Half Yearly Report

RNS Number : 4159A

Ceres Power Holdings plc

30 March 2012

 



30 March 2012

Ceres Power Holdings plc

Interim results for the six months ended 31 December 2011

Ceres Power Holdings plc ("Ceres", "Ceres Power" or "the Group") announces its interim results for the six months ended 31 December 2011.

Business Highlights:

·     Further improvements made in core fuel cell technology

·     Significant improvements made in CHP product reliability and durability, with further work on-going to enable the CHP product to meet the power degradation target

·     Commercial agreement signed with Dutch partner to launch CHP product in Benelux

·     Business review completed in conjunction with partners, resulting in decision to focus only on low cost mass market product launch in 2016

·     External evaluation confirms Ceres world-leading CHP product cost capability

·     Company cost reduction and restructuring programme announced, saving more than £3m annually

·     £18.6m in net cash at 31 December 2011

·     Requirement to raise further funding by end Q3 2012

Financial Highlights:

	Six months ended 31 December 2011 (Unaudited)	Six months ended 31 December 2010 (Unaudited)
	£'000	£'000
Revenue	136	395
Other operating income	134	98
Operating loss	(9,382)	(7,403)
Interest receivable	121	297
Loss for the financial period	(8,154)	(5,932)
Loss per share	(9.46)p	(6.88)p
Net cash and  short-term investments	18,616	34,217

David Pummell, Chief Executive of Ceres Power, commented:

"We have made significant progress in improving the durability and reliability of our CHP product design and I am confident that we can launch a low cost, mass market product in 2016. Following an internal review, and taking input from key strategic partners, we have decided to focus our resources on this 2016 product programme and cease the parallel 2014 product development and launch programme as previously planned. This focusing of our resources enables me to restructure our operations, reducing our cash burn and avoiding unnecessary effort and expenditure on an early product that we now believe is unlikely to achieve significant uptake."

Phil Bentley, Managing Director British Gas, commented:

"Ceres has made good progress over the last six months and I believe they now have the right leadership, engineering and product focus.  We support Ceres' decision to focus on delivering the low cost mass market product in the UK for 2016, and the British Gas team looks forward to continuing its work with Ceres to ensure the new product meets UK customer requirements."

For further information contact:

Ceres Power Holdings plc	Tel. [phone]
David Pummell, Chief Executive
Rex Vevers, Finance Director
Investec Securities	Tel. [phone]
Chris Sim / James Ireland
Kreab Gavin Anderson & Company	Tel. [phone]
Ken Cronin/Deborah Walter

www.cerespower.com

Chairman's Statement

The last six months have been very important in terms of technical and commercial progress.

The reliability and performance of our core fuel cell module have improved significantly and almost all of the issues previously identified have now been resolved.  However, we have not yet achieved our internal durability target for CHP product power degradation; delivering this remains our primary focus and will be required to commence further field trials. Specific programmes of work are underway to validate and test the required product modifications. In conjunction with the significant improvements made to programme management and engineering capability over the period, this provides the Board with confidence that Ceres can successfully deliver the necessary improvements and bring the Company's unique low cost fuel cell CHP product to market.

In parallel with resolving the remaining technical issues, we have decided to concentrate our efforts on launching our low cost product in 2016, a decision endorsed by our strategic partners. This enables us to restructure the business and reduce cash burn, thereby delaying the need to raise further funds to the end of Q3 2012 and reducing the level of funds needed over the next few years.

The increasing need for a disruptive technology like the Ceres CHP unit is evident with increasing energy prices and the scale of national infrastructure investment required. This has led to the UK Government proposing an increase in the applicable feed-in tariff and acknowledging the long term potential of residential CHP. It is also pleasing to note that there is widespread interest outside the UK as evidenced by our new commercial agreement announced today with Itho-Daalderop to address the Benelux market.

The next six months are crucial to deliver the improvements in CHP product durability, and raise further funding by the end of Q3 2012 to continue to meet the Company's planned expenditure, maintaining the business as a going concern. The Board has considered all the alternative options and believes that this is the best strategy to deliver value to shareholders.

Brian Count

Chairman

Chief Executive's Review

Business Review

Since becoming Chief Executive in September 2011, I have focused the Company on conducting a rigorous internal testing and validation programme, to resolve the key technical issues that were identified from the previous in-home field trials and improve the performance of the CHP product. 

