Results for half year ended 31 March 2015

19 May 2015

INTELLIGENT ENERGY HOLDINGS PLC: RESULTS FOR THE HALF-YEAR ENDED 31 MARCH 2015

STRONG YEAR ON YEAR REVENUE GROWTH, SUBSTANTIAL PROGRESS MADE IN EACH DIVISION

PROPOSED LANDMARK £1.2BN REVENUE TRANSACTION IN DP&G

THE COMPANY REMAINS CONFIDENT OF ACHIEVING THE BOARD'S EXPECTATIONS FOR FY 2014/15

OVERALL STRATEGY REMAINS AS OUTLINED AT THE TIME OF IPO

Intelligent Energy Holdings plc, the energy technology group ("Intelligent Energy", "IE", the "Group" or the "Company"), is pleased to announce its half-year unaudited financial results for the six months ended 31 March 2015.

Summary Financial Performance

Operational Highlights

The Company deploys its world class, proprietary fuel cell platform across three external facing divisions. Each division focuses on a distinct and growing global mass market: Distributed Power & Generation ("DP&G"); Motive; and, Consumer Electronics ("CE"). These three divisions are supported by an internal facing division, Platform Support, whose principle objective is R&D and technology development.

Dr. Henri Winand, Chief Executive Officer of Intelligent Energy Holdings plc, commented:

"As a business, we have taken very important operational steps forward as we continue to focus on delivering our growth strategy.

The envisaged Distributed Power & Generation agreement would be a transformative c.£1.2bn revenue transaction over ten years which would deliver substantial, long term recurring revenues and free cashflow from completion. We expect to drive EBITDA margin growth through the life of the contracts using our successfully field tested technology infusion approach. This is a landmark transaction not just for Intelligent Energy, but for the telecoms industry more broadly. It is a very exciting market for Intelligent Energy, with tremendous opportunities for substantial further growth beyond this transaction.

We also signed our fourth joint development agreement with another Asian major car manufacturer, while we have continued to successfully deliver on our contractual commitments to some of the most demanding automotive companies in the world.

There is no doubt that the rate at which fuel cells are becoming an established part of the automotive landscape is accelerating.

With three Asian car manufacturers as customers in addition to one European Premium Car Manufacturer, Intelligent Energy is well positioned as a leading independent supplier of fuel cell technologies in this important segment where volume Asian car OEMs lead the field in terms of fuel cell electric vehicles and refuelling infrastructure deployment. 

The acquisition of certain intellectual property assets from BIC was very important strategically for our Consumer Electronics division. The central objective for this division has always been to assist with the transformation of how consumers use their portable electronic devices by bringing embedded fuel cell technology to the mass market at scale for our industrial partners. This transaction is a big step forward in our ability to do so on a mass market scale sooner than expected.

We posted exceptionally strong revenue growth over the period. As anticipated, losses increased slightly year on year due to the important investments we have made in Distributed Power & Generation and Consumer Electronics to accelerate Intelligent Energy's future growth.

The Board remains confident in the outlook for Intelligent Energy."

Outlook

At the Group level, the Company remains confident of achieving the Board's expectations for the year ending 30 September 2015.

Funding Guidance

As planned, successful delivery of the Company's growth strategy is expected to require the raising of additional funds (in addition to the proposed non-recourse debt funding for the DP&G business). Given the continued successful progress of our strategic initiatives, in particular the transaction with BIC, which enables us to accelerate our consumer electronics product roadmap, as well as the potential of the DP&G division to scale, we continue to keep our funding structure and mix under review such that we can fully capitalise on the substantial opportunities in each of our target markets whilst maintaining a robust capital position.

The IE Board will continue to consider various alternatives to fund the Company through to free cash flow positive from the perspective of protecting existing shareholder value, including extending commercial collaboration opportunities and non-equity financing structures. As an element of this plan, the Company is currently engaged in discussions with strategic industrial partners and other investors.

Presentation and webcasts

Today, there will be a 9.30am presentation and webcast in London for analysts and investors.

Link to webcast: http://edge.media-server.com/m/p/62n9emsh

Webcast access on mobile devices - QR Code 08:30am GMT / 09:30 BST:

For access to the live and on demand webcast from any IOS Apple or Android mobile devices:

Conference call:

A copy of the presentation will be made available from 9.00am today on the Intelligent Energy website under 'Latest

Downloads at http://www.intelligent-energy.com/investors/reports-presentations.

