
unwanted and highly damaging electrical power by fault currents without having
to interrupt the steady supply of power to downstream grid users. In doing
this, the Group's HTS FCL also prevents the common cascading effect causing
blackouts that occur when one part of the grid fails resulting in an
`over-spill' of power to an adjacent grid.
The ground-breaking installation of the Group's machine into the US power grid
is to be partly funded by the Californian Energy Commission and is scheduled to
be delivered in December of this year. Work on the project progressed very well
in the period and our engineering team, in collaboration with SCE, completed
the development of the necessary electronic and communication protocols that
will support the HTS FCL's operation once installed into the grid. Further to
this, our engineers successfully implemented a number of performance and design
improvements that were identified as a result of our testing programme carried
out at the end of last year.
Elsewhere, work continued on our detailed technical analysis of the New York
power grid for which we were commercially commissioned as part of a US$39m US
Department of Homeland Security project. Our engineering team completed and
delivered analysis during the period and are now in detailed technical
discussions with ConEd and other third parties concerning the evident and
substantial benefits to grid performance that can be derived from the
installation of HTS FCLs. The project, named `Hydra', is aimed at developing
power grids in the United States that can keep centres of commerce on line
under all conditions - including grid events related to severe weather,
accidents or terrorist attacks.
Working with two of the world's largest and most technically advanced utility
companies at this stage of the development of our medium-voltage HTS FCL is
providing an opportunity for our technical team to rapidly develop industrial
scale devices that can be very simply installed in the grids of these
utilities. It is also providing the Group with the ideal means to enter into a
market confidently predicted to be worth up to €5bn per annum.
Looking further to the future, our five-year development programme of a
high-voltage FCL designed for transmission level installations also progressed
well during the period. In particular our development work being carried out
under an US$11m project funded by the US Department of Energy commenced and is
progressing to schedule.
Renewable energy generators
Good progress with both the technical development of our next generation of
renewable energy generators and our growing engagement with commercial
customers for those products continued in the period. Of particular note, we
were delighted to receive confirmation from E.ON WK of its decision to upgrade
the size of the HTS hydro-generator that we are currently developing for it for
use at its commercial hydro-electric dam in Bavaria, Germany. This is obviously
a strong endorsement not only of our technology, but of the overall potential
impact that HTS materials can have on the efficiency of renewable energy
generators.
Our work for E.ON-WK in conjunction with our collaborative partner, Converteam
SAS (`Converteam') is progressing on schedule and we expect our respective
engineering teams to complete installation of the world's first HTS commercial
generator in 2009. In conjunction with the installation, E.ON-WK will replace
the power plant's existing turbines with higher capacity blades - at E. ON-WK's
cost - designed specifically to drive the HTS generator. In addition, E.ON-WK
will promote the upgraded HTS generator to be the hydro-power station's 'pole
position' generator; responsible for not just additional power during peak
usage but to provide the ongoing 'base load' supply of electrical power to over
3,000 homes in the local area.
The HTS generators being developed by Converteam based on Zenergy technology
can generate electrical energy with significantly higher efficiency than
conventional copper-based generators and it is estimated that retrofitting with
HTS generators will generate in aggregate 14GW of electricity `for free' from
existing hydro-dam structures - the equivalent to the electricity produced by
approximately 40 conventional power stations, and will do so without any
further environmental impact.
Whilst hydro-power is currently the largest and most mature source of renewable
energy, contributing to about 19% of electricity production worldwide, the
Group is also working with Converteam to manufacture a new generation of highly
compact, lightweight and efficient wind power generators that will be capable
of reducing ongoing offshore wind generation costs by up to 25%. Moreover,
using our HTS power generators significantly reduces tower and foundation
costs. With Converteam, we continued work on the ground-breaking project to
produce an 8MW, direct-drive wind power generator. Part funded by the UK
Department for Business Enterprise & Regulatory Reform, we are currently
building a scaled version of the eventual 8MW machine which will be used to
further evaluate the eventual design specifications of the final machine. In
2007, Zenergy received a €0.9million contract for the delivery of HTS coils for
the scaled machine.
