Results for year ended 30 September 2015

(LSE: IEH; ADR: INGYY)

30 November 2015

INTELLIGENT ENERGY HOLDINGS PLC: RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2015

SUBSTANTIAL INCREASE IN REVENUES AND CONTROLLED CASH-BURN GIVES A STABLE PLATFORM FOR LONG TERM GROWTH

Intelligent Energy Holdings plc, the energy technology group ("Intelligent Energy", "IE", the "Group" or the "Company"), is pleased to announce its annual financial results for the year ended 30 September 2015.

SUMMARY FINANCIAL PERFORMANCE

OPERATIONAL HIGHLIGHTS

DP&G division

· Landmark £1.2bn revenue, 10 year power management contract for c. 27,400 telecom towers signed with GTL

· GTL contract is expected to complete in Q1 2016

· GTL contract was preceded by revenue generating interim agreements

· Good early progress regarding installation and commissioning of fuel cells on GTL sites with scheduled further roll out post contract completion

Motive division

· Continuing to build ever-closer relationships with leading vehicle manufacturers

o In April 2015, a Joint Development Agreement ('JDA') was agreed with a new major Asian vehicle manufacturer

o In September 2015, a £6.5m extension to an existing JDA with an Asian OEM was signed

· Important progress made in the on-going development of our market leading technology

o In May 2015, an IE-led consortium won Government funding to develop a new class of zero-emission, range-extended light commercial vehicles

o New 100kW engine architecture shown to automotive OEMs and other industry partners

· Post year end, in October 2015, announced as lead on a European public-private partnership to develop IE's 90kW engine for mass production, with participation from BMW and Daimler

· Interest in our proprietary technology has continued to expand following the recent diesel and petrol emission standard issues

CE division

· Migrating to proven JDA model

· Industrial partnering discussions progress favourably

· Acquisition and integration of intellectual property assets from BIC

· Launch of Upp 1 across Apple's United Kingdom retail store network in November 2014

o Continue to collect important information on consumer energy consumption

Platform Support

· Strengthened IP portfolio. Currently have over 900 patents (Sept 2014: 400) with 1000 pending (Sept 2014: 600)

· Demonstrated prototype embedded fuel cells in tablets and mobile phones

· Looking to demonstrate embedded fuel cells in drones in the near future

STRATEGIC FOCUS AND OUTLOOK

DP&G division

· The GTL contract is expected to complete in Q1 2016

· Once completed, profit margins are expected to increase to c.15%

· Excellent relationships with the majority of the key telecom operators

· Working to deliver a second GTL sized contract in FY2016

· High degree of confidence in medium term target of 125,000 - 135,000 towers

Motive division

· Recent industry news flow accelerating momentum toward hydrogen fuel cells

· Positive dialogue with a number of car manufacturers - broadening pipeline of potential JDA partners

· Delivering on our commitments to current JDA partners

· Expansion of our current activities into the emerging field of zero-emission range extended vehicles

CE division

· Finalise migration to JDA model, followed by potential license and royalties opportunities

· Complete the integration of BIC and leverage that IP across all divisions

· Continuing positive industrial partner discussions

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

In many ways, it has been a very important year for Intelligent Energy, with key steps forward across each division. We have reported substantial revenue growth underpinned by DP&G's GTL interim contract. In addition, we have a clear path to further revenue and margin expansion with the expected completion of the long term contracts with GTL in Q1 2016. Our Motive division continues to build relationships with leading vehicle manufacturers, while 'Dieselgate' and 'Petrolgate' are fundamental drivers for change in the automotive industry. Within Consumer Electronics, the integration of the BIC IP acquisition is progressing well and we are delighted with the broader applications of the acquired IP across other parts of the business. We continue to collect important customer data through the Upp product, which is a key part of our embedded technology strategy. With regard to our funding requirements, we continue to make progress on our announced two stage funding process.

