Interim Results
AFC Energy Plc
25 July 2007
AFC Energy plc
('AFC Energy' or 'the Company')
Unaudited Interim results to 30 April 2007
AFC Energy, the low-cost alkaline fuel cell company with a clear route to
commercialisation, is pleased to announce its unaudited interim results for the
six months ended 30 April 2007.
HIGHLIGHTS
• Successful admission to AIM, raising net proceeds of £2.4 million
• Received contractual purchase order from Akzo Nobel Base Chemicals B.V.
('Akzo Nobel') for the supply of fuel cells
• Shareholders' funds of £3.909 million
Post-period events
• First technological milestone achieved with the operation for 500 hours
of a small-scale single cell unit, within the projected timescale described
in the Admission Document
• Intended delivery of fuel cells to Akzo Nobel on schedule
• Signed a Memorandum of understanding to supply fuel cells to the
Indonesian government
Gerard Sauer, Chief Executive, AFC Energy said:
'The successful admission of AFC Energy to AIM has significantly increased our
visibility among potential customers and given us the capital we need to take
our fuel cell through to commercialisation.
'The applications for AFC Energy's technology continue to grow as we identify
more locations with hydrogen sources combined with a need for lower cost, clean
energy.
'Our project with the Indonesian government is an excellent example of where
clean energy can be produced cost effectively and we look forward to working
closely with our partners in Asia.
'As we continue to drive down the cost of our components and streamline our
manufacturing processes for mass scale production, we will capitalise on the
increasing demand for commercially viable clean energy.'
For further information please visit www.afcenergy.com or contact:
AFC Energy plc 01483 276726
Gerard Sauer, Chief Executive
Nabarro Wells & Co. Limited 020 7710 7400
Richard Swindells / Anthony Rowland
Madano Partnership 020 7593 4000
Mark Way / Graham Moonie
CHAIRMAN'S STATEMENT
I am pleased to welcome all new AFC Energy shareholders and to introduce our
interim report for the six months ended 30 April 2007 - the first report since
the Company became quoted on AIM.
AIM listing
In April 2007 the Company's shares were successfully admitted to trading on the
London Stock Exchange's Alternative Investment Market ('AIM') to secure the
working capital necessary to continue preparing for commercialisation of its
low-cost alkaline fuel cells. This generated a net funding inflow of £2.4
million.
Company strategy
AFC Energy is engaged in the design and development of alkaline fuel cells and
improving the processes and reducing the costs and number of components required
for their manufacture.
AFC Energy has identified industries that produce hydrogen as waste or
by-product as the markets with the most immediate potential for our technology.
The Company's proprietary technology, which has been under development for over
six years, has already achieved some important milestones in its development,
including the proof of concept on the operation of its electrode.
Akzo Nobel contract
The company signed its first contract with Akzo Nobel in March 2007 to supply
alkaline fuel cells to its chlor-alkali (chlorine production) business. Akzo
Nobel is the fourth-largest chlorine producer in Europe.
AFC Energy will receive payments for the supply of its technology and it is
intended that delivery of AFC Energy's first fuel cells to Akzo Nobel will begin
during the first quarter of 2008.
Following successful installation and trialing of these initial 10kW units at
Akzo Nobel's Bitterfeld site in Germany, a system expansion study towards
developing a 200kW system is due to be completed by the second quarter of 2009
in collaboration with Akzo Nobel personnel. The Directors of AFC Energy
anticipate entering into further collaboration agreements with Akzo Nobel, for
larger systems, as the project moves forward.
The excess hydrogen produced by Akzo Nobel will support several Megawatts of
green electricity and the Directors anticipate that the AFC Energy business
model will offer a capital payback within three years with effective zero cost
electricity thereafter.
Post-period events - since 1 May 2007
Successful performance of single cell unit
The company achieved its first technological milestone, the operation for 500
hours of a small-scale single cell unit, within the projected timescale
described in the Admission Document.
The cell was tested successfully under specific high corrosion conditions,
designed to demonstrate operation and corrosion resistance of the system. The
trial demonstrated a consistent output with minimum degradation and little
evidence of corrosion.
The successful test of the single cell unit is an important part of the
continued progress towards AFC Energy's goal of delivery of functional systems
during 2008 in preparation for full commercialisation during 2009. The next
expected milestone is the operation of the first scaled single cell scheduled
for August 2007.
