TIDMPPS
RNS Number : 6139E
Proton Power Systems PLC
14 May 2013
Press Release 14 May 2013
Proton Power Systems plc
("Proton Power" or the "Group")
Final Results
Proton Power Systems plc (AIM:PPS), the designer, developer and
producer of fuel cells and fuel cell electric hybrid systems, today
announces its results for the year ended 31 December 2012.
Highlights:
-- Turnover increased by 5% to GBP920,000 (2011: GBP875,000)
-- Raised EUR4.1million of new funding
-- Development of the PM Module S5 which has now successfully
completed more than 10,000 hours of start/stop operation
-- First installation of the 5kW PM Module within an EON
power station in cooperation with Modl
-- Cooperation agreement signed with Modl for the development
and production of a fully integrated fuel cell stationary
power system
-- Receipt of an order from the RENESTA project for two
5kW PM Module systems
-- Successful road testing of the Smith Electric Vehicles
("SEV") Newton 7.5 tonne truck with the Proton Motor
7kW Range Extender System (REX)
-- Another successful year for the ZEM passenger ship in
Hamburg with more than 700 hours of operation in 2012
-- Further investment in the Group's R&D infrastructure
to allow continuous testing and operation
-- Opening a new branch office in the Cologne area
-- Completion of the new PM400 (25kW) stack development
-- Acquired 100% of SPower Holding Gmbh and its subsidiary
SPower GmbH
John Wall, Chairman of Proton Power, commented: "We continue to
make progress in our core business segments and I am particularly
pleased with the achievements of the Group during 2012 including in
particular the successful integration of our range extender into a
Smith's Newton truck, the agreement entered into with Modl, the
installation of a Proton Fuel Cell at one of E.ON's substations
and, more recently, the acquisition of SPower which is now fully
integrated within the Group and whose results will be consolidated
for the first time in our interim results to June 2013.
We are well placed and have great confidence that Proton's
products and solutions will have a major role to play in the
growing acceptance of the use of fuel cells for power supply and
storage."
- Ends -
Proton Power Systems plc
John Wall, Chairman Tel: +44 (0) 7802 917
615
Achim Loecher, Group Financial Director Tel: +49 (0) 89 127
626 550
www.protonpowersystems.com
Westhouse Securities Limited
Nominated adviser and broker
Antonio Bossi Tel: +44 (0) 20 7601
6100
www.westhousesecurities.com
Chairman and CEO's statement
We are pleased to report our results for the year ended 31
December 2012.
Business development
Proton is pleased to report the following achievements in
2012:
-- Development of the PM Module S5 which has now successfully
completed more than 10,000 hours of start/stop operation
-- First installation of the 5kW PM Module within an EON power station in cooperation with Modl
-- Cooperation agreement signed with Modl for the development
and production of a fully integrated fuel cell stationary power
system
-- Receipt of an order from the RENESTA project for two 5kW PM Module systems
-- Successful road testing of the Smith Electric Vehicles
("SEV") Newton 7.5 tonne truck with the Proton Motor 7kW Range
Extender System (REX)
-- Another successful year for the ZEM passenger ship in Hamburg
with more than 700 hours of operation in 2012
-- Further investment in the Group's R&D infrastructure to
allow continuous testing and operation
-- Opening a new branch office in the Cologne area
-- Completion of the new PM400 (25kW) stack development
The Group has now finalised development of the fuel cell Range
Extender System for light duty vehicles. The SEV Newton truck is in
the testing period and so far excellent results have been achieved,
fully in line with our expectations. The vehicle participated in
the Bertha Mercedes Benz Challenge completing a non-stop trip from
Munich to Stuttgart (about 220 km) with energy from the batteries
and the fuel cell Range Extender. The SEV Newton truck has also
participated in several road shows, presenting electric vehicles to
logistics companies. A larger fuel cell Range Extender for electric
urban buses and other mobile applications is now under
development.
A project is under preparation with Solaris Coach & Bus for
the integration of our fuel cell Range Extender in an 18m Solaris
Bus and the Group is working with Siemens on an integrated solution
for an electric bus system for urban buses. Discussions with other
European bus manufacturers are on-going. The electric urban bus
market is seen as very important to the Group because of the
worldwide demand for emission reductions in large cities.
Several 5kW stationary power systems have now been delivered to
customers and the Group is now quoting for projects involving
higher quantities. Market analysis has also identified a gap in the
Smart Grid network for fuel cell stationary power supply. The
Company is now working on applications in the high power sector
(> 20kW) which will address the market for uninterruptible power
supply as well as Smart Grid applications.
Interest has been shown from the maritime sector for the fuel
cell system for several ship projects, mainly inland tourist and
ferry boats as well as coast guard ships. The maritime market is
seen as a longer term opportunity.
The Group successfully completed development of the new 25kW
fuel cell stack. The new stack will be used in all three market
segments (stationary, mobile and maritime). The Group continues to
work on the development of new stack generations as well as the
optimization of the current systems.
Our long term experience in different fuel cell applications, as
well as our own stack development and production, gives us a unique
market position and a competitive advantage in comparison to our
competitors in Europe, which are mainly integrators using stacks
produced in North America. Our own stack design allows us to
optimise our systems for customers' requirements. We also see the
development of an independent European stack as vital for the
industry.
Discussions with the German Hydrogen Organisation (NOW) have
taken place for additional funding opportunities, including the
commercial roll-out of the Range Extender system for light duty
vehicles and buses.
The Group's product strategy includes:
-- Modular stationary power of 5kW, 25kW and 75kW for IT, Smart
Grid and industrial applications.
-- A modular Range Extender for light duty commercial vehicles and city buses of 7kW and 20kW.
-- Maritime modular fuel cell systems of 25kW and 75kW for ships.
Targets for 2013 are:
-- Further orders for the new PM Module (19 inch modular Power Supply unit with 5kW).
-- Start to manufacture the first REX system for SEV Newton vehicles as a serial product.
-- Presentation of the first electric bus with an Electric Hybrid Battery/REX system.
-- Additional OEM partners for stationary and mobile applications.
-- Development of a 25kW modular fuel cell Range Extender.
-- Start a joint project for a mobile application with Magna
Steyr based on an Austrian funding project.
Finance
Turnover increased by 5% to GBP920,000 mainly as a result of
funded projects started in April 2010. The loss for the year was
GBP4,172,000 and was in line with management expectations.
The Group secured new loan funding in 2012 of EUR4,100,000 from
Roundstone Properties Limited and received grant funding of
EUR825,548 from the German Government to develop the Range Extender
system and for the development of a new stack generation.
In addition to the above the group received EUR308,623 from
sales of the 19 inch module, from sales of stacks and engineering
services and from the service contract with ATG, the operator of
the Zemship in Hamburg.
The total funds raised of EUR5,234,171 financed the working
capital for the year. The Company continues to be interested in
involving other investors alongside Roundstone Properties Limited
in this exciting opportunity.
Outlook
The Group expects new partnerships in 2013 with OEM partners
based on the provision of full support, from first planning to
completion of prototypes. Products based on our 5kW and 25kW
systems are available and we plan to sell them in higher
quantities.
Talks with potential customers show a strong interest in our
technology. Although the overall introduction of fuel cells takes
time, we are positive on the outlook for 2013. New partnerships
will strengthen our position in our European home market.
The Group will continue to invest in infrastructure, technology
and employees. The Group's employees are the driving force and the
basis of its know-how. Without the technical expertise of the team,
the Group could not have made such huge steps in the development of
fuel cell technology.
After the year-end the Group acquired SPower Holding GmbH and
its subsidiary SPower GmbH, the power supply solution provider
focused on IT, Telecoms, public infrastructure and healthcare
customers which recently developed and will soon launch a new
product for Solar Energy Storage. Sales and service of solutions
are now being delivered by a single enlarged sales team which will
allow the Company to target the Middle Eastern and South American
markets.
On behalf of the Board we would like to take this opportunity to
thank the Proton Power team and our advisors for their hard work
and effort as well as our customers and suppliers for their
confidence and support throughout the year.