Presentation and webcasts

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

Link to webcast: http://edge.media-server.com/m/p/k7v5xmjf

Conference call:

A copy of the presentation will be made available from 9.00am today on the Intelligent Energy website at: http://www.intelligent-energy.com/investors/reports-presentations

Enquiries:

About Intelligent Energy

Intelligent Energy Holdings plc is an energy technology group which develops 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 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 co-located at the French Alternative Energies and Atomic Energy Commission in Grenoble and at NASA in Florida, USA. Intelligent Energy Holdings plc is listed on the London Stock Exchange and has an ADR program in the USA (LSE: IEH; ADR: INGYY).

More information on Intelligent Energy is available at WordPress, Twitter, YouTube and LinkedIn. Or visit www.intelligent-energy.com.

OPERATING AND FINANCIAL REVIEW

Market opportunity

IE has built a market leading portfolio of hydrogen fuel cell IP and technology which is focused on addressing some of the major challenges facing global growth.

1. The Distributed Power & Generation ("DP&G") division is addressing the critical demand for efficient, economic and clean distributed power in emerging economies, where current infrastructure cannot meet the growing demand for power

2. The Motive division is capitalising upon the increasing concern and tightening of regulations relating to carbon emissions, offering a solution which is acceptable to consumers and manufacturers

3. Consumer Electronics ("CE") is focused on solving current power limitations as demands increase for consumer electronic devices

DP&G division

IE has identified a major opportunity to provide uninterrupted power to the telecoms industry. India currently has the second largest mobile telecom subscriber base globally, with c. 1 billion subscribers. However, the grid is unable to meet the demand for power providing a substantial opportunity for IE.

India currently has over 400,000 telecom towers in operation. The DP&G division has established itself as a leading provider of efficient, economic and clean power through the GTL transaction. The management have excellent relationships with most of the key operators and there is a high degree of confidence with regard to the medium term target of 125,000 to 135,000 towers.

GTL transaction

DP&G signed a landmark transaction with GTL Limited whereby the company will acquire GTL's energy management business, providing efficient and economic energy to over 27,400 telecom towers in India. The deal is expected to complete in Q1 2016.

The deal, worth £1.2 billion in revenues over ten years, is the world largest fuel cell transaction. As well as being a landmark transaction for IE, it is also a powerful reference point for future transaction of this nature, illustrating the efficiency and effectiveness of IE's fuel cell technology deployed at scale.

The highlights of the transaction are:

· IE expects to earn approximately £120m revenue per annum from providing power and maintaining equipment

· The expected initial EBITDA margin is expected to start at c. 15%, equivalent to an EBITDA margin of c. £17m per annum

· Approximately £85m is payable for the Energy Management Business, of which up to £25m will be financed from IE resources

· The balance will be funded through debt secured against the revenue streams of the Energy Management Business

· Over the life of the agreement, the EBITDA margin is expected to grow to between 30% - 35% which is a cash equivalent EBITDA of c. £40m per annum, conservatively assuming no additional growth in revenue per site

· Approximately 290 existing GTL employees who are responsible for the current operation of the contracts will transfer to IE's Indian operating subsidiary on completion

The agreement with GTL is subject to the following conditions:

· Completion of Indian Competition Commission regulatory clearance

· The GTL group of companies completing their own corporate approvals including concluding any final approvals required from lenders

· IE completing the £60m Indian domestic fund raising. This is expected to be concluded before the end of Q1 calendar year 2016

Should the transaction not complete under certain conditions, IE will pay a break fee of 1% of IE's market capitalisation to GTL.

In expectation of completion of the GTL contract, IE continues to progress discussions relating to know-how and intangible assets that would increase IE's ability to expand margins, increase the attractiveness of IE's energy management model to partners and help to enable replication of the model elsewhere in South East Asia. This transaction would require funding of £30m to £45m by non-recourse debt, with no related IE equity injection or cash outflow.