AFC Energy's Proposed Technological ''Milestones''
The new milestones that the Company is aiming to achieve, and to have
independently verified by the team at Surrey University, are as follows:
+------------+-----------------------------------+--------------------+
|Milestone |Description |Target Completion |
+------------+-----------------------------------+--------------------+
|1 |Small scale single cell 500 hours |May 2007 - ACHIEVED |
| |operation | |
+------------+-----------------------------------+--------------------+
|2 |First scaled single cell operation |August 2007 |
+------------+-----------------------------------+--------------------+
|3 |Scaled single cell 500 hours |October 2007 |
| |operation | |
+------------+-----------------------------------+--------------------+
|4 |First prototype system operation |January 2008 |
+------------+-----------------------------------+--------------------+
|5 |System operation 500 hours |February 2008 |
+------------+-----------------------------------+--------------------+
|6 |Delivery of multiple systems to |August 2008 |
| |customer | |
+------------+-----------------------------------+--------------------+
Source: AFC Energy development programme.
MOU with the government of Indonesia
In June 2007 AFC Energy entered into a Memorandum of Understanding ('M.O.U.')
with the Government of Indonesia, and specifically with the State Ministry for
Development of Disadvantaged Areas of the Republic of Indonesia.
The M.O.U. relates to the CIUP (Community Integrated Utility Program) project
that aims to provide 32 million households with the ability to produce
electricity and potable drinking water over the next ten years. AFC Energy has
been appointed as the exclusive fuel cell supplier to this program, whether with
AFC Energy proprietary fuel cells or as an agent for third-party fuel cells.
The M.O.U. contains an initial order totalling US$13.5 million for three
thousand 3.5kW systems at US$4,500 per system. Supplies are scheduled to begin
around the fourth quarter of 2008. The primary trial of 3,000 units will be in
the Nabire-Papua region.
The M.O.U. also confirms that both parties undertake to enter into a joint
venture to establish, within 18 months, a manufacturing facility in partnership
with a number of interested Indonesian corporations. The intention is that over
the following 8 - 10 years up to six million 5kW units could be manufactured.
Financial highlights to 30th April 2007
The Company incurred costs of £599,000 in the period, as it built up a team of
technical experts and support staff tasked with the development and testing of
the company's products and their commercialisation.
Monthly payments are being received on account from Akzo Nobel, our first
customer, and we are delighted to have met the various milestones agreed with
Akzo at the outset of the project.
As the relationship with Akzo Nobel develops, AFC Energy will be committing
further capital as detailed in the Admission Document to develop manufacturing
processes and the overall scaling up of the project.
The Company's net assets and shareholder funds at the April balance sheet date
were £3.909 million.
Tim Yeo, Chairman
Interim financial statements for the six months to 30 April 2007
Income statement
Six 9 January
months to 2006 to 31
30 April October
2007 2006
Note
£ £
Unaudited Audited
Revenue - -
Cost of sales (32,785) -
Gross loss (32,785) -
Administrative expenses (566,173) (617,158)
Operating loss (598,958) (617,158)
Financial income 16,280 14,013
Financial expenses - (27)
Net financing costs 16,280 13,986
Loss before tax (582,678) (603,172)
Taxation 2 58,667 60,679
Loss for the period attributable to equity (524,011) (542,493)
shareholders
Basic loss per share 3 (0.7p) (1.2p)
All amounts relate to continuing operations.
