TIDMIEH
RNS Number : 6524P
Intelligent Energy Holdings PLC
21 November 2016
(LSE: IEH; ADR: INGYY)
21 November 2016
INTELLIGENT ENERGY HOLDINGS PLC: RESULTS FOR THE YEARED 30
SEPTEMBER 2016
REFOCUSED BUSINESS PROVIDES A PLATFORM FOR GROWTH IN SALES OF
FUEL CELL PRODUCTS
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 2016.
SUMMARY FINANCIAL PERFORMANCE
12 months to 12 months to
30 September 2016 30 September 2015
GBPm GBPm
---------------------- --------------------------- --------------------------
Revenue 91.8 78.2
---------------------- --------------------------- --------------------------
Adjusted EBITDA
(1) (33.4) (46.2)
---------------------- --------------------------- --------------------------
Exceptional items
and impairments
(3) (51.3) (0.0)
---------------------- --------------------------- --------------------------
Profit/(loss) after
tax (82.7) (42.8)
---------------------- --------------------------- --------------------------
Cash (2) 20.6 24.2
---------------------- --------------------------- --------------------------
(1) EBITDA is a non-statutory measure often used
by investors as a proxy for cash and to calculate
the value of a business. The Company uses adjusted
EBITDA (Earnings before Interest, impairment
charges, Tax, Depreciation, Amortisation, share
of joint venture results, equity fund raising
costs and IFRS2 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. Please see notes
1 and 2 for a reconciliation of adjusted EBITDA
to EBITDA and operating loss
(2) Cash is defined as cash and cash equivalents
and short term deposits
(3) Exceptional items and impairments include GBP48.6m
of non-cash accounting charges and GBP2.7m
of cash restructuring costs
OPERATIONAL HIGHLIGHTS
-- Launched and are implementing a revised corporate strategy,
focused on commercialising IE's proven technology and generating
revenues in the short term
o Operating business refocused on air cooled fuel cell
technology with a power output from 1W to 20kW
o Changing the culture of the business with much greater
commercial and results based focus
o Commercial team strengthened
o Increased emphasis on sales opportunities relating to
manufacture and sale of existing reference designs
o Simplified the structure and internal systems of the company,
including a unified Commercial, Delivery and Design function
o Monthly cash burn reduced by more than 50%
-- Continued and ongoing Joint Development Agreement activity with Suzuki
-- Demonstration of fuel cell applications for drones and hand held devices
-- Continued successful operation of the Interim power
management agreement with GTL for 27,000 Indian telecoms sites
o Seven sites currently being powered by IE's fuel cells
(generating 49.632 MWh of fuel cell powered electricity as at 31
October 2016)
o Site power availability of close to 100%
STRATEGIC FOCUS AND OUTLOOK
As previously announced, IE reviewed its strategy during the
year. This reflected a lack of commercial traction across a variety
of applications and an eventual funding envelope that necessitated
in IE having to focus upon those technologies which were closest to
being ready to be brought to market and deliver revenue growth.
Having secured additional funding, the Company has launched its
revised strategy and believes the most appropriate way to deliver
shareholder value, given current markets, is to continue to
commercialise the business with a focus on driving revenue growth
from a simplified operating base.
The UK business is now focused on Air Cooled (AC) fuel cell
commercial opportunities with a power requirement of sub 1W to
20kW. It is the intention to grow this business in FY16/17 from its
restructured base and to continue to reduce cash burn from the
current run rates over the course of this financial year.
Four important developments have been carried out as part of the
revised strategy to focus IE on commercial outcomes:
1. Instigation of a much more focused approach. The
implementation of a change of culture across the business and the
creation of a more focused executive decision making body will
speed up the process from the laboratory to the market.
2. Creation of a new Product Delivery function. This will
accelerate the market deployment of the Company's technologies and
take those technologies which are closest to market to the point of
manufacture.
3. Simplification of the Company systems. Over the last few
months IE has been reviewing its processes and systems with a view
to streamlining and simplifying the way the newly resized business
operates. Going forward, the Company will adhere to a continuous
improvement programme to ensure it remains operationally aligned to
delivering the revised strategy.
4. Commercial team strengthened. The Company has recruited
additional people with different skill sets and track records to
deliver commercial outcomes and is increasing its resources in the
US, Japan, China and India. These are potentially lucrative markets
for IE where there is already an existing customer base.
Consequently, the Company will move to selling its core fuel
cell stack products and systems to customers, while only
co-developing projects under a JDA model in selective cases where
it makes sense to do so. IE has enough manufacturing capacity for
at least the next year to meet demand and will continue to protect
its intellectual property portfolio. The Company believes there is
demand for its fuel cell stacks and modules and the Company will
target markets where its technology can be incorporated into
commercial products.
Martin Bloom was appointed as Interim Group Chief Executive
Officer on 9 June 2016 when Dr Henri Winand stepped down from the
role. With immediate effect, Mr Bloom has been appointed to this
role on a permanent basis. He was an independent Non-Executive
Director of Intelligent Energy from 2012 and has significant
experience in building high-growth energy technology companies and
has strong international connections in the energy sector.
Martin Bloom, Chief Executive Officer of Intelligent Energy
Holdings plc, commented:
"As I outlined at the Analyst and Investor Day in September, we
know we have the technology, people and know-how to deliver future
growth for the core fuel cell business, so the next steps are all
about commercialisation. My objective is to prioritise delivering
revenues and building the business. The revised strategy is all
about outcomes, especially commercial outcomes."
There will be a conference call for analysts and investors at
09:00 this morning. Please contact Tulchan Communications via
intelligentenergy@tulchangroup.com for details.