In addition, 4 Clean Water Systems were installed in conjunction with our Joint Venture partner Hydro Industries confirming that second customer use of Energy at telecom tower sites is viable.

Financials

DP&G recorded revenue of £72.2m (2013/14: £5.0m) and EBITDA of -£2.5m (2013/14: -£4.4m). The interim contract with GTL delivered low EBITDA margins, due to the nature of the services delivered which also required no capital expenditure.

Motive division

It has been a major year for the automotive industry and fuel cell technology. 2015 saw the start of the commercial roll-out of fuel cell electric vehicles. More recently, there has been a great deal of news regarding the difficulties in keeping diesel and petrol engines within emissions limits. Both are key drivers for the introduction of fuel cell technology, where IE is the market leader. IE now works with 25% of the global OEM market.

Joint Development Agreements ("JDAs")

During the period, the Motive division was pleased to make two important announcements with major vehicle manufacturers. The first announcement was that IE had added another major Asian vehicle manufacturer as a customer. The second announcement regarded an extension of a JDA with an existing partner worth £6.5m over two years. These two announcements reflect the pace at which fuel cell propulsion is becoming a prominent part of the automotive industry, and is further evidence of IE's technological leadership in this market.

Technological developments

During the period IE announced it will lead a three year, £12.7m consortium partly funded by a £6.3m grant from the Advanced Propulsion Centre to work alongside partners including British Gas, DHL, Frost EV, Millbrook and CENEX. This project is a continuation of the Motive Division's development of low carbon Light Commercial Vehicles following the launch of zero emission London taxis in 2012.

Post year end, in October 2015, we were announced as lead on a €5m grant funded European public-private partnership to develop IE's 90kW engine for mass production, with participation from BMW and Daimler.

The division continues to deliver to its current automotive customers against their demanding standards, and is engaged in substantive discussions with a number of additional automotive OEMs.

Financials

During the year, Motive recorded revenue of £5.9m (2013/14: £8.6m) and EBITDA of -£0.3m (2013/14: £0.5m). The revenue pattern reflects the phasing of JDA agreements in the year.

CE division

Working with its global commercial partners, CE's focus is leveraging IE's market leading technology to develop and commercialise embedded fuel cell technology for the mass market of portable consumer electronic products. Some important steps toward achieving that goal have been taken in this financial period.

Acquisition of BIC Intellectual Property Assets

A strategically important acquisition was made in April 2015, with the purchase of the portable fuel cell and disposable fuel cartridge assets of Société Bic (S.A.) ('BIC'). The acquisition materially enhanced IE's extensive portfolio of IP including valuable, high volume, low cost manufacturing and production IP of disposable cartridges. The financial consideration was $15m in cash and up to $7m under an earn-out arrangement. The integration of the acquisition is progressing in line with expectations, and is expected to complete in the second half of the calendar year 2016. 

Developments with Upp

IE launched its first hand held fuel cell portable power solution, Upp (Upp1), in UK Apple stores on 19th November 2014. It has since won a number of important industry awards. These include being named a 2015 CES Innovation Awards Honoree which recognised Upp1 as a cutting edge technology product in portable power, and being named a 2015 Gold Edison Award Winner for its next generation solution that allows users to "Live Life Unplugged".

Sales volumes were, however, disappointing, reflecting manufacturing issues with the metal hydride fuel cartridges and limited market traction. Upp1 delivered its key objectives with regard to technology validation and the collection of important data regarding consumer fuel consumption behaviour.

 IE has plans to launch with an industrial partner under a JDA model, a smaller and lighter next generation Upp. This version will use disposable fuel cell cartridge technology from the BIC acquisition.

Alongside the development of a next generation Upp, there is also a continued focus on increasing our understanding of consumer energy usage using IE's proprietary remote engine monitoring technology (AMBIS). This information is invaluable as we work toward the commercialisation of embedded technology in mass market consumer products.

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 (2013/14: £0.0m) and EBITDA of -£8.6m (2013/14: -£10.1m).

