THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED
BY THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER
ARTICLE 7 OF THE EU REGULATION 596/2014 AS IT FORMS PART OF THE UK
LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("MAR").
UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY
INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE
PUBLIC DOMAIN.
26 March 2024
AFC Energy PLC
("AFC Energy" or the
"Company")
Final Results for year ended 31 October
2023
AFC Energy (AIM: AFC), a leading provider of hydrogen
power generation technologies, is pleased to announce its results
for the year ended 31 October 2023 ("FY 2023"). The results
are included below and copies are available at
www.afcenergy.com.
Highlights:
· 2023
strategy focussed on market penetration with key agreements signed
to expand distribution channels for the fuel cell division,
resulting in a £27m orderbook[1]
for 30kW S Series H-Power Generators and ancillary equipment
· Signed
first Heads of Terms with Speedy Hire for the formation of Speedy
Hydrogen Solutions
o 50:50 joint venture
with AFC Energy executed after year end
o Initial order
commitment of £2.0m with first year projected orders of £4.7m
· Signed
exclusive distribution agreement with TAMGO, an entity wholly owned
by the Zahid Group, focussed on key markets in Saudi Arabia, the
Middle East and Northern Africa (MENA) region
· Signed
first order from Acciona for 30kW H-Power Generator and 45kWh
battery energy storage system following successful H-Power
Tower trial in 2023
· Modest
revenue of £0.2m (2022: £0.6m) due to focus on market penetration
which led to material growth in current customer orderbook
o 200kW S+ Series
generator (ABB) deferred revenue of £1.4m (2022: £1.6m)
o Loss after tax of
£17.5m (2022: £16.4m)
· Receipt
of first S+ Series fuel cell stacks from 3rd party
contract manufacturer for ABB's initial 200kW H-Power Generator
· Completed
strategic supplier qualification for all key H-Power Generator
components - positioning for scale up with each selected on ability
to deliver +1,000 generators worth of components per annum
·
Significant qualifying R&D investment in 2023 of £8.5m (2022:
£9.0m), with £4.1m R&D tax credits received (2022: £0.5m)
·
Engineered and built world's largest modular ammonia cracker
currently in operation (commissioned December 2023)
· Grant
award of £4.3m from the UK Government under its red diesel scheme
which aims to displace diesel in the construction, quarrying and
mining sectors
· Strong
balance sheet with £27.4m of cash at period end (2022: £40.2m)
Post Period
Developments
· Completed
design and engineering on 30kW H-Power Generator, with successful
Factory Acceptance Testing complete
· S Series
fuel cell operation cost reductions achieved
o Reduced £/kW capital
cost of H-Power Generator by 50% since 2023 H-Power Tower
o Achieved 16%
improvement in fuel efficiency, which will drive material savings
for customers' total cost of ownership versus prior year
measurement
· Company's
first third party Attestation of Conformity for CE Mark from TUV
SUD for 30kW H-Power Generator
· Next
generation ammonia cracker on test and delivering material
improvements in performance
Outlook
· 2024 is
focussed on delivery. Targeting sales to Speedy Hydrogen
Solutions and Acciona initially to meet growth in UK and European
construction demand
o First customer hires
through Speedy Hydrogen Solutions
o Delivery of first
50kVA H-Power Generator to Acciona
· Receipt
and delivery of first orders from TAMGO to meet the accelerated
growth in Saudi offgrid power demand
· 200kW S+
Series generator, part funded by ABB, currently in build and test
phase with first operation targeted for H1 2024
·
Confirmation of manufacturing partners for scaled H-Power
production
· Ammonia
cracker validation and announcement of first development and
deployment partners
[1]
As at
the date of publication, comprising committed and uncommitted
elements within existing contracts
Adam Bond, Chief
Executive of AFC Energy, said:
"Validation of (i)
our H-Power Generator business model, (ii) customer demand, (iii)
technology and (iv) route to market were all key aims of
2023. Twelve months later, our contracted order book,
multiple routes to market and successful product deployments
highlight the tangible successes achieved by AFC Energy over the
year.
Never before has
customer pull to displace diesel generators been stronger, driven
by Government policy, tendering requirements, carbon reduction
commitments and emissions based regulations. Together with
our new distribution partners, including Speedy Hire and TAMGO, we
are confident of the Company's robust commercialisation
strategy.
