Ceres Power Reports Half-yearly results for the six months ended 31 December 2019

By March 16, 2020 15   min read  (2970 words)

March 16, 2020 |

Ceres Financials
  • Strategic partnerships continue to deliver commercial growth  

Ceres Power Holdings plc (“Ceres Power”, “Ceres”, the “Company” or the “Group”) (AIM: CWR.L), a global leader in fuel cell and electrochemical technology, announces its half-yearly results for the six months ended 31 December 2019.

Financial Highlights

  • Revenue and other income up 33.6% to £11.0m (H1 2018: £8.3m), reflecting strong progress on major contracts
  • Strong gross margin of 67% consistent with the asset-light licencing business
  • Continued investment in the business to grow future value, while reducing operating loss to £2.8m (H1 2018: £3.0m)
  • Further equity injection of £49m from Bosch and Weichai post period end adds to strong cash and short-term investments of £64.6m at 31 December 2019

Operating Highlights

  • New system licence and joint development agreement signed with Doosan worth £8.0m over two years
  • Completed joint development with Weichai of first prototype 30kW range extender system for electric buses targeting the Chinese market
  • Bosch commenced initial low-volume pilot production of fuel cell systems in Germany
  • First product launch of the SteelCell® with Japan’s Miura Co. in a combined heat & power (“CHP”) system for commercial use
  • Developed Ceres’ first zero-emission combined heat & power (“CHP”) system designed for exclusive use with hydrogen fuel
  • New UK manufacturing facility built and commissioned which will ramp up to 2MW annual capacity this year with the intent to upscale to 3MW in due course

Current Trading and Outlook

  • Expect similar revenue growth to continue for the full year with strong order book* of £22m and pipeline* of £50m as at 31 December 2019
  • We are exploring partnerships with system engineering companies to access new customers and applications
  • Bosch has increased its stake in Ceres to c.18%, generating gross proceeds of £38m
  • Weichai to invest a further £11m in Ceres to maintain its equity stake at 20%. We still plan to establish a fuel cell system manufacturing joint venture in China later this year
  • Gross equity proceeds of £49m will allow Ceres to extend the application of its technology including developing electrolysis capability
  • Ceres has undertaken a brand refresh to support the broadening of its technology, wider industry and business development and purpose
  • We are monitoring the rapidly-moving developments around COVID-19. Our current guidance for the full year performance remains aligned with market expectations and we will continue to assess potential impacts on future trading

Phil Caldwell, CEO of Ceres Power commented:

“Ceres has a technology that the world urgently needs to tackle climate change. As a management team, we are focused on maintaining our industry-leading position in fuel cells, while also maximising the future value for Ceres presented by the broader addressable market for clean energy technology.

I believe that the quality and success of the partnerships we have built with Bosch, Weichai, Doosan, Miura and others is a huge endorsement of our technology, our team and our approach. We are now in a privileged position, with investor support, committed partners and balance sheet strength, to capitalise on the substantial opportunities that exist to deliver long-term profit and to do so with purpose.”

*Order book refers to confirmed contracted revenue and other income while pipeline is contracted revenue and other income which management estimate is contingent upon options not under the control of Ceres.

About Ceres Power

Ceres is a world-leading developer of fuel cell and electrochemical technology that enables its partners to deliver clean energy at scale and speed. Its asset-light, licensing model has seen it embed its technology in some of the world’s most progressive companies – such as Weichai in China, Bosch in Germany, Miura in Japan, and Doosan in South Korea – to develop systems and products that address climate change and air quality challenges for transportation, industry, data centres and everyday living. Ceres is listed on the AIM market of the London Stock Exchange (“LSE”) (AIM: CWR.L) and was awarded the Green Economy Mark by LSE, which recognises listed companies that derive more than 50% of their revenues from the green economy.

Chief Executive’s statement

We are delighted to report that Ceres has maintained momentum across all areas of the business in the first half of the year. Revenue and other operating income was up 33.6% to £11.0m (H1 2018: £8.3m) and we continue to carefully manage costs, with operating losses slightly reduced at £2.8m (H1 2018: £3.0m).

During the period, we signed a further commercial agreement with Doosan, successfully commissioned our new UK manufacturing plant in Redhill and we also announced the development of Ceres’ first zero-emission CHP system, designed exclusively for use with hydrogen fuel.

Notwithstanding the current COVID-19 situation, for the first time the top five long-term global risks in terms of likelihood, as identified by the World Economic Forum Global Risks Report 2020, are all risks associated with the environment. We are witnessing a singular alignment of government, business and society around the climate emergency, giving further impetus to our ambition to embed our technology in products and systems globally, to support the transition to a clean energy future. Therefore we were delighted to be awarded the Green Economy Mark by LSE, which recognises listed companies that derive more than 50% of their revenues from the green economy.

Our key target markets of China, Japan, South Korea and Europe increasingly have government policies, subsidies and targets in place to encourage, speed and facilitate the path to carbon net zero. Importantly for Ceres, over the past 18 months we have been a beneficiary of the effects of this momentum in the private sector, as corporations have invested around U$1bn in companies with differing fuel cell technologies.