Platform Support

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. This range of power outputs spans a number of important mass markets utilising only two underlying technology architectures: air-cooled ("AC") and evaporatively-cooled ("EC") in off-grid and distributed power markets where the cost of power is significantly higher and the 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 prototype embedded fuel cells in tablets and mobile phones.

The Group has made progress investigating broader commercial applications its embedded technology for consumer electronics applications. An example is provided by the use of fuel cells in drones as a result of integrating expertise from the BIC IP. IE is developing zero emission range extenders (ZERE) to extend the range of battery electric vehicles which can be integrated in to both new and existing configurations. These developments are necessary steps towards embedding IE technology and moving towards the ultimate goal of a royalty and licensing business model by providing a range of products and demonstrating various applications of the technology.

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.

People

We were pleased to make a number of important appointments through the year. We appointed Garrett Forde as Chief Operating Officer and a member of the Group Executive. Garrett is responsible for managing the Group's three divisions, the engineering and technology development activities, and the streamlining of its end to end business operations. We have also strengthened our investor relations function with the appointment of Sarah Wojcik as Head of Investor Relations.

Following the completion of the BIC acquisition, we also appointed an acting Managing Director of the CE division, Julian Hughes. In addition the Group is currently recruiting a new Managing Director of the Motive division.

Funding Guidance

As previously announced, lE intends to raise additional funds through a two tier process. Both transactions are consistent with lE's objective of protecting existing shareholders. Firstly, this involves a proposed issue of a convertible instrument to industrial partners; the terms of the convertible instrument include a strike price that is at a premium to the current share price. Secondly, IE realises there is significant value in aspects of its DP&G Indian operations and has therefore appointed Jefferies, the investment bank, to assist IE in realising some of this value to finance its current and future growth plans and notes that it has been in discussions with potential investors since the early summer.

With respect to the convertible loan note, IE is currently in advanced discussions with two blue chip industrial parties. With their proposed participation in IE's convertible loan note the two blue chip industrial parties look forward to supporting the deployment of lE's world class fuel cells and hydrogen energy in general.

Air Liquide (one of the two parties referred to above) noted:

''Air Liquide already tested Intelligent Energy technologies in several occasions and values the company for its broad technology platform potential. lE's recent acquisition of intellectual property relating to hydrogen fuel solutions and high volume manufacturing techniques from Société Bic is a good example of innovative hydrogen fuel technology. We are looking forward to further collaboration with lE to contribute to Air Liquide efforts in addressing new hydrogen energy markets" said Pierre Etienne Franc, VP advanced Business & Technologies of Air Liquide and the CEO of ALIAD.

Group Financial Summary

At a consolidated financial level 2014/15 saw significant revenue growth and a reduction in losses attributable to shareholders.

Within these headline numbers, the Group saw a number of contrasting financial trends by division.

The DP&G business in India, though the interim contract arrangements with GTL, saw significant revenue expansion year on year. This was delivered, as expected under the interim arrangements, at low margins, resulting in negative divisional EBITDA for the year, once central divisional costs were accounted for. The signing of higher margin long term contracts with GTL provides confidence that the DP&G division will move into positive EBITDA in the year ahead, once the conditions precedent related to the contract are cleared.

In Motive, the phasing of new JDA arrangements saw a decline in revenue year on year and a small negative EBITDA contribution for the year as a whole. Customer traction since the end of the year and the broader positive sentiment and deployment of industrial capital in a number of key markets underpin confidence that the current year will strengthen the financial performance of the Motive division.

The CE division, from a trading perspective, saw a disappointing year in 2014/15, with limited sales of UPP, launched in UK Apple stores in November 2014. This was counterbalanced by the successful acquisition of fuel cell IP and assets from BIC, for £10m, which are expected to play a key role in delivering embedded IE fuel cell designs in a variety of consumer and portable products. The investment thesis for the acquisition reflected the cost of developing equivalent capability in house, and the time it would take to do so, against the prospect of pulling forward the mass deployment of embedded fuel cells where the Group believes that significant value should accrue to the shareholders of IE.