The UK offshore wind market is the largest worldwide within it Zenergy and
Converteam are very well positioned, government supported and technically
advanced.
2G HTS wire
We have for a number of years been developing our own unique processes for the
production of a new generation of HTS wire intended to dramatically reduce the
overall cost of our proprietary commercial products. This second generation HTS
wire ('2G') is able to achieve substantial cost savings by eliminating the use
of silver in its production and also by adopting continual roll-to-roll
mass-manufacturing `all chemical' processes in its manufacture (as opposed to
lengthy, low-yielding and restrictive batch processes associated with the
production of 1G wire).
Although the decision to pursue our own 2G solution was largely based on the
dramatic cost savings it offers, we also recognise the importance of developing
our own processes for the manufacture of HTS wire quickly and on an industrial
scale. As a result of this focus and the significant technical achievements of
our in-house development team we believe we are now the only Group in the world
to have the capability of producing 2G wire using a continuous proprietary
roll-to-roll process.
It will be recalled that we signed a five year exclusive collaboration
agreement with ThyssenKrupp VDM GmbH (`ThyssenKrupp') in October of last year.
As highlighted at the time of the agreement, ThyssenKrupp is the sole
industrial supplier of textured nickel tape in the world which is a key
component in the manufacture of 2G wire. Our collaborative arrangement with
ThyssenKrupp was established so we could develop our techniques and processes
in conjunction with the company and in the full knowledge of the behaviour of
its materials. In return, ThyssenKrupp is able to ensure it produces the nickel
tape in a way that is ideal for use with our 'all-chemical' techniques.
Accordingly, through the period I am pleased to report that our respective
engineering teams worked closely and work continues to progress well.
Accordingly, we can state that Zenergy is well positioned to address the huge
market of HTS coils for the wind and hydro market - supported by our innovative
2G wire programme.
Industry Endorsements
The Group was pleased to be presented the 2008 Hermes Award, regarded as one of
the most prestigious annual technology prizes, for its ground-breaking HTS
induction heater at the opening of the 2008 Hannover Fair. The Hermes Award is
acknowledged as the most generous international industrial prize as it includes
a €100,000 prize and is presented to the most exceptional new technical product
that demonstrates substantial commercial benefit and has either undergone
rigorous industrial trials or reached the industrial application stage.
Earlier in the year, Zenergy also claimed the CleanEquity Monaco 2008 Award for
Excellence in the Field of Environmental Technology Development, which was
presented to the Group by H.S.H. Prince Albert II of Monaco at the prestigious
annual conference held in Monaco.
Outlook
Technical and commercial progress has been very encouraging in the first half
of this year and I have no doubt that we have the technical know-how,
commercial relationships and ground-breaking products to capitalise on our
position through the second half of this year and beyond. I look forward to
securing further commercial orders for the first of our fully developed HTS
products and continuing with technical development of our other products.