John Wall FCA Dr Faiz Nahab
Chairman CEO
Operating and financial review
Group activities
The Group has begun selling PM Module S5 with 5kW for stationary
power. The PM Module S5 can be used in parallel with up to three
units for applications requiring 15kW. For higher power demand, the
new PM400 has been developed, which can provide 25kW and up to 75kW
in parallel. The necessary infrastructure for such applications
(supply of pressurized air, cooling and DC/DC conversion) is
currently under development. The Group aims to offer its customers
a complete solution as a stand-alone application, or connected to
an uninterruptible power supply ("UPS") system. Units each with
75kW can be used in parallel for higher power demand. The Group
plans to design even higher power solutions, if required by its
customers, above 100kW for stationary power to be used in UPS or
Smart Grid applications.
The Group has also developed a mobile 7kW fuel cell system to
operate as a Range Extender for battery driven light duty vehicles
in cooperation with Smith Electric Vehicles ("SEV") based in the UK
and USA. A Range Extender is continuously charging the battery
based on a hydrogen fuel cell. The benefits are a significant
increase of range of operation and support of air-conditioning or
heating devices with zero emissions. The Group has completed a full
integration of the Range Extender system into SEV's Newton light
duty vehicle, which was introduced to the market at the Hannover
Industrial Exhibition in April 2012. The results of extensive
testing are fully in line with the Group's expectations. It is
anticipated that sales of the first vehicles to customers in
Germany will arise during 2013. A German government grant funding
program is supporting the first vehicles with 48% of the
investment.
The fuel cell Range Extender concept also provides exciting
opportunities for urban electric bus applications. For that reason,
the Group has developed a 20kW Range Extender version for buses,
which can be used in modular operation with 20kW, 40kW and 60kW. An
Austrian funding project in cooperation with Magna Steyr will start
in 2013 with the integration of the 20kW Range Extender into a
German branded light duty vehicle.
The Group has also developed a 25kW fuel cell stack which will
be used for stationary and mobile applications in a single or
modular mode. The Group is already designing the next generation of
fuel cell stacks. The Group's accumulated stack know-how is vital
to allow it to optimize stacks for individual applications.
Strategy
Sales strategy
Proton Motor is targeting mid-size technology companies to
co-operate with, as well as large international companies. The
Group is specifically looking for partners with market access for
its applications and solutions. These partners should already be
active in the market for battery powered electric solutions. Adding
a fuel cell is often seen as the key to solving critical problems
with pure battery powered products.
The sales process always starts with consulting, simulation,
packaging study, integration, testing and final roll out with
service support. Proton Motor can act as turn-key supplier for a
complete solution with all the necessary know how under one roof.
To have its own fuel cell stack gives a complete product offering
from stack to final application which the Directors see as
necessary to supply customers with a complete and optimized
solution.
Manufacturing strategy
To date, the Group's fuel cell modules and fuel cell hybrid
systems have been produced in relatively small volumes, on a
project-by-project basis, largely utilising a combination of
semi-automated processes and manual assembly. However, Proton
Motor's technology development has been undertaken with the key
objective of designing and manufacturing fuel cells and fuel cell
hybrid systems for volume production with experienced contract
manufacturers. In order to seek to achieve this, the Directors
have:
-- identified target markets and commercial applications;
-- established further key commercial partnerships within these target markets;
-- designed the Group's fuel cells and fuel cell hybrid systems
to meet the engineering requirements for volume manufacturing;
-- switched over to a new and more cost effective stack
generation which will lead to a decrease in production costs by
more than 60%;
-- established quality control procedures;
-- installed professional commercial test benches to ensure high
quality standards for the Group's fuel cells and fuel cell
systems;
-- built up a new electrical infrastructure for continuous testing;
-- reviewed, risk assessed and secured supplier and component manufacturing relationships;
-- identified and assessed major commercial factors, such as
cost, availability, robustness and durability of components;
and
-- secured and properly documented necessary regulatory and
operational approvals for each application.
Market and competitive environment
The Board believes the growth in the fuel cell market will be
determined by the following factors:
-- the ongoing depletion of fossil fuel reserves;
-- current and future air quality regulation;
-- growing industrial and consumer demand for alternative sources of energy;
-- the potential long term competitiveness of the auto and transportation industries;
-- energy security concerns;
-- limitations of purely battery powered propulsion systems; and
-- discussions regarding hydrogen as an energy storage for green energy (power to gas).
Initial market segments have been identified, which the Board
believes, would benefit from the advantages of fuel cell hybrid
systems and are target market segments for the Group. Those market
segments are:
-- city buses;
-- passenger ferry boats;
-- light duty vehicles; and
-- auxiliary power units ("APUs") for back-up power and smart grid applications.
The Directors see significant growth and demand in those market
segments for fuel cell applications.
Competitive advantages
The Directors are confident that the Group's technology brings
the following distinct combination of characteristics to the power
systems market:
-- zero harmful emissions;
-- lower fuel consumption than comparable commercial alternatives;
-- no recharge requirement, unlike batteries;
-- silent operation;
-- a standard fuel cell stack for use in multiple applications;
-- modular fuel cell systems for easy customer adoptions
-- a reliable, robust and durable technology; and
-- successful integration of fuel cell technology into a hybrid and Triple-Hybrid(c) system.
Future prospects
The Group's principal objective is to expand volume
manufacturing with industrial partners based on licence agreements.
This will enable the Group to achieve an economically viable unit
cost for its fuel cells and fuel cell hybrid systems. Also the
Group will utilize the sales channels of its industrial partners to
address various markets and ensure growth of sales volume. The
Directors believe that the advanced stage of commercialisation of
the Group's technology, coupled with the Group's preferred
partnerships, will enable the business to establish itself firmly
as a leading, global, fuel cell and fuel cell hybrid system
provider.
Consolidated income statement
for the year ended 31 December 2012
Notes 2012 2011
GBP'000 GBP'000
Continuing operations
Revenue 4 920 875
Cost of sales (3,449) (3,600)
Gross loss (2,529) (2,725)
Fair value (loss) / gain
on embedded derivatives (14) 3,735
Other operating income 14 145
Administrative expenses (1,465) (1,502)
Operating loss (3,994) (347)
Finance income - 2
Finance costs (178) (1,247)
Loss for the year attributable
to equity holders of the
parent 5 (4,172) (1,592)
Loss per share (expressed
as pence per share)
Basic 9 (0.7) (0.3)
Diluted 9 (0.7) (0.3)
Consolidated statement of comprehensive income
2012 2011
GBP'000 GBP'000
Loss for the period (4,172) (1,592)
Other comprehensive income
Exchange differences on
translating foreign operations (32) 1
Other comprehensive income (32) 1
Total comprehensive income
for the period (4,204) (1,591)
Attributable to equity holders
of the parent (4,204) (1,591)
Balance sheets
as at 31 December 2012
Group Company
Note 2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Intangible assets 10 50 146 - -
Property, plant and equipment 11 609 657 - -
Investment in subsidiary 12 - - 11,187 16,427
659 803 11,187 16,427
Current assets
Inventories 218 149 - -
Trade and other receivables 13 141 149 15 13
Cash and cash equivalents 14 185 293 3 1
544 591 18 14
Total assets 1,203 1,394 11,205 16,441
Liabilities
Current liabilities
Trade and other payables 15 527 511 33 65
Borrowings 16 - 1,999 - 1,999
527 2,510 33 2,064
Non-current liabilities
Borrowings 16 4,468 - 4,468 -
Embedded derivatives on
convertible interest 17 228 - 228 -
4,696 - 4,696 -
Total liabilities 5,223 2,510 4,729 2,064
Net (liabilities) / assets (4,020) (1,116) 6,476 14,377
Equity
Equity attributable to equity
holders of the parent company
Ordinary shares 19 9,672 9,479 9,672 9,479
Share premium 18,211 17,243 18,211 17,243
Merger reserve 15,656 15,656 15,656 15,656
Reverse acquisition reserve (13,862) (13,862) - -
Share option reserve 608 469 608 469
Foreign translation reserve 4,716 4,252 - -
Capital contributions 1,113 1,140 - -
Retained earnings (40,134) (35,493) (37,671) (28,470)
Total equity (4,020) (1,116) 6,476 14,377
These financial statements were approved by the Board of
Directors on 13 May 2013 and were signed on its behalf by:
J Wall FCA
Director
Statements of changes in equity
Reverse Share Capital
Share Share Merger Acquisition Option Translation Contribution Retained Total
Group Capital Premium Reserve Reserves Reserve Reserve Reserves Earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2011 5,100 8,474 15,656 (13,862) 385 3,359 1,165 (30,876) (10,599)
Share based
payments - - - - 84 - - - 84
Proceeds from
share issues 4,379 8,769 - - - - - - 13,148
Deemed
distribution
(see note 21) - - - - - - - (2,158) (2,158)
Transactions
with owners 4,379 8,769 - - 84 - - (2,158) 11,074
Loss for the
year - - - - - - - (1,592) (1,592)
Other
comprehensive
income:
Currency
translation
differences - - - - - 893 (25) (867) 1
Total
comprehensive
income for the
year - - - - - 893 (25) (2,459) (1,591)
Balance at 31
December 2011 9,479 17,243 15,656 (13,862) 469 4,252 1,140 (35,493) (1,116)
Balance at 1
January 2012 9,479 17,243 15,656 (13,862) 469 4,252 1,140 (35,493) (1,116)
Share based
payments - - - - 139 - - - 139
Proceeds from
share issues 193 968 - - - - - - 1,161
Currency
translation
differences - - - - - 496 (27) (469) -
Transactions
with owners 193 968 - - 139 496 (27) (469) 1,300
Loss for the
year - - - - - - - (4,172) (4,172)
Other
comprehensive
income:
Currency
translation
differences - - - - - (32) - - (32)
Total
comprehensive
income for the
year - - - - - (32) - (4,172) (4,204)
Balance at 31
December 2012 9,672 18,211 15,656 (13,862) 608 4,716 1,113 (40,134) (4,020)
======== ======== ======== ============ ======== =========== ============= ========= ========
Statements of changes in equity
Share
Share Share Merger Option Retained Total
Company Capital Premium Reserve Reserve Earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January 2011 5,100 8,474 15,656 385 (35,094) (5,479)
Proceeds from share issues 4,379 8,769 - - - 13,148
Deemed distribution (see note 21) - - - - (2,158) (2,158)
Share based payments - - - 84 - 84
Transactions with owners 4,379 8,769 - 84 (2,158) 11,074
Profit for the year - - - - 8,782 8,782
Total comprehensive income for
the year - - - - 8,782 8,782
Balance at 31 December 2011 9,479 17,243 15,656 469 (28,470) 14,377
Balance at 1 January 2012 9,479 17,243 15,656 469 (28,470) 14,377
Proceeds from share issues 193 968 - - - 1,161
Share based payments - - - 139 - 139
Transactions with owners 193 968 - 139 - 1,300
Loss for the year - - - - (9,201) (9,201)
Total comprehensive income for
the year - - - - (9,201) (9,201)
Balance at 31 December 2012 9,672 18,211 15,656 608 (37,671) 6,476
Share premium account
Costs directly associated with the issue of the new shares have
been set off against the premium generated on issue of new
shares.
Merger reserve
The merger reserve of GBP15,656,000 arises as a result of the
acquisition of Proton Motor Fuel Cell GmbH and represents the
difference between the nominal value of the share capital issued by
the Company and its fair value at 31 October 2006, the date of the
acquisition.
Reverse acquisition reserve
The reverse acquisition reserve (Group only) arises as a result
of the method of accounting for the acquisition of Proton Motor
Fuel Cell GmbH by the Company. In accordance with IFRS 3 the
acquisition has been accounted for as a reverse acquisition.
Share option reserve
The Group operates an equity settled share-based compensation
scheme. The fair value of the employee services received for the
grant of the options is recognised as an expense. The total amount
to be expensed over the vesting period is determined by reference
to the fair value of the options granted. At each balance sheet
date the Company revises its estimate of the number of options that
are expected to vest. The original expense and revisions of the
original estimates are reflected in the income statement with a
corresponding adjustment to equity. The share option reserve
represents the balance of that equity.
Statements of cash flows
for the year ended 31 December 2012
Group Company
Year ended 31 December Year ended 31 December
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Loss for the period (4,172) (1,592) (9,201) 8,782
Adjustments for:
Depreciation and amortisation
/ (write back) 276 283 8,855 (6,602)
Loss on disposal of fixed
assets 38 - - -
Interest income - (2) - -
Interest expenses 178 1,247 177 1,246
Share based payments 139 84 139 84
Movement in inventories (73) (17) - -
Movement in trade and other
receivables 8 444 (2) -
Movement in trade payables 26 74 (31) 22
Movement in fair value of
embedded derivatives 14 (3,735) 14 (3,735)
Net cash used in operations (3,566) (3,214) (49) (203)
Interest paid (1) (2) - -
Net cash used in operating
activities (3,567) (3,216) (49) (203)
Cash flows from investing
activities
Capital contribution to
subsidiary - - (3,614) (3,228)
Purchase of intangible assets (48) (24) - -
Purchase of property, plant
and equipment (151) (185) - -
Interest received - 2 - -
Net cash used in investing
activities (199) (207) (3,614) (3,228)
Cash flows from financing
activities
Proceeds from issue of loan
instruments 7,247 3,429 7,247 3,429
Settlement of loan instruments (4,741) - (4,741) -
Proceeds from issue of new
shares 1,161 - 1,161 -
Net cash generated from
financing activities 3,667 3,429 3,665 3,429
Net increase/(decrease)
in cash and cash equivalents (99) 6 2 (2)
Effect of foreign exchange
rates (9) 19 - -
Opening cash and cash equivalents 293 268 1 3
Closing cash and cash equivalents 185 293 3 1
Notes to the financial statements
1. General information
Proton Power Systems plc ("the Company") and its subsidiary
(together "the Group") design, develop, manufacture and test fuel
cells and fuel cell hybrid systems as well as the related technical
components. The Group's design, research and development and
production facilities are located in Germany.
The Company is a public limited liability company incorporated
in England & Wales. The address of its registered office is: St
Ann's Wharf, 112 Quayside, Newcastle upon Tyne, NE99 1SB. The
Company's initial public offering took place at the Alternative
Investment Market of the London Stock Exchange on 31 October 2006
and its shares are listed on this exchange.
The consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting
Standards Board (IASB) as adopted by the European Union. The
consolidated financial statements for the year ended 31 December
2012 (including comparatives) were approved and authorised for
issue by the board of directors on 13 May 2013.
The financial information set out in this preliminary
announcement does not constitute statutory accounts within the
meaning of s495(2) or s495(3) of the Companies Act 2006. The
statutory accounts contain an unqualified audit report, which did
not include a statement under s498(2) or s498(3) of the Companies
Act 2006, and will be delivered to the Registrar of Companies.
The statutory accounts for the year ended 31 December 2011 which
have been delivered to the Registrar of Companies, contained an
unqualified audit report and did not include a statement under
s498(2) or s498(3) of the Companies Act 2006.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied.
Development of the Group
Proton Power Systems plc was incorporated on 7 February 2006 and
on 31 October 2006 acquired the entire share capital of Proton
Motor Fuel Cell GmbH. As a result of this transaction, the
shareholders in Proton Motor Fuel Cell GmbH received shares in the
Company.
In preparing the consolidated financial statements, Proton Motor
Fuel Cell GmbH has been deemed to be the acquirer and the Company,
the legal parent, has been deemed to be the acquiree. Under IFRS 3
"Business Combinations", the acquisition of Proton Motor Fuel Cell
GmbH by the Company has been accounted for as a reverse acquisition
and the consolidated IFRS financial information of the Company is
therefore a continuation of the financial information of Proton
Motor Fuel Cell GmbH.
As permitted by Section 408 of the Companies Act 2006, no
separate income statement is presented in respect of the parent
Company. The loss for the financial period dealt within the
accounts of the parent Company was GBP9,201,000.
Basis of preparation
The consolidated financial statements of Proton Power Systems
plc have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union and
with those parts of the Companies Act 2006 applicable to those
companies under IFRS. The consolidated financial statements have
been prepared under the historical cost convention except for
embedded derivatives which are carried at fair value through profit
and loss and on the basis that the Group continues to be a going
concern. Until such time as the Group achieves operational cash
inflows through becoming a volume producer of its products to a
receptive market it will remain dependent on its ability to raise
cash to fund its operations from existing and potential
shareholders and the debt market.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial statements, are disclosed in Note 3.
Basis of consolidation
Subsidiaries are all entities over which the Group has the power
to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting
rights. The existence and effect of potential voting rights that
are currently exercisable or convertible are considered when
assessing whether the Group controls another entity. Subsidiaries
are consolidated fully from the date on which control is
transferred to the Group. They are de-consolidated from the date
that control ceases.