We continue to
target further capital cost reductions, manufacturing scale up
partners and newly announced international dealerships during 2024,
giving us confidence in delivering contracted customer deployments
and revenue growth.
Together with our
fuel processing division's market leading modular ammonia cracking
technology and the partners we are currently in discussion with who
have expressed interest in the technology, we continue to believe
the true value of this technology platform is not yet reflected in
the Company's value and as a Board, we are reviewing options to
capitalise on this unrealised value.
We are well placed
to build on the foundations set in 2023 and look forward to the
successful deliveries of our new H-Power Generators into the hands
of customers throughout the remainder of the 2024 calendar
year."
For further information, please
contact:
AFC Energy plc
Adam Bond (Chief Executive
Officer)
|
+44 (0) 14
8327 6726
investors@afcenergy.com
|
Peel Hunt LLP - Nominated
Adviser and Joint Broker
Richard Crichton / Georgia
Langoulant / Brian Hanratty
|
+44 (0)
207 418 8900
|
Zeus - Joint Broker
David Foreman / James Hornigold
(Investment Banking)
Dominic King (Corporate Broking) /
Rupert Woolfenden (Sales)
|
+44 (0)
203 829 5000
|
RBC Capital Markets - Joint
Broker
Matthew Coakes / Teri Su
Eduardo Famini / Jack
Wood
FTI Consulting - Financial
PR Advisors
Ben Brewerton / Tilly Abraham / Evie
Taylor
|
+44 (0) 20
7653 4000
+44 (0)
203 727 1000
afcenergy@fticonsulting.com
|
|
|
|
|
About AFC
Energy
AFC Energy plc is a leading provider of
hydrogen energy solutions, to provide clean electricity for on and
off grid power applications. The Company's fuel cell technology is
targeting near term commercial deployment across the construction
and temporary power markets with longer term opportunities in
electric vehicle charging, maritime and data centres as part of a
portfolio approach to the decarbonisation of society's growing
electrification needs. The Company's proprietary ammonia
cracking technology further highlights emerging opportunities
across the distributed hydrogen production market with a focus on
hydrogen's role in supporting the decarbonisation of hard to abate
industries.
Chair's
Report
Leading the
transition
COP 28 was held in Dubai in 2023 and renewed the
focus on the global need to decarbonise and the opportunities this
is creating. AFC Energy was represented by our CEO, Adam Bond, and
with hydrogen high on the COP agenda, there was a lot of interest
in our technology and products. It was also a great backdrop for
the fuel cell and then fuel processing announcements we made around
the time.
Strategic
development
The construction sector remains our primary
commercial focus due to its reliance on diesel generators and the
growing pressure to displace diesel when tendering for
contracts.
To this end, the joint venture announced with Speedy
Hire combines perfectly their marketing and logistical
strength with our hydrogen fuelled equipment and
technical expertise.
The first H-Power Generator passed factory acceptance
testing in March 2024 and I'm delighted to report that feedback has
already been very positive, particularly from the potential JV
customers that have visited.
The Board
Graeme Lewis retired as chief financial officer and
resigned as a director from the board on 30 November 2022. I wish
to thank Graeme for his service and wish him well in
retirement.
Taking over from Graeme, Peter Dixon-Clarke joined us
on 1 December 2022, bringing with him his considerable fund raising
and transactional experience from across the energy sector.
Jim Gibson resigned on 9 June 2023, and I wish to
thank him for his five years of service. Jim's duties as chief
operating officer have been shared amongst the existing
C-suite.
This year saw the retirement of Joe Mangion as
nonexecutive and chair of the Audit Committee on 31 July 2023. I
wish to thank Joe for his six-years of service and wish him well in
his retirement.
Taking over from Joe on 1 August 2023, I'm delighted
to welcome Duncan Neale to the Board. Duncan has both the breadth
and depth of experience in the role and in the energy sector that
will serve the Company well as we look to scale.
Environmental,
Social and Governance (ESG)
A great deal of focus has understandably been on the
important role that the Company's products can play in
decarbonising the environment. However, as we grow and start to
manufacture in volume, we need to take further steps ourselves as a
company.