A copy of the presentation will be made available from 07:00 on
the Intelligent Energy website at:
http://www.intelligent-energy.com/investors/reports-presentations
Enquiries:
Intelligent Energy Holdings plc +44 (0)1509 271271
Martin Bloom Group Chief Executive Officer
John Maguire Chief Financial Officer
Tulchan Communications intelligentenergy@tulchangroup.com
James Macey White
Matt Low
Group Financial Summary
As a result of lower than originally expected
commercial traction, constrained funding and
a slower than expected evolution of the market,
the Company entered into a restructuring programme
during the year which included a reappraisal
of the carrying values of certain assets and
a revised strategy.
As part of the restructuring process, the divisional
structure of the Company's three customer facing
segments and a platform support segment were
replaced by unified commercial, deployment and
design functions in the core fuel cell business.
In addition, new development activity on the
evaporatively cooled fuel cell platform covering
a 20kW - 200kW power range ceased, while the
current capability has been maintained.
Consequently, while the business was reported
as 4 segments in 2014/15, it is reported in
2015/16 as a unified core fuel cell division
and a separate Essential Energy branded business
in India, which has been providing power management
services for telecoms towers. Consequently,
the results (and the prior year numbers) are
presented on this new reporting basis.
Overall, at a consolidated financial level,
while Revenue grew from GBP78.2m in 2014/15
to GBP91.8m in 2015/16, the impact of the restructuring
was such that losses attributable to shareholders
increased from GBP42.8m to GBP82.7m. This included
the de-recognition of the deferred tax asset,
impairments to other assets and restructuring
costs which in total comprised GBP51.3m (2014/15
GBP0.0m). This represents a one-time, non-cash
accounting charge of GBP48.6m and a cash cost
of GBP2.7m to the income statement. It reflects,
with reference to the deferred tax assets, uncertainty
as to future profits and, in relation to the
impairment of the carrying value of assets and
IP, less certainty of commercial traction for
specified activities in the short term.
Within these headline numbers, the segmental
position was as follows:
The Essential Energy business, though the interim
contract arrangements with GTL, (which are renewed
on a monthly basis), saw revenue expansion year
on year, due to the full year effect of 27,000
sites being serviced and exchange rate movements.
This was delivered, as expected under the interim
arrangements, at low margins, resulting in negative
EBITDA for the year once central EE costs were
accounted for.
The core fuel cell segment recorded revenue
in the year relating to AC fuel cell joint development
agreements. While the JDAs generated incremental
margin in their own right, costs relating to
running the business and further development
of fuel cell technology meant that the fuel
cell segment continued to be EBITDA negative.
With respect to the balance sheet, negative
EBITDA and investment activities represent a
consumption of cash in the business, at an average
of GBP2.4m per month for H1, including R&D tax
credits of GBP5.4m. Restructuring of the business
in H2 reduced the underlying cash burn to an
estimated GBP1.1m by September 2016, incurring
one off cash costs of GBP2.5m in H2. The cash
burn for the year was partly offset by the gross
proceeds of GBP30m from the issue of a convertible
loan note, the full terms of which were approved
by shareholders in general meeting on 09 June
2016. Cash balances at 30 September 2016 were
GBP20.6m, (GBP24.2m 30 September 2015).
Consolidated income statement
Revenue and gross margin
Revenue for the year was GBP91.8m (2014/15:
GBP78.2m). GBP85.1m (2014/15 GBP72.2m) was recorded
in the Essential Energy segment for the provision
of power management related services to GTL
in India for a portfolio of c27,000 telecoms
towers. The year on year growth in revenue of
GBP12.9m reflected the full year effect of the
interim contract, an increase in the number
of customers using the towers and a GBP2.5m
increase resulting from the impact of exchange
rate movements. GBP6.7m (2014/15 GBP6.0m) of
revenue was recorded in the fuel cell technology
segment. This related to Joint Development activity
with automotive customers and an emerging markets
mobile hand set OEM.
Over 99% of revenue in the year related to activity
for customers based outside of the UK.
The Company's gross margin is stated after deducting
cost of sales which includes fuel costs in the
Essential Energy segment, labour costs, materials
and direct facilities costs used in delivering
contracted revenue-earning joint development
projects. Gross margin for the year was GBP1.8m
(2014/15: GBP2.3m) and in percentage terms,
2% of revenue (2014/15: 3%). The low gross margins
reflected the nature of the interim sub-contract
arrangements with GTL within the Essential Energy
segment, which as previously disclosed generates
minimal margins. The Company continues discussions
with GTL in relation to Essential Energy.
Research and development
In the year, R&D expenditure amounted to GBP9.6m
(2014/15: GBP19.1m). GBP1.0m of restructuring
costs were recorded in H2 within this total,
and R&D spend is now focused on AC fuel cells
and their applications. R&D costs mainly comprise
of staff costs, outsourced services and material
costs related to fuel cell research and development.
The overall decrease year on year of GBP9.5m
reflected the impact of the restructuring program
in the second half of 2015/16. An average of
60 (2014/15: 105) directly employed staff have
been engaged in R&D over the course of the year,
and post the restructuring this had reduced
to 31 staff as at 30 September (31 were so engaged
in the fuel cell segment and none in the Essential
Energy segment).
Operations and application engineering
Operating costs in the year amounted to GBP44.5m
(2014/15: GBP24.9m). GBP25.1m of non-cash impairment
charges and GBP0.9m of other restructuring charges
were recorded within this, reflecting the implementation
of the restructuring program and impairment
of those assets which do not directly relate
to the focus on relevant AC fuel cell applications.