I reported in October 2011 that we had reduced internal leakage in our cells, improved interconnect corrosion resistance and improved anode tolerance to multiple hot relight and load cycling events.  I am pleased to report that since then we have achieved further significant improvements in CHP product performance from the levels seen during the field trials. We have now significantly reduced the rapid degradation experienced at that time and, through the implementation of defined projects, I am confident that we will continue to improve product performance to meet the targets required to launch a mass market product in 2016.

We continue to focus on improving our core fuel cell technology and implementing engineering solutions to the CHP product.  This work centres on the fuel processing unit and the durability of the cell.  Although we have made excellent progress in improving CHP product durability, we have not yet achieved our internal target for CHP power degradation.  I set out in the sections below the progress made and the nature of the work going forward.

During the last few months we have conducted an internal review of our commercialisation strategy, and as part of this, conducted detailed discussions with British Gas and Itho-Daalderop.  Taking into account the remaining work to achieve the required product performance and the likely limited uptake for the higher cost first generation product in 2014, we have decided to cancel the first generation field trials planned for later this year and focus all our resources on delivering the low cost mass market product in 2016.  This has a number of strategic benefits: Ceres and its partners can focus on the mass market product design, and the Group can restructure its business and reduce the on-going cash burn by avoiding the parallel 2014 product launch programme with its associated in-home field trials later this year.  Going forward, the mass market product programme will be delivered in collaboration with existing and new partners.

The new focus on the 2016 product programme has enabled me to launch a restructuring of the business that will deliver a significant reduction in the on-going cash cost. This provides the Group further time to resolve the remaining technical issues and demonstrate improvements in product durability. As previously reported the Company requires further funding, and the initial tranche can now be delayed to the end of Q3 2012 and be smaller in size. The details of the restructuring and cost reduction programme are set out below.

The Company has developed a unique low carbon technology and embodied this in a low cost wall-mounted CHP product that has the capability to achieve mass market uptake within the global residential energy market.  Like any disruptive technology, the path to completing the development and commercialization is challenging.  However, with our current and new strategic partners, we can together deliver a commercially compelling mass market residential CHP product that will in turn deliver significant shareholder value.

CHP Programme

Recent improvements in product operating strategy, software and hardware have improved average availability to greater than 94% on more than 10 CHP products operating on our test stands. This clearly indicates the capability of our design to deliver a stable product platform.

During the last period we have made significant improvement to CHP product durability and we have achieved power degradation in the range 3-7% per 1000hrs across multiple CHP products.  We have achieved cell degradation of 1% per 1000hrs on stacks running on dry hydrogen for more than 5700hrs, and around 3% per 1000hrs on stacks running on simulated reformate.  Extended testing of CHP products indicates that residual power degradation may be due to control and contamination of the fuel processing unit. We have made good progress in the identification and characterization of these issues and work is ongoing to develop and test engineering solutions.  These should enable sustained delivery of the correct hydrogen-rich stream to the fuel cell stack. I am confident that the engineering modifications that we have identified can significantly improve the CHP product durability.

In addition, we have commenced a programme of work on the fuel cell anode that is expected to deliver further significant improvements in CHP product durability. 

In my update to investors in January 2012, I reported that we were finalising design modifications to the balance of plant components to accommodate the improved fuel cells.   I am pleased to report that these engineered solutions, developed in conjunction with our suppliers, have contributed to the improvements to CHP reliability and durability.  This validation testing continues and I will update shareholders on progress achieved.

Commercial Partners

I am pleased to announce that we have concluded a new agreement with our existing assembly partner Itho-Daalderop to sell our wall-mounted CHP product in Benelux.  Under the terms of the agreement, we will work closely together on the design of the mass market product to maximize its market fit and help value engineer the product to meet cost targets.  In return for Ceres granting four years' exclusivity in the Benelux market, Itho-Daalderop has committed to order a minimum of 78,000 units over this period.

We are very excited by this development and the opportunity to take our unique low cost CHP product into an additional major European market where boiler sales are around 400,000 units per annum.

We have commenced commercial discussions with potential partners to develop our CHP product for sale in Asia Pacific and potentially North America, regions where they have well established businesses and are growing their market share. The low cost, compact Ceres CHP product is an excellent fit with these territories. These partners offer development, manufacturing and channel to market capabilities in domestic appliances and new energy products, and can help us access new channels to a significant customer base.