Dr. Jens Müller
Chief Executive Officer
5 September 2008
Consolidated income statement
For the six months ended 30 June 2008
Note Unaudited Unaudited Audited
Six months Six months Year ended
to 30 June to 30 June 31December
2008 2007 2007
€000 €000 €000
Revenue 2 1,043 94 268
Cost of sales (802) (67) (221)
Gross profit 241 27 47
Other operating income 307 206 578
Sales and marketing expenses (498) (179) (519)
Administrative expenses (1,721) (1,420) (2,703)
Research & development expenses (1,428) (632) (2,644)
Loss before research & development, (1,179) (864) (1,586)
depreciation & amortisation & equity
settled share based payments
Research & development expenses (1,428) (632) (2,644)
Depreciation & amortisation (307) (272) (603)
Equity settled share-based payment (185) (230) (408)
expenses
Operating loss 3 (3,099) (1,998) (5,241)
Financial income 4 539 141 295
Financial expenses 4 (30) (554)
Net financing income/(expense) 509 141 (259)
Loss before tax (2,590) (1,857) (5,500)
Taxation 92 13 263
Loss for the period attributable to 3 (2,498) (1,844) (5,237)
equity holders of the Parent
Earnings/(loss) per share (Euros)
Basic and fully diluted loss per share 5 (0.06) (0.05) (0.13)
Consolidated statement of recognised income and expense
For the six months ended 30 June 2008
Note Unaudited Unaudited Audited
Six months Six months Year to
to 30 June to 30 June 31
2008 2007 December
2007
€000 €000 €000
Foreign exchange translation 8 (1,323) (40) (338)
differences
Net income recognised directly in 8 (1,323) (40) (338)
equity
Loss for the period 8 (2,498) (1,844) (5,237)
Total recognised income and expense 8 (3,821) (1,884) (5,575)
Total recognised income and expense 8 (3,821) (1,884) (5,575)
for the period attributable to the
equity holders of the parent
Consolidated balance sheet
Note Unaudited Unaudited Audited
30 June 30 June 31 December
2008 2007 2007
€000 €000 €000
Non-current assets
Property, plant and equipment 6 2,080 1,484 1,671
Goodwill 7 1,228 1,391 1,303
Other intangible assets 7 3,801 2,997 3,176
7,109 5,872 6,150
Current assets
Inventories 501 339 543
Trade and other receivables 947 786 753
Research & development tax 232 150
credit receivable
Cash and cash equivalents 12,580 7,488 17,746
14,260 8,613 19,192
Total assets 21,369 14,485 25,342
Current liabilities
Trade and other payables (1,658) (844) (1,966)
Non current liabilities
Deferred tax liabilities (594) (718) (653)
Total liabilities (2,252) (1,562) (2,619)
Net assets 19,117 12,923 22,723
Equity attributable to equity
holders of the parent
Share capital 8 646 595 645
Share premium 8 31,701 18,409 31,672
Translation reserve 8 (1,708) (87) (385)
Warrant reserve 8 200 200 200
Retained loss 8 (11,722) (6,194) (9,409)
Total equity attributable to 19,117 12,923 22,723
shareholders
Consolidated cash flow statement
For the six months ended 30 June 2008
Notes Unaudited Unaudited Audited
Six months Six months Year ended
to 30 June to 31 December
2008 30 June 2007
2007
€000 €000 €000
Cash flows from operating
activities
Loss for the period (2,498) (1,844) (5,237)
Adjustments for:
Depreciation and amortisation 6,7 307 272 603
Foreign exchange gains 168 12 12
Gain on sale of fixed assets - - (39)
Financial income (539) (141) (295)
Financial expenses 30 - 554
Equity settled share-based 185 230 408
payment expenses
Taxation (92) (13) (263)
Operating loss before changes (2,439) (1,484) (4,257)
in working capital and
provisions
Increase in trade and other (128) (237) (167)
receivables
Increase in stock 42 (216) (420)
Increase in trade and other (299) (322) 801
payables
Cash absorbed by operations (2,824) (2,259) (4,043)
Tax received/(paid) - - 86
Net cash from operating (2,824) (2,259) (3,957)
activities
Cash flows from investing
activities
Interest received 389 53 237
Proceeds from the sale of - - 307
fixed assets
Acquisition of property, plant (689) (542) (1,275)
and equipment
Development expenditure (859) (984) (1,426)
capitalised and other
intangible assets acquired
Net cash from investing (1,159) (1,473) (2,157)
activities
Cash flows from financing
activities
Proceeds from the issue of 8 30 8,426 21,739
share capital
Net cash from financing 30 8,426 21,739
activities
Net (decrease)/increase in (3,953) 4,694 15,625
cash and cash equivalents
Cash and cash equivalents at 17,746 2,722 2,722
start of period
Effect of exchange rate (1,213) 72 (601)
fluctuations on cash held
Cash and cash equivalents at 12,580 7,488 17,746
end of period
Notes
1. Basis of preparation
The condensed consolidated interim financial statements for the six months
ended 30 June 2008 have been prepared under applicable International Financial
Reporting Standards adopted by the European Union (`IFRS`), which include
International Accounting Standards (`IAS`) and interpretations issued by the
International Accounting Standards Board (`IASB`) and its committees, which are
expected to be endorsed by the European Union.