Excluding restructuring and impairments the
decrease in costs year on year reflects lower
headcount, with an average of 151 directly employed
staff in the year (2014/15: 215), and post the
restructuring this had reduced to 119 (74 in
the fuel cell segment and 37 in the Essential
Energy segment). Activities covered include
application engineering, solutions development,
supplier management, logistics, facilities and
IT.
Administration costs
Administration costs in the year amounted to
GBP7.6m, (2014/15: GBP12.1m). This included
GBP0.8m of restructuring charges. Administration
costs comprise commercial and corporate activities,
including sales, marketing, HR, finance, legal
and procurement. An average of 116 (2014/15:
116) directly employed staff have been engaged
in this area over the course of the year, and
post the restructuring this had reduced to 52
staff (31 in the fuel cell segment and 21 in
the Essential Energy segment).
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
cash flow, before any cash movements relating
to investment, tax, funding and changes in working
capital. It is not an IFRS measure, and therefore
not shown in the Group income statement.
For IE, adjusted EBITDA is measured as revenue
less cost of sales less R&D and Operations and
Application Engineering costs and Administration
costs, adjusted for depreciation, amortisation,
impairment, 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 GBP33.4m
(2014/15: loss GBP46.2m). The movement in adjusted
EBITDA mainly reflected the net impact of the
restructuring program in the second half of
2015/16.
(Loss)/profit for the year
The loss for the year was GBP82.7m (2014/15
loss: GBP42.8m), being a reflection of the adjusted
EBITDA reported above, and the following items:
The Group's share of the loss on joint ventures
(details of which are set out below) accounted
for under the equity method of GBP0.4m (2014/15:
GBP0.8m), together with an impairment charge
of GBP1.6m (2014/15 GBP0.0m).
Net interest charges of GBP2.7m (2014/15: GBP1.3m).
The higher year on year interest reflects the
issue of a GBP30m convertible loan note in May
2016.
An income tax debit of GBP18.1m (2014/15: credit
GBP11.6m) reflects the net impact of R&D tax
credits less the derecognition of a GBP21.9m
deferred tax asset, due to uncertainty on the
magnitude and timing of future profits.
Equity issue costs of GBP0.2m (2014/15: GBP0.3m)
and an IFRS 2 share based payments charge of
GBP0.2m (2014/15: GBP2.3m).
Consolidated statement of financial position
Non-current assets
Property, plant and equipment at GBP2.8m (2015:
GBP8.5m) represented additions of GBP1.4m in
the year, offset by depreciation of GBP2.4m,
impairments of GBP4.5m and foreign exchange
of GBP0.2m. Impairments reflected assets directly
related to the EC platform and leasehold improvements
for properties that have been exited as part
of the restructuring process. Intangible assets
at GBP7.9m (2015: GBP27.0m) reflected additions
of GBP3.2m, a contingent consideration adjustment
of GBP3.0m, amortisation of GBP2.3m, impairment
of GBP16.9m and foreign exchange of GBP0.1m.
Intangible assets primarily represent the Group's
intellectual property patent portfolio of over
1,000 patents, including patents pending. The
impairments relate primarily to patents that
do not immediately support expected short term
revenue opportunities.
Investments using the equity method
The Group accounts for joint ventures using
the equity method, and includes the carrying
value of its share of the net assets of joint
ventures in the statement of financial position.
Joint ventures at 30 September 2016 comprise
IE CHP and SMILE FC System Corporation. In the
year, the carrying value of the joint ventures
moved from GBP1.1m to GBP0.0m, mainly reflecting
IE's share of net costs. In addition, during
the year, the Company exited its stake in Aquapurum,
and IE CHP joint venture has been wound down
after the balance sheet date.
Current assets
Inventory at GBP1.6m (2015: GBP5.3m) was lower
year on year, due to an impairment provision
of GBP4.1m. This reflected uncertainty on the
conversion of inventory into profitable opportunities.
Trade and other receivables at GBP7.8m (2015:
GBP11.5m) was lower year on year by GBP3.7m.
The cash and short term deposits balance at
GBP20.6m (2015: GBP24.2m) represents the funding
of EBITDA losses in the year, adjusted for movements
in working capital, together with capital investment,
interest movements and the proceeds from the
issue of convertible loan notes.
Current liabilities
Trade and other payables at 30 September 2016
were GBP8.4m (2015: GBP14.2m), a reduction of
GBP5.8m.
Convertible loan notes
Intelligent Energy Holdings plc issued secured
convertible loan notes in May 2016 for GBP30.0m,
with a coupon rate of 13 per cent payable quarterly
in arrears which are due to mature in May 2019.
Issue costs of GBP2.8m, primarily relating to
an arrangement fee, was paid from the gross
proceeds. The loan note is a compound financial
instrument and for accounting purposes was split
into a debt component (GBP20.7m at 30 September
2016) and an equity component of GBP5.4m (net
of deferred tax).
The loan note can convert into shares at the
holder's discretion up to maturity at 8p per
ordinary share. Full conversion would represent
375m new ordinary shares, compared to the current
issued share capital of the Company of 206.2m
ordinary shares.
Commitments
At 30 September 2016, outstanding purchase orders
amounted to GBP3.4m (2015 GBP6.2m).
Going concern
The Directors recognise that the short term
trading and commercialisation of the Group's
fuel cell technology provides some challenges.
The Group meets its day to day working capital
requirements through its cash resources. The
Directors have prepared detailed cash forecasts
for the next 18 months, which indicate that
the Group will be able to operate within these
available resources. However, the current trading
position of the Group and its forecast development
plans result in cash consumption for at least
the next year. While it is expected that the
Group will exit the current financial year with
cash on its balance sheet the cash position
thereafter will depend on future trading and/or
any further action taken with respect to the
company's cost base. The exact nature and evolution
of these are by their nature uncertain.