In addition, we have held extensive discussions with our partners regarding the market entry strategy for our CHP product.  This confirms our own findings that the right strategy is to focus the Company's resources solely on the development of the mass market product in 2016. This more closely aligns our approach with that of our partners, and also reduces the cost and risk of delivering this product in 2016.  The elimination of parallel product programmes will simplify our task and in my judgment will deliver the best overall value to shareholders. 

Restructuring Programme

I have launched a major restructuring programme that aligns resources with the required activities and delivers significant on-going savings.  The restructuring will require employee consultation on the proposed reduction in headcount, likely to impact most functions and levels within the Company. I anticipate that following completion of the consultation process, the on-going savings will be more than £3 million p.a. In addition, we will also defer some expenditure relating to manufacturing scale-up and eliminate the costs of the product launch previously planned in 2014.

External Evaluation of Ceres CHP Low Product Cost

As part of the Company's business review, Booz & Co., working with AEA Technology, has conducted a detailed review of the cost of the current CHP product and the mass market CHP product design for launch in 2016.  This included a detailed analysis of the CHP product design, bill of materials and the fuel cell and stack manufacturing processes including energy, labour and scrap costs.  The companies reviewed quotations from Ceres' supply chain partners, applied cost-down experience curves for similar mass market technology products and has confirmed the variable cost of Ceres' 1kW CHP product is estimated to be ~£2,500 and ~£1,750 at volumes of 20k and 100k per annum respectively.  The cost of the stack of fuel cells is estimated to be ~£380 and ~£250 for the same volumes. This independent validation of the low cost design underpins our confidence that the CHP product can achieve true mass market uptake and compete with conventional condensing boilers when in volume.

Government Support

In February this year, the UK Government published its Feed in Tariff Consultation which included a proposed increase in the tariff for small scale combined heat and power technologies including Ceres CHP. The proposal to increase the generation tariff to 12.5p per kWh is predicted to raise the annual income for a typical home installing a Ceres CHP product from £350 to £436, on top of the annual energy savings of approximately £286. This is a very welcome initiative that will help drive customer uptake.

The UK Government has signalled its intent to use policy measures such as the Feed in Tariff to "jumpstart" micro-CHP technology, with an ambition for 1 million CHP units to be installed in the UK by 2020. Greg Barker, Minster of State for Climate Change said that micro-CHP technology has the potential to be "an attractive, price-competitive alternative to taking electricity from the grid or installing a conventional boiler."

I am very pleased that the UK Government continues to recognise the potential of micro CHP to make a significant reduction to carbon emissions in the difficult-to-address housing sector and has signalled both an increase in the Feed in Tariff level and confirmed the long-term future for the Feed in Tariff for micro-CHP. This represents a fundamental shift in strategic UK residential energy policy, reinforcing the Government's support for mass market uptake of technologies like Ceres Power's CHP product.

Financial

At the period end, the Group held £18.6m (2011:£34.2m) in cash and money market funds. As previously mentioned, the Group will need to raise an initial tranche of funding before the end of Q3 2012 to continue to meet the Company's planned expenditure. Although the Company has been successful in raising finance in the past, there is no assurance that adequate finance can be obtained in the future. This represents a material uncertainty which may cast doubt on the ability of the Company to continue as a going concern. However, the Board has a reasonable expectation that additional funding will be secured when required and accordingly the accounts have been prepared   on a going concern basis. Reference should be made to note 1 to these accounts.

Revenue for the period decreased to £0.1m from £0.4m in the previous period, reflecting the lower amortisation rate of the up-front milestone payments received from British Gas. The unamortised portion of milestone payments received from all commercial partners decreased to £2.4m (2011:£2.8m), reflecting the revenue recognised in the period. Other operating income, being government grant-funded programmes was in line with the prior period at £0.1m.

Operating costs rose 22% to £9.7m (2011:£7.9m), largely due to the annualised effect of higher costs such as employee numbers that arose in the first half of 2011. All of this increase was accounted for by the rise in research and development costs to £7.2m from £5.4m in the prior period. There was no increase in administrative expenses in the period, remaining at £2.5m (2011:£2.5m). Interest receivable fell to £0.1m (2011:£0.3m) reflecting continued low levels of interest rates and a reduction in net cash held.  An income tax credit of £1.1m (2011:£1.2m) has been recorded in the period, consisting of an additional recovery of £0.6m in respect of the previous financial year and an estimated income tax recovery of £0.5m in respect of the current financial year.