Balance sheet Note 30 April 31 October
2007 2006
£ £
Unaudited Audited
Non-current assets
Intangible assets 4 303,132 287,051
Property, plant and equipment 5 255,680 152,184
558,812 439,235
Current assets
Trade and other receivables 6 349,083 114,735
Cash and cash equivalents 3,245,129 96,244
3,594,212 510,979
Total assets 4,153,024 950,214
Equity and liabilities
Equity attributable to shareholders
Share capital 7 87,683 70,000
Share premium 4,821,412 1,334,935
Other reserves 66,602 11,546
Retained earnings (1,066,504) (542,493)
Total equity 3,909,193 873,988
Current liabilities
Trade and other payables 8 243,831 76,226
Total equity and liabilities 4,153,024 950,214
Cash flow statement Six months 9 January
to 30 2006 to 31
April October
2007 2006
£ £
Unaudited Audited
Cash flows from operating activities
Loss before tax for the period (582,678) (603,172)
Adjustments for:
Depreciation of property, plant and equipment 43,673 32,023
Amortisation of intangible assets 5,085 12,131
Equity-settled share-based payment expenses 55,056 11,546
Interest paid - 27
Interest received (16,280) (14,013)
Cash flows from operating activities before changes (495,144) (561,458)
in working capital and provisions
Increase in trade and other receivables (175,681) (54,056)
Increase in trade and other payables 167,605 76,226
Cash generated absorbed by operating activities (503,220) (539,288)
Cash flows from investing activities
Acquisition of patents (21,166) (299,182)
Acquisition of property, plant and equipment (147,169) (184,207)
Net cash from investing activities (168,335) (483,389)
Cash flows from financing activities
Proceeds from the issue of share capital 4,035,558 1,404,935
Share issue costs (531,398) -
Interest paid - (27)
Interest received 16,280 14,013
Net cash from financing activities 3,520,440 1,418,921
Net increase in cash and cash equivalents 2,848,885 396,244
Cash and cash equivalents at 1 November 2006 396,244 -
Cash and cash equivalents at 30 April 2007 3,245,129 396,224
Statement of Changes in Equity
Share Share Other Retained Total
Capital Premium Reserve Earnings
£ £ £ £ £
Audited Audited Audited Audited Audited
Balance at 9 January 2006 - - - - -
Loss after tax for the period - - - (542,493) (542,493)
Total recognised income and - - - (542,493) (542,493)
expense for the period
Equity-settled share-based - - 11,546 - 11,546
payments
Issue of equity shares 7,000 1,397,935 - - 1,404,935
Bonus issue of shares 63,000 (63,000) - - -
Balance at 31 October 2006 70,000 1,334,935 11,546 (542,493) 873,988
Unaudited Unaudited Unaudited Unaudited Unaudited
Balance at 1 November 2006 70,000 1,334,935 11,546 (542,493) 873,988
Loss after tax for the period - - - (524,011) (524,011)
Total recognised income and - - - (524,011) (524,011)
expense for the period
Equity-settled share-based - - 55,056 - 55,056
payments
Issue of equity shares 17,683 4,017,875 - - 4,035,558
Share issue costs - (531,398) - - (531,398)
Balance at 30 April 2007 87,683 4,821,412 66,602 (1,066,504) 3,909,193
Share capital is the amount subscribed for shares at 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 reserves represent amounts credited to revenue reserves in respect of
share-based payments charged to the income statement. This reserve is a realised
profit and is distributable.
Retained earnings represent the cumulative loss of the Company attributable to
the equity shareholders.
Notes forming part of the interim financial statements
1 Significant accounting policies
a. Basis of accounting
The financial statements for the six month period ended 30 April
2007 were prepared on the basis of the accounting policies adopted
within the financial statements of the Company for the period ended
31 October 2006. The financial statements of the Company for the
period ended 31 October 2006 were prepared in accordance with
International Financial Reporting Standards (IFRSs).
The accounting policies set out below have, unless otherwise
stated, been applied consistently in these financial statements.
b. Measurement convention
The financial statements are prepared on the historical cost basis.
c. Intangible assets
Patents are valued at cost less accumulated amortisation and
impairment charges. Amortisation is provided to write off the cost
less estimated residual value of each asset over its expected
useful life, as follows:
Patents 5% per annum straight line
d. Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation
and impairment charges. Depreciation is provided at rates calculated
to write off the cost less estimated residual value of each assets
over its expected useful life, as follows:
Leasehold improvements Over the life of the lease
Fixtures, fittings and Over one to three years on a straight
equipment line basis.
e. Leases
Leases are classified as finance leases whenever the terms of the
lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.
f. Deferred taxation
Deferred tax is accounted for using the liability method and as
such all timing differences between the Company's profits
chargeable to tax and its results shown in the financial statements
are recognised. These timing differences arise from the inclusion
of gains and losses for tax purposes in different periods to those
in which they are recognised in the financial statements. Deferred
tax assets are only recognised to the extent that it is probable
that future taxable profits will be available against which any
temporary differences can be utilised. Deferred tax is measured on
a non-discounted basis at rates of tax expected to apply in the
periods in which the timing differences are expected to reverse.
g. Equity-settled share-based payments
The Company issues equity-settled share-based payments to certain
employees which are measured at fair value and recognised as an
expense in the income statement with a corresponding increase in
equity. The fair values of these payments are measured at the date
of grant using option-pricing models, taking into account the terms
and conditions upon which the awards are granted. The fair value of
the awards is recognised as an expense over the period during which
employees become unconditionally entitled to the awards, subject to
the Company's estimate of the number of awards which will lapse,
due to employees leaving the Company prior to vesting. The total
amount recognised in the income statement as an expense is adjusted
to reflect the number of awards that vest.