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Group. The cost of an
acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at
the date of exchange. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date,
irrespective of the extent of any non-controlling interest. The
excess of the cost
of acquisition over the fair value of the Group's share of the
identifiable net assets acquired is recorded as goodwill. If the
cost of acquisition is less than the fair value of the net assets
of the subsidiary acquired, the difference is recognised directly
in profit and loss.
Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Unrealised
losses are also eliminated but considered an impairment indicator
of the asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the
policies adopted by the Group.
Share-based payments
The Company issues equity-settled share-based payments to
certain employees of the Group. A fair value for the equity settled
share awards is measured at the date of grant. The Group measures
the fair value using the valuation technique most appropriate to
value each class of award being a Black-Scholes pricing model. The
fair value determined at the grant date is expensed on a
straight-line basis over the vesting period, based on the Group's
estimate of the shares that will eventually vest and adjusted for
the effect of non-market based vesting conditions. The value of
shares issued to settle fees and finance costs has been measured by
reference to the fair value of services provided.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ('the functional
currency'). The consolidated financial statements are presented in
the British Pound ("Sterling"), which is the Group's presentation
currency. Given the Company's listing on the Alternative Investment
Market of the London Stock Exchange, the Directors consider that it
is appropriate to present the financial statements in Sterling.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit and
loss.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are not re-translated.
(c) Group companies
The results and financial position of all the Group entities
(none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
-- Assets, liabilities and equity for each balance sheet
presented are translated at the closing rate at the date of that
balance sheet;
-- income and expenses for each income statement are translated
at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the rate on the dates of the transactions); and
-- all resulting exchange differences are recognised as other
comprehensive income.
Cost of investment
The cost of an acquisition is measured at the fair values, on
the date of exchange, of assets given, liabilities incurred or
assumed, and equity instruments issued, plus any costs directly
attributable to the acquisition. At each balance sheet date, the
Company reviews the carrying amount of the investment to determine
whether there is any indication that the investment has suffered an
impairment loss. Any impairment loss is recognised as an expense
immediately.
Property, plant and equipment
Property, plant and equipment are stated at acquisition cost or,
as the case may be, production cost, reduced by accumulated
depreciation and impairment losses. Costs of acquisition / costs of
production include the expenses directly attributable to the
acquisition. All repairs and maintenance are reported in profit and
loss as expenditure in the financial year in which they were
incurred. The costs of production include all directly attributable
costs, as well as the appropriate proportion of the overheads
relating to production.
Depreciation is charged on the basis of the economic life of the
assets on a straight line basis as follows:
-- Office equipment, furniture & equipment 10% - 33%
-- Technical equipment & machinery 20%
-- Leasehold property improvements over the life of the lease,
or useful economic life where shorter
Additions in the financial year are depreciated from the time of
their acquisition.
The residual values and the useful lives of property, plant and
equipment are reviewed at each financial year-end and, if
applicable, are adjusted. When the carrying amount of an asset
exceeds its recoverable amount, the carrying amount is reduced to
the recoverable amount. To determine the recoverable amount, the
Group's management estimates expected future cash flows from each
cash generating unit and determines a suitable interest rate in
order to calculate the present value of those cash flows.
Gains and losses arising from the disposal of assets are
determined as the difference between the net disposal proceeds and
the carrying amount of the item and are recognized in the income
statement.
Intangible assets
Intangible assets are capitalised at acquisition cost and
amortised over their estimated economic life of the assets of three
years, on a straight-line basis.
A self-developed intangible asset is recognized if the following
criteria are fulfilled:
-- identification of the self-developed asset is possible;
-- the technical feasibility of completing the self-developed
asset so that it will be available for use or sale;
-- the availability of adequate technical, financial and other
resources to complete the development and to use or sell;
-- probability that the expected future economic benefits that
are attributable to the self-developed intangible asset will flow
to the entity; and
-- the development costs of the asset can be measured
reliably.
Self-developed intangible assets are amortised over the assumed
economic life of the assets, on a straight-line basis. If a
self-developed intangible asset is not recognized in accordance
with IAS 38, the development costs are expensed in the period in
which they are incurred.
Amortisation starts when the asset is available for use. The
capitalized costs include all directly attributable costs, as well
as reasonable parts of the overheads relating to production. If
applicable, received government grants are deducted from the
capitalized development costs in accordance with IAS 20.24.
Amortisation is charged to administrative expenses.
Self-developed intangible assets are tested for impairment
annually. Insofar as there are indications of an impairment for
other intangible assets, the planned amortisable intangible assets
shall be subjected to an impairment test and, if necessary, the
carrying amount reduced to the recoverable amount within the
meaning of IAS 36.
Impairment of non-financial assets
At each balance sheet date the Group reviews the carrying amount
of its property, plant and equipment and intangible assets to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss, if any. Where the asset does not
generate cash flows that are independent from other assets, the
Group estimates the recoverable amount of the cash-generating unit
to which the asset belongs. An intangible asset with an indefinite
life is tested for impairment annually and whenever there is an
indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than the carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised as income immediately, unless
the relevant asset is carried at a revalued amount in which case
the reversal of the impairment loss is treated as a revaluation
increase.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is determined using the first-in, first-out (FIFO)
method. The cost of finished goods and work in progress comprises
design costs, raw materials, direct labour, other direct costs and
related production overheads (based on normal operating capacity).
Net realisable value is the estimated selling price in the ordinary
course of business, less applicable variable selling expenses.
Customer-specific contracts
Accounting for customer-specific contracts is carried out in
accordance with IAS 11. If the result of a construction contract
can be reliably estimated, the revenue and expenses are reported in
accordance with the percentage of completion as per the reporting
date. This is usually determined from the ratio of the costs of the
contract incurred up to the reporting date in comparison with the
estimated overall costs of the contract, unless this would lead to
a distortion in the presentation of the percentage of completion.
Insofar as the result of a contract cannot be reliably estimated,
the proceeds of the contract are to be recorded only in the amount
of the costs of the contract incurred which are likely to be
collectible.
Where it is probable that the total cost of the construction
contract will exceed the total contract revenue the expected loss
is recognised immediately as an expense in the income
statement.
Trade receivables
Trade and other receivables are recorded at the time of their
initial recognition at fair value and subsequently at amortized
cost less any impairment in value that may be necessary. An
impairment in value in the case of trade and other receivables is
recognized if there are objective indications that the amount of
the debt due cannot be collected in full. The impairment in value
is recognized in profit and loss. Insofar as the reasons for value
adjustments made in previous periods no longer exist, corresponding
write-ups shall be made.
Deposits with financial institutions
Deposits with financial institutions are initially measured at
their fair value.
Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Trade and other payables
Trade and other payables, payables in respect of shareholders as
well as other payables, are initially valued at fair value and
subsequently at amortised cost.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
Where it is deemed that a host debt instrument contains an
embedded derivative, the embedded derivative is recognised
separately, initially at fair value, then fair valued through the
profit and loss.
Equity
Share capital represents the nominal value of shares that have
been issued. Share premium includes any premiums received on issue
of share capital. Any transaction costs associated with the issuing
of shares are deducted from share premium, net of any related
income tax benefits.
Taxes on income and revenue
Tax expenses are the aggregate amount of current taxes and
deferred taxes. Current taxes are measured in respect of the
taxable profit (tax loss) for a period. Current tax is measured
using tax rates that have been enacted or substantively enacted by
the balance sheet date.
Deferred tax liabilities are the future tax expense (tax income)
on the differences between the carrying amount of an asset or
liability in the balance sheet and its tax base. Deferred tax
liabilities are recognized for all taxable temporary differences
and deferred tax assets to the extent that it is probable that
taxable profit will be available against which the deductible
temporary difference can be utilised.
The carrying amount of a deferred tax asset is reviewed at each
balance sheet date and is reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to
allow the benefit of part, or all, of that deferred tax asset to be
utilized. Deferred tax liabilities and assets are measured at the
tax rates that are expected to apply to the period when the asset
is realized or the liability is settled, based on tax rates that
have been enacted or substantively enacted by the balance sheet
date. Deferred taxes are recognized in profit and loss, except to
the extent that it relates to items previously charged or credited
to equity.
Employee benefits
The Company makes discretionary contributions to the personal
pension plans of employees. The contributions are expensed on an
accruals basis.