I am pleased that Monika Biddulph has taken on
leading ESG activity for the Board, and especially pleased by the
way that this has been embraced by all our employees.
Our
employees
I would like to thank our employees for their
continued commitment to what has been a milestone year.
Chief Executive Officer's
Report
Displacing
diesel
The 2023 financial year saw the global hydrogen
market grow with over half a trillion US dollars of new projects in
the pipeline to support industry's decarbonisation commitments.
In recognition of how this rapidly expanding industry
is evolving, and the growing importance of decarbonised
ammonia as a hydrogen carrier in the facilitation of
global trade, we have commenced consideration of standalone
divisions within AFC Energy reflecting both the consumption (fuel
cells) and production (fuel conversion or ammonia cracking) of
hydrogen. This delineation would reflect the fact that whilst there
is a clear overlap in technologies where ammonia cracking can
facilitate fuel cell deployments, there is also a growing number of
stand alone enquiries for the cracker technology that gives rise to
a value proposition that perhaps is not currently reflected in the
value of AFC Energy.
Across our fuel cell division, in the 2023 financial
year, ten first generation 10kW H-Power Towers were successfully
deployed to customer sites predominantly in the construction
sector. The aim of these deployments was to:
· validate
the operation of the S Series fuel cell technology in the form of
generators;
· validate
the plant hire business model for the UK construction market;
· validate
the pain points and drivers for uptake of hydrogen powered fuel
cell generators;
· obtain
valuable customer feedback to build into subsequent H-Power
Generator platforms;
· generate
nominal revenue from the weekly rental of H-Power Towers; and
· validate a
contractual order book of new generator orders.
The success of these first generation trials
evidenced industry demand for our zero emission generators, which
was the impetus behind our initial Heads of Agreement with Speedy
Hire signed in July 2023 (which was subsequently converted to a
joint venture in the form of Speedy Hydrogen Solutions post year
end) and first commercial orders from Acciona and Speedy Hydrogen
Solutions (post year end). These partnerships provided valuable
insights that informed the 30kW generator product which, post year
end, culminated in delivery of the Company's first Factory
Acceptance Test (announced in March 2024) and its first independent
Attestation of Conformity for CE Mark from global certification
agency, TUV SUD (March 2024) - both massive achievements for the
Company.
This strategy has proven highly successful and whilst
not reflected in the earned revenue in the 2023 financial year, can
be evidenced in the order book of £27m as at the date of this
report highlighting both committed and uncommitted orders on
existing contracts for S Series generators derived from customer
contracts including Acciona and Speedy Hydrogen Solutions. This
order book would not have been possible without the investment of
time and resources throughout 2023.
In parallel with customer deployments was a programme
of cost reduction that successfully represented a 50% fall in
component and material costs brought about by engineering and
scaled component procurement. This cost down approach to the
H-Power Generator platform has continued to evidence further value
enhancements into 2024, including the confirmation of a robust and
globally diversified supply chain across all key components
positioning AFC Energy well for manufacturing scale up.
The growing displacement of the global diesel
generator market represents a US$20bn per annum opportunity which,
through tightened regulation and emission standards, corporate
sustainability targets, and rising costs of compliance, makes AFC
Energy's H-Power Generator an increasingly viable alternative to
support industry's roadmap to a decarbonised future.
The vast adoption of diesel generation by industry,
whether for prime or backup power, creates a sizeable
prize to chase, however our immediate focus remains
on the construction market with its immediate decarbonisation
challenges.
Throughout this overview, a theme resonates with all
our partners, that the time to displace diesel is now and whilst it
will take time to transition from the material sunk cost in diesel
generators in the market today, the pressure to find alternative
off-grid power solutions is imminent.
Our fuel conversion division has also reached new
milestones during the course of the year culminating in the launch
of the world's largest modular, scalable ammonia cracker platform
in late 2023. Much of 2023 was spent in the design, engineering and
build phase of this platform, including the launch of the Company's
next generation ammonia cracker which is designed for low cost,
efficient production of hydrogen at the point of demand. Since
launch, we have hosted many visitor groups from across the Globe to
the site, reflecting industry's growing interest in ammonia
adoption as a clean and sustainable fuel of the future.