The financial information included in this document is unaudited and does not
comprise statutory accounts within the meaning of section 240 of the Companies
Act 1985. The comparative figures for the year ended 31 December 2007 are
extracted from the statutory financial statements for that financial period
which have been filed with the Registrar of Companies and on which the auditor
gave an unqualified report, without any statement under section 237(2) or (3)
of the Companies Act 1985.
2. Accounting policies
The interim financial statements have been prepared under the same accounting
policies as those used for the financial statements for the year ended 31
December 2007 with the following additions:
Foreign currency
The functional currency of the parent company was deemed to have changed from
Euros to Sterling from 1 January 2008 following the Sterling placing in
December 2007, resulting in the parent company having a predominately Sterling
based cash position and cost base. The results of the Group continue to be
presented in Euros.
Revenue
Construction contracts
As soon as the outcome of a construction contract can be estimated reliably,
contract revenue and expenses are recognised in the income statement in
proportion to the stage of completion of the contract. The stage of completion
is assessed by reference to the percentage of costs incurred to date compared
to the expected costs to complete the contract. An expected loss on a contract
is recognised immediately in the income statement.
Goods sold
Revenue from the sale of goods is recognised in the income statement when the
significant risks and rewards of ownership have been transferred to the buyer.
No revenue is recognised if there are significant uncertainties regarding
recovery of the consideration due, associated costs or the possible return of
goods.
Revenues represent the amounts (excluding value added tax) derived from the
provision of goods and services to customers during the period.
3. Segmental reporting
Geographic segments
For management purposes, the Group is currently organised into four
geographical regions based on the location of the Group's assets - Germany,
USA, Australia and UK. These geographical regions are the basis on which the
Group reports its primary segment information.
Business segment
The Group has one business segment, being the development and production of
high temperature superconducting wires, components and applications.
Six months to 30 June Germany USA Australia UK Eliminations Consolidated
2008
€000 €000 €000 €000 €000 €000
Revenue
Total revenue 964 79 - - - 1,043
Result
Segment result being (1,723) (703) (141) (503) (29) (3,099)
loss from operations
Net financial income 10 (27) 1 525 - 509
Loss before tax (1,713) (730) (140) 22 (29) (2,590)
Tax - - 81 - 11 92
Loss for the period (1,713) (730) (59) 22 (18) (2,498)
Other information
Capital additions 963 304 281 - - 1,548
Depreciation and (183) (103) (21) - - (307)
amortisation
Balance sheet
Segment assets 4,352 1,242 1,021 29,765 (15,011) 21,369
Segment liabilities (1,308) (70) (92) (187) (595) (2,252)
Net assets/(liabilities) 3,044 1,172 929 29,578 (15,606) 19,117
Six months to June Germany USA Australia UK Eliminations Consolidated
2007
€000 €000 €000 €000 €000 €000
Revenue
Total revenue 180 - - - (86) 94
Result
Segment result being (745) (674) (189) (353) (37) (1,998)
loss from operations
Net financial income - 1 1 140 (1) 141
Loss before tax (745) (673) (188) (213) (38) (1,857)
Tax - - - - 13 13
Loss for the period (745) (673) (188) (213) (25) (1,844)
Other information
Capital additions 798 592 119 17 - 1,526
Depreciation and (161) (98) (13) - - (272)
amortisation
Balance sheet
Segment assets 2,208 926 310 19,076 (8,035) 14,485
Segment liabilities (420) (1,998) (633) (213) 1,702 (1,562)
Net assets/ 1,788 (1,072) (323) 18,863 (6,333) 12,923
(liabilities)
4. Finance income and expense
Six months to Six months to Year to
30 June 2008 30 June 2007 31 December