Underpinning the three customer facing divisions is a fourth area of the business, Platform Support, which combines activities relating to research and development, product development, operations and business services. These costs fell slightly year on year, as costs relating to the IPO of the Group in the prior year were not repeated, and a series of efficiency activities mitigated the rise in costs elsewhere in the division to underpin the expected trading performance in the core of the business.

With respect to the balance sheet, the Platform Support costs and negative EBITDA and investment activities in the three trading divisions represent a planned consumption of cash in the business, with cash balances declining over the course of the year, to £24.2m at 30 September 2015.

The successful signing of long term contracts for £1.2bn of revenue over the next decade in DP&G requires short term acquisition funding of approximately £85m, £60m from senior bank debt and £25m from Group. Additional funds will also be required to continue activities relating to Platform Support and CE. Work is well underway at the time of writing to support the additional funding required relating to these needs.

Consolidated income statement

Revenue and gross margin

Revenue for the year was £78.2m (2013/14: £13.6m). This reflect strong progression within the year, and year on year, with second half 2014/15 revenue of £50.8m (2013/14 H2: £10.1m), compared to H1 2014/15 revenue of £27.4m (2013/14 H1:£3.5m). In addition, the mix of revenue by division year on year changed materially, with Motive representing 63% of revenue in 2013/14, and DP&G 92% of revenue in 2014/15.

£72.2m of revenue was recorded in DP&G (2013/14 £5.0m) representing in particular strong growth in H2 from this new line of business. DP&G commenced trading in March 2014, and saw a material step change in its activities with the signing of an interim energy supply agreement with GTL in India in August 2014, covering approximately 10,000 telecoms tower sites. This expanded to approximately 27,400 sites from April 2015.

£5.9m of revenue was derived from the Motive division (2013/14: £8.6m), balanced towards the first half of the year due to the pattern of joint development activities entered into. Revenue was derived from joint development and public body funded project related activity only, with the expectation that this will develop in future periods into further licencing and royalty opportunities, some of which are already contracted as options or agreed royalties based on the volume of production at the time. This aspect of Motive's revenue stream is expected to be variable and difficult to predict in terms of when such opportunities, which are expected to be material in revenue and margin terms, might occur.

For the year, CE generated less than £0.1m of revenue (2013/14: £nil). This was very disappointing and not in line with the original internal expectations for this business. A number of issues, including manufacturing concerns relating to fuel cartridge production meant that commercial take up in the period was limited, although the presence of UPP in UK Apple retails stores represented a significant technology validation point for IE. Action was taken during the year to reset the cost base of the CE business and accelerate the journey to embedded fuel cell technology where material value is considered to be concentrated.

Over 99% of revenue in the year related to activity for customers based outside of the UK.

Gross margin represents revenue less cost of sales. Cost of sales in the period reflects fuel costs in the DP&G division, labour costs, materials and direct facilities costs used in delivering contracted revenue-earning projects in Motive and the cost of production of orders for UPP. Gross margin for the year was £2.3m (2013/14: £3.7m) and in percentage terms, 3% of revenue (2013/14: 27%). The reduction in the percentage gross margin year on year reflected additional revenue in DP&G being incurred under a low margin interim agreement basis with GTL, and the lower absolute gross margin reflected lower revenue from higher margin Motive activity.

Research and development

In the year, R&D expenditure in the year amounted to £19.1m (2013/14: £21.3m). R&D costs mainly comprise staff costs, outsourced services and material costs related to fuel cell research and development, covering both air cooled and evaporatively cooled technology. The overall decrease year on year of £2.2m reflected the capitalisation of £2m of development costs for the 305 modular fuel cell systems deployed on telecom tower sites in India, a lower level of material usage and outsourced services supporting the R&D programs during the year. An average of 105 (2013/14: 104) directly employed staff have been engaged in R&D over the course of the year.