Speedy Hydrogen
Solution ("SHS") Joint Venture
SHS, our new joint venture with Speedy Hire, signed
in November 2023, is a market first and aligns perfectly with our
stated business model of selling H-Power Generators wholesale to
plant hire companies for onward rental to the construction sector
and temporary power markets.
The UK construction market is aggressively moving
towards the displacement of diesel generators with high profile
projects such as HS2 stating there will be no diesel generators on
site by 2029. Speedy Hire and SHS are aiming to step into this void
with viable alternative technologies that include hydrogen fuelled
generators.
Since announcement of our first Heads of Terms with
Speedy Hire in July 2023, market demand for the H-Power Generators
has exceeded expectations and will surpass first year orders based
on current business model projections.
Post year end, SHS committed to an initial £2.0m
purchase of generators from AFC Energy. The generators are to be
delivered during the first six months of calendar year 2024, with
the intention of increasing orders for the first full year (12
months ended 31 October 2024) up to £4.7m. The initial focus of
orders is on the S Series air-cooled fuel cell platform sized at
30kW.
The generators are exclusively available for hire,
via Speedy Hire, to its customers, in the UK and Ireland. This
exclusivity will apply for an initial three-year period subject to
an annual minimum order quantity which increases each year.
Speedy's customers have already shown strong interest
and established a growing pipeline of demand, driven particularly
by changing tender requirements and emission regulations, where UK
infrastructure and construction projects are targeting the removal
of diesel generators by as early as 2029.
TAMGO distribution
agreement
In September 2023, we announced the signing of an
exclusive distribution agreement with Saudi Arabia's The Machinery
Group LLC, which trades as TAMGO.
TAMGO is an approved vendor to many of Saudi Arabia's
largest infrastructure and mining projects including NEOM, Red Sea
Global and Qiddiya. In a number of these projects, the target of
displacing diesel generators is within the current decade, and so
presents a near-term growth trajectory further supporting our
business model of partnering with dealers and plant hire businesses
which provide immediate access to global markets in a timely cost
efficient manner, enabling the Company to meet the accelerated path
to decarbonisation many construction projects are on.
TAMGO are marketing both our S Series (air cooled)
and S+ Series (liquid cooled) H-Power Generators to end customers
in the industrial and off-grid power markets in the Kingdom of
Saudi Arabia and a further 16 countries in the MENA and surrounding
region. Several client proposals have already been submitted to
Saudi companies seeking to adopt hydrogen as part of their off-grid
power solution.
TAMGO will provide local customer support with on the
ground maintenance and servicing of our generators, along with
engineering, design, commissioning and logistics support direct to
customers.
We continue to believe this region presents
unprecedented growth potential for the H-Power Generator platform
with additional benefits of working with a partner with strong
pedigree in localised manufacturing capability within the Saudi
market. This positions AFC Energy and TAMGO to create a market
leading positioning for our technology within the MENA region.
ACCIONA
In April 2023, having hosted our first 10kW H-Power
Tower trial in 2022, ACCIONA was the first to sign a lease for our
new 30kW H-Power Generator for a six-month period with an option to
purchase the system at a pre-agreed price.
As part of the agreement, a battery storage unit will
be harmonised for operation with the fuel cell generator, providing
a total 50kVA nameplate generator package. The combined system is
expected to undergo factory acceptance testing shortly with
deployment to Spain thereafter.
ABB E-mobility
(ABB)
In March 2023, we announced the successful operation
and validation of our first high-power density, liquid cooled fuel
cell stacks with ABB E-mobility. The stacks, referred to as the
"S+" Series (as distinct from the Company's "S" Series air cooled
technology), were delivered to Germany for successful independent
validation in October 2022.
Since then, our engineers have been designing and
testing the 200kW generator packaging and, following receipt of our
new 140kW (gross) fuel cell stacks in 2023 and long lead component
ordering, we are nearing initial operation of the 200kW H-Power
system. This is a landmark moment for our latest, complementary
liquid cooled generator technology allowing us to now achieve
nameplate fuel cell ratings from 10kW (air cooled) through to in
excess of 100kW (liquid cooled).