2007
€000 €000 €000
Financial income
Interest income - bank 370 74 275
Foreign exchange gain 84 67
Gain on forward contracts held 85 - 20
at fair value
Financial income 539 141 295
Financial expense
Foreign exchange loss (30) - ( 554)
Financial expenses (30) - (554)
Net financial income/(expense) 509 141 (259)
5. Earnings per share
Basic earnings per share
The calculation of basic earnings per share for the six months ended 30 June
2008 was based on the loss attributable to ordinary shareholders of €2,498,000
(Six months ended 30 June 2007: €1,844,000) and a weighted average number of
Ordinary Shares outstanding during the period of 44,014,000 (Six months ended
30 June 2007: 37,535,000) calculated as follows:
Thousand of shares Six months Six months Year to
to to 31 December
30 June 2008 30 June 2007
2007
Issued ordinary shares at start 43,948 36,091 36,091
of period
Placing - May 2007 - 1,444 2,853
Placing - December 2007 - - 254
Share options exercised 66 - -
Weighted average number of 44,014 37,535 39,198
ordinary shares
Diluted earnings per share
Share options and warrants have not been included in the calculation of fully
diluted earnings per share since these are anti-dilutive. The instruments that
could potentially dilute the basic earnings per share in the future, but were
not included because they were anti-dilutive for the periods presented are:
Thousand of shares 30 June 30 June 31 December
2008 2007 2007
Warrants issued in respect of the 160 160 160
working capital facility from Cloverleaf
Holdings Limited (issued 16 August 2006)
Share options 1,402 1,220 1,346
Total potential dilutive instruments 1,562 1,380 1,506
55,008 share options have lapsed in the period 1 January 2008 to 30 June 2008.
6. Property, plant and equipment
Technical Office Assets under Total
plant and and construction
equipment business
equipment
€000 €000 €000 €000
Cost
Balance at 1 January 2007 1,186 259 65 1,510
Additions 284 39 219 542
Effects of movements in foreign (5) 2 - (3)
exchange
Balance at 30 June 2007 1,465 300 284 2,049
Balance at 1 January 2008 1,676 365 210 2,251
Additions 432 61 196 689
Effect of movements in foreign (37) (3) - (40)
exchange
Balance at 30 June 2008 2,071 423 406 2,900
Depreciation
Balance at 1 January 2007 (279) (76) - (355)
Depreciation charge for the (164) (48) - (212)
period
Effects of movement in foreign 2 - - 2
exchange
Balance at 30 June 2007 (441) (124) - (565)
Balance at 1 January 2008 (427) (153) - (580)
Depreciation charge for the (179) (75) - (254)
period
Effect of movements in foreign 14 - - 14
exchange
Balance at 30 June 2008 (592) (228) - (820)
Net book value
At 30 June 2007 1,024 176 284 1,484
At 30 June 2008 1,479 195 406 2,080
No assets are held under finance leases.
7. Intangible assets
Goodwill Patents Development Total
and rights
Trademarks
€000 €000 €000 €000
Cost
Balance at 1 January 2007 1,415 855 1,317 3,587
Additions - 68 916 984
Effects of movements in foreign (24) (20) (31) (75)
exchange
Balance at 30 June 2007 1,391 903 2,202 4,496
Balance at 1 January 2008 1,303 866 2,488 4,657
Additions - 51 808 859
Effect of movements in foreign (75) (54) (135) (264)
exchange
Balance at 30 June 2008 1,228 863 3,161 5,252
Amortisation
Balance at 1 January 2007 - (46) (4) (50)
Amortisation charge for the - (40) (20) (60)
period
Effects of movement in foreign - 2 - 2
exchange
Balance at 30 June 2007 - (84) (24) (108)
Balance at 1 January 2008 - (133) (45) (178)
Amortisation charge for the - (41) (12) (53)
period
Effect of movements in foreign - 8 - 8
exchange
Balance at 30 June 2008 - (166) (57) (223)
Net book value
At 30 June 2007 1,391 819 2,178 4,388
At 30 June 2008 1,228 697 3,104 5,029
Amortisation and impairment charge
The amortisation charge is recognised in administrative expenses. Patents and
Trademarks are amortised over a 15 year period. Development rights are
amortised over a five to ten year period, commencing when the product under
development is available for sale.