Enquiries:

About Intelligent Energy

Intelligent Energy Holdings plc is a leader in the development of efficient and clean hydrogen fuel cell power systems for the global automotive, consumer electronics, distributed power and generation markets - from powering zero-emission vehicles to compact energy packs for mobile devices and stationary power units for the always-on infrastructure.

Working with international companies, Intelligent Energy aims to embed its technology in mass market applications to solve the challenges of continuous power and productivity, by creating everyday energy solutions to power people's lives. The Group's extensive intellectual property and expertise is based around proprietary fuel cell technologies, which are the product of over 25 years of research and development. Its patent portfolio includes more than 900 patents granted (and over 1000 patents pending) across more than 400 patent families. The Group also maintains a significant body of confidential know-how and trade secrets.

With its principal facility and headquarters in Loughborough, UK, the company also has operations in India, Japan and Singapore, a commercial office in Silicon Valley, USA, and development facilities collocated with NASA operations in Florida, USA. Intelligent Energy Holdings plc is listed on the London Stock Exchange (LSE: IEH).

More information on Intelligent Energy is available at WordPress, Twitter, YouTube and LinkedIn. Or visit the Intelligent Energy website.

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Operational and Financial Review

Market overview

IE has built a market leading portfolio of IP and technology which today comprises over 900 patents with another 1,000 patents pending. Together, this IP and technology means IE can provide efficient and economic solutions to some of the major challenges facing global growth. It is currently being deployed against three major global themes:

DP&G division - our objective is to build a portfolio of customers generating high quality, long-term, recurring revenues and free cashflow, creating substantial demand for Intelligent Energy's proprietary fuel cell technology to address some of the most important challenges facing global growth

IE has identified a significant opportunity to provide comprehensive energy management services to the telecoms industry in India. India currently has the second largest mobile telecom subscriber base globally, with circa 1 billion subscribers, but the current infrastructure means constant power availability is a significant problem. 70% of the towers need at least eight hours of off-grid power on a daily basis.

Background to targeting India

The combination of these dynamics makes India an ideal market for Intelligent Energy to solve the main challenges which can impact the commercial viability of large scale fuel cell deployment.

IE first identified the Indian telecoms market as a major growth opportunity in 2008. We established a local presence, headquartered in Bangalore, and have carefully built long term relationships with a wide number of the major telecoms operators and other potential customers as well as field operational expertise and experience.

As part of this process, IE established a wholly owned Power Management Company (Essential Energy) in India which to date has focused itself on demonstrating to telecom operators how it would deliver cost effective and reliable power to their telecom towers. We started operating fuel cells in 2011 and have built industry support for fuel cell technology as being a desirable solution to industry power needs. This has been achieved through a number of initiatives including:

· Having a number of case studies and reference sites that have been independently audited by our customers and partners

· Carrying out large scale operating site surveys

· Extensive field testing of IE's commercial approach

· Building a number of commercial reference points - we have demonstrated significant power dependability at the same time as reducing fuel consumption by 18% on an existing tower portfolio

Improving margins through management of the contracts

IE have established a stepped approach to increase the margins of the power management contracts it has targeted in the Indian telecoms industry. Initially, the baseline performance of the site is improved through the use of IE's proprietary engine health monitoring software (AMBIS) which provides unique insights into energy management optimisation and preventative maintenance based on IE's long standing engine technology specialism and know-how.

At the appropriate time, the efficiencies of each site are improved further by the deployment of IE's market leading fuel cell technology. This has already begun and is expected to accelerate from the completion of the proposed GTL transaction. Finally, there is further opportunity to drive margins by securing alternate uses of power for the equipment, for example with local water purification. The final EBITDA margins are targeted to reach 50% - 55% once this process has been successfully implemented, where IE is responsible for capital replacement. The asset-light model EBITDA margins are targeted to reach 30%-35% with no on-going capex expenditure.

Each step has already been utilised and proven as independent applications, leading to customer confidence to advance at scale. This model will grow to larger power segments and other geographies over time. With existing auctions for 3/4G spectrum, persistent poor electricity grid quality, increased number of tenants per tower and increased number of towers overall, as well as the need to reduce costs, this segment offers substantial opportunities for IE.

Operations

During the first half of the year, IE operated in India to supply power to telecoms tower sites using existing non fuel cell technology. By better managing the existing portfolio of sites through our remote monitoring system AMBIS, we have already improved the efficiency of a number of diesel generators by c.20%. IE's first next generation fuel cell was deployed in the field in December 2014, a deployment which will gather pace over time as the GTL power optimisation starts post the envisaged completion of this transaction.