Operations and application engineering

Operations and Application Engineering expenditure in the year amounted to £24.9m (2013/14: £21.1m). The increase in costs year on year reflects higher headcount, with an average of 215 directly employed staff in the year (2013/14: 175). Activities covered include application engineering, solutions development, supplier management, logistics, facilities and IT.

Administration costs

Administration costs in the year amounted to £12.1m, (2013/14: £16.9m), the reduction year on year mainly reflecting the absence of IPO and equity raising related costs in 2014/15. Administration costs comprise commercial and corporate activities, including sales, marketing, HR, finance, legal and procurement. An average of 116 (2013/14: 75) directly employed staff have been engaged in this area over the course of the year.

Adjusted EBITDA

EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) is a non-statutory measure that is widely used as an indicator of trading profitability and a proxy for a company's 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, EBITDA is measured as revenue less cost of sales less R&D and Operations and Application Engineering costs and administration costs, adjusted for depreciation, one off fund raising costs and the IFRS 2 share based payments charge, which is predominantly non cash based. On this measure, adjusted EBITDA for the year was a loss of £46.2m (2013/14: loss £39.4m). The movement in EBITDA reflected the impact of £1.4m of lower gross margin, and planned higher operating costs of £5.4m to support increased activity across the three divisions.

(Loss)/profit for the year

The loss for the year was £42.8m (2013/14 loss: £48.2m), being a reflection of the adjusted EBITDA reported above, and the following items:

The Group's share of the loss on joint ventures accounted for under the equity method of £0.8m (2013/14: £1.0m). This was offset by the receipt of an earn out of £1.5m in the year of from the sale of the Company's 50% share in Emerald Automotive in 2013/14, for which the Group recorded an initial profit on disposal of £1.0m.

Net interest charges of £1.3m (2013/14: £4.0m), with no interest accruing in 2014/15 for the convertible loan notes issued in H2 2012/13. These notes were converted to equity in July 2014 and no further interest charges are recorded post conversion.

An income tax credit of £11.6m (2013/14: £11.4m) reflects the net impact of R&D tax credits and deferred tax credits relating to the trading losses in the UK.

Equity issue costs of £0.3m (2013/14: £7.0m) and an IFRS 2 share based payments charge of £2.3m (2013/14: £6.0m).

Consolidated statement of financial position

Non-current assets

Property, plant and equipment at £8.5m (2014: £6.9m) represented additions of £4.8m in the year, offset by

depreciation of £3.2m. Additions included test rigs and chambers and other equipment for the commercialisation programmes. Intangible assets at £27.0m (2014: £11.5m) reflected additions of £17.3m and amortisation of £1.8m. Intangible assets primarily represent the Group's intellectual property patent portfolio of over 1,000 patent, including patents pending. The BIC acquisitions in the year contributed materially to additions in the year.

Investments using the equity method

The Group accounts for joint ventures using the equity method, and include the carrying value of its share of positive net assets in the statement of financial position. Joint ventures comprise IE CHP, Aquapurum Water in India and SMILE FC System Corporation. In the year, the carrying value of the joint ventures moved from £1.4m to £1.1m, mainly reflecting Intelligent Energy's share of net costs and the retranslation of the net assets of SMILE FC System Corporation.

Current assets

Inventory at £5.3m (2014: £4.1m) was higher year on year due to the production of Upp fuel cell chargers with the initial year end stocks of Upp planned to be deployed in India. Inventory includes material used for DP&G fuel cell units and Motive activities.

Trade and other receivables at £11.9m (2014: £12.9m) were slightly down year on year. The cash and short term deposits balance at £24.2m (2014: £88.9m) represents the funding of EBITDA losses in the year, adjusted for movements in working capital, together with capital and other investments and interest movements.

Current liabilities

Trade and other payables at 30 September 2015 were £14.2m (2014: £17.6m).

