25th Mar 2008 07:01
Ceres Power Holdings plc25 March 2008 Ceres Power Holdings plc ("Ceres", "Ceres Power" or "the Group") Interim results for the six months ended 31 December 2007 Ceres Power Holdings plc announces its interim results for the six months ended31 December 2007. Highlights: During the period: • Successful demonstration of an integrated wall-mountable CHP Unit • CHP Product value engineering programme commenced • Product design concept completed for residential energy security application with EDF Energy Networks • Growth in commercial revenues to £0.3m • Volume cell manufacturing processes established in new Product Facility • Volume component and equipment suppliers selected for CHP Product manufacture • £9.4m in cash and cash equivalents at 31 December 2007 Since the period end: • Centrica plc invests £20m for a 9.999% equity stake at 300 pence per share • Volume forward order from British Gas for minimum 37,500 CHP Products • £5m funded development and trialling programme secured with British Gas with £1m already received for the first phase • Chairmen of Siemens UK and Motorola UK join board as Non-Executive directors Brian Count, Chairman, commented: "I am delighted to assume the Chairmanship of Ceres Power during atransformational period for the Group. Ceres has developed a unique, innovativeand environmentally friendly technology which I am confident will deliversignificant shareholder value. The focus of the Group going forward is todeliver a commercially viable product that can address the mass markets in theUK and overseas. During this financial year we have made significant progress interms of product development, with the demonstration of a CHP Unit, andcommercial traction with a major new agreement with British Gas. We are nowextremely well positioned with leading technology, a clear plan for thecommercial roll out of our CHP Product, and a strong cash position." For further information contact: Brian Count, ChairmanPeter Bance, Chief ExecutiveRex Vevers, Finance Director +44 (0) 1293 400 404Ceres Power Patrick d'Ancona +44 (0) 207 153 1530M: Communications Chairman's Statement Introduction I am pleased to report that Ceres Power has made substantial progress in thehalf year ended 31 December 2007. The successful demonstration in September ofan integrated wall-mountable CHP Unit marked the transition of Ceres into aproduct business with the potential to address global market opportunities.Following this demonstration, the Group announced in January 2008 that it hadsigned a major new agreement with British Gas, including a funded triallingprogramme and a volume forward order for residential CHP products. In addition,Centrica subscribed for new shares representing 9.999% of the Company's enlargedissued share capital at a price of 300 pence per share, providing a cashinjection of around £20 million. Ceres' unique fuel cell technology at the core of the CHP Unit has enabled theGroup to design a compact, wall-mountable Unit capable of generating electricityand all of the hot water and central heating required for a typical UK home,without the need for a separate boiler. This achievement places the Group in anideal position to address developing micro-generation market opportunities. The UK Government has estimated that over time micropower products have thepotential to supply over one-third of Britain's total electricity needs and tohelp the country improve its energy security, meet its environmental obligationsand deliver energy savings to consumers. The Energy Saving Trust in a report onmicro-generation published in December 2007 recognised that a 1kW fuel cell CHPis an important technology in delivering CO2 savings in the home. In the announcement of the commercial agreement with Ceres, British Gasestimated that based on 5.6 million UK homes having a fuel cell CHP unitinstalled by 2020, savings would result equivalent to the CO2 emissions fromeight (750 MW) new Combined Cycle Gas Turbine power stations. Financial Results These interim financial results are the first results following the adoption ofInternational Financial Reporting Standards as adopted by the European Union("IFRS"). I am pleased to report that for the six month period ended 31 December 2007 theGroup delivered growth in commercial revenues to £279,000 (2006: £30,000). Thisgrowth in revenue has been achieved through the continued technical progress andthe successful delivery on the Group's commercial contracts. Other operatingincome remains significant at £431,000 (2006: £469,000) with an increasingproportion of the Group's overall income coming from commercial revenuesreflecting the commercialisation of the Group's technology. Research and development and administration expenses increased 17% to £4,027,000(2006: £3,434,000) reflecting the continued investment in the Group's productdevelopment and commercial capabilities and the increase in headcount in 2007.Interest receivable increased by 5% as the Group benefited from the effect ofrising short term interest rates on short term cash deposits held with financialinstitutions. The loss for the period attributable to shareholders increased by25% to £3,017,000 (2006: £2,406,000) as the Group continues to invest indeveloping its engineering and manufacturing capabilities ahead of mass marketuptake of its fuel cell technology. The net decrease in cash and cash equivalents for the period increased by£879,000 to £1,785,000 (2006: £906,000). This increase is attributable to anincrease in cash used in operations of £225,000, a decrease in income taxreceived of £320,000 and an increase in capital expenditure of £249,000primarily due to the fit out of the Product Facility. The Group continues tomaintain a strong balance sheet with £9.4m in cash and cash equivalents. Inaccordance with the Group's treasury policy, all funds are invested in shortterm low risk cash deposits with financial institutions with the primaryobjective being to preserve the Group's capital. After the period end, the Group has substantially strengthened the balance sheetand liquidity position. In February 2008, the Group received £20,015,514 fromthe issue of 6,671,838 new shares at a price of 300 pence per share to GB GasHoldings Limited (a subsidiary of Centrica plc). In addition, the Group received£1,000,000 from British Gas Services Limited, being the first milestone paymentunder the initial phase of the development, supply and distribution agreementannounced in January 2008. The Group now has a robust financial position tocommercialise its CHP design. Commercial The Group has continued to meet its obligations under commercial contracts withBritish Gas Services Limited and EDF Energy Networks Limited, resulting in thesignificant increase in commercial revenue during the half year. It isanticipated that this progress will continue during the second half resulting infurther growth in commercial revenues. Since the end of the period, the Group has secured a £5 million funded triallingand development programme with British Gas, following on from the existingcontract with British Gas (part funded by the DTI, now BERR) to design, buildand test a CHP Unit. British Gas is committing its operational resources (inaddition to the financial payments) to support the programme including training,installation, servicing and logistics. Ceres has also secured a volume forward order from British Gas to deliver inaggregate a minimum of 37,500 CHP Products on an escalating basis over afour-year period. Both Ceres and British Gas have agreed to promote the CeresCHP Product with the intention of achieving substantially greater levels ofannual sales over the four-year period. Approximately 1.5 million boilers areinstalled each year in the UK and it is forecast by industry bodies thatresidential CHP could take 30% of this market by 2015 (see SBGI 2006). The agreement with British Gas provides Ceres with a volume channel to theresidential market for its integrated CHP Product in Mainland UK. The Groupretains the right to sell and distribute the CHP Product anywhere else in theworld and is developing channels to market internationally as a key priority forthe Group. During the half year, the Group completed the product design concept of aprototype energy security device for use in residential applications in the UK,under the contract for on-site power with EDF Energy Networks. The productembodiment consists of a fuel cell power device hybridised with an electricalstorage unit. This is part of the Group's strategy to develop on-site powergeneration from cylinder gas for applications such as uninterruptible powersupplies, load-shedding support, remote power generation and battery charging. Technology and Product Engineering During the half year, the Group completed the successful demonstration of anindustry-leading integrated wall-mountable CHP Unit, being a key deliverableunder the existing contract with British Gas (part-sponsored by the DTI, nowBERR). With more than 78% of all residential boilers sold in Western Europebeing wall-mounted, the Group's CHP design is a key differentiator, enabling theGroup to address the new build and replacement markets both in UK and overseas. As previously announced at the CHP demonstration in September, the focus ofvalue engineering has been on fuel cell module component development andintegration. Significant part-count and weight reductions have already beenachieved for the fuel cell module to enable delivery of the 20% size and weightreductions for the CHP Product. Value engineering activities have also involved extensive evaluation and testingof balance of plant components. This has resulted in selection of key componentsfrom volume manufacturers that will enable achievement of product performanceand cost targets. Based on the value engineering achievements to date the Group is on track todeliver the first phase of the new development and trialling programme withBritish Gas. The Group will provide further updates on value engineering progress during2008. Manufacturing Operations During the half year, the Group has successfully completed the commissioning ofthe Product Facility. This facility has been fitted-out with key machines usedfor the validation of key volume manufacturing processes for fuel cells andstacks. Progress on manufacturing scale-up in the Product Facility has enableddetailed planning for a new Mother Plant facility to be completed. Manufacturing scale-up has been supported by the South East England DevelopmentAgency ("SEEDA") in the form of grant funding towards manufacturing developmentfor assembly and testing of fuel cell stacks and complete CHP Units. As previously announced it is anticipated that a site will be secured duringcalendar year 2008. Intellectual Property Protection, management and exploitation of the Group's valuable intellectualproperty portfolio remains a major