After careful consideration, and the modelling
of foreseeable sensitivities and remedial actions
available to the Company, the Directors believe
that the Company can manage its position in
a way which allows it to fulfil its appropriate
commitments and settle its obligations as they
fall due without recourse to additional funding.
This position is not impacted materially by
the delivery or non-delivery of the long term
GTL contract in India, the outcome of which
would not negatively materially impact the cashflows
of the Group.
The Directors forecasts assume the business
will secure a significant level of revenues
that are not presently contracted. If these
future revenues are not secured as the Directors
envisage, then the Directors position is subject
to i) the business taking the above mentioned
actions on the Company's cost base and on ii)
the continuation of JDA revenues, for the foreseeable
future. Despite the business having a track
record over many years of securing JDA revenues,
the achievement of forecast levels are uncertain.
Given the above circumstances, it is possible
that the Group could have a shortfall in cash
and require additional funding during the forecast
period.
The above factors result in a material uncertainty
which may cast significant doubt on the Company's
and Group's ability to continue as a going concern
and that it may therefore be unable to realise
its assets and discharge its liabilities in
the normal course of business. The financial
statements do not include the adjustments that
would result if the Company and Group were unable
to continue as a going concern. The unqualified
report of the auditors includes an emphasis
of matter in this respect.
Despite this, the Directors believe that the
track record of the business in securing JDA
activity, the options available to the Group
from trading activities and the ability to realise
value from the IP portfolio mean that the Directors
consider that the Company will have sufficient
funds to pay its debts as they fall due for
the foreseeable future. It is on this basis
that the Directors, in their opinion, consider
that the Company remains a going concern and
the financial statements have been prepared
on that basis.
Outlook
The Group exited 2015/16 with GBP20.6m cash
at bank and an underlying cash burn, defined
as EBITDA less capex (but excluding interest
on the convertible loan note), estimated at
GBP1.3m a month. Including interest on the convertible
loan note averaged on a monthly basis, this
is cGBP1.6m a month. Revenue in the year ahead
is expected to be a mix of JDAs and air cooled
fuel cell related sales, which are forecast
to reduce but not eliminate the Company's net
cash burn. Separately, discussions continue
with respect to the funding of the GTL long
term power management contracts in India. If
these discussions cease there is expected to
be no material negative impact on the current
trading prospects of the core fuel cell business.
Should they complete successfully, IE would
expect to have a minority stake in the ongoing
business.
Forward-looking statements
Certain statements made in this announcement are, or may be,
forward-looking statements. 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. 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 statements. No reliance should be
placed on such forward-looking statements. Without limitation to
the foregoing, nothing in this announcement is intended to
constitute (or should be construed as) a profit forecast for the
financial year 2016/17.
Intelligent Energy Holdings plc
Consolidated income statement
Notes 2016 2015
----------------------------------- ------ ------- -------
GBPm GBPm
Revenue 1 91.8 78.2
Cost of sales 3 (90.0) (75.9)
----------------------------------- ------ ------- -------
Gross profit 1.8 2.3
Research and development
costs 3 (9.6) (19.1)
Operating costs 3 (44.5) (24.9)
Administration costs 3 (7.6) (12.1)
----------------------------------- ------ ------- -------
Operating loss (59.9) (53.8)
----------------------------------- ------ ------- -------
Analysed as:
Operating loss before exceptional
items (32.1) (53.8)
* Exceptional items 4 (27.8) -
Operating loss after exceptional
items (59.9) (53.8)
----------------------------------- ------ ------- -------
Finance income 0.7 0.4
Finance cost (3.4) (1.7)
Share of loss of joint ventures
accounted for using the
equity method - net of income
tax (0.4) (0.8)
Joint venture exceptional (1.6) -
impairment charge
Gain on disposal of joint
venture - 1.5
----------------------------------- ------ ------- -------
Loss before tax (64.6) (54.4)
Income tax (Including exceptional
charge of GBP21.9m (2015:
Nil) (18.1) 11.6
----------------------------------- ------ ------- -------
Loss for year attributable
to owners of the Company (82.7) (42.8)
----------------------------------- ------ ------- -------
Earnings per share (expressed
in pence per share) 5
Basic and diluted earnings
per share (42.8) (22.7)
Consolidated statement of comprehensive income
2016 2015
----------------------------------------- --- ------- -------
GBPm GBPm
Loss for the year (82.7) (42.8)
Other comprehensive income;
Items that are or may be subsequently
reclassified to profit or loss
Exchange gain on retranslation
of foreign operations 0.5 0.2
---------------------------------------- ---- ------- -------
Comprehensive expense for the
year attributable to owners of
the Company (82.2) (42.6)
---------------------------------------- ---- ------- -------
Consolidated statement of financial position
Group
------------------
Notes 2016 2015
------------------------------------ ------ -------- --------
GBPm GBPm
Non-current assets
Property, plant and equipment 6 2.8 8.5
Intangible assets 7 7.9 27.0
Investments accounted for using
the equity method - 1.1
Investments in subsidiaries - -
and joint ventures
Deferred tax asset - 21.9
Tax receivable - 0.4
Trade and other receivables - 0.9
------------------------------------ ------ -------- --------
10.7 59.8
------------------------------------ ------ -------- --------
Current assets
Inventories 1.6 5.3
Trade and other receivables 7.8 11.5
Current tax receivable 3.0 4.2
Short term deposits - 0.6
Cash and cash equivalents 20.6 23.6
33.0 45.2
------------------------------------ ------ -------- --------
Total assets 43.7 105.0