We have made excellent progress toward completing the long term power management transaction with GTL, providing economic, efficient and clean power to over 26,000 telecom towers.

This proposed transaction is unique and ground-breaking in the context of the Indian telecoms market. It is a complicated and detailed transaction that involves a wide number of banks and other parties. Many important steps have been taken, reflecting the commitment of GTL and its banks toward completing the transaction and working with Intelligent Energy for the long term.

1) In August 2014, we signed an initial contract with GTL to provide economic, efficient and clean power for 10,000 telecom towers recognising c.£4m revenue per month.

2) In April 2015, this arrangement was extended to increase the size of the telecom estate to over 26,000. Consequently, from the start of April 2015, we are recognising c.£10m revenue a month.

We look forward to updating the market shortly on further progress towards the finalisation of this long term transaction. The anticipated agreement with GTL will be subject to the following conditions:

The Board's medium-term target of 125,000 to 135,000 sites contracted remains on track.

Financials

DP&G recorded revenue of £23.7m in H1 2014/15 (H1 2013/14: £0.0m) and EBITDA of -£1.4m (H1 2013/14: -£1.6m). EBITDA includes DP&G costs in the UK as well as India. The interim contract with GTL was operated at low EBITDA margins, as it did not require any capital injection to purchase assets.

CE division - our objective is to create an ecosystem of technologies and industrial partners to bring embedded fuel cells and disposable fuel cartridges to mass consumer markets

The principle objective of CE is, working in conjunction with its global commercial partners, to leverage IE's market leading technology to develop and commercialise embedded fuel cell technology for the mass market of portable consumer electronic products. In doing so, IE will have the opportunity to deploy its margin rich IP based royalty and licencing model. Some critical steps forward to achieving that goal have been taken in this financial period.

Acquisition of BIC Intellectual Property Assets

We made a strategically important acquisition in February 2015 which completed in April 2015, acquiring the portable fuel cell and disposable fuel cartridge assets of Société Bic (S.A.) ('BIC'). The financial consideration was $15m in cash and up to $7m under an earn-out arrangement.

This acquisition was a significant advancement in the successful execution of our corporate strategy with regard to the embedding of our technology in portable consumer electronic devices. Amongst a number of things, it materially enhanced IE's previous, extensive portfolio of IP and also provides IE with valuable, high volume manufacturing and production IP.

Developments with Upp

IE launched its first hand held fuel cell portable power solution, Upp (Upp1), in UK Apple stores on 19th November 2014. In early November 2014, the product was named a 2015 CES Innovation Awards Honoree which recognises Upp1 as a cutting edge technology product in portable power and, in May 2015, named as 2015 Gold Edison Award Winner for its next generation solution that lets users "Live Life Unplugged".

We believe that the significant value generation opportunity is in embedded consumer devices. Hand held fuel cell products (Upp1 and beyond) are a tactical step to gain credibility, gain invaluable consumer on the move energy consumption data and seed the presence of fuels in the market. Given the low initial Upp1 sales volumes and the prospect of bringing forward the embedded technology enabled by the transaction with BIC, the company will continue to introduce Upp variants to collect data and progress the technology, and it will do so at relatively lower volumes than previously envisaged.

In addition, there is a clear Upp product roadmap in place, which includes a continued focus on increasing our understanding of consumer energy usage using the Company's proprietary remote engine health monitoring technology (AMBIS) while developing smaller and lighter hardware in appropriate volumes. The smaller and lighter Upp2 will be launched in calendar year 2015. This will be followed by Upp3 which will use disposable fuel cell cartridge technology post the integration of the BIC technology. As reported at our AGM, we expect Upp3 to be introduced to the market in the first half of calendar year 2016. This will be followed by the introduction of our revolutionary embedded fuel cell product, and the fuel delivery that goes with its introduction, for use as the power source in mass-market consumer electronics.

Financials

CE has continued to make a number of important operational and technological commercial steps. It is still at an early stage of its development with regard to revenue generation. It recorded revenue of £0.1m in H1 2014/15 (H1 2013/14: £0.0m) and EBITDA of -£5.9m (H1 2013/14: -£3.1m).