Goodwill
Goodwill is allocated as follows: Zenergy Power GmbH €170,000, Zenergy Power,
Inc. €975,000 and Zenergy Power Pty Ltd €83,000, the entities are considered to
be the smallest cash generating unit to which goodwill can be allocated.
Goodwill is tested annually for impairment. Goodwill is denominated in the
currency of the acquired entity.
8. Capital and reserves
Reconciliation of movement in capital and reserves
Share Share Translation Warrant Retained Total
capital premium reserve reserve earnings equity
€000 €000 €000 €000 €000 €000
Balance at 1 January 2007 532 10,046 (47) 200 (4,580) 6,151
Total recognised income - - (40) - (1,844) (1,884)
and expense
Equity-settled share based - - - - 230 230
payment transactions
Paid in share capital
- Placing 63 8,363 - - - 8,426
Balance at 30 June 2007 595 18,409 (87) 200 (6,194) 12,923
Share Share Translation Warrant Retained Total
capital premium reserve reserve earnings equity
€000 €000 €000 €000 €000 €000
Balance at 1 January 2008 645 31,672 (385) 200 (9,409) 22,723
Total recognised income - - (1,323) - (2,498) (3,821)
and expenses
Equity settled share based - - - - 185 185
payments transactions
Paid in share capital - 1 29 - - - 30
share options exercised
Balance at 30 June 2008 646 31,701 (1,708) 200 (11,722) 19,117
The aggregated current and deferred tax relating to items that are charged or
credited to equity is €Nil.
Translation reserve
The translation reserve comprises all foreign exchange differences arising from
the translation of the financial statements of foreign operations.
Warrant reserve
The warrant reserve comprises the fair value of the equity component of
warrants issued by the Group.
Share capital
30 June 2008 30 June 2007 31 December 2007
Ordinary shares in thousands of
shares
On issue at start of period 43,948 36,091 36,091
Placing - May 2007 - 4,285 4,285
Placing - December 2007 - - 3,572
Share options exercised 90 - -
On issue - fully paid 44,038 40,376 43,948
30 June 30 June 30 June 30 June 31 December 31 December
2008 2008 2007 2007 2007 2007
£000 €000 £000 €000 £000 €000
Authorised
Ordinary shares of £ 1,000 1,264 1,000 1,484 1,000 1,359
0.01 each
Allotted, called up
and fully paid
Ordinary shares of £ 440 646 404 599 439 645
0.01 each
Shares classified in 646 599 645
equity
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Group.
On 3 May 2007, 4,285,746 new Ordinary Shares were issued at £1.40 per share
raising £5.8 million (net of fees of £0.2 million), which at the exchange rate
prevailing on the date was equivalent to €8.4 million (net of fees of €0.4
million).
On 12 December 2007, 3,571,484 new Ordinary Shares were issued at £2.80,
raising £9.7 million (net of fees of £0.3 million), which at the exchange rate
prevailing at the date was equivalent to €13.3 million (net of fees of €0.5
million).
On 25 January 2008, 73,119 new Ordinary Shares were issued in respect of an
exercise of options resulting in proceeds of £17,998 (€24,289).
On 6 May 2008, 6,873 new Ordinary Shares were issued in respect of an exercise
of options resulting in proceeds of £1,500 (€1,905).
On 11 June 2008 10,417 new Ordinary Shares were issued in respect of an
exercise of options resulting in proceeds of £3,125 (€3,950).
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