focus. The Group continues to invest heavilyin ensuring that its unique technology is protected through patents, trademarks,know-how and trade secrets. The Group, through its wholly-owned subsidiary CeresIntellectual Property Company Limited (CIPCO), is actively engaged in expandingthe IP portfolio to encompass materials, product designs, key components andmanufacturing processes. To support the commercialisation of its products, the Group's investment in itsIP portfolio will increase with an increasing focus on branding and ensuringclear channels to market. We continue to ensure that our IP is properlyprotected in all our commercial contracts. People The Group has continued to recruit high calibre personnel with experience indeveloping and managing a global supply chain, delivering on commercialcontracts and building a volume production capability. We will continue to buildour capability in all areas and this will be a key focus during 2008/09. I would like to thank Philip Holbeche, who retired as Executive Chairman on 2January 2008, for his contribution to Ceres. Philip formed Ceres in 2001 todevelop and commercialise the unique materials technology transferred fromImperial College. Philip, as executive chairman, oversaw the successfuldevelopment of Ceres from a small private company into a public company quotedon AIM in 2004 and its continued development thereafter. I would also like to thank John Gunn, who stepped down from the Board inFebruary 2008, for his contribution to Ceres. He and his family were foundingshareholders in Ceres in 2001 and his support has been a significant factor inthe successful development of the Group. On behalf of the board, I would like to wish both Philip and John every successin their future endeavours. The board has now been re-shaped to meet the future challenges with theappointments in February 2008 of Sir David Brown (Chairman of Motorola UK) andAlan Wood (Chairman of Siemens UK) as Non-Executive Directors. Their experienceof building and running high growth technology businesses will be invaluable asCeres progresses towards mass market delivery of its products. Outlook Continued technical and commercial progress has provided the basis to deliver onour priorities for calendar year 2008: •Value engineering of the CHP Unit to deliver performance, size and weight improvements under the first phase of the new CHP programme with British Gas •Securing an appropriate site for the Mother Plant facility, based on detailed planning completed during the period. •Demonstration of a prototype energy security device under the contract with EDF Energy Networks •Growing revenues with existing partners and establishing new market channels Dr Brian CountChairman CONSOLIDATED INCOME STATEMENTFor the six months ended 31 December 2007 Six months Six months Year ended 30 ended 31 ended 31 June 2007 December 2007 December 2006 Unaudited Unaudited Unaudited Note £'000 £'000 £'000 -------- -------- -------- Continuing operations Revenue 279 30 98 Research and developmentexpenses (2,606) (2,395) (4,942) Administrative expenses (1,421) (1,039) (2,024) Other operating income 431 469 970 -------- -------- --------Operating loss (3,317) (2,935) (5,898) Interest receivable andsimilar income 300 287 597 -------- -------- --------Loss before income tax (3,017) (2,648) (5,301) Income tax credit - 242 416 -------- -------- --------Loss for the periodattributable toshareholders (3,017) (2,406) (4,885) -------- -------- -------- Losses per share expressed in pence per share: Basic and diluted loss per share 2 (5.05)p (4.10)p (8.27)p -------- -------- -------- CONSOLIDATED BALANCE SHEETAs at 31 December 2007 31 December 31 December 30 June 2007 2006 2007 Unaudited Unaudited Unaudited Note £'000 £'000 £'000 -------- -------- --------Assets Non-current assets Property, plant andequipment 1,836 1,800 1,842 Other receivable 53 53 53 -------- -------- --------Total non-current assets 1,889 1,853 1,895 -------- -------- --------Current assets Trade and other receivables 540 439 628 Cash and cash equivalents 9,357 13,115 11,142 -------- -------- --------Total current assets 9,897 13,554 11,770 -------- -------- -------- Liabilities Current liabilities Trade and other payables (1,351) (802) (855) -------- -------- --------Net current assets 8,546 12,752 10,915 -------- -------- -------- Non-current liabilities Other payables (32) (24) (22) -------- -------- --------Net assets 10,403 14,581 12,788 -------- -------- -------- Equity Share capital 3 3,003 2,968 2,981 Share premium account 15,854 15,470 15,594 Other reserves 7,463 7,463 7,463 Profit and loss account (15,917) (11,320) (13,250) -------- -------- --------Total shareholders' equity 10,403 14,581 12,788 -------- -------- -------- CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the six months ended 31 December 2007 Share premium Other Profit and Share capital account reserves loss account Total (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000 £'000 -------- -------- ------- -------- ------- At 1 July 2006 2,925 15,137 7,463 (9,535) 15,990 Issue ofshares, netof costs 43 333 - - 376 Net lossfor the period - - - (2,406) (2,406) Share-basedpayments charge - - - 621 621 -------- -------- ------- -------- ------- At 31 December 2006 2,968 15,470 7,463 (11,320) 14,581 Issue of shares, net of costs 13 124 - - 137 Net loss for the period - - - (2,479) (2,479) Share-basedpayments charge - - - 549 549 -------- -------- ------- -------- -------At 30 June 2007 2,981 15,594 7,463 (13,250) 12,788 Issue ofshares, netof costs 22 260 - - 282 Net lossfor the period - - - (3,017) (3,017) Share-basedpayments charge - - - 350 350 -------- -------- ------- -------- -------At 31 December 2007 3,003 15,854 7,463 (15,917) 10,403 -------- -------- ------- -------- ------- CONSOLIDATED CASH FLOW STATEMENTFor the six months ended 31 December 2007 Six months Six months Year ended 31 ended 31 ended 30 December 2007 December 2006 June 2007 Unaudited Unaudited Unaudited Note £'000 £'000 £'000 -------- -------- --------Cash flows from operatingactivitiesCash used in operations 4 (1,887) (1,662) (3,894)Income tax received - 320 494 -------- -------- --------Net cash used in operatingactivities (1,887) (1,342) (3,400) -------- -------- -------- Cash flows from investingactivities Interest received 301 285 597 Purchases of property,plant and equipment (474) (225) (577) -------- -------- --------Net cash (used in)/generatedfrom investing activities (173) 60 20 -------- -------- -------- Cash flows from financingactivities Proceeds of issue ofshares (net of expenses) 275 376 501 -------- -------- --------Net cash from financingactivities 275 376 501 -------- -------- -------- Net decrease in cash andcash equivalents (1,785) (906) (2,879) Cash and cash equivalents atbeginning of period 11,142 14,021 14,021 -------- -------- --------Cash and cash equivalents atend of period 9,357 13,115 11,142 -------- -------- -------- Notes to the interim financial statements for the six months ended 31 December 2007 1. Basis of preparation These interim financial statements are the first interim financial statementsfollowing the adoption of International Financial Reporting Standards as adoptedby the European Union ("IFRS"). As the Group has not previously published itsfinancial statements under IFRS, this announcement contains reconciliations frompreviously reported amounts under UK Generally Accepted Accounting Principles("UK GAAP") together with explanations of the changes. The comparative figuresin respect of prior periods have been restated to reflect the adoption of IFRS.Also included in Appendix I are the restated Group accounting policies that theDirectors anticipate will be complied with in the annual financial statementsfor the year ending 30 June 2008. The financial information has been prepared in accordance with all IFRS andInternational Financial Reporting Interpretations Committee ("IFRIC")interpretations that had been published by 31 December 2007 as endorsed by theEuropean Union (EU). The Standards that will be applicable for the year ending30 June 2008 are not known with certainty at the time of preparing the interimresults. Accordingly, the accounting policies for that accounting period will bedetermined finally only when the annual financial statements for the year ending30 June 2008 are prepared. This interim report, which comprises the consolidated income statement, theconsolidated balance sheet, the consolidated statement of changes in equity, theconsolidated cash flow statement and the related notes, is unaudited and doesnot constitute audited accounts within the meaning of the Companies Act 1985.The accounts for the year ended 30 June 2007, on which the auditors gave anunqualified audit opinion, were prepared in accordance with UK GAAP and not inaccordance with IFRS and have been filed with the Registrar of Companies. 2. Loss per share Six months Six months Year ended 30 ended 31 ended 31 June 2007 December 2007 December 2006 Unaudited Unaudited Unaudited £'000 £'000 £'000 -------- -------- -------Loss per £0.05 ordinary shareLoss for the period attributable to shareholders (3,017) (2,406) (4,885) -------- -------- ------- Weighted average numberof shares in issue 59,753,341 58,625,285 59,057,064 Basic and diluted lossper share (5.05)p (4.10)p (8.27)p -------- -------- ------- 3. Called up share capital Ceres Power Holdings plc had called-up share capital totalling 59,618,027ordinary shares of £0.05 each at 30 June 2007 as disclosed in the statutoryfinancial statements of Ceres Power Holdings plc for the year ended 30 June2007. During the six months ended 31 December 2007, the Company issued 52,490 ordinaryshares of £0.05 each on the exercise of warrants for cash consideration of£36,743, 380,062 ordinary shares of £0.05 each on the exercise of employee shareoptions for cash consideration of £238,598, and 2,638 ordinary shares of £0.05each were issued as remuneration for non-executive director services. The valueof the shares on the days of issue totalled £7,276. 4. Cash used in operations Six months Six months Year ended 31 ended 31 ended 30 December 2007 December 2006 June 2007 Unaudited Unaudited Unaudited £'000 £'000 £'000 -------- -------- -------Loss before income tax (3,017) (2,648) (5,301) Adjustments for: Interest receivable (300) (287) (597) Depreciation of property,plant and equipment 371 317 674 Share-based paymentexpense 350 621 1,170 Share-based remunerationfor services 7 - 12 -------- -------- ------- Operating cash flows beforemovements in workingcapital (2,589) (1,997) (4,042) -------- -------- ------- Decrease / (increase) intrade and other receivables 90 40 (129) Increase in trade andother payables 612 295 277 -------- -------- ------- Decrease in workingcapital 702 335 148 -------- -------- ------- Cash used in operations (1,887) (1,662) (3,894) -------- -------- ------- Independent review report to Ceres Power Holdings plc Introduction We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 31December 2007, which comprises the consolidated income statement, theconsolidated balance sheet, the consolidated statement of changes in equity, theconsolidated cash flow statement and the related notes. We have read the otherinformation contained in the half-yearly financial report and considered whetherit contains any apparent misstatements or material inconsistencies with theinformation in the condensed set of financial statements. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the AIM Rules for Companies which requirethat the financial information must be presented and prepared in a formconsistent with that which will be adopted in the company's annual financialstatements. This interim report has been prepared in accordance with the basis set out inNote 1. As disclosed in note 1, the next annual financial statements of thecompany will be prepared in accordance with IFRS's as adopted by the EuropeanUnion. The accounting policies are consistent with those that the directorsintend to use in the next annual financial statements. Our responsibility Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. This report, including the conclusion, has been prepared for and onlyfor the company for the purpose of the AIM Rules for Companies and for no otherpurpose. We do not, in producing this report, accept or assume responsibilityfor any other purpose or to any other person to whom this report is shown orinto whose hands it may come save where expressly agreed by our prior consent inwriting. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 31 December 2007 is not prepared, in allmaterial respects, in accordance with the basis set out in Note 1and the AIMRules for Companies. PricewaterhouseCoopers LLPChartered AccountantsCambridge Notes: (a) The maintenance and integrity of the Ceres Power Holdings plc website is theresponsibility of the directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the website. (b) Legislation in the United Kingdom governing the preparation anddissemination of financial information may differ from legislation in otherjurisdictions. Transition to International Financial Reporting Standards These interim financial statements are the first financial statements followingthe adoption of International Financial Reporting Standards ("IFRS"). As the Group has not previously published a full set of financial statementsunder IFRS, this release contains reconciliations from previously reportedamounts under UK Generally Accepted Accounting Principles ("UK GAAP"). Theserestated financial figures will be the principal comparative figures in the 2008financial statements and have been released to provide a more detailed analysisof the impact of adopting IFRS on the Group. 1. Introduction For all periods up to and including 30 June 2007, the Group has prepared itsfinancial statements in accordance with UK GAAP. However, for accounting periodscommencing after 1 January 2007 AIM quoted Groups are required to prepareconsolidated accounts in accordance with IFRS. Therefore, the Group's firstpublished Interim Financial Statements under IFRS are in respect of the sixmonths ended 31 December 2007 and the first Annual Report and Accounts preparedon this basis will be for the year ending 30 June 2008. This document presents previously published UK GAAP information restated on anIFRS basis. It is important to recognise that the move from UK GAAP to IFRS doesnot change the cash flows of the Group nor does it impact Group strategy orcommercial decisions. 2. Summary of changes The changes required to the financial statements of the Group arising from theadoption of IFRS are: •the recording of a holiday pay accrual; •the restatement of treatment of lease incentives; and •the recording of forward foreign exchange contracts at fair value. The restated accounting policies and reconciliations between financialstatements previously presented under UK GAAP and the IFRS presentation areincluded in the following appendices: Appendix 1: Restatement of Group accounting policies Appendix 2: Restatement of the balance sheet as at 1 July 2006 Appendix 3: Restatement of the income statement for the year ended 30 June 2007 Appendix 4: Restatement of the balance sheet as at 30 June 2007 Appendix 5: Explanation of material adjustments to the cash flow statement 3. Summary of Impacts to Financial Statements 3.1 Summary income statement impact for the six months ended 31 December 2006 The table below shows the impact of IFRS adoption on the Group consolidatedincome statement for the six months ended 31 December 2006: Before Tax After Tax Loss per share Unaudited Unaudited Unaudited £'000 £'000 Pence -------- -------- -------- Reported loss - UK GAAP (2,667) (2,425) (4.14)p IFRS adjustments IAS 19 "Employee Benefits" 23 23 0.04p IAS 17 "Leases" (4) (4) - IAS 39 "Financial Instruments: - - -Recognition and Measurement" -------- -------- --------Sub total of adjustments 19 19 0.04p -------- -------- --------Restated loss - IFRS (2,648) (2,406) (4.10)p -------- -------- -------- 3.2 Summary income statement impact for the year ended 30 June 2007 The table below shows the impact of IFRS adoption on the Group consolidatedincome statement for the year ended 30 June 2007: Before Tax After Tax Loss per share Unaudited Unaudited Unaudited £'000 £'000 Pence -------- -------- -------- Reported loss - UK GAAP (5,282) (4,866) (8.24)p IFRS adjustments IAS 19 "Employee Benefits" (10) (10) (0.02)p IAS 17 "Leases" (8) (8) (0.01)p IAS 39 "Financial Instruments:Recognition and Measurement" (1) (1) - -------- -------- --------Sub total of adjustments (19) (19) (0.03) -------- -------- --------Restated loss - IFRS (5,301) (4,885) (8.27)p -------- -------- -------- 3.3 Net asset adjustments The table below shows the impact of IFRS adoption on the Group consolidated netassets at 1 July 2006, 31 December 2006 and 30 June 2007: As at 1 July As at 31 As at 30 June 2006 December 2006 2007 Unaudited Unaudited Unaudited £'000 £'000 £'000 -------- -------- -------- Total shareholders'equity - UK GAAP 16,060 14,632 12,877 IFRS adjustments IAS 19 "Employee Benefits" (52) (29) (62) IAS 17 "Leases" (18) (22) (26) IAS 39 "Financial Instruments: Recognitionand Measurement" - - (1) -------- -------- --------Sub total of adjustments (70) (51) (89) -------- -------- --------Total shareholders'equity - IFRS 15,990 14,581 12,788 -------- -------- -------- 4. Details of changes 4.1 IAS 19 "Employee Benefits" IAS 19 requires companies to make an accrual for holiday pay. At the date oftransition a £52,000 holiday pay accrual was recognised with a correspondingadjustment being made to retained earnings. 4.2 IAS 17 "Leases" IAS 17 requires that any benefits received and receivable as an incentive tosign an operating lease are spread from the inception to the termination of thelease, whereas under UK GAAP the incentives are spread over the period to thefirst rent review. At the date of transition a £18,000 non current liability wasrecognised with a corresponding adjustment being made to retained earnings. 4.3 IAS 39 "Financial Instruments: Recognition and Measurement" Ceres uses forward foreign exchange contracts to hedge against foreign currencydenominated purchase commitments. Under UK GAAP, these forward foreign exchangecontracts were held off balance sheet at period ends. Under IFRS, the fair valueof all forward foreign exchange contracts is recognised on the balance sheet. Atthe date of transition, no fair value adjustment was required. During the yearended 30 June 2007, a fair value payable of £1,000 was recognised with acorresponding debit to the income statement. Appendix 1: Restatement of Group accounting policies Introduction The following are the restated Group accounting policies that the Directors haveestablished in order to produce the interim financial statements in accordancewith IFRS, as adopted by the EU, and which the Directors anticipate will becomplied with in the annual financial statements for the year ending 30 June2008, the Group's first IFRS financial statements. There is, however, apossibility that the directors may determine that some changes are necessarywhen preparing the full annual financial statements for the first time inaccordance with accounting standards adapted for use in the EU. The IFRSStandards and IFRIC interpretations that will be applicable and adopted for usein the EU at 30 June 2008 are not known with certainty at the time of preparingthis financial information. The consolidated financial statements will be prepared on a historical costbasis except for certain items which will be measured at fair value, asdiscussed in the accounting policies below. Basis of consolidation The consolidated financial statements include the financial statements of CeresPower Holdings plc and all of its subsidiary undertakings. The financial statements of Ceres Power Limited have been consolidated undermerger accounting rules. The financial statements of Ceres Intellectual PropertyCompany Limited have been consolidated under acquisition accounting rules. Intra-group transactions, profits, losses and balances are eliminated in full onconsolidation. The Group has taken the exemption not to apply IFRS 3, "Business Combinations",retrospectively to business combinations that took place before 1 July 2006. Property, plant and equipment Property, plant and equipment is stated at historical cost less depreciation.Historical cost includes expenditure that is directly attributable to theacquisition of the assets. Subsequent costs are included in the asset's carryingamount or recognised as a separate asset, as appropriate, only when it isprobable that future economic benefits associated with the asset will flow tothe Group and the cost of the asset can be measured reliably. All other repairsand maintenance are charged to the income statement during the financial periodin which they are incurred. Depreciation is calculated using the straight-line method to allocate their costover their estimated useful lives, as follows: Leasehold improvements 10% Plant and machinery 33% Computer equipment 33% Fixtures and fittings 33% Depreciation for assets under construction commences when the asset is installedand ready for its intended use. Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call withbanks and other short-term highly liquid investments with original maturities ofthree months or less. Trade and other receivables Trade receivables are recognised and carried at the original invoice amount lessan allowance for any uncollectible amounts that is made when the full amount isno longer considered probable. Actual bad debts are written off when identified. Revenue recognition Revenue comprises the fair value of the consideration received or receivable forthe sale of goods and services in the ordinary course of the Group's activities.Revenue is shown net of value-added tax and after eliminating sales within theGroup. Revenue in respect of the sale of goods is recognised to the extent thatit is probable that the economic benefits will flow to the Group and the revenuecan be measured reliably. Revenue in respect of the sale of services isrecognised over the period that the related work is performed and when thespecific conditions in the agreement have been met. Foreign currencies The consolidated financial statements are presented in pounds sterling, which isthe Company's functional and presentational currency. Transactions denominatedin foreign currencies are translated into sterling at the actual rate ofexchange ruling at the date of the transaction. Monetary assets and liabilitiesdenominated in foreign currencies are translated into sterling at rates rulingat the balance sheet date. Exchange differences are included in the incomestatement. Derivative financial instruments The Group's activities expose it primarily to the financial risks of changes inforeign currency exchange rates. The Group uses forward foreign exchangecontracts to hedge against foreign currency denominated purchase commitments. Changes in the fair value of derivative financial instruments that do notqualify for hedge accounting are recognised in the income statement as theyarise. Government grants Revenue grants are credited to the income statement (as other operating income)on a case-by-case basis. For revenue grants with no technical milestones, andwhere recovery is assured, the revenue is recognised on an accruals basis inorder to match the associated expenditure with the grant income. For revenuegrants with technical milestones, revenue is recognised only when the relevantmilestone has been achieved and the associated cash has been received. Pension scheme arrangements The Group operates a defined contribution pension scheme for employees. Theassets of the scheme are held separately from those of the Group. The pensioncosts charged represent contributions paid by the Group to individual pensionplans and are charged to the income statement as they become payable. In addition, a stakeholder pension scheme is also available to employees. Deferred taxation Deferred tax is provided in full, using the liability method, on temporarydifferences between the tax bases of assets and liabilities and their carryingamounts in the consolidated financial statements. Deferred tax assets arerecognised to the extent that it is probable that future taxable profit will beavailable against which the temporary differences can be utilised. Share-based payments Employees receive remuneration in the form of equity-settled share-basedpayments. The fair value at the date of grant of equity-settled, share-basedpayments is expensed on a straight-line basis over the vesting period, based onthe Group's estimate of shares that will eventually vest. The charge is thencredited back to reserves. Fair value is measured by the use of a Black-Scholes model. The expected lifeused in the model has been adjusted, based on the directors' best estimate, forthe effects of non-transferability, exercise restrictions, and behaviouralconsiderations. Research and development expenditure Research costs are expensed as incurred. Development expenditure is capitalisedwhen it can be separately measured and its future recoverability can bereasonably regarded as assured. Following initial recognition, the related assetis amortised over the period of expected future sales with impairment reviewsbeing carried out at least annually. The asset is carried at cost less anyaccumulated amortisation and impairment losses. The Group has not yetcapitalised any development costs as the criteria set out in IAS 38, "Intangibleassets", have not been met. Operating leases Leases in which a significant portion of the risks and rewards of ownership areretained by the lessor are classified as operating leases. Payments made underoperating leases (net of any incentives received from the lessor) are charged tothe income statement on straight-line basis over the period of the lease.Benefits received and receivable as an incentive to sign an operating lease areamortised over the full lease term. New accounting standards The following new standards, amendments to standards or interpretations aremandatory for the first time for the year ending 30 June 2008: IFRIC 10, 'Interim financial reporting and impairment', is effective for annualperiods beginning on or after 1 November 2006. This interpretation has not hadany impact on the timing or recognition of impairment losses. IFRIC 11, 'IFRS 2 - Group and treasury share transactions', is effective forannual periods beginning on or after 1 March 2007. Management do not expect thisinterpretation to have any effect on the Group as it already accounts for groupshare transactions using principles consistent with IFRIC 11. IFRS 7, 'Financial instruments: Disclosures', is effective for annual periodsbeginning on or after 1 January 2007. As this interim report contains onlycondensed financial statements, the full IFRS 7 disclosures are not required atthis stage. The full IFRS 7 disclosures will be given in the annual financialstatements. Amendment to IAS 1, 'Capital disclosures', is effective for annual periodsbeginning on or after 1 January 2007. As this interim report