Motive division - our objective is to create an ecosystem of motive customers to licence and co-invest in the Company's common fuel cell technologies

As the automotive industry rolls out the market introduction and start of commercial sales of fuel cell electric vehicles in earnest during 2015, the Motive division has a very promising opportunity. This is due to IE's proprietary technology offering best-in-class power densities and being engineered for cost-competitive, high-volume production. The Group is very well-placed to provide a low-risk and accelerated route to market for automotive OEMs.

Fuel cells and the automotive landscape

The acceleration of new customer wins is a good reflection of the pace at which fuel cells enter the motive landscape. It took eight years for the Motive division to win its first two customers, which led to a licence payment of £45m. In just the past ten months, we have added two additional customers.

Subsequent to the period end, we signed our most recent JDA with a new customer, a major Asian car manufacturer. With three Asian car OEMs and one European Premium Car Manufacturer, Intelligent Energy is already very well placed in this important segment where volume Asian car OEMs lead the field in terms of fuel cell electric vehicles and refuelling infrastructure deployment. As the industry gathers pace, with OEMs such as Toyota, Nissan and Honda launching fuel cell electric vehicles and starting to invest into refuelling infrastructure such as Toyota, Nissan and Honda in Japan, Intelligent Energy remains very well positioned in this sector with already signed option licence agreement and other JDAs offering a substantial store of value for the company.

We continue to deliver for our customers and have experienced further interest from, and are engaged in, discussions with a number of additional automotive OEMs who do not have their own fuel cell technology but who are now looking to enter this market.

Financials

During the first half, Motive revenues came from its existing client base. Motive recorded revenue of £3.7m in H1 2014/15 (H1 2013/14: £3.5m) and EBITDA of -£0.3m (H1 2013/14: £0.1m).

As noted, there is increased interest in motive fuel cell technology and one could expect increased probability of existing or new customers exercising licenses for our technology. The timing of these is difficult to predict and therefore guidance continues to remain the same as that offered to date for this division.

Platform Support - technology developments

Intelligent Energy's patented and highly differentiated technology results in class leading power densities.

As a consequence, the Group is able to develop and deploy fuel cell stacks and systems that cover a wide power range (from a few Watts to being scalable well beyond 100kW). This range of power outputs spans a number of important mass markets (including those targeted by the CE, DP&G and Motive divisions) utilising only two underlying technology architectures: air-cooled ("AC") and evaporatively-cooled ("EC"), but always in off-grid and distributed power markets where $/kW and $/kWh are much higher than for grid connected applications as well as where regulations are much lighter than grid connected applications. The Group's 'design once, deploy many times' philosophy leads to a convergence of effort (by the Group and its partners) around common technology platforms, manufacturing methods and supply chains. This differentiated business model allows for operational efficiency and results in significant barriers to entry against current and future competitors in each of the Group's target markets.

We are pleased to have been able to demonstrate in H1 prototype embedded fuel cells in laptops and mobile phones.

The Group has made progress across all its platforms during the half year under review. This includes its embedded technology for consumer electronics applications, which is currently in the process of integrating expertise from the BIC IP signed in February 2015 and completed after the period end.

The Group continues to make focused investments in expanding its broad intellectual property portfolio, creating a significant barrier to entry to competitors. Patents granted stand at over 900 with over 1,000 patents pending, materially above the 400 and 600 respectively at 30 September 2014.

Corporate activities and business services

The Board is focused and dedicated toward delivering the growth strategy outlined at its IPO, working toward the key objective of delivering significant shareholder value by delivering its world class technology portfolio and IP across its target end markets. Some important operational steps have been made through this financial period toward that goal, and a clear plan is in place to continue that progress.

An on-going priority for the Board has been effective engagement with its investors and other stakeholders. A number of important steps have been carried out accordingly. We were pleased to announce the appointment of UBS Investment Bank as joint corporate broker and joint financial advisor and Stifel as joint corporate broker. We have also appointed a full time Head of Investor Relations.

We have also strengthened the operational management team, appointing Garrett Forde as Chief Operating Officer and a member of its Group Executive. Garrett is responsible for managing the Group's three divisions, its engineering and technology development activities as well as streamlining its end to end business operations. Garrett has already made some valuable improvements toward streamlining the operations of the business and improving efficiencies. Following the completion of the BIC acquisition, we also appointed a new, acting, Managing Director of the CE division, Julian Hughes

In order to support the growth objectives of Intelligent Energy's three external facing divisions, additional talent was recruited across all key disciplines within the business during the financial year. The total number of employees within the Group globally as at 31 March 2015 was 459 (31 March 2014: 343).