Following successful validation of the S+ Series
technology with ABB E-mobility and their funding of this
development, we entered into an agreement with ABB establishing a
pipeline for the purchase of their first ten 200kW S+ Series fuel
cell generators over a defined term. The first of these systems
will be purchased from AFC Energy as part of the revised contract,
with the subsequent nine at ABB's option. ABB also invested a
further £2m into AFC Energy giving them a total equity stake of
just over 2% in the Company.
Fuel Processing -
Modular Ammonia Cracker
Ammonia has continued to gain international
importance as a clean hydrogen carrier fuel with the announcement
of billions of dollars in new ammonia production plant investment
during 2023. With global hydrogen trade expected to be facilitated
through the shipping of clean ammonia at scale, the importance of
ammonia cracking and the reproduction of hydrogen at the point of
demand from ammonia, is also growing in importance.
AFC Energy remains at the forefront of distributed
ammonia cracking technology with the launch, during March 2023, of
the Company's latest generation ammonia cracker reactor technology,
and subsequently (post year-end), its first, and the world's
largest, modular, scalable ammonia cracker facility here in the UK.
Delivery of the pilot cracker facility was the culmination of two
years of technology development, design, engineering and build
before announcing the commissioning of the 400kg per day facility
in December 2023. It is being used to validate and test the design,
engineering, components, operation and safety aspects of the
technology.
The plant has been designed to produce fuel cell
grade hydrogen with power consumed locally at a fraction of the
power consumed by an equivalent sized electrolyser. This makes it
an ideal source of distributed hydrogen, whether used in stationary
or maritime applications.
Demand for such applications is growing rapidly with
the Hydrogen Council, in collaboration with McKinsey, forecasting
that 400 out of the 660 million tons of hydrogen needed for carbon
neutrality by 2050 will be transported over long distances, with
ammonia expected to account for about 45% of that 660 million
tons.
To meet this demand, there is already a
well-established supply chain for ammonia, which enables a lower
barrier to its adoption globally as a hydrogen carrier fuel.
However, the lack of commercially available ammonia cracking
technologies within the existing value chain presents an enormous
opportunity for AFC Energy.
During 2024, AFC Energy will be working to design and
engineer a containerised ammonia cracker platform, including
purification technology, to enable mobile units to produce hydrogen
at the point of consumption. The containerised cracker platform,
will be a standalone product capable of being sold to hydrogen
consumers, positioning AFC Energy at the forefront of this emerging
global market.
As an initial step in the commercialisation of this
technology, we have signed our first Letter of Intent in 2023 with
the trading arm of one of Europe's largest energy companies to
market the potential for ammonia and green ammonia as a hydrogen
carrier fuel based on a perceived demand for modular crackers from
its customers. This is in addition to the growing list of customer
enquiries wishing to explore the potential for networked hydrogen
production through ammonia cracking across Europe.
The ammonia cracker technology platform is an
exciting and key part of the global value chain and the strides
forward made during 2022 and 2023 continues to position AFC Energy
at the forefront of this technology.
Outlook
The 2024 financial year is all going to be about
delivery. Delivery of our first 30kW H-Power Generators to Speedy
Hire (through SHS) and its customers. Delivery of our first 50kVA
H-Power Generator to ACCIONA. Delivery of first orders from TAMGO
across the Saudi and MENA regions.
To achieve this, we have continued to focus on the
securing of our supply chain, with component qualification taking
place across most of 2023. We are also focussing on scaling up our
manufacturing capabilities to meet the growing demand for our
generators. We plan to do this through a combination of strategic
partnerships within our sub-assembly supply chain and a modest
investment into our on-site assembly capabilities. This will ensure
effective management of working capital.
Work on the liquid cooled generator for ABB
continues, with initial testing expected to complete within 2024,
to be followed by CE marking prior to shipping. In the meantime,
early pre-ordering of the 200kW H Power Generator is available with
active marketing of the system already underway with TAMGO for the
Saudi market.
We continue to see interest in our hydrogen power
generators from global distributors and plant hire businesses and
so collaborative working with this sector to support
decarbonisation requirements of their customers will also be an
important part of 2024.
The Board also intends to explore options to both
demonstrate and unlock the material unrecognised value of our
ammonia cracking technology to the benefit of shareholders through
industry partnerships and other strategic avenues.