Other provisions
Other provisions are made insofar as there is a constructive
obligation arising from past events and it is probable that an
outflow of resources will be required to settle the obligation and
the amount has been reliably estimated. The valuation of the
provisions is reviewed at each reporting date. Provisions for
guarantees are made in relation to individual cases.
Recognition of revenue and expenses
Revenue comprises revenue from the sale of goods and the
rendering of services. Revenue is measured by reference to the fair
value of consideration received or receivable by the Group for
goods supplied and services provided, excluding VAT, rebates and
trade discounts. Revenue is recognised at the point that the goods
or services have been provided to the customer. Recognition of
revenues from interest and interest expenses is made on an accruals
basis. Financing costs are recorded as expenses in the period in
which they are incurred. Research costs are expensed in the period
in which they are incurred in accordance with IAS 38.54. Expenses
for development costs that fulfil the criteria of IAS 38.57 are
capitalized (see Intangible assets above).
Royalty income
Royalty income is recognised on an accruals basis in accordance
with the substance of the relevant agreements.
Government grants
Grants from the government are recognised at their fair value
where there is a reasonable assurance that the grant will be
received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in
the income statement over the period necessary to match them with
the costs that they are intended to compensate. Government grants
for expenses already incurred are recognized as income in the
period in which the corresponding claim is created.
Leases
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the income statement on a
straight-line basis over the period of the lease.
Derivative financial instruments
All derivative financial instruments are accounted for at fair
value through profit and loss.
Conversion of debt instruments
On conversion of debt instruments the total consideration is
deemed to be the fair value of the liabilities extinguished in
accordance with the Companies Act.
Standards, amendments and interpretations not yet applied by
Proton Power Systems plc
The IASB and IFRIC have issued additional standards and
interpretations which are effective for periods starting after the
date of these financial statements. The following standards and
interpretations have yet to be adopted by the Group:
-- IFRS 9 Financial Instruments (effective 1 January 2015).
-- IFRS 10 Consolidated Financial Statements (effective 1 January 2013).
-- IFRS 11 Joint Arrangements (effective 1 January 2013)
-- IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2013).
-- IFRS 13 Fair Value Measurement (effective 1 January 2013).
-- IAS 19 Employee Benefits (Revised June 2011) (effective 1 January 2013).
-- IAS 27 (Revised), Separate Financial Statements (effective 1 January 2013).
-- IAS 28 (Revised), Investments in Associates and Joint Ventures (effective 1 January 2013).
-- Presentation of Items of Other Comprehensive Income -
Amendments to IAS 1 (effective 1 July 2012).
-- Disclosures - Offsetting Financial Assets and Financial
Liabilities - Amendments to IFRS 7 (effective 1 January 2013).
-- Offsetting Financial Assets and Financial Liabilities -
Amendments to IAS 32 (effective 1 January 2014).
-- Mandatory Effective Date and Transition Disclosures -
Amendments to IFRS 9 and IFRS 7 (effective 1 January 2015).
-- Government Loans - Amendments to IFRS 1 (effective 1 January 2013).
-- IFRIC 20 Stripping Costs in the Production Phase of a Surface
Mine (effective 1 January 2013).
-- Annual Improvements 2009-2011 Cycle (effective 1 January 2013).
-- Transition Guidance - Amendments to IFRS 10, IFRS 11 and IFRS
12 (effective 1 January 2013).
-- Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS
27 (effective 1 January 2014). Not yet adopted by the EU.
EU adoption date for IFRS 10, IFRS 11, IFRS 12, IAS 27 (Revised)
and IAS 28 (Revised) is 1 January 2014.
The revised standards will be adopted in the Group's
consolidated financial statements, where relevant for the period
beginning 1 January 2013, although are not anticipated to have a
significant impact on the Group.
3. Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. Estimates and judgements are
continually evaluated and are based on historical experience and
other factors, including expectations of future events that are
believed to be reasonable under the circumstances. The estimates
and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial period are discussed below.
Recognition of development costs
Self developed intangible assets are recognised where the Group
can estimate that it is probable that future economic benefits will
flow to the entity. See Note 10.
Valuation technique
Market capitalisation is taken to equate to fair value less
costs to sell in the assessment of the carrying value of the
investment in the Company. See note 12.
Classification and fair value of financial instruments
The Group uses judgement to determine the classification of
certain financial instruments, in particular convertible loans
advanced during the year. Judgement is applied to determine whether
the instrument is a debt, equity or compound instrument and whether
any embedded derivatives exist within the contracts.
Judgements have been made regarding whether the conversion
feature meets the "fixed for fixed" test in each instrument. In the
case of each instrument it is deemed it is not met on the basis
that the loan is in Euros and shares are in Sterling.
The Group uses valuation techniques to measure the fair value of
these financial instruments. In applying these valuation
techniques, management use estimates and assumptions that are, as
far as possible, consistent with observable market data. Where
applicable market data is not observable, management uses its best
estimate about the assumptions that market participants would make.
These estimates may vary from the actual prices that would be
achieved in an arm's length transaction at the reporting date.
4. Segmental information
An operating segment is a group of assets and operations engaged
in providing products or services that are subject to risks and
returns that are different from those of other operating segments
for which discreet financial information is available and is
regularly reviewed by the Chief Operating Decision Maker
("CODM").
Based on an analysis of risks and returns, the Directors
consider that the Group has only one identifiable operating
segment, green energy.
All non-current assets are located in Germany.
Revenue from external customers
2012 2011
GBP'000 GBP'000
Germany 918 835
Rest of Europe 2 40
920 875
Alster-Touristik GmbH represented 10.78% of the Group's revenue
in 2012.
The results as reviewed by the CODM for the only identified
segment are as presented in the financial statements with the
exception of the revaluation loss (2011: gain) on the fair value of
the embedded derivative of GBP14,000 (2011: GBP3,735,000) and the
associated impact on the balance sheet.
5. Loss on ordinary activities before taxation
2012 2011
GBP'000 GBP'000
Loss on ordinary activities before taxation is
stated
after charging
Depreciation and other amounts written off property,
plant and equipment and intangible assets:
Owned 276 283
Hire of other assets - operating leases 196 196
Pension contributions 39 36
Foreign exchange loss - 131
Change in fair value of embedded derivatives 14 -
after crediting
Foreign exchange gains (20) -
Grants from public bodies (670) (775)
Change in fair value of embedded derivatives - (3,735)
6. Auditor's remuneration
2012 2011
GBP'000 GBP'000
Audit services
Fees payable to the Company's auditor for the audit
of the parent company and consolidated accounts 18 21
Fees payable to the Company's auditor and its associates
for other services:
All other services 2 3
20 24
7. Staff numbers and costs
The average number of persons employed by the Group (including
Directors) during the year, analysed by category, was as
follows:
Number of employees
Group Company
2012 2011 2012 2011
Development and construction 39 37 - -
Administration and sales 17 16 5 5
56 53 5 5
The aggregate payroll costs of these persons were as
follows:
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Wages and salaries 2,448 2,190 15 15
Share based payments 139 84 40 21
Share options forfeited - (7) - -
Social security costs 416 385 1 1
Other pension costs 39 36 - -
3,042 2,688 56 37
Share based payments
The Group has incurred an expense in respect of 23,000,000
(2011: 20,790,000) share options during the year issued to
employees as follows:
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Share options 139 77 40 21
Shares - - - -
139 77 40 21
Details of share options granted during 2012 are disclosed in
the Directors' report on page 11 and the Remuneration report on
pages 14 to 15. The cost of these options to the Group is being
written off over a two year period from the date of grant at which
point they become exercisable.
At 31 December 2012 the Group operated a single share option
scheme ("SOS"). The SOS allows the Company to grant options to
acquire shares to eligible employees. Options granted under the SOS
are unapproved by HM Revenue & Customs. The maximum number of
shares over which options may be granted to an employee under the
SOS may not be greater than 10 per cent of the Company's issued
share capital at the date of grant when added to options or awards
granted in the previous 10 years. The exercise of options can take
place at any time after the second anniversary of the date of
grant. Options can not, in any event, be exercised after the tenth
anniversary of the date of grant.
All share-based employee remuneration will be settled in equity.