Funding Guidance

As planned, successful delivery of the Company's growth strategy is expected to require the raising of additional funds (in addition to the proposed non-recourse debt funding for the DP&G business). Given the continued successful progress of our strategic initiatives, in particular the transaction with BIC, which enables us to accelerate our consumer electronics product roadmap, as well as the potential of the DP&G division to scale, we continue to keep our funding structure and mix under review such that we can fully capitalise on the substantial opportunities in each of our target markets whilst maintaining a robust capital position.

The IE Board will continue to consider various alternatives to fund the Company through to free cash flow positive from the perspective of protecting existing shareholder value, including extending commercial collaboration opportunities and non-equity financing structures. As an element of this plan, the Company is currently engaged in discussions with strategic industrial partners and other investors.

Group Financial Summary

Consolidated Income Statement

Revenue and gross margin

Revenue for the half year was £27.4m (H1 2013/14: £3.5m). H1 2013/14 saw revenue being recorded from the Motive division only, the current half year included revenue contributions from DP&G and CE, with modest revenue growth from Motive. Over 99 per cent of revenue in the period related to activity for customers based outside of the UK, and from a base of zero revenue last half year, DP&G represented 87% of revenue.

Gross margin represents revenue less cost of sales. Cost of sales in the period primarily reflects fuel costs in the DP&G division, labour costs, materials and facilities used in delivering contracted revenue-earning joint development projects in Motive and the cost of goods sold for Upp in CE. Gross margin for the half year was £1.6m (H1 2013/14: £0.9m) and, in percentage terms, 6 per cent of revenue (H1 2013/14: 26 per cent). The reduction in the percentage gross margin reflects the low margin nature of the GTL interim agreement in DP&G, pending signing of the higher margin long term agreements.

Research and development

In the period, R&D expenditure for non-revenue generating projects amounted to £10.3m (H1 2013/14: £8.3m). This included a charge of £1.7m for the non-recoverable costs of the development product runs for CE including a provision for the carrying value of selected CE stock items. An average of 110 (H1 2013/14: 102) directly employed staff in this area of the business.

Operation costs

Operation costs in the year amounted to £12.7m (H1 2013/14: £7.7m). This was an increase of £5.0m, primarily related to an increase in employee numbers. There was an additional £0.7m related to the share-based payments charge, arising under IFRS 2, for equity based incentive schemes. An average of 226 (H1 2013/14: 166) directly employed staff have been engaged in this area of the business over the course of the period, covering supplier management, logistics, facilities, IT, aspects of application engineering, customer solutions development, and related commercial activities and procurement.

Administration costs

Administration expenses in the year amounted to £6.1m (H1 2013/14: £4.0m). Of the increase of £2.1m, £0.9m related to the share-based payments charge, arising under IFRS 2 and £0.2m to patent related costs and £1.0m to new public company related costs. An average of 103 (H1 2013/14: 69) directly employed staff have been engaged in this area of the business over the course of the period, covering patents, marketing, HR, finance, legal, corporate business development and other corporate and PLC related costs.

Adjusted EBITDA

EBITDA (Earnings before Interest, Tax, Depreciation, Amortisation and share of joint venture results) is a non-statutory measure that is widely used as an indicator of trading profitability and a proxy for operating cashflow, before any cash movements relating to investment, tax, funding and changes in working capital. It is not an IFRS measure, and not therefore shown in the Group income statement.

For Intelligent Energy, the Directors use adjusted EBITDA which is measured as EBITDA excluding one-off fund raising costs and the IFRS 2 share-based payments charge. On this measure, adjusted EBITDA for the half year was a loss of £23.7m (H1 2013/14: loss of £16.7m). The movement in adjusted EBITDA reflected planned higher operating costs, to support the activities of two recently launched divisions, namely DP&G and CE which recorded their first revenues in 2014.

Profit/(loss) after tax

The loss for the half year was £21.4m (H1 2013/14: loss of £17.2m), being a reflection of the adjusted EBITDA reported above, and the following items:

Consolidated Statement of Financial Position

Comparatives are stated with respect to the opening balance sheet at 30 September 2014.

Non-current assets

Property, plant and equipment at £9.7m (30 September 2014: £6.9m) represented additions of £4.2m in the half year, offset by depreciation of £1.4m. Additions included power generating assets, test rigs and chambers and other equipment for the commercialisation programs. Intangible assets at £12.8m (30 September 2014: £11.5m) reflected additions of £1.8m and amortisation of £0.5m. Intangible assets include the Group's intellectual property patent portfolio of over 400 patent families, including 1000 patents pending.