------------------------------------ ------ -------- --------
Current liabilities
Trade and other payables (8.4) (14.2)
Finance lease (0.3) -
Derivative financial instruments - (0.1)
(8.7) (14.3)
------------------------------------ ------ -------- --------
Non current liabilities
Deferred tax liability (1.8) -
Provisions - (3.0)
Liability component of convertible
loan notes 9 (20.7) -
Finance lease (0.3) -
------------------------------------ ------ -------- --------
(22.8) (3.0)
------------------------------------ ------ -------- --------
Total liabilities (31.5) (17.3)
------------------------------------ ------ -------- --------
Net assets 12.2 87.7
------------------------------------ ------ -------- --------
Equity attributable to owners
of the Company
Equity share capital 10.3 9.4
Share premium 223.3 222.9
Other reserves 41.1 35.2
Retained earnings (262.5) (179.8)
------------------------------------ ------ -------- --------
Total equity 12.2 87.7
------------------------------------ ------ -------- --------
Consolidated statement of changes in equity
Other reserves
-----------------------------------------------
Equity
Equity component Currency
of
share Share convertible Capital Merger translation Retained Total
capital premium loan notes reserve reserve reserve earnings equity
-------------------------- --------- -------- ------------ -------- --------- ------------ --------- -------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 October
2014 9.4 222.7 - 7.5 29.3 (1.8) (139.3) 127.8
-------------------------- --------- -------- ------------ -------- --------- ------------ --------- -------
Loss for the year - - - - - - (42.8) (42.8)
Other comprehensive
expense - - - - - 0.2 - 0.2
-------------------------- --------- -------- ------------ -------- --------- ------------ --------- -------
Total comprehensive
expense
for the year - - - - - 0.2 (42.8) (42.6)
-------------------------- --------- -------- ------------ -------- --------- ------------ --------- -------
Shares issued (net of
issue costs) - 0.2 - - - - - 0.2
Share-based payment
transactions - - - - - - 2.3 2.3
-------- ------------ -------- --------- ------------ --------- -------
Total transactions with
owners, recognised
directly
in equity - 0.2 - - - - 2.3 2.5
-------------------------- --------- -------- ------------ -------- --------- ------------ --------- -------
Balance at 1 October
2015 9.4 222.9 - 7.5 29.3 (1.6) (179.8) 87.7
-------------------------- --------- -------- ------------ -------- --------- ------------ --------- -------
Loss for the year - - - - - - (82.7) (82.7)
Other comprehensive
income - - - - - 0.5 - 0.5
-------------------------- --------- -------- ------------ -------- --------- ------------ --------- -------
Total comprehensive
income/(expense)
for the year - - - - - 0.5 (82.7) (82.2)
-------------------------- --------- -------- ------------ -------- --------- ------------ --------- -------
Shares issued 0.9 0.4 - - - - - 1.3
Issue of convertible
loan notes (net of
deferred
tax of GBP1.9m) (note
27) - - 5.4 - - - - 5.4
Share-based payment
transactions - - - - - - 0.2 0.2
Share purchase - - - - - - (0.2) (0.2)
-------------------------- --------- -------- ------------ -------- --------- ------------ --------- -------
Total transactions with
owners, recognised
directly
in equity 0.9 0.4 5.4 - - - - 6.7
-------------------------- --------- -------- ------------ -------- --------- ------------ --------- -------
Balance at 30 September
2016 10.3 223.3 5.4 7.5 29.3 (1.1) (262.5) 12.2
-------------------------- --------- -------- ------------ -------- --------- ------------ --------- -------
Consolidated statement of cash flows
Group
----------------
Notes 2016 2015
------------------------------------- ------ ------- -------
GBPm GBPm
Operating activities
Loss before tax (64.6) (54.4)
Net financing expense 2.7 1.3
Gain on disposal of joint
venture - (1.5)
Share of joint venture losses 0.4 0.8
Joint venture impairment 1.6 -
------------------------------------- ------ ------- -------
Operating loss (59.9) (53.8)
Adjustment for:
Depreciation and impairment
of property, plant and equipment 6 6.9 3.2
Amortisation and impairment
of intangible assets 7 19.2 1.8
Equity settled share-based
payments 0.2 2.3
Working capital adjustments:
Decrease/(increase) in inventories 3.7 (1.2)
Decrease/(increase) in trade
and other receivables 4.0 (0.4)
Decrease in trade and other
payables (5.5) (3.4)
Taxation received 5.1 4.8
------------------------------------- ------ ------- -------
Net cash outflow from operating
activities (26.3) (46.7)
------------------------------------- ------ ------- -------
Investing activities
Net interest (paid)/received (0.1) 0.1
Finance lease capital repayment (0.1) -
Proceeds on disposal of joint
venture - 1.5
Sale of short term deposits 0.6 42.2
Purchase of property, plant
and equipment (0.6) (4.8)
Purchase of intangible assets 7 (3.2) (14.6)
Investment in joint venture (0.7) (0.5)
Net cash (outflow)/inflow
from investing activities (4.1) 23.9
------------------------------------- ------ ------- -------
Financing activities
Interest paid on convertible (1.0) -
loan notes
Issue of ordinary share capital 1.1 0.2
Issue of convertible loan
notes 9 27.2 -
------------------------------------- ------ ------- -------
Net cash inflow from financing
activities 27.3 0.2
------------------------------------- ------ ------- -------
Decrease in cash and cash
equivalents (3.1) (22.6)
Effect of foreign exchange
rates on cash and cash equivalents 0.1 0.1
Cash and cash equivalents
at beginning of period 23.6 46.1
------------------------------------- ------ ------- -------
Cash and cash equivalents
at year-end 20.6 23.6
------------------------------------- ------ ------- -------
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 2016 and 30
September 2015 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
2016 have been reported on by the Company's auditor and will be
delivered to the registrar of companies in due course. The report
of the auditor was (i) unqualified, (ii) drew attention by way of
emphasis without qualifying their report to a material uncertainty
in respect of going concern 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, will shortly be available
for download 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 2016.