The Group has no legal or constructive obligation to repurchase or
settle options. Share options and weighted average exercise price
are as follows for the reporting periods presented:
2012 2011
Weighted Weighted
average exercise average exercise
Number price Number price
GBP GBP
Opening balance 28,355,000 0.063 8,085,000 0.122
Granted 23,000,000 0.020 20,790,000 0.041
Forfeited (340,000) 0.100 (520,000) 0.100
Closing balance 51,015,000 0.043 28,355,000 0.063
At 31 December 2012 255,000 of the above options were
exercisable at an exercise price of 77.5p and 79p.
The fair values of options granted were determined using the
Black-Scholes valuation model. Significant inputs into the
calculation include a weighted average share price and exercise
prices as illustrated above. Furthermore, the calculation takes
into account future dividends of nil and volatility rates of
between 50% and 94%, based on expected share price. Risk-free
interest rate was determined between 4.000% and 5.125% for the
various grants of options. It is assumed that options granted under
the SOS have an average remaining life of 14 months (2011: 18
months).
The underlying expected volatility was determined by reference
to the historical data, of the Company. No special features
inherent to the options granted were incorporated into measurement
of fair value.
Directors' remuneration
Details of Directors' remuneration are given in the Remuneration
report on pages 14 to 15.
The remuneration of key management of the Group was as
follows:
Group
2012 2011
GBP'000 GBP'000
Wages and salaries including social
security contributions 212 275
Share-based payment charge 130 35
342 310
The Company has no key management other than Directors.
8. Taxation
Due to losses within the Group, no expenses for tax on income
were required in either the current or prior periods.
2012 2011
GBP'000 GBP'000
Tax reconciliation
Loss before tax (4,172) (1,592)
Expected tax credit at 27.65 % (2011: 30.92%) (1,153) (492)
Expenses not deductible / income not chargeable
for tax purposes (6) (1,148)
Tax losses carried forward 1,159 1,640
Tax charge - -
9. Loss per share
Basic loss per share is calculated by dividing the loss
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year.
Diluted loss per share is calculated by adjusting the weighted
average number of ordinary shares outstanding to assume conversion
of all dilutive potential ordinary shares. The Company has one
category of dilutive potential ordinary shares, share options;
however, these have not been included in the calculation of loss
per share because they are anti dilutive for these periods.
2012 2011
Basic Diluted Basic Diluted
GBP'000 GBP'000 GBP'000 GBP'000
Loss attributable to equity holders
of the Company (4,172) (4,172) (1,592) (1,592)
Weighted average number of ordinary
shares in issue (thousands) 639,239 639,239 619,895 619,895
Effect of dilutive potential ordinary
shares from share options and convertible
debt (thousands) - - - 9,961
Adjusted weighted average number
of ordinary shares 639,239 639,239 619,895 629,856
Pence per Pence per Pence per Pence per
share share share share
Loss per share (pence per share) (0.7) (0.7) (0.3) (0.3)
10. Intangible assets - Group
Copyrights,
trademarks
and other
intellectual
property Development
rights costs Total
GBP'000 GBP'000 GBP'000
Cost
At 1 January 2011 94 1,454 1,548
Exchange differences (3) (32) (35)
Additions 24 - 24
At 31 December 2011 115 1,422 1,537
At 1 January 2012 115 1,422 1,537
Exchange differences (2) (32) (34)
Additions 48 - 48
Disposals - (62) (62)
At 31 December 2012 161 1,328 1,489
Amortisation
At 1 January 2011 66 1,235 1,301
Exchange differences (2) (31) (33)
Charged in year 19 104 123
At 31 December 2011 83 1,308 1,391
At 1 January 2012 83 1,308 1,391
Exchange differences (1) (19) (20)
Charged in year 29 69 98
Disposals - (30)) (30)
At 31 December 2012 111 1,328 1,439
Net book value
At 31 December 2012 50 - 50
At 31 December 2011 32 114 146
At 1 January 2011 28 219 247
Self-developed intangible assets in the amount of GBP48,000
(2011: GBP24,000) are recognized in the reporting year, because the
prerequisites of IAS 38 have been fulfilled.
The useful life of self-developed intangible assets is three
years from completion of the asset.
For self-developed intangible assets brought into use no
indications of impairment in value that would trigger an impairment
test arose in the reporting year. There were no self-developed
intangible assets (2011: GBPnil) not yet been brought into use.
There are no individually significant intangible assets.
11. Property, plant and equipment - Group
Technical
Leasehold equipment Office & Self-constructed
property & machinery other equipment plant & machinery Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2011 256 1,054 587 - 1,897
Exchange differences (6) (37) (14) (2) (59)
Additions 13 75 19 78 185
Disposals - (12) - - (12)
At 31 December 2011 263 1,080 592 76 2,011
At 1 January 2012 263 1,080 592 76 2,011
Exchange differences (6) (13) (13) (2) (34)
Additions 49 37 50 15 151
Transfers 73 - - (73) -
Disposals - (8) (1) - (9)
At 31 December 2012 379 1,096 628 16 2,119
Depreciation
At 1 January 2011 67 652 531 - 1,250
Exchange differences (2) (30) (12) - (44)
Charge for year 22 111 27 - 160
Disposals - (12) - - (12)
At 31 December 2011 87 721 546 - 1,354
At 1 January 2012 87 721 546 - 1,354
Exchange differences (2) (4) (13) - (19)
Charge for year 31 116 31 - 178
Disposals - (1) (2) - (3)
At 31 December 2012 116 832 562 - 1,510
Net book value
At 31 December 2012 263 264 66 16 609
At 31 December 2011 176 359 46 76 657
At 1 January 2011 189 402 56 - 647
12. Investment in subsidiary undertaking
2012 2011
Company GBP'000 GBP'000
Shares in Group undertaking
Cost
At beginning of year 36,664 33,436
Additions 3,614 3,228
At end of year 40,278 36,664
Impairment
At beginning of year 20,237 26,839
Charge for the year / (Write back) 8,854 (6,602)
At end of year 29,091 20,237
Net book value
At end of year 11,187 16,427
On 31 October 2006 the Company acquired the entire share capital
of Proton Motor Fuel Cell GmbH, a company incorporated in Germany.
The cost of investment comprises shares issued to acquire the
company valued at the listing price of 80p per share, together with
costs relating to the acquisition and subsequent capital
contributions made to the subsidiary.
Following a review of the Company's assets the Board has
concluded that there are sufficient grounds for its investment in
the subsidiary undertaking to be subject to an impairment review
under IAS 36. In arriving at the charge (2011: credit) in the year
of GBP8,854,000 (2011: GBP6,602,000) the Board has determined the
recoverable amount by reference to the fair value of the asset less
costs to sell (see note 3).
13. Trade and other receivables
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 116 135 - -
Other receivables 13 2 4 2
Prepayments and accrued income 12 12 11 11
141 149 15 13
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair values.
In addition some of the unimpaired trade receivables are past
due as at the reporting date. The age of financial assets past due
but not impaired is as follows:
Group
2012 2011
GBP'000 GBP'000
Not more than three months 42 60
14. Cash and cash equivalents
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and on hand 185 293 3 1
15. Trade and other payables
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 117 189 3 3
Other payables 65 40 - 2
Accruals and deferred income 345 282 30 60
527 511 33 65
The Directors consider that the carrying amount of trade and
other payables approximates to their fair values.
16. Borrowings
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Loan
Current and total borrowings 4,468 1,999 4,468 1,999
During the year the Company has drawn down EUR3,400,000 in
short-term loans from Roundstone Properties Limited. These loans
were of 60 days' duration, interest free, unsecured and were to be
settled either in cash or by the issue of ordinary share capital.
These instruments were classified as a debt host instrument with an
embedded derivative being the conversion feature. Due to the short
term nature of the instrument, the embedded derivative was of
immaterial value.
On 1 February 2012 the company converted EUR1,400,000 in short
term loans to ordinary shares of 1p each at a price of 6p per
share.
On 1 October 2012 the Group and Company entered into a new loan
agreement with Roundstone Properties Limited which combined all
existing Roundstone Properties Limited's loans and provided total
facilities of EUR5,600,000. Further draw downs under this agreement
during the year were EUR1,100,000. The loans under this facility
are repayable on 30 October 2015 and carry interest at 10% per
annum. Roundstone Properties Limited has the option to convert
accrued interest and outstanding interest at any time into ordinary
shares in the Company at 2p per share.
These instruments were classified as a debt host instrument with
an embedded derivative being the conversion feature. The embedded
derivative has been fair valued and the residual value of the
instrument had been recognised as debt. The debt has subsequently
been measured at amortised cost.