Chief Financial Officer's
Report
Financial highlights for the 2023 financial year
were:
· £27.4m
closing cash position;
· £8.5m of
qualifying R&D investment;
· £4.1m of
R&D tax credits received; and
· £4.3m UK
Government Grant awarded.
Result for the
year
After revenue of £0.2m (2022: £0.6m) the Company
produced a loss after tax of £17.5m (2022: £16.4m) for the 2023
financial year.
This loss was driven by operating costs of £20.0m
(2022: £19.7m) offset by interest earned of £0.5m (2022: £0.1m) and
R&D tax credits of £2.1m (2022: £3.0m).
Of the £20.0m of operating costs, £4.7m (2022: £5.1m)
related to R&D materials, £9.6m (2022: £7.6m) to staff costs
and £5.7m (2022: £7.0m) to other administrative expenses.
Of the administrative expenses, £2.4m (2022: £3.5m)
related to non-cash items, mainly depreciation and share based
payments.
The reduction of expected R&D tax credits, from
£3.0m to £2.1m, is due to the changes in UK Government legislation,
effective 1 April 2023, which reduced the value of the uplift from
130% to 86%, as well as reducing the recovery rates and tightening
definitions around qualifying expenditure.
Strong closing cash
position of £27.4m
A summary of the cash flow for the 2023 financial
year is set out within the table below:
Cash flow
summary
|
£'m
|
Net loss before tax
|
(19.6)
|
Non-cash items
|
2.2
|
R&D credits received
|
4.1
|
Working capital movement
|
0.2
|
|
(13.1)
|
Investing activities
|
(1.2)
|
Financing activities
|
1.5
|
|
(12.8)
|
Opening cash
|
40.2
|
Closing cash
|
27.4
|
Operational cash burn (i.e., before investing or
financing activities) of £13.1m equated to an average of £1.1m per
month, suggesting a cash runway, at similar expenditure levels, of
24-months beyond the end of the 2023 financial year. This cash
runway will reduce in proportion to the rate at which the Company
scales up its commercial and manufacturing capabilities.
£8.5m of qualifying
R&D investment
£8.5m (2022: £9.0m) of the Company's R&D invested
is expected to qualify under the UK Government's R&D tax credit
scheme. This was deployed as follows:
Qualifying R&D
expense
|
£'m
|
Materials
|
3.3
|
Staff costs
|
4.7
|
Other costs
|
0.5
|
|
8.5
|
The £8.5m was deployed approximately 40%, 25% and 35%
across each of the Company's three value streams, being: air cooled
generators; liquid cooled generators; and fuel processing
respectively.
In the case of air cooled generators, the investment
funded the customer driven evolution from the 10kW H-Power Tower to
the 30kW H-Power Generator, the success of which culminated in the
JV with Speedy Hire.
In the case of liquid cooled generators, the
investment funded the customer driven evolution from the 100kW fuel
cell laboratory test to the 200kW generator unit, currently
undergoing laboratory testing.
In the case of fuel processing, the investment funded
construction of our pilot modular ammonia cracker. This has been
designed to a scale equivalent to a 1MW electrolyser, meaning an
output of 400kg of hydrogen per day to fuel cell purity, and
currently undergoing a series of onsite field tests to prove out
the economics and useability.
The Company has assessed each of the three value
streams against the six tests set out within the accounting
standard that need to be met before the related investment can be
capitalised as intangible assets.
Based on the above assessment, the Company has
concluded that for the 2023 financial year the amounts invested
should still be expensed as operating costs. For the 2024 financial
year that is expected to change, due to the continued progress
during that year.
Receipt of £4.1m in
R&D tax credits
Of the £4.1m (2022: £0.5m) received, £1.1m related to
the 2021 financial year and £3.0m to the 2022 financial year.
The Company received two years' worth of R&D tax
credits during the 2023 financial year because it accelerated
submission of its 2022 corporation tax return. The full value of
the £3.0m claim, lodged in July 2023, was received in September
2023.
Award of a £4.3m UK
Government Grant
In July 2023, the Company announced the award of a UK
Government Grant worth up to £4.3m to the Company.