(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
2016.
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 Fuel Cell Technology and
Essential Energy is the primary basis of information reported to
the Intelligent Energy Holdings plc Board of Directors. The
performance of these elements of the business are 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 two separate businesses:
'Fuel Cell Technology' focusing on hydrogen fuel cell applications
across a range of industries and 'Essential Energy' which focuses
on power management for telecom towers in India. The group was
reorganised during the year into this structure, previously being
organised as four business units of Consumer Electronics, Motive,
Distributed Power and Generation and Platform Support. The
comparative disclosures for 2015 have been restated to the current
segmental basis.
2016 Essential Fuel Group
Energy Cell
Technology
---------------------------- ---------- ------------ -------
GBPm GBPm GBPm
Revenue from external
sales 85.1 6.7 91.8
------------------------------ ---------- ------------ -------
EBITDA (Segment profit
measure) (2.5) (31.3) (33.8)
------------------------------ ---------- ------------
Depreciation, amortisation
and impairment (26.1)
------------------------------ ---------- ------------ -------
Operating loss (59.9)
Net financing cost (2.7)
Share of loss of joint
ventures (0.4)
Joint venture impairment (1.6)
------------------------------ ---------- ------------ -------
Loss before tax (64.6)
Income tax (18.1)
------------------------------ ---------- ------------ -------
Loss for the year (82.7)
------------------------------ ---------- ------------ -------
2015 Essential Fuel Group
Energy Cell
Technology
----------------------- ---------- ------------ -------
GBPm GBPm GBPm
Revenue from external
sales 72.2 6.0 78.2
------------------------- ---------- ------------ -------
EBITDA (Segment
profit measure) (2.5) (46.3) (48.8)
------------------------- ---------- ------------
Depreciation and
amortisation (5.0)
------------------------- ---------- ------------ -------
Operating loss (53.8)
Net financing cost (1.3)
Share of loss of
joint ventures (0.8)
Gain on disposal
of joint venture 1.5
------------------------- ---------- ------------ -------
Loss before tax (54.4)
Income tax 11.6
------------------------- ---------- ------------ -------
Loss for the year (42.8)
------------------------- ---------- ------------ -------
Other segmental disclosures
2016 2015
Essential Fuel Group Essential Fuel Group
Energy Cell Energy Cell
Technology Technology
--------------------- ---------- ------------ ------ ---------- ------------ ------
GBPm GBPm GBPm GBPm GBPm GBPm
Depreciation
and amortisation 0.2 4.5 4.7 0.1 4.9 5.0
Goodwill impairment - 5.9 5.9 - - -
Other intangible
impairment - 11.0 11.0 - - -
Property, plant
and equipment
impairment 1.4 3.1 4.5 - - -
Restructuring
costs - 2.7 2.7 - - -
Total assets 5.6 38.1 43.7 6.3 98.7 105.0
Additions to
non current assets 0.7 3.9 4.6 0.9 21.2 22.1
Total liabilities 11.3 20.2 31.5 7.6 9.7 17.3
--------------------- ---------- ------------ ------ ---------- ------------ ------
2 Adjusted EBITDA
The Company uses adjusted EBITDA (earnings before
interest, impairment charges, tax, depreciation,
amortisation, share of joint venture results,
equity fund raising costs and IFRS 2 share based
payment charges) 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.
2016 2015
----------------------------------- --------- --------
GBPm GBPm
EBITDA (33.8) (48.8)
Share based payment charge 0.2 2.3
Equity fund raising cost 0.2 0.3
----------------------------------- --------- --------
Adjusted EBITDA (33.4) (46.2)
----------------------------------- --------- --------
3 Expenses by nature
2016 2015
------------------------------------------- ------ ------
GBPm GBPm
Cost of fuel 85.2 70.8
Depreciation, amortisation and impairment 26.1 5.0
Staff costs (note 11) 20.5 27.3
Inventory write-down 4.1 1.5
Consultancy, contractors and outsourced
services 2.9 7.9
Legal and professional costs 2.7 2.7
Facilities and services 2.6 4.0
Operating lease charge 2.1 1.9
Travel and subsistence 1.6 2.6
Costs of inventories recognised
as an expense 1.0 2.9
Materials and consumables used for
research and development 1.0 2.2
Marketing 0.5 1.2
Share based payments 0.2 2.3
Equity fund raising costs 0.2 0.3
Research and development expenditure
credit (0.2) (0.4)
Capitalised staff costs (0.1) (1.7)
Other expenses 1.3 1.5
------------------------------------------- ------ ------
Total cost of sales, research and
development costs, operating costs
and administration costs 151.7 132.0
------------------------------------------- ------ ------
4 Exceptional charges
The Group has implemented a material restructuring of its
business during the year. The objective is to focus the Group on
the most immediate and material market opportunities, while
substantially and sustainably reducing the costs and cash burn of
the business.
The Company plans to maintain its core high power technology
Intellectual Property portfolio, know-how and expertise appropriate
for motive and high power distributed energy applications. However,
further investment and development would only be made when
profitable and scalable opportunities arise in lockstep with the
deployment of refuelling infrastructures. As part of this
restructuring, and to align the business with this revised focus
there has been a simplification of the organisational structure, a
reduction of the number of jobs across several locations in which
the Group operates and the closure of some office locations.