The loss for the financial year attributable to shareholders increased to £8.2m from £5.9m due to the increased research and development expenditure and lower revenue. The average number of shares in issue during the year was in line with the previous period at 86.2m. The loss per ordinary share rose to 9.46 pence (2011:6.88p). 

During the period, the Group's net cash used in operations increased by £1.2m to £7.3m (2011:£6.1m) reflecting the higher operating loss of £2m, partly offset by an increased income tax receipt of £0.6m. The purchase of property, plant and equipment fell to £1m during the year compares to an investment of £1.4m during the previous period, but received no capital grant (2011:£0.6m).

Outlook

The business restructuring and the focus on delivering a low cost mass market product in 2016 will enable the Company to focus all its resources on the resolution of the remaining issues related to further improving product power degradation performance.  The significant progress made in resolving the technical issues from field trials and the substantial improvements in CHP power degradation performance to date underpin our confidence that we can reach the required product performance for mass market product launch.

The reduced on-going cash burn will allow additional testing and validation time to accumulate more comprehensive technical and product performance data which is considered necessary to refinance the Group by the end of Q3 2012.

I look forward to updating you on progress with our cost reduction and product improvement programmes.  In addition, I shall update you on further developments with our commercial partners.

I am confident that we will deliver these milestones building a robust platform for the development of our low cost, mass market CHP product to be launched in volume in 2016.

David Pummell

Chief Executive Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 December 2011

		Six months ended 31 December 2011 (Unaudited)		Six months ended 31 December 2010 (Unaudited)		Year ended 30 June 2011 (Audited)
	Note	£'000		£'000		£'000
Revenue		136		395		692
Operating costs	2	(9,652)		(7,896)		(17,702)
Other operating income		134		98		352
Operating loss		(9,382)		(7,403)		(16,658)
Interest receivable		121		297		503
Loss before income tax		(9,261)		(7,106)		(16,155)
Income tax credit		1,107		1,174		2,334
Loss for the financial period / year and total comprehensive loss		(8,154)		(5,932)		(13,821)
Losses per £0.05 ordinary share expressed in pence per share:
Basic and diluted loss per share	3	(9.46)p		(6.88)p		(16.04)p

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

CONSOLIDATED BALANCE SHEET

As at 31 December 2011

		31 December 2011 (Unaudited)		31 December 2010 (Unaudited)		30 June 2011 (Audited)
	Note	£'000		£'000		£'000
Assets
Non-current assets
Property, plant and equipment		4,762		4,373		4,635
Other receivables		81		81		81
Total non-current assets		4,843		4,454		4,716
Current assets
Trade and other receivables		789		1,138		941
Derivative financial instruments		-		56		29
Current tax receivable		500		340		1,500
Short-term investments	6	-		10,000		8,000
Cash and cash equivalents	6	18,616		24,217		18,687
Total current assets		19,905		35,751		29,157
Liabilities
Current liabilities
Trade and other payables		(2,899)		(3,159)		(4,570)
Total current liabilities		(2,899)		(3,159)		(4,570)
Net current assets		17,006		32,592		24,587
Non-current liabilities
Other payables		(2,052)		(1,883)		(1,667)
Provisions for other liabilities and charges		(290)		(165)		(228)
Total non-current liabilities		(2,342)		(2,048)		(1,895)
Net assets		19,507		34,998		27,408
Equity
Share capital	4	4,311		4,309		4,309
Share premium account		64,821		64,821		64,821
Other reserve		7,463		7,463		7,463
Profit and loss account (deficit)		(57,088)		(41,595)		(49,185)
Total equity		19,507		34,998		27,408

The interim financial statements on pages 9 to 15 were approved by the Board of Directors on 29 March 2011 and were signed on its behalf by:

David Pummell                                                                       Rex Vevers

Director                                                                                   Director