2 Taxation Six months 9 January
to 30 to 31
April October
Recognised in the income statement 2007 2006
£ £
Unaudited Audited
Research and development tax credit 58,667 60,679
Reconciliation of effective tax rates
£ £
The reasons for the difference between the actual tax
charge for the period and the rate of 30% applied to
the loss for the period are as follows:
Loss before tax (582,678) (603,172)
Tax using domestic rates of corporation tax of 30% 174,803 180,952
Effect of:
Effect of expenses not deductible for tax purposes (5,787) (8,667)
Research and development allowance 110,000 37,924
Research and development tax credit (36,667) (53,095)
Depreciation in excess of capital allowances (4,272) 6,248
Losses carried forward (179,410) (102,683)
58,667 60,679
3 Loss per share
The calculation of the loss per share is based
upon the net loss after tax attributable to the
ordinary shareholders of £524,011 (31 October
2006: a loss of £542,493) and a weighted average
number of shares in issue, for the period
1 November 2006 to 30 April 2007 of 72,077,825
(9 January 2006 to 31 October 2006: 45,144,125).
Six months 9 January
to 30 April 2006 to 31
2007 October
2006
Unaudited Audited
Loss per share (0.7p) (1.2p)
Diluted loss per share
No diluted loss per share has been presented as the Company is loss making.
4 Intangible assets Patents
£
Cost
Balance at 9 January 2006 -
Additions 319,986
Amount attributed to tangible non-current assets (20,804)
Balance at 31 October 2006 299,182
Additions 21,166
Balance at 30 April 2007 320,348
Amortisation
Balance at 9 January 2006 -
Charge for the period 12,131
Balance at 31 October 2006 12,131
Charge for the period 5,085
Balance at 30 April 2007 17,216
Net book value
At 30 April 2007 303,132
At 31 October 2006 287,051
5 Property, plant and equipment Leasehold Fixtures, Total
Improvements fittings
and
equipment
£ £ £
Cost
Balance at 9 January 2006 - - -
Acquisitions (note 4) - 20,804 20,804
Additions 62,208 101,195 163,403
Balance at 31 October 2006 62,208 121,999 184,207
Additions 83,450 63,719 147,169
Balance at 30 April 2007 145,658 185,718 331,376
Cost
Balance at 9 January 2006 - - -
Charge for the period 9,090 22,933 32,023
Balance at 31 October 2006 9,090 22,933 32,023
Charge for the period 1,439 42,234 43,673
Balance at 30 April 2007 10,529 5,167 75,696
Net book value
At 30 April 2007 135,129 120,551 255,680
At 31 October 2006 53,118 99,066 152,184
6 Trade and other receivables 30 April 31 October
2007 2006
£ £
Unaudited Audited
Other receivables 349,083 114,735
7 Share capital Authorised
share
capital
£
Authorised
At 31 October 2006 - 70,000,000 Ordinary shares of 1p
each(1) 700,000
At 30 April 2007 - 700,000,000 Ordinary shares of 0.01p
each(1) 700,000
(1)On 23 March 2007 the authorised share capital of the Company was changed from
70,000,000 ordinary shares of 1p to 700,000,000 ordinary shares of 0.01p.
Issued Issued
share share
capital capital
Number £
Issued
At 31 October 2007 - ordinary shares of 1p each 7,000,000 70,000
Issued on 13 February 2007 - ordinary shares of 1p each 449,982 4,500
Total at 23 March 2007 pre-conversion 7,449,982 74,500
Converted to ordinary shares of 0.01p each on 23 March
2007 74,499,820 74,500
Issued on 24 April 2007(2) 13,183,034 13,183
At 30 April 2007 87,682,854 87,683
(2)Issued pursuant to a placing arrangement and the listing of all of the
Company's ordinary shares on the Alternative Investment Market of the London
Stock Exchange.
8 Trade and other payables 30 April 31 October
2007 2006
£ £
Unaudited Audited
Trade payables 98,089 40,976
Taxation and social security payable 37,515 12,333
Accruals 108,227 22,917
243,831 76,226
Publication of non-statutory accounts
The financial information contained in this interim statement does not
constitute accounts as defined by section 240 of the Companies Act 1985. The
financial information for the preceding period is based on the statutory
accounts for the financial period ended 31 October 2006. Those accounts, upon
which the auditors issued an unqualified opinion, have been delivered to the
Registrar of Companies.
Copies of the interim statement may be obtained from the Company Secretary,
AFC Energy plc, Unit 71.4 Dunsfold Park,Cranleigh, Surrey GU6 8TB and can be
accessed from the company's website at www.afcenergy.com.
- ends -
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