contains onlycondensed financial statements, the full disclosures relating to the amendmentto IAS 1 are not required at this stage. The full disclosures will be given inthe annual financial statements. Use of assumptions and estimates The preparation of the consolidated financial statements requires management tomake judgements, estimates and assumptions that affect the application ofpolicies and reported amounts of assets and liabilities, income and expenses.The estimates and associated assumptions are based on historical experience andvarious other factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making judgements aboutcarrying values of assets and liabilities that are not readily apparent fromother sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised. Material estimates and assumptions are made in particular with regard toestablishing uniform depreciation and amortisation periods for the Group and inrecognising grant revenue where there are no technical milestones in theagreement. Appendix 2 Restatement of the balance sheet as at 1 July 2006 from UK GAAP to IFRS Reformatted UK Employee Leases As restated in GAAP as Benefits IAS 17 accordance with previously IAS 19 IFRS reported £'000 £'000 £'000 £'000 --------- -------- ------- --------AssetsNon-current assetsProperty, plant andequipment 1,870 - - 1,870 Other receivable 53 - - 53 --------- -------- ------- --------Total non-current assets 1,923 - - 1,923 --------- -------- ------- --------Current assets Trade and other receivables 554 - - 554 Cash and cash equivalents 14,021 - - 14,021 --------- -------- ------- --------Total current assets 14,575 - - 14,575 Liabilities Current liabilities Trade and other payables (438) (52) 7 (483) --------- -------- ------- --------Net current assets 14,137 (52) 7 14,092 --------- -------- ------- --------Non-current liabilitiesOther payables - - (25) (25) --------- -------- ------- --------Net assets 16,060 (52) (18) 15,990 --------- -------- ------- -------- Equity Share capital 2,925 - - 2,925 Share premium account 15,137 - - 15,137 Other reserves 7,463 - - 7,463 Profit and loss account (9,465) (52) (18) (9,535) --------- -------- ------- --------Total shareholders' equity 16,060 (52) (18) 15,990 --------- -------- ------- -------- Appendix 3 Restatement of the income statement for the year ended 30 June 2007 from UK GAAPto IFRS Reformatted UK Employee Leases Financial As restated in GAAP as Benefits IAS IAS 17 instruments accordance with previously 19 IAS 39 IFRS reported £'000 £'000 £'000 £'000 £'000 --------- ------- ------ -------- -------Continuing operations Revenue 98 - - - 98 Research and developmentexpenses (4,922) (12) (8) - (4,942) Administrativeexpenses (2,025) 2 - (1) (2,024) Other operatingincome 970 - - - 970 --------- ------- ------ -------- -------Operating loss (5,879) (10) (8) (1) (5,898) Interestreceivable andsimilar income 597 - - - 597 --------- ------- ------ -------- -------Loss beforeincome tax (5,282) (10) (8) (1) (5,301)Income tax credit 416 - - - 416 --------- ------- ------ -------- -------Loss for the periodattributableto shareholders (4,866) (10) (8) (1) (4,885) --------- ------- ------ -------- ------- Losses per share expressed inpence per share:Basic and diluted loss per share (8.24)p (0.02)p (0.01)p - (8.27)p --------- ------- ------ -------- ------- Appendix 4 Restatement of the balance sheet as at 30 June 2007 from UK GAAP to IFRS Reformatted UK Employee Leases Financial As restated in GAAP as Benefits IAS IAS 17 instruments accordance with previously 19 IAS 39 IFRS reported £'000 £'000 £'000 £'000 £'000 -------- ------- ------ -------- --------AssetsNon-current assetsProperty, plant andequipment 1,842 - - - 1,842 Other receivable 53 - - - 53 -------- ------- ------ -------- --------Total non-currentassets 1,895 - - - 1,895 -------- ------- ------ -------- --------Current assets Trade and otherreceivables 628 - - - 628 Cash and cashequivalents 11,142 - - - 11,142 -------- ------- ------ -------- --------Total currentassets 11,770 - - - 11,770 LiabilitiesCurrent liabilities Trade andother payables (788) (62) (4) (1) (855) -------- ------- ------ -------- --------Net current assets 10,982 (62) (4) (1) 10,915 -------- ------- ------ -------- --------Non-current liabilitiesOther payables - - (22) - (22) -------- ------- ------ -------- --------Net assets 12,877 (62) (26) (1) 12,788 -------- ------- ------ -------- -------- Equity Share capital 2,981 - - - 2,981 Share premium account 15,594 - - - 15,594 Other reserves 7,463 - - - 7,463 Profit andloss account (13,161) (62) (26) (1) (13,250) -------- ------- ------ -------- --------Total shareholder'sequity 12,877 (62) (26) (1) 12,788 -------- ------- ------ -------- -------- Appendix 5 Explanation of material adjustments to the cash flow statement Income taxes received of £320,000 in the six months ended 31 December 2006 and£494,000 in the year ended 30 June 2007 are classified as part of operating cashflows under IFRS's, but were included in a separate category of Taxation underUK GAAP. Cash and cash equivalents includes short-term deposits under IFRS's.Under UK GAAP movements in short-term deposits were included under a separatemanagement of liquid resourses category. There are no other material differencesbetween the cash flow statement presented under IFRS's and the cash flowstatement presented under UK GAAP. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ceres Power