17. Embedded derivatives
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Embedded derivatives on convertible
interest 228 - 228 -
The embedded derivatives relate to the conversion features
attached to convertible interest as disclosed under note 16. The
derivatives are initially recognised at fair value and fair valued
at each subsequent accounting reference date.
The embedded derivatives fall within the fair value hierarchy
level 3 which means that inputs for the liability are not all based
on observable market data (unobservable inputs). Details of
movements in the fair value of embedded derivatives are given in
note 28.
18. Deferred income tax - Group
2012 2011
GBP'000 GBP'000
Accelerated capital allowances - 32
Losses carried forward - (32)
- -
Deferred tax assets are recognised for tax loss carry-forwards
to the extent that the realisation of the related benefit through
future taxable profits is probable. The Group has not recognised
deferred income tax assets of GBP7,833,000 (2011: GBP6,902,000) in
respect of losses amounting to GBP4,403,000 (2011: GBP4,112,000)
and EUR32,140,000 (2011: EUR27,163,000).
19. Share capital
The share capital of Proton Power Systems plc consists of fully
paid Ordinary shares with a par value of GBP0.01 (2011; GBP0.01)
and Deferred Ordinary shares with a par value of GBP0.01. All
Ordinary shares are equally eligible to receive dividends and the
repayment of capital and represent one vote at the shareholders'
meeting of Proton Power Systems plc. Deferred Ordinary shares have
no rights other than the repayment of capital in the event of a
winding up. None of the parent's shares are held by any company in
the Group.
On 1 February 2012 19.343m ordinary shares of 1p each were
issued. This comprised the conversion of EUR1,400,000 in short term
loans to ordinary shares of 1p each at a price of 6p per share.
Details of share options in issue are given in Note 7.
The number of shares in issue at the balance sheet date is
639,238,776 (2011: 619,895,443) Ordinary shares of 1p each (2011:
1p each) and 327,963,452 (2011: 327,963,452) Deferred Ordinary
shares of 1p each.
Proceeds received in addition to the nominal value of the shares
issued during the year have been included in share premium, less
registration and other regulatory fees and net of related tax
benefits.
2012 2011
Deferred Deferred
Ordinary ordinary Ordinary ordinary
shares shares shares shares
No. No. No. No.
'000 GBP'000 '000 GBP'000 '000 GBP'000 '000 GBP'000
Shares issued and fully paid
At the beginning of the year 619,895 6,199 327,963 3,280 181,991 1,820 327,963 3,280
Share issue 19,344 193 - - 437,904 4,379 - -
639,239 6,392 327,963 3,280 619,895 6,199 327,963 3,280
20. Commitments
Neither the Group nor the Company had any capital commitments at
the end of the financial year, for which no provision has been
made. Total future lease payments under non-cancellable operating
leases are as follows:
2012 2011
Land and Land and
buildings Other buildings Other
Group GBP'000 GBP'000 GBP'000 GBP'000
Operating leases which expire:
Within one year - - - -
In the second to fifth years inclusive 1,340 - - -
After more than five years - - 1,361 -
1,340 - 1,361 -
21. Related party transactions
During the year ended 31 December 2012 the Group and Company
entered into the following related party transactions:
Group Company
Year ended 31 December Year ended 31 December
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Expenses
Roundstone Properties Limited effective
loan interest (209) (1,246) (209) (1,246)
At 31 December 2012 the Group and Company had the following
balances with related parties:
Group Company
Year ended 31 December Year ended 31 December
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Amounts due to
Roundstone Properties Limited borrowing
and embedded derivatives (see Note
16) (4,468) (1,999) (4,468) (1,999)
Further borrowings were drawn down during the year which
contained embedded derivatives. In accordance with IAS 39 these
have been fair valued resulting in a deemed distribution of GBPnil
(2011: GBP2,158,000) to Roundstone Properties Limited.
During the year the Company made capital contributions to Proton
Motor Fuel Cells GmbH of GBP3,614,000 (2011: GBP3,228,000).
22. Risk management objectives and policies
The Group's activities expose it to a variety of financial
risks:
-- foreign exchange risk;
-- credit risk; and
-- liquidity risk.
The Group's overall risk management programme focuses on the
unpredictability of cash flows from customers and seeks to minimise
potential adverse effects on the Group's financial performance. The
Board has established an overall treasury policy and has approved
procedures and authority levels within which the treasury function
must operate. The Directors conduct a treasury review at least
monthly and the Board receives regular reports covering treasury
activities. Treasury policy is to manage risks within an agreed
framework whilst not taking speculative positions.
The Group's risk management is co-ordinated at Proton Motor Fuel
Cell GmbH in close co-operation with the Board of Directors, and
focuses on actively securing the Group's short to medium term cash
flows by minimising the exposure to financial markets.
23. Foreign currency sensitivity
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the Euro and Sterling. Foreign exchange risk arises
from the Group's conversion of its parent Company assets and
liabilities denominated in Euros to the reporting currency of
Sterling.
The Group does not hedge either economic exposure or the
translation exposure arising from the profits, assets and
liabilities of Euro business.
Euro denominated financial assets and liabilities, translated
into Sterling at the closing rate, are as follows:
Year ended 31 December Year ended 31 December
2012 2011
EUR'000 GBP'000 EUR'000 GBP'000
Financial assets - - - -
Financial liabilities (5,459) (4,468) (2,755) (1,999)
Short-term exposure (5,459) (4,468) (2,755) (1,999)
The following table illustrates the sensitivity of the net
result for the year and equity with regard to the parent Company's
financial assets and financial liabilities and the Sterling/Euro
exchange rate. It assumes a +/- 9.07% change of the Sterling/Euro
exchange rate for the year ended at 31 December 2012 (2011: 8.88%).
This percentage has been determined based on the average market
volatility in exchange rates in the previous 12 months. The
sensitivity analysis is based on the parent Company's foreign
currency financial instruments held at each balance sheet date.
If the Euro had strengthened against Sterling by 9.07% (2011:
8.88%) then this would have had the following impact:
Year ended Year ended
31 December 31 December
2012 2011
GBP'000 GBP'000
Net result for the year (405) (205)
Equity (405) (205)
If the Euro had weakened against Sterling by 9.07% (2011: 8.88%)
then this would have had the following impact:
Year ended Year ended
31 December 31 December
2012 2011
GBP'000 GBP'000
Net result for the year 405 205
Equity 405 205
Exposures to foreign exchange rates vary during the year
depending on the value of Euro denominated loans. Nonetheless, the
analysis above is considered to be representative of Group's
exposure to currency risk.
24. Credit risk analysis
Credit risk is managed on a Group basis. Credit risk arises from
cash and deposits with banks, as well as credit exposures to
customers, including outstanding receivables and committed
transactions. For banks and financial institutions, only
independently rated parties with a minimum rating of 'A' are
accepted. If customers are independently rated, these ratings are
used. Otherwise, if there is no independent rating, risk control
assesses the credit quality of the customer, taking into account
its financial position, past experience and other
factors.Individual risk limits are set based on internal or
external ratings in accordance with limits set by the Board.
No credit limits were exceeded during the reporting period, and
management does not expect any losses from non-performance by these
counterparties. The Directors do not consider there to be any
significant concentrations of credit risk.
The Group's exposure to credit risk is limited to the carrying
amount of financial assets recognised at the balance sheet date, as
summarised below:
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 185 293 3 1
Trade and other receivables 129 137 4 2
Short-term exposure 314 430 7 3
The Group continuously monitors defaults of customers and other
counterparties, identified either individually or by group and
incorporates this information into its credit risk controls. Where
available at reasonable cost, external credit ratings and/or
reports on customers and other counterparties are obtained and
used. The Group's policy is to deal only with creditworthy
counterparties.
The Group's management considers that all the above financial
assets that are not impaired for each of the reporting dates under
review are of good credit quality, including those that are past
due.
None of the Group's financial assets are secured by collateral
or other credit enhancements.
In respect of trade and other receivables, the Group is not
exposed to any significant credit risk exposure to any single
counterparty or any group of counterparties having similar
characteristics. The credit risk for liquid funds and other
short-term financial assets is considered negligible, since the
counterparties are reputable banks with high quality external
credit ratings.
25. Liquidity risk analysis
Prudent liquidity risk management includes maintaining
sufficient cash and the availability of funding from an adequate
amount of committed credit facilities. The Group maintains cash to
meet its liquidity requirements.