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 December 2011

		Share capital (Unaudited)		Share premium account (Unaudited)		Other reserve (Unaudited)		Profit and loss account (deficit) (Unaudited)		Total (Unaudited)
		£'000		£'000		£'000		£'000		£'000
At 1 July 2010		4,309		64,821		7,463		(35,976)		40,617
Comprehensive loss
Loss for the period		-		-		-		(5,932)		(5,932)
Total comprehensive loss		-		-		-		(5,932)		(5,932)
Transactions with owners
Share-based payments charge		-		-		-		313		313
Total transactions with owners		-		-		-		313		313
At 31 December 2010		4,309		64,821		7,463		(41,595)		34,998
Comprehensive loss
Loss for the period		-		-		-		(7,889)		(7,889)
Total comprehensive loss		-		-		-		(7,889)		(7,889)
Transactions with owners
Share-based payments charge		-		-		-		299		299
Total transactions with owners		-		-		-		299		299
At 30 June 2011		4,309		64,821		7,463		(49,185)		27,408
Comprehensive loss
Loss for the period		-		-		-		(8,154)		(8,154)
Total comprehensive loss		-		-		-		(8,154)		(8,154)
Transactions with owners Issue of shares, net of costs		2								2
Share-based payments charge		-		-		-		251		251
Total transactions with owners		2		-		-		251		253
At 31 December 2011		4,311		64,821		7,463		(57,088)		19,507

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

CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 31 December 2011

		Six months ended 31 December 2011 (Unaudited)		Six months ended 31 December 2010 (Unaudited)		Year ended 30 June 2011 (Audited)
	Note	£'000		£'000		£'000
Cash flows from operating activities
Cash used in operations	5	(9,405)		(7,529)		(14,824)
Income tax received		2,107		1,454		1,454
Net cash used in operating activities		(7,298)		(6,075)		(13,370)
Cash flows from investing activities
Purchase of property, plant and equipment		(970)		(1,444)		(2,313)
Capital grant contributions to property, plant and equipment		-		573		831
Movement in short-term investments		8,000		15,000		17,000
Finance income received		189		275		628
Net cash generated from/(used in) investing activities		7,219		14,404		16,146
Cash flows from financing activities
Proceeds from issuance of ordinary shares		2		-		-
Net cash generated from financing activities		2		-		-
Net (decrease)/increase in cash and cash equivalents		(77)		8,329		2,776
Exchange gains/(losses) on cash and cash equivalents		6		(12)		11
		(71)		8,317		2,787
Cash and cash equivalents at beginning of period		18,687		15,900		15,900
Cash and cash equivalents at end of period		18,616		24,217		18,687

Reconciliation to net funds  

Opening net funds		26,687		40,900		40,900
Net (decrease)/increase in cash and cash equivalents		(71)		8,317		2,787
Decrease in short-term investments		(8,000)		(15,000)		(17,000)
Closing net funds (note 6)		18,616		34,217		26,687

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

Notes to the interim financial statements for the six months ended 31 December 2011

1. Basis of preparation

The financial information has been prepared in accordance with all IFRS and IFRS Interpretations Committee ("IFRIC") interpretations that had been published by 31 December 2011 as endorsed by the European Union (EU). The Standards that will be applicable for the year ending 30 June 2012 are not known with certainty at the time of preparing the interim results. Accordingly, the accounting policies for that accounting period will be determined finally only when the annual financial statements for the year ending 30 June 2012 are prepared.

This interim report, which comprises the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related notes, is unaudited and does not constitute audited accounts within the meaning of the Companies Act 2006. The accounts for the year ended 30 June 2011, on which the auditors gave an unqualified audit opinion, have been filed with the Registrar of Companies.

The accounting policies adopted are consistent with those of the financial statements for the year ended 30 June 2011, as described in those financial statements.  As at the date of signing the interim financial statements, there are no new Standards likely to affect the financial statements for the year ending 30 June 2012. 

The Company is continuing to develop its fuel cell residential Combined Heat and Power product and in common with many technology development companies, the Company raises finance for its activities in discrete tranches. Further funding is raised as and when required.

The directors prepare annual budgets and cash flow projections that extend beyond 12 months from the date of this report. These projections include the proceeds of future fundraising to be secured within the next six months to meet the Company's and Group's planned expenditures and to maintain the Company and Group as a going concern. Although the Company has been successful in raising finance in the past, there is no assurance that it will obtain adequate finance in the future. This represents a material uncertainty related to events or conditions which may cast significant doubt on the entity's ability to continue as a going concern and, therefore, that it may be unable to realize its assets and discharge its liabilities in the normal course of business. However, the directors have a reasonable expectation that they will secure the additional funding when required to continue meeting product development costs for the foreseeable future and therefore believe that the going concern basis is appropriate for the preparation of the financial statements.