Investments using the equity method

The Group accounts for joint ventures using the equity method, and includes the carrying value of its share of positive net assets in the statement of financial position. In the period, the carrying value moved from £1.4m to £1.0m, reflecting Intelligent Energy's share of net costs in SMILE FC System Corporation and foreign exchange revaluation of the net assets of SMILE FC System Corporation.

Current assets and current liabilities

Inventory at £6.1m (30 September 2014: £4.1m) an increase of £2.0m reflected Upp related stock that is expected to be deployed in H2 2014/15.

Trade and other receivables at £13.6m (30 September 2014: £11.1m) were up £2.5m. Trade and other payables at 31 March 2015 of £14.9m (30 September 2014: £17.6m) were down £2.7m.

The net movement in inventory and trade and other receivables and payables for the half year was an increase in working capital of £7.2m.

The cash and short term deposits balance at £58.2m represents the opening cash and short term deposit balance of £88.9m at 30 September 2014, offset by EBITDA losses, capital investments, movements in working capital and the receipt of R&D tax credits in cash.

Commitments

At 31 March 2015, outstanding purchase orders amounted to £8.6m (H1 2013/14: £6.7m). IE is also contractually committed to a further ¥500m (£2.8m) investment in SMILE FC System Corporation, now expected in 2016, and £10m ($15m) for the acquisition of BICs fuel cell IP and assets, paid in April 2015, plus an earn out of £4.7m ($7m) based on future sales of relevant CE products.

Forward-looking statements

Certain statements made in this announcement are forward-looking. These represent expectations for the Company's business, and involve risks and uncertainties. The Company has based these forward-looking statements on current expectations and projections about future events. The Company believes that expectations and assumptions with respect to these forward-looking statements are reasonable. However, because they involve known and unknown risks, uncertainties and other factors, which in some cases are beyond the Company's control, actual results or performance may differ materially from those expressed or implied by such forward-looking statements.

Principal risks

Each division considers strategic, operational and financial risks and identifies actions to mitigate those risks. These risk profiles are updated at least annually. The principle risks and uncertainties for the remaining six months of the financial year are consistent with the Group's risks as set out in pages 20-23 of the 2014 Annual Report.

Intelligent Energy Holdings plc

Condensed consolidated interim income statement

All of the loss for the period is attributable to the owners of the Company and all activities relate to continuing operations.

All of the comprehensive expense for the period relates to continuing operations.Condensed consolidated interim statement of financial position

Condensed consolidated interim statement of changes in equity

Condensed consolidated interim statement of cash flows

Notes to the condensed interim financial statements

1. General information

Intelligent Energy Holdings plc ('the company') and its subsidiaries (together, 'the group') are an energy technology business which develops advanced, power-dense hydrogen fuel cell technologies providing highly efficient and clean power generation. The Group works with a range of major international companies towards the aim of embedding its technologies in mass market applications.

The company is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in the UK. The address of its registered office is Charnwood Building, Holywell Park, Ashby Road, Loughborough, England.

These condensed interim financial statements were approved for issue on 18 May 2015.

These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 September 2014 were approved by the board of directors on 28 November 2014 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 489 of the Companies Act 2006.

2. Basis for preparation

These condensed interim financial statements for the six months ended 31 March 2015 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting', as adopted by the European Union. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 30 September 2014, which have been prepared in accordance with IFRSs as adopted by the European Union.

Going concern basis

The company meets its day-to-day working capital requirements through its cash resources. The current position of the Group and its development plans result in cash consumption for the foreseeable future. The business has a number of opportunities, some of which will absorb cash. The group is considering raising additional funding to support these opportunities and in the absence of such additional funding the Directors retain the discretion to defer the investment in these opportunities and other expenditure. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance and the significant period end cash and short term deposit position of £58.2 million, show that the group is expected to be able to operate within the current level of cash resources. After making enquiries, the Directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future, based on the Directors discretion to defer investment and other expenditure. The Group therefore continues to adopt the going concern basis in preparing its condensed interim financial statements.

3. Accounting policies

The accounting policies applied in these condensed interim financial statements are consistent with those in the previous financial year except as described below:

· Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The resulting gain or loss is recognised in the income statement. The full fair value of a derivative is classified as a non-current asset or liability when the remaining maturity of the derivative is more than 12 months and as a current asset or liability when the remaining maturity of the derivative is less than 12 months.

· Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss.

Adoption of new and revised standards

The following standards and changes are applicable to the Group and have been adopted as they are mandatory for the year ended 30 September 2015.

· IFRS 10 Consolidated Financial Statements: This new standard outlines the requirements for the preparation and presentation of consolidated financial statements, requiring entities to consolidate entities it controls. Control requires exposure to rights to variable returns and the ability to affect those returns through power over an investee. The adoption of this standard has had no significant impact.

· IFRS 11 Joint Arrangements: This new standard outlines the accounting by entities that jointly control an arrangement. Joint control involves the contractual agreed sharing of control and arrangements subject to joint control are classified as either a joint venture (representing a share of net assets and equity accounted) or a joint operation (representing rights to assets and obligations for liabilities, accounted for accordingly). The adoption of this standard has had no significant impact. 

· IFRS 12 Disclosure of Interests in Other Entities: This is a consolidated disclosure standard requiring a wide range of disclosures about an entity's interests in subsidiaries, joint arrangements, associates and unconsolidated "structured entities". Disclosures are presented as a series of objectives, with detailed guidance on satisfying those objectives. The adoption of this standard has had no significant impact on these interim condensed financial statements.

· Amendments to IAS 36 Impairment of assets and recoverable amount disclosures for non-financial assets: The amendments reverse the unintended requirement in IFRS 13 Fair Value Measurement to disclose the recoverable amount of every cash-generating unit to which significant goodwill or indefinite-lived intangible assets have been allocated. Under the amendments, recoverable amount is required to be disclosed only when an impairment loss has been recognised or reversed. The adoption of this amendment has had no significant impact.

· Amendment to IAS 32 Financial Instruments: Presentation - Offsetting financial assets and financial liabilities. This amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The adoption of this amendment has had no significant impact.

· Amendments to IAS 28 Investments in Associates and Joint Ventures apply IFRS 5 to an investment or portion of an investment, in an associate or a joint venture that meets the criteria to be classified as held for sale. It also does not require re-measurement of the retained interest in the investment upon cessation of significant influence or joint control. The adoption of this amendment has had no significant impact.

4. Judgments and estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources if estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 30 September 2014, with the exception of changes in estimates that are required in determining the provision for income taxes (see Note 3).

5. Operating segments

The Group complies with IFRS 8 'Operating Segments' which requires operating segments to be identified and reported upon that are consistent with the level at which results are regularly reviewed by the entity's chief operating decision maker. The chief operating decision maker for the Group is the Intelligent Energy Holdings plc Board of Directors. Information on the divisions is the primary basis of information reported to the Intelligent Energy Holdings plc Board of Directors. The performance of the divisions is assessed on a non-IFRS measure being EBITDA (earnings before interest, tax, depreciation, amortisation and share of joint venture results).

The Group is strategically organised as three externally facing business units: Motive which focuses on fuel cell technology application in vehicles, Distributed Power and Generation which focuses on the provision of power management services, and Consumer Electronics which focuses on the mass market application of portable energy and miniaturisation of fuel cell technology. These business units are supported by Platform Support which undertakes research and development activities and back office support functions.

For the six months ended 31 March 2015 there was no inter-segment revenue.

For the six months ended 31 March 2014 there was no inter-segment revenue.

7. Adjusted EBITDA

The Company uses adjusted EBITDA (earnings before interest, tax, depreciation, amortisation, share of joint venture results, equity fundraising costs and IFRS 2 share based payment charges) as an indicator of trading profitability and a proxy for operating cash flow, before any cash movements relating to investment, tax funding and changes in working capital. It is not an IFRS measure, and not therefore shown in the Group income statement.

8. Finance income / (cost)

Other finance costs for the six months ended 31 March 2015 relates to impairment of a financial asset.

9. Gain on disposal of joint venture

The Company disposed of its investment in IE LEV Limited on 28 February 2014, with the recognition of a gain of £983,000 in the period ended 31 March 2014. Deferred contingent consideration of £1,458,000 from the sale of the investment was received during the period which were previously recognised at a fair value of £nil due to the uncertainty associated with this amount. This has been recognised as a gain in the period. In total a gain of £2,441,000 has been realised on the sale of the investment.

10. Taxation

11. Share-based payment plans

A total equity settled share-based payment expense of £1,877,000 has been recognised in the period (six months ended 31 March 2014: £611,000). The charge arises from schemes implemented in prior periods in respect of the 2001 and 2009 Share Option Schemes and the 2013 Management Incentive Plan as detailed in the Annual Report for the year ended 30 September 2014 and in respect of the following schemes implemented in the period.