As at 31 December 2019 our order book stood at £22m and we had a further £50m pipeline, being a combination of staged licensing payments and engineering services. As an asset-light, licensing business we anticipate signing around one to two new licensees per year and our mix of revenues with upfront licences should help support healthy gross margins, which in the period were comfortably above our target of 50%.

Ceres has established partnerships with some of the world’s leading engineering and technology companies, and as well as bringing on new partners, we have significant opportunities to expand our relationships and the scope of our existing partnerships. Ultimately, we seek partnerships that will enable the adoption of high volume manufacturing, providing economies of scale for the SteelCell® and bringing it to the mass market, delivering long-term royalty income for our shareholders.


Since entering a strategic collaboration with Bosch in August 2018, our partnership continues to strengthen. Our respective expertise in fuel cells, manufacturing and product development has seen us develop a 10kW system, based on two 5kW SteelCell® stacks, to be used in cities, factories, data centres and as charge points for electric vehicles. Bosch has now commenced low-volume production of the system and fuel cell stacks at its facilities in Germany. This is a significant milestone for Ceres as it’s the first time a third party has manufactured our cell technology under licence following successful technology transfer outside of the UK. The collaboration and licence agreement and joint development agreements will provide significant staged revenues to Ceres through licensing and longer-term royalties on 5kW SteelCell® stacks.

In January 2020, Bosch announced it would increase its stake in Ceres from c.4% to c.18% of the enlarged issued share capital of Ceres with a £77.3m investment in the Company. It acquired £39.3m of shares from existing shareholders and injected £38m of new money into the Company by purchasing new shares. These funds will help Ceres broaden the application of its fuel cell technology.

We view Bosch’s decision to increase its investment in Ceres as extremely positive and a strong signal of its intention to move towards future scale up to high volume manufacture of the SteelCell®.

We are pleased to have Bosch alongside Weichai as strong commercial partners as well as significant strategic investors.


Ceres’ collaboration with Weichai, first announced in May 2018, has grown into a very strong working relationship. Following successful technology transfer and the licensing of system-level technology, we announced in September 2019 that the combined team had produced a first prototype 30kW solid oxide fuel cell (“SOFC”) range extender for electric city buses running on compressed natural gas. The joint development agreement has now started a second iteration of the design that will move on to field trials.

Pending successful field trials which are anticipated towards the end of this year, Weichai and Ceres intend to establish a fuel cell manufacturing company this year in Shandong Province, China, to manufacture SteelCell® SOFC systems. The joint venture (with an initial 51%:49% respective shareholding and minimum initial investment by Ceres expected to be £8m) will provide a staged path to high volume manufacturing of the SteelCell® under license, for use in commercial vehicles, buses and certain stationary power markets in China.

Following the decision in January 2020 by Bosch to increase its stake in Ceres to 18%, Weichai has exercised its own non-dilution rights and has indicated it will invest a further £11m to maintain its equity stake at 20%. Ceres anticipates that its strong cash position will allow it to participate fully in the new JV and maintain access to China, the world’s fastest growing market for fuel cells.


In July 2019, Ceres signed a collaboration and licensing agreement with Doosan, to jointly develop SOFC distributed power systems, initially targeting the South Korean commercial building market. The agreement delivers £8m to Ceres over two years and includes licensing, technology transfer and engineering services. Doosan has taken a system-level licence of Ceres’ proprietary SteelCell® SOFC technology to develop a low carbon 5-20kW power system.

Doosan has established itself as a world leader in the fuel cell industry with order book in excess of 1tn won (c.U$850m). South Korea also benefits from a supportive regulatory regime and ambitious long-term targets to encourage the hydrogen economy and use of fuel cells. It is an important market for Ceres and we are looking to expand our collaboration with Doosan to access broader applications within South Korean and internationally.


In Q4 2019, Ceres marked a significant milestone in its history with the first commercialisation of a product utilising its SteelCell® technology. Japanese boiler-manufacturer Miura has been working with Ceres since 2016 to develop an SOFC CHP unit, which has now been released in a soft market launch for the Japanese commercial market. Operating on the main gas supply and capturing heat as hot water, the overall efficiency of the system reaches 90%, delivering both major energy savings and helping to lower carbon footprint.


We continued to make good progress with Honda and other leading industrial companies in various programmes.


During the period we completed the new manufacturing facility in Redhill in the UK, and in January we began production to get up to 2MW of annual fuel cell capacity. We are now producing stacks and are in the early stages of production ramp up. This involves working through a number of early stage production issues which we are working to resolve in order to achieve full capacity. In parallel, the Ceres team has been working closely with Bosch, both in the UK and in Germany, to establish a parallel pilot manufacturing plant in a Bosch facility in Germany, which has also started production.

We intend to expand the Redhill facility from 2MW to 3MW in due course, to support existing and future partner programmes.


As a clean energy technology licensing company, it is imperative that Ceres remains at the leading-edge, continually maturing existing products and furthering R&D into new applications for customers. We continue to focus R&D spend on improving our competitive advantage in power density, cost and product lifetime. We remain on track to release the next generation (V6) of our core technology in the financial year 2020/21.