2. Operating costs

Operating costs are split as follows:

		Six months ended 31 December 2011 (Unaudited)		Six months ended 31 December 2010 (Unaudited)		Year ended 30 June 2011 (Audited)
		£'000		£'000		£'000
Research and development costs		7,161		5,428		12,869
Administrative expenses		2,491		2,468		4,833
		9,652		7,896		17,702

Notes to the interim financial statements for the six months ended 31 December 2011

3. Loss per share

		Six months ended 31 December 2011 (Unaudited)		Six months ended 31 December 2010 (Unaudited)		Year ended 30 June 2011 (Audited)
		£'000		£'000		£'000
Loss for the financial period / year attributable to shareholders		(8,154)		(5,932)		(13,821)
Weighted average number of shares in issue		86,183,955		86,177,614		86,177,614
Loss per £0.05 ordinary share (basic & diluted)		(9.46)p		(6.88)p		(16.04)p

4. Share capital

Ceres Power Holdings plc had called-up share capital totaling 86,177,614 ordinary shares of £0.05 each at 30 June 2011 as disclosed in the statutory financial statements of Ceres Power Holdings plc for the year ended 30 June 2011.

During the  period 38,048 ordinary shares of £0.05 each were issued on the exercise of employee share options for cash consideration of £1,902.

5. Cash used in operations

		Six months ended 31 December 2011 (Unaudited)		Six months ended 31 December 2010 (Unaudited)		Year ended 30 June 2011 (Audited)
		£'000		£'000		£'000
Loss before income tax		(9,261)		(7,106)		(16,155)
Adjustments for:
Other finance income		(121)		(297)		(503)
Depreciation of property, plant and equipment		790		620		1,296
Share-based payments charge		251		313		612
Operating cash flows before movements in working capital		(8,341)		(6,470)		(14,750)
Decrease/(increase) in trade and other receivables		111		(45)		(23)
Decrease in trade and other payables		(1,237)		(1,072)		(172)
Increase in provisions		62		58		21
Increase  in working capital		(1,064)		(1,059)		(74)
Cash used in operations		(9,405)		(7,529)		(14,824)

Notes to the interim financial statements for the six months ended 31 December 2011

6. Net cash, short-term investments and financial assets

		31 December 2011 (Unaudited)		31 December 2010 (Unaudited)		30 June 2011 (Audited)
		£'000		£'000		£'000
Cash at bank and in hand		653		578		1,265
Short-term bank deposits < 3 months		2		17,816		12,885
Money market funds		17,961		5,823		4,537
Cash and cash equivalents		18,616		24,217		18,687
Short-term investments (bank deposits > 3 months)		-		10,000		8,000
		18,616		34,217		26,687

The Group typically places surplus funds into pooled money market funds and bank deposits with durations of up to twelve months and UK Government gilts with durations of up to twelve 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/MR1+ (Moody's) and AAA V1+ (Fitch) and deposits with banks having a minimum long -term rating of AA-/AA-/Aa3 and short-term rating of F1+/A-1/P-1 for banks which the UK Government holds less than 25% ordinary equity.

Independent review report to Ceres Power Holdings plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2011, which comprise the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the basis of preparation set out in note 1.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2011 is not prepared, in all material respects, in accordance with the basis of preparation set out in note 1 and the AIM Rules for Companies.

Emphasis of matter - Going concern

In forming our conclusion on the condensed set of financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 1 to the condensed set of financial statements concerning the Company's and Group's ability to continue as a going concern. In forming their conclusion the directors currently include in their projections the proceeds of a fundraising to be secured in the next six months to meet the Company's and Group's planned expenditure and to maintain the Company and Group as a going concern. Although the Company has been successful in raising finance in the past, there is no assurance that it will obtain adequate finance in the future. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company's and Group's ability to continue as a going concern. The condensed set of financial statements does not include the adjustments that would result if the Company was unable to continue as a going concern.

PricewaterhouseCoopers LLP

Chartered Accountants

Gatwick

29 March 2011

Notes:

(a)  The maintenance and integrity of the Ceres Power Holdings plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

(b)  Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

END

 

 

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