2014 Share save scheme

The Company implemented a tax qualifying share save plan during the period which encourages share ownership by qualifying employees in the UK and enables them to share in the value created for shareholders. Eligible employees can participate by making monthly saving contributions, up to £250 per month, over a period of three years linked to the grant of an option over the Company's shares. 508,679 options were granted on 31 December 2014 at a price of 145 pence per share option. The fair value of the options at grant date is determined using a Black-Scholes model to be 80.77 pence per share option.

Deferred Bonus Plan

An annual bonus plan is in place for the financial year ending 30 September 2015 for executive directors and senior managers of the company. 50 per cent of any bonus earned will be delivered in the form of a nil-cost award under the Company's 2014 Deferred Bonus Plan which will ordinarily vest, subject to continued employment, after two years.

12. Earnings per share

Earnings per share is based on the Group's profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding during the period.

The impact of share options, share warrants and potential ordinary share awards have an antidilutive impact on the earnings per share for the six month period ended 31 March 2015 and 30 March 2014 and therefore were excluded from the weighted-average number of ordinary shares used in the calculation of diluted earnings per share.

13. Property, plant and equipment

14. Intangible assets

15. Short-term deposits

Short-term bank deposits include restricted bank deposits of £3,500,000 at 31 March 2015 (30 September 2014 £3,500,000), held as security in relation to trading activities in India and are pledged until the maturity of the associated contract in June 2015.

16. Cash and cash equivalents

17. Share Capital

18. Financial risk management and financial instruments

Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk.

The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 30 September 2014. There have been no changes in the risk management processes or in any risk management policies since the year end.

Financial instruments

Fair value estimation

Financial instruments are classified as follows: level 1 instruments are those valued using unadjusted quoted prices in active markets for identical instruments; level 2 instruments are those valued using techniques based significantly on observable market date; level 3 instruments are those valued using information other than observable market data.

Derivative financial assets and liabilities at 31 March 2015 comprise forward foreign exchange contracts. These derivatives have been fair valued using forward exchange rates that are quoted in an active market and falls within level 2 of the fair value hierarchy.

The fair value of the liability element of the convertible loan notes is estimated on inception by discounting future cash flows using rates estimated to be those which were available for debt on similar terms and falls within level 2 of the fair value hierarchy. There have been no transfers between valuation levels and no changes in valuation techniques during the period.

19. Related party transactions

There have been no significant related party transactions during the period requiring disclosure.

20. Events occurring after the reporting period

On 2 April 2015, the group completed the acquisition of the portable fuel cell and disposable fuel cartridge assets and IP from Société Bic (S.A.) ('BIC'). The acquisition complements and extends Intelligent Energy's existing technology and manufacturing capability for embedding the group's technology in portable consumer electronic devices.

The acquisition completed on 2 April 2015 with the payment of US$13 million with a further US$2 million to be paid once transition services are completed. Contingent consideration is payable on a potential earn out up to $7 million. The following table summarises the consideration payable and the assets acquired.

The contingent consideration arrangement requires the group to pay the former owners an amount based on the quantity of future product sales up to a maximum undiscounted amount of US$7 million. The potential undiscounted amount of all future payments that the group could be required to make under this acquisition agreement is between US$2 million and US$9 million. The fair value of the contingent consideration arrangement of £2,662,000 was estimated by discounting the amount potentially payable using a discount rate of 16.3% based on the forecast future revenue from relevant product sales.

Statement of directors' responsibilities

The directors confirm that to the best of their abilities these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

· an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

By order of the Board

Henri Winand

19 May 2015

Chief Executive Officer

John Maguire

19 May 2015

Chief Financial Officer

INDEPENDENT REVIEW REPORT TO INTELLIGENT ENERGY HOLDINGS PLC

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 March 2015 which comprises the Condensed consolidated interim income statement, Condensed consolidated interim statement of comprehensive income, Condensed consolidated interim statement of financial position, Condensed consolidated interim statement of changes in equity, Condensed consolidated interim statement of cash flows and the related explanatory 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.

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 DTR of the UK FCA.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. 

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.

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 UK. 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 March 2015 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

Anthony Hambleton

for and on behalf of KPMG LLP

Chartered Accountants

St Nicholas House

31 Park Row

Nottingham

NG1 6FQ

19 May 2015