Convertible loan notes

Intelligent Energy Holdings plc issued unsecured convertible loan notes in August 2013 for £32.5m with a coupon rate of 5 per cent, compounding annually, which was due to mature in 2017. The loan note was a compound financial instrument and for accounting purposes was split into a debt component (£18.5m at 30 September 2013) and an equity component of £12.3m.

The loan note converted into shares at IPO in July 2014 and the debt component was retired, including accrued interest. The equity component remains as a frozen balance.

Commitments

At 30 September 2015, outstanding purchase orders amounted to £6.2m (2014 £16.2m). Intelligent Energy is also contractually committed to a further ¥500m (£2.8m) investment in SMILE FC System Corporation, expected in 2016.

Going concern

The Group 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. As noted above, the business has plans for significant expansion. The cash balance at the year-end of £24.2m is not sufficient to allow the Company to implement its business plan in full without additional funding. As previously announced, IE intends to raise additional funds through a two tier process. Both transactions are consistent with IE's objective of protecting existing shareholders. Firstly, this involves a proposed issue of a convertible instrument to industrial partners. Secondly, the Company realises there is significant value in aspects of its DP&G Indian operations and has therefore appointed Jefferies, the investment bank, to assist the Company in realising some of this value to finance its current and future growth plans and notes that it has been in discussions with potential investors since the early summer. As a result the Board have sufficient reason to believe that additional funding will be forthcoming within the required time frame to support the planned expansion of the business.

The Board have also carefully considered the company's position in the event that the additional financing to fund the planned expansion is not forthcoming. In that scenario, the Board is satisfied that they retain sufficient discretion over costs linked to expansion plans, and the ability to manage the business in a way which allows it to fulfil its appropriate commitments and settle its obligations as they fall due. It is on this basis that the Directors have formed their opinion that the company remains a going concern and the financial statements should, and have been, drawn up on that basis.

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.

Intelligent Energy Holdings plc

Consolidated income statement

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes forming part of the preliminary financial statements

Basis for preparation

The financial information presented within this document does not comprise the statutory accounts of Intelligent Energy Holdings plc for the financial years ended 30 September 2015 and 30 September 2014 but represents extracts from them. These extracts do not provide as full an understanding of the financial performance and position, or financial and investing activities, of the Company as the complete Annual Report.

The statutory accounts for the financial year ended 30 September 2015 have been reported on by the Company's auditor and will be delivered to the registrar of companies in due course. The reports of the auditor were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The Annual Report, including the auditor's report, can be downloaded at www.intelligent-energy.com.

(a) Significant accounting policies

The accounting policies applied in these financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 30 September 2015.

(b) Judgments and estimates

In preparing these financial statements, management necessarily makes judgments and estimates that have a significant effect on the values recognised in the financial statements. Changes in the assumptions underlying these judgments and estimates could result in a significant impact to the financial statements.

The significant judgments made by management in applying the Group's accounting policies and key sources of estimation uncertainty are the same as those applied to the consolidated financial statements as at and for the year ended 30 September 2015.

1 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 and 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 the Group's research and development activities and also provides back office support functions.

2 Adjusted EBITDA

3 Expenses by nature

4 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 shares associated with the convertible loan notes has an antidilutive impact on the earnings per share.

962,500 share options (2014: 3,780,600), 4,298,646 share awards (2014: 5,446,133), nil share warrants (2014: 6,655,460) and nil potential ordinary shares in relation to the convertible debt (2014: 15,689,840) were excluded from the weighted-average number of ordinary shares used in the calculation of the diluted earnings per share because their effect would have been antidilutive.

5 Property, plant and equipment

The cost of plant, machinery and equipment at 30 September 2015 includes £3.8 million (2014: £1.5 million) of assets in the course of construction.

6 Intangible assets

7 Issued share capital

The issue of ordinary shares during the year generated additional gross funds of £0.2 million (2014: £109.9 million) for the business.