In addition to this, our engineering teams are working with partners in China, Japan, South Korea and the US to develop further systems for the SteelCell®, with demand for new and higher power applications (such as the automotive application delivered with Weichai). We will continue to invest to access these opportunities.

In December 2019, Ceres announced the successful development of its first zero-emission combined heat & power (CHP) system, designed exclusively for use with hydrogen fuel. In initial testing, the system has achieved greater than 50% electrical efficiency, with an overall efficiency of 90% achievable in combined heat & power mode. Ceres’ hydrogen CHP is simpler than its existing fuel-flexible system, delivering an equivalent performance with fewer components, a reduced size and up to a 40% unit cost reduction. It has been developed as part of Ceres’ continuing product roadmap for customers seeking greater innovation to tackle climate change and air pollution.

Another promising additional application for Ceres’ SOFC technology is solid oxide electrolysis, essentially the process of reversing fuel cells to produce hydrogen and e-fuels from renewable energy. In January, we announced that early stage testing on the application of Ceres’ technology as a solid oxide electrolyser (SOEC) has delivered encouraging results and we will deploy some of the funds raised from Bosch’s increased investment to further R&D in this area.


The business continues to achieve strong commercial growth and we delivered revenue and other income in the first half of the year of £11.0m, up from £8.3m in the same period last year. A higher proportion of engineering services than last year delivered a gross margin of 67% in the period (H1 2018: 82%), comfortably ahead of our target of maintaining margins above 50%. We continue to anticipate that the mix between licence fees and engineering services will vary going forwards, based on deal flow.

Adjusted EBITDA loss of (£1.4m) improved from the same period last year (£2.0m), reflecting the increased revenue and other income offset by reduced gross margin and continued investment in the business. Operating loss decreased slightly from £3.0m to £2.8m reflecting the movement in adjusted EBITDA loss as well as increased depreciation. During the period we capitalised £0.9m development costs and we began this treatment in January 2019 due to our confidence in the commercialisation potential of the technology. Net cash used in Operating Activities (£3.6m) slightly increased from prior year (£3.2m), affected primarily by movements in working capital.

The tax credit of £1.1m for the period includes a Research and Development tax credit (“R&D tax credit”) of £1.3m net of withholding tax suffered of £0.2m, and £2.5m of R&D tax credit relating to the prior year was received in February 2020.

The Group held £64.6m of cash, cash equivalents and short-term investments at 31 December 2019. After the period end, our strategic partner Bosch agreed to invest £38m of new equity in Ceres, through the issue of 11.9 million new ordinary shares, reinforcing our existing strong financial position. This completed in March 2020. Under its anti-dilution rights Weichai has also agreed to invest a further £11m in the Company, which is expected to be received in April.

Principal risks and uncertainties


The health and safety of our people remains our first priority. We have been monitoring the spread of COVID-19 very closely and liaising with our partners to ensure alignment and to reduce the impact to our business.

We have introduced measures to reduce face to face contact and non-essential business travel has been restricted. We have business continuity measures in place such as working from home where possible and our manufacturing workforce has been segregated between our two sites in Redhill and Horsham. We continue to follow all Government guidelines in relation to COVID-19.

The global impact clearly remains fast moving and uncertain and it is our initial assessment that we could see some short-term impact on the timing of our partner programmes and manufacturing output in the UK. Notwithstanding these risks, our current guidance on performance for the full year remains aligned with market expectations and we will continue to assess potential impacts on future trading.

There are a number of other risks and uncertainties that have the potential to impact the execution of the Group’s strategy, as well as its short-term results. The Executive Directors regularly review the risks facing the Group and these risks are set out in the Annual Report along with mitigations to reduce the likelihood of them occurring and to manage any possible impact. The directors do not consider that these risks have changed materially in the last six months, apart from COVID-19 as mentioned above. The manufacturing facility in Redhill is also working through a number of early stage production issues which we anticipate we will resolve shortly.


We remain fully committed to our core business, our existing programmes and customers and our success depends on our partners’ success. We continue to make good progress with our key partner programmes and have increasing confidence of progressing towards commercialisation, as evidenced by the £49m further investments by Bosch and Weichai.

We will continue to invest in the business to support our growth and our customers. We intend to use these proceeds to fund further product uses for solid oxide fuel cells and diversify research & development activity to potential electrolysis applications for Ceres’ technology, and expand pilot manufacturing at Redhill from 2MW to 3MW, accelerate core power system development for higher power applications and increase investment in test capability, all in support of customer programmes.

We have a unique technology that has been 20 years in the making, and an unprecedented moment in time when it is more beneficial and more sought after than ever before. I firmly believe that we have the team, the partnerships and the financial strength to consolidate Ceres’ position as a global leader in clean technology and to play an important role in addressing the major challenges of climate change and air quality.

I am hugely excited about the opportunities ahead and look forward to updating you on our progress in the coming months.

Philip Caldwell

Chief Executive Officer

Read the most up to date Fuel Cell and Hydrogen Industry news at FuelCellsWorks


Author FuelCellsWorks

More posts by FuelCellsWorks
error: Alert: Content is protected !!