The intention of the restructuring is to focus the business on
existing tangible commercial opportunities whilst preserving the
Group's core capability to provide best of class, fuel cell based,
power solutions to customers in its target markets.
Exceptional charges have been recognised within the reported
results as follows:
2016 2015
------------------------------------- ----- -----
GBPm GBPm
Exceptional research and development
costs
Restructuring costs 1.0 -
------------------------------------- ----- -----
Exceptional operating costs
Inventory write-down 3.7 -
Property, plant and equipment 4.5 -
impairment
Intangible asset impairment 16.9 -
Restructuring costs 0.9 -
------------------------------------- ----- -----
26.0 -
Exceptional administration costs
Restructuring costs 0.8 -
------------------------------------- ----- -----
Total exceptional costs charged 27.8 -
within operating loss
------------------------------------- ----- -----
Exceptional joint venture charge
Joint ventures impairment 1.6 -
------------------------------------- ----- -----
Exceptional taxation charge
Deferred tax asset de-recognition 21.9 -
------------------------------------- ----- -----
Total exceptional charges 51.3 -
------------------------------------- ----- -----
An exceptional charge of GBP3.7 million has been recognised
during the year to write-down the carrying value of inventory to
its net realisable value. This charge arises from a refocus of the
business following the reorganisation of the Company announced in
April 2016. The charge arises against inventory relating to
consumer electronic raw materials and finished goods.
As a result of the reorganisation of the business during the
year an impairment of specific property, plant and equipment assets
of GBP4.5 million, specific patent intangible assets of GBP9.3
million, 305 development intangible of GBP1.7 million, goodwill of
GBP5.9 million and joint ventures of GBP1.6 million have been
impaired as a result of the re-focussing on specific market
opportunities as detailed above.
In addition, in light of the changes to the business, there is
increased uncertainty over the ability to utilise the historic
taxable trading losses and currently the Directors consider that,
there is not sufficient convincing evidence, at this time, to
enable the recognition of a deferred tax asset. Therefore the
deferred tax asset relating to trading losses has been
de-recognised resulting in an exceptional tax charge of GBP21.9
million in the year.
An impairment review has been performed at 30 September 2016
which has confirmed the carrying value of the remaining GBP10.7m of
non-current assets is supported on a value in use basis.
Restructuring costs of GBP2.7 million have been incurred during
the year in relation to employee severance and office closures.
The total cash outflow during the year in respect of exceptional
charges was GBP2.5 million (2015: GBPnil).
5 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 year.
2016 2015
Earnings per share - Basic (pence) (42.8) (22.7)
- Diluted (pence) (42.8) (22.7)
-------------------------------------------------------------- ------------ ------------
Loss for the financial year (GBP
million) (82.7) (42.8)
-------------------------------------------------------------- ------------ ------------
Weighted average number of shares
used:
* Issued ordinary shares at beginning of year 188,325,451 188,112,899
* Effect of ordinary shares issued during the year 4,998,481 60,871
-------------------------------------------------------------- ------------ ------------
Basic weighted average number
of shares 193,323,932 188,173,770
-------------------------------------------------------------- ------------ ------------
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.
467,678 share options (2015: 1,471,179), 1,869,784 share awards
(2015: 4,298,646), and 375,000,000 potential ordinary shares in
relation to the convertible debt (2015: nil) 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.
6 Property, plant and equipment
Office Plant,
equipment, machinery
fixtures and
Group and fittings equipment Total
------------------------------ ------------- ---------- ------
GBPm GBPm GBPm
Cost:
At 1 October 2014 2.1 14.2 16.3
Additions 0.4 4.4 4.8
At 1 October 2015 2.5 18.6 21.1
Additions 1.0 0.4 1.4
Disposals - (1.3) (1.3)
Transfer to inventory - (0.5) (0.5)
At 30 September 2016 3.5 17.2 20.7
------------------------------ ------------- ---------- ------
Depreciation and impairment:
At 1 October 2014 1.5 7.9 9.4
Depreciation charge for
the year 0.4 2.8 3.2
At 1 October 2015 1.9 10.7 12.6
Depreciation charge for
the year 0.3 2.1 2.4
Impairment charge 0.2 4.3 4.5
Disposals - (1.3) (1.3)
Transfer to inventory - (0.5) (0.5)
Foreign exchange 0.1 0.1 0.2
At 30 September 2016 2.5 15.4 17.9
------------------------------ ------------- ---------- ------
Net book value:
At 30 September 2016 1.0 1.8 2.8
------------------------------ ------------- ---------- ------
At 30 September 2015 0.6 7.9 8.5
------------------------------ ------------- ---------- ------
At 1 October 2014 0.6 6.3 6.9
------------------------------ ------------- ---------- ------
The cost of plant, machinery and equipment at 30 September 2016
includes GBP0.3 million (2015: GBP3.8 million) of assets in the
course of construction. Office equipment, fixtures and fittings
includes assets under non-cancellable finance leases with a net
book value of GBP0.7m. (2015: GBPnil).