The Group manages its liquidity needs by carefully monitoring
scheduled debt servicing payments for long-term financial
liabilities as well as cash-outflows due in day-to-day business.
Liquidity needs are monitored in various time bands, on a
day-to-day and week-to-week basis, as well as on the basis of a
rolling 30-day projection. Long-term liquidity needs for a 180-day
and a 360-day lookout period are identified monthly.
As at 31 December 2012, the Group's liabilities have contractual
maturities which are summarised below:
Within 6
months 6 to 12 months 1 to 5 years
GBP'000 GBP'000 GBP'000
Trade payables 117 - -
Other short term financial liabilities 64 - -
Borrowings and embedded derivatives
on convertible loans - - 5,138
This compares to the maturity of the Group's financial
liabilities in the previous reporting period as follows:
Within 6
months 6 to 12 months 1 to 5 years
GBP'000 GBP'000 GBP'000
Trade payables 189 - -
Other short term financial liabilities 40 - -
Borrowings and embedded derivatives
on convertible loans 853 1,146 -
The above contractual maturities reflect the gross cash flows,
which may differ to the carrying values of the liabilities at the
balance sheet date. Borrowings and embedded derivatives on
convertible loans have been combined as they relate to the same
instruments. Contractual maturities have been assumed based on the
assumption that the lender does not convert the loans into equity
before the repayment date.
26. Financial instruments
The assets of the Group and Company are categorised as
follows:
As at 31 December 2012 Group Company
Non-financial Non-financial
assets assets
/ financial / financial
assets assets
not in not in
scope scope
Loans of IAS Loans of IAS
and receivables 39 Total and receivables 39 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Intangible assets - 50 50 - - -
Property, plant and equipment - 609 609 - - -
Investment in subsidiary - - - - - -
Inventories - 218 218 - - -
Trade and other receivables 129 12 141 4 11 15
Cash and cash equivalents 185 - 185 3 - 3
314 889 1,203 7 11 18
================ ============= ======= ================ ============= =======
As at 31 December 2011 Group Company
Non-financial Non-financial
assets assets
/ financial / financial
assets assets
not in not in
scope scope
Loans of IAS Loans of IAS
and receivables 39 Total and receivables 39 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Intangible assets - 146 146 - - -
Property, plant and equipment - 657 657 - - -
Investment in subsidiary - - - - 16,427 16,427
Inventories - 149 149 - - -
Trade and other receivables 137 12 149 2 11 13
Cash and cash equivalents 293 - 293 1 - 1
430 964 1,394 3 16,438 16,441
================ ============= ======= ================ ============= =======
The liabilities of the Group and Company are categorised as
follows:
As at 31
December
2012 Group Company
Financial Financial
liabilities liabilities
valued valued
at fair Liabilities at fair Liabilities
Financial value not within Financial value not within
liabilities through the scope liabilities through the scope
at amortised profit of IAS at amortised profit of IAS
cost and loss 39 Total cost and loss 39 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade and other
payables 182 - 345 527 3 - 30 33
Borrowings 4,468 - - 4,468 4,468 - - 4,468
Embedded
derivatives
on convertible
loans - 228 - 228 - 228 - 228
4,650 228 345 5,223 4,471 228 30 4,729
============= ============ =========== ======= ============= ============ =========== =======
As at 31
December
2011 Group Company
Financial Financial
liabilities liabilities
valued valued
at fair Liabilities at fair Liabilities
Financial value not within Financial value not within
liabilities through the scope liabilities through the scope
at amortised profit of IAS at amortised profit of IAS
cost and loss 39 Total cost and loss 39 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade and other
payables 229 - 282 511 5 60 65
Borrowings 1,999 - - 1,999 1,999 - - 1,999
Embedded
derivatives
on convertible
loans - - - - - - - -
2,228 - 282 2,510 2,004 - 60 2,064
============= ============ =========== ======= ============= ============ =========== =======
Financial liabilities measured at fair value based on level
3.
27. Capital management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern, provide returns
for shareholders and benefits to other stakeholders and to maintain
a structure to optimise the cost of capital. The Group defines
capital as debt and equity. In order to maintain or adjust the
capital structure, the Group may consider: the issue or sale of
shares or the sale of assets to reduce debt.
The Group routinely monitors its capital and liquidity
requirements through leverage ratios consistent with industry-wide
borrowing standards. There are no externally imposed capital
requirements during the period covered by the financial
statements.
28. Financial liabilities measured at fair value based on Level 3
Fair value measurement at
the end of the reporting
period
Financial liabilities Total
at fair value
through profit
or loss
Embedded derivatives
GBP'000 GBP'000
Total gains for the period included in
profit or loss for liabilities held at
the end of the reporting period 1,818 1,818
Opening balance at 1 January 2011 (5,669) (5,669)
Issues (2,342) (2,342)
Total gains or losses
- in profit or loss 3,735 3,735
- in other comprehensive income - -
Settlements 4,276 4,276
Closing balance at 31 December 2011 - -
===================== =======
Total gains for the period included in
profit or loss for liabilities held at
the end of the reporting period 3,735 3,735
Opening balance at 1 January 2012 - -
Issues (214) (214)
Total gains or losses
- in profit or loss (14) (14)
- in other comprehensive income - -
Settlements
Closing balance at 31 December 2012 (228) (228)
===================== =======
Total gains or losses for the period
included in profit or loss for liabilities
held at the end of the reporting period (14) (14)
Gains or losses included in profit or loss for the periods
(above) are presented in fair value gains on embedded derivatives
within the income statement.
29. Post balance sheet events
On 7 February 2013 the Group acquired 100% of the issued share
capital of SPower Holding GmbH and its subsidiary SPower GmbH
(together "SPower") for a cash consideration of EUR5.00.
Established in 2007, SPower serves IT, Telecoms, public
infrastructure and healthcare customers in Germany, Europe and
Middle East with power supply solutions for DC and AC power demand.
Beside the business for power supply, SPower also offers solutions
for Solar Systems as well as a new product line for Solar Energy
Storage, which will be released to the market in the second quarter
of 2013. SPower is also planning to launch a new high power
uninterruptible power supply product line in 2013.
SPower will be completely integrated into the Proton Motor
division. Sales, after sales service and logistics will be
strengthened. Cross selling synergies will be optimised with
products from Proton Motor being offered to the existing SPower
customers.
The Board of Proton Power believes that the acquisition will
strengthen and enlarge Proton Motor's business division and provide
it with the opportunity, in the future, to add a fuel cell based
option to the SPower product line. Sales and service of
solutions will be delivered by a single enlarged sales team and
this will allow the Company to target the Middle Eastern and South
American markets. SPower expects to report a turnover of circa EUR3
million for the year to 31 December 2012 and to be breaking even at
the operating profit level. Also through the integration with
Proton Motor which is expected to result in cost synergies of
approximately EUR200,000 per annum, management expects that SPower
will increase
turnover to around EUR5 million and become profitable in the
year to December 2013.
At this stage, the Directors have yet to finalise the business
combinations acquisition accounting for SPower due to the elapsed
time since the acquisition date of 7 February 2013 and, as such,
the required fair value accounting and disclosures required by
IFRS3 (revised) have yet to be completed. They will be presented in
the group's interim financial statements for the six months ending
30 June 2013.
Dr. Faiz Nahab and Thomas Melczer, who are both directors of
Proton Power, each hold approximately 41.8 per cent. of SPower
share capital and will each receive a nominal total consideration
of EUR1 for their SPower shares. Dr. Faiz Nahab has also
provided, and will continue to provide, a guarantee for a bank
loan to SPower of EUR2.2 million. In addition, Dr. Faiz Nahab is
connected to Roundstone Properties Limited, a substantial
shareholder in the Company.
On 30 April 2013 the Company entered into a loan agreement with
Roundstone Properties Limited which provides a facility of
EUR2,384,000 to the Company which is to be used primarily to
discharge the existing bank loan to SPower referred to above. The
loan is unsecured, carries interest at 2% above LIBOR and is
repayable on 30 April 2016.
A copy of the general accounts of the Company is available from
the Company's website at www.protonpowersystems.com and is being
posted to shareholders today together with a notice of annual
general meeting to be held at the offices of Westhouse Securities,
One Angel Court, London, EC2R 7HT at 1.00pm on 5 June 2013.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFFFUDFDSESI
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