Transaction costs in respect of equity issues have been deducted from equity (net of any related income tax benefit) to the extent that they are incremental costs directly attributable to the equity transactions that would otherwise have been avoided. The value of issue costs netted off equity in the year was £nil (2014: £1.6 million).

8 Commitments

Energy Management Business transaction

On 30 September 2015 the Group signed an agreement to acquire GTL Limited's ("GTL") energy management business to provide efficient and economical energy to over 27,400 telecom towers in India ("Energy Management Business").

This pioneering transaction supports the growth strategy of the Group's Distributed Power and Generation division. It immediately provides a managed customer base of significant scale to which the Group can begin to economically deploy its market leading fuel cell technology, optimise the existing operating base which includes the increasing use of the Group's asset management and business intelligence capability ('AMBIS') and develop cost effective hydrogen fuel distribution. The transaction provides a platform for the large scale economic deployment of fuel cells as a distributed power solution.

Consideration of INR850 Crores (approximately £85m) is payable for the Energy Management Business, of which up to £25m will be financed by the Group and a maximum INR 600 Crores (approximately £60m) from debt funding secured against the revenue streams of the Energy Management Business, both due on completion.

The acquired contracts of the Energy Management Business will involve the management of the current power generating assets of the telecom tower companies of the Global Group (of which GTL is part) and their gradual replacement with fuel cells on a site by site basis where economically suitable.

Power generating assets and the funding of replacement like for like capacity remain the responsibility of the telecom tower companies of the Global Group.

The acquisition of the Energy Management Business also includes approximately 290 permanent staff who are currently involved with the delivery of the energy management contracts and of sub-contracted services.

Until completion, the Group will continue to operate under an existing interim sub-contract arrangement for power supply services to the 27,400 sites.

Completion of the acquisition of the Energy Management Business is subject to a number of conditions, including those set out below:

• Completion of Indian competition regulatory clearance;

• The GTL group of companies completing their own corporate approvals including concluding any final approvals required from lenders;

• Completion of £60 million of Indian domestic fund raising.

Should the transaction not complete under certain conditions, the Group will pay a break fee of 1% of the Group's market capitalisation to GTL.

Activities in South East Asia

An opportunity has been identified to acquire certain intangible assets to support the development of its energy management capabilities within DP&G. The Directors of the Group believe that this transaction would align with the acquisition of the energy management business in India by providing the Group with increased operational capabilities with a particular focus on its energy management activities.

Should the transaction conclude, the Group would secure access to valuable know-how, operational processes and services that can be leveraged within the acquired energy management business, together with the Group's existing know how and new technology, to drive increased efficiencies and higher EBITDA margins. The intangible assets proposed to be acquired would be harnessed to benefit the acquired energy management business by improving performance and reducing down time for the network. The transaction would also be expected to (i) enable the Group to replicate the business model elsewhere across the South East Asian market; and (ii) increase the attractiveness of the Group's energy management model to partners. The approach aligns with the Group's medium term targets for the DP&G business and offers the Group increased capabilities and opportunities that will benefit the Group as the Indian power management model is replicated in other developing markets.

The transaction is expected to require funding in the range of £30 million to £45 million and will be funded by non-recourse debt finance (with no related Group equity injection or cash outflow). It is expected that the debt repayments will be self-financed by charges payable by the Group's Indian energy management business for access to and use of the acquired assets and expertise as a result of expanding margins.

The Directors of the Group retain final discretion to decide whether or not to proceed with the transaction which decision shall depend on various factors, including the outcome of the proposed acquisition of the Energy Management Business.

9 Asset acquisition

On 27 February 2015, the Group entered into a contract to acquire portable fuel cell and disposable fuel cartridge assets and IP from Société Bic (S.A.) ('BIC'). The acquisition complements and extends the Group'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 and a further US$2 million paid following completion of transition services. 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$nil and US$7 million.

The fair value of the contingent consideration arrangement at the time of acquisition of £2.7 million 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.