7 Intangible assets
Group Development Software Patents Goodwill Total
-------------------------- ------------ --------- -------- --------- ------
Cost: GBPm GBPm GBPm GBPm GBPm
At 1 October 2014 - 3.1 5.2 11.5 19.8
Additions 2.0 1.0 14.3 - 17.3
At 1 October 2015 2.0 4.1 19.5 11.5 37.1
Additions - - 3.2 - 3.2
Contingent consideration
adjustment - - (3.0) - (3.0)
At 30 September 2016 2.0 4.1 19.7 11.5 37.3
-------------------------- ------------ --------- -------- --------- ------
Amortisation and
impairment:
At 1 October 2014 - 1.5 1.2 5.6 8.3
Amortisation charge
for the year - 0.9 0.9 - 1.8
At 1 October 2015 - 2.4 2.1 5.6 10.1
Amortisation charge
for the year 0.3 0.7 1.3 - 2.3
Impairment charge 1.7 - 9.3 5.9 16.9
Foreign exchange - - 0.1 - 0.1
At 30 September 2016 2.0 3.1 12.8 11.5 29.4
-------------------------- ------------ --------- -------- --------- ------
Net book value:
At 30 September 2016 - 1.0 6.9 - 7.9
-------------------------- ------------ --------- -------- --------- ------
At 30 September 2015 2.0 1.7 17.4 5.9 27.0
-------------------------- ------------ --------- -------- --------- ------
At 1 October 2014 - 1.6 4.0 5.9 11.5
-------------------------- ------------ --------- -------- --------- ------
8 Impairment testing of goodwill and other assets
The carrying value of Goodwill acquired through business
combinations is tested annually for impairment or whenever events
or changes in circumstances indicate the carrying value may not be
recoverable. All other assets across the Group have a defined life
and are amortised over a fixed period. The carrying value of these
assets are reviewed for impairment whenever events or changes in
circumstances indicate the carrying value may not be
recoverable.
Allocation of goodwill
The statement of financial position of the Group is reviewed by
the Chief Operating Decision Maker (CODM), which is defined as
being Intelligent Energy Holdings plc's Board of Directors, at a
group level.
As detailed in note 1 the Group is organised into two segments
following the reorganisation of Group being 'Fuel Cell Technology'
and 'Essential Energy' and this is the level at which the results
of the business are reviewed by the CODM and are the cash
generating units (CGU's) at which impairment testing is performed.
The recoverable amount of each CGU is has been determined based on
value-in-use calculations. All goodwill is allocated to the Fuel
Cell Technology segment.
Impairment
The Group has undertaken a reorganisation of the business during
the year which triggered an impairment review resulting in an
impairment of goodwill and other assets as detailed below and in
note 9. Impairments within each segment are as follows:
Essential Fuel Group
Energy Cell
Technology
------------------------------ ---------- ------------ ------
GBPm GBPm GBPm
Goodwill impairment - 5.9 5.9
Intangible assets impairment - 11.0 11.0
Property, plant and
equipment impairment 1.4 3.1 4.5
-------------------------------- ---------- ------------ ------
1.4 20.0 21.4
------------------------------ ---------- ------------ ------
Impairments have been recognised in respect of certain specific
intangible and property, plant and equipment assets as a result of
the refocus of the business from the reorganisation in the year.
The impairment of goodwill has been recognised on the basis of the
estimated recoverable amount of the Fuel Cell Technology segment at
31 March 2016 of GBP13m. Following the development of the strategy
for the reorganised business in the second half of the 2015/16
financial year, the impairment review performed at 30 September
2016 has indicated a value-in-use for the Fuel Cell Technology
segment higher than the carrying value of assets in that segment.
However in accordance with IAS 36 the impairment of goodwill has
not been reversed.
Period of projected cash flows
The directors have used a five-year forecast period with an
assumed long term growth rate after 2021 of 2% per annum. The
directors expect to benefit from opportunities to move towards
positive cash flow.
Discount rate
Future cash flows are discounted at a pre-tax rate of 17.9%
(2015: 14.6%).
Research and development costs are based on the estimated
investments required by the business to complete the research and
development phases of each product line currently in progress. In
each case senior management has estimated the total cost of labour,
materials and capital expenditure necessary to start full
production.
Raw material and production costs are based on estimated product
cost structures. The costs are based on current raw material and
production costs, synergies in mass production and the effect of
learning during manufacture.
Conclusion
The Directors have confirmed that the recoverable amount of the
segments supported their carrying values and the assumptions used
in estimating the value in use are appropriate.
9 Convertible loan notes
GBPm
Carrying amount of liability
Proceeds from issue of convertible notes
(30,000,000 notes at GBP1 par value) 30.0
Transaction costs (2.8)
------------------------------------------------- ------
Net proceeds 27.2
Amount classified as equity (net of transaction
costs of GBP0.7m) (7.3)
Interest expense (note 12b) 2.3
Interest paid (1.0)
------------------------------------------------- ------
At 30 September 2016 21.2
------------------------------------------------- ------
Current 0.5
Non-current 20.7
------------------------------------------------- ------
The Company issued 30 million 13 per cent. secured convertible
and redeemable loan notes at a par value of GBP30 million on 17 May
2016. The loan notes mature three years from the issue date at
their nominal value of GBP30 million or can be converted into
shares at the holder's option at any date up to maturity at the
rate of 8 pence per share. Any unconverted loan notes at maturity
become payable on demand. Interest at 13 per cent per annum is
payable on a quarterly basis. The interest charged during the year
is calculated by applying an effective interest rate of 30.3 per
cent on the liability component. The loan notes are secured by way
of an equitable charge over the Company's shares in its principal
subsidiary, Intelligent Energy Limited.
10 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"). The transaction involves the
acquisition of long term power management contracts for telecom
towers up to 2025.
Discussions are ongoing with debt and equity investors. However
currently there is no certainty as to the outcome of these
discussions. Under the circumstance in which the transaction does
not proceed the India business would continue as a power management
company which is not expected to materially impact negatively on
the cash flows of the group.
Should the transaction complete it is envisaged that Intelligent
Energy will hold a minority equity stake in the enlarged Indian
business.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PGGQAGUPQGUU
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