The grant was awarded by the Department for Energy
Security and Net Zero under its Red Diesel Replacement scheme,
which aims to displace diesel in the construction, quarrying and
mining sectors.
The grant will reimburse 50% of eligible costs of the
next generation air cooled and liquid cooled fuel cell generators.
First receipts under the grant will occur during the 2024 financial
year and will be recorded in the Statement of Comprehensive Income
as other income.
The developments must culminate in a field trial for
both the air cooled and liquid cooled generators, alongside a
hybrid battery, at one, or more, of the quarries. If the field
trials are delayed beyond the March 2025 closing date then there is
a high risk of under recovery.
No recoveries were made under this grant during the
2023 financial year. The first claim has now been made and receipt
expected in due course.
ABB E-mobility
(ABB)
During the 2023 financial year, the Sale &
Development agreement with ABB was revised by both parties. Under
the revised agreement, ABB has, for a pre-agreed total and defined
term, a discount to be spread over the purchases of the first ten
eligible fuel cell systems.
The total cash value of the original contract was
£4.0m and this remained unchanged after the revision, with £2.0m
having been received in the 2022 financial year and the £2.0m
balance received in the 2023 financial year in return for the
purchase of newly issued shares in the Company.
Joint venture (JV)
with Speedy Hire
The commercial elements of the JV are covered within
the CEO report.
Whilst the plan to enter into the JV was announced
during the 2023 financial year, the contracts were not completed
until after it.
In terms of JV funding, initial investments become
unconditional on signing of the contract, with future cash
injections conditional on certain pre-agreed operational milestones
set out within the JV agreement.
Subsequent injections are to be funded in the form of
commercial interest-bearing loan notes, issued in equal share by
each of the partners. Payment is expected to be made from the
existing cash resources of each company, with the option to seek
external debt at a suitable point in the future.
To maintain exclusivity in the UK and Ireland, a
minimum order of H-Power Generators has been agreed between the
partners. This quantity increases annually and is phased over three
years, being the minimum term of the exclusivity agreement.
Going
concern
To deliver on the Company's intention to capitalise
on its growing market opportunities it needs to scale up its
manufacturing output and continue investing in research and
development, both of which will require additional funding.
Whilst the Board recognises the challenges of
fundraising in the current economic climate, it is confident that
when the Company chooses to seek additional funding that it will be
available. This view is based primarily on the:
· recent
technical successes of both the fuel cell and fuel processing
teams;
· UK
Government requirements for construction tenders to include a
non-diesel solution for onsite electricity generation;
· growing
levels of interest expressed by the construction market in the
recent joint venture with Speedy Hire plc;
· positive
feedback from external advisors; and
· growing
levels of institutional engagement, in both the fuel cell and fuel
processing value streams, particularly following recent site
visits.
This is further discussed in the notes to the
accounts.
Outlook
At the end of February 2024, the Company held £18.0m
of cash balances. Of the £9.4m of outflow since the end of the 2023
financial year, nearly half related to capital purchases, inventory
build-up of £2.6m and other working capital. The average monthly
cash outflow from operations therefore remained consistent with
Board expectations at £1.3m per month.
The 2024 financial year has started strongly with
successful factory acceptance testing of the first 30kW H-Power
Generator in March and the growing pipeline of orders driven by the
JV with Speedy Hire.
Statement of
comprehensive income
For the year ended 31 October
2023
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
Note
|
|
£000
|
|
£000
|
|
|
|
|
|
|
|
Revenue from customer contracts
|
|
5
|
|
227
|
|
582
|
Cost of sales
|
|
|
|
(294)
|
|
(467)
|
Gross
(loss)/profit
|
|
|
|
(67)
|
|
115
|
|
|
|
|
|
|
|
Other income
|
|
|
|
41
|
|
22
|
Operating costs
|
|
6
|
|
(19,994)
|
|
(19,749)
|
Operating
loss
|
|
|
|
(20,020)
|
|
(19,612)
|
|
|
|
|
|
|
|
Finance income
|
|
11
|
|
512
|
|
143
|
Finance costs
|
|
11
|
|
(53)
|
|
(19)
|
Loss before
tax
|
|
|
|
(19,561)
|
|
(19,488)
|
Taxation
|
|
12
|
|
2,086
|
|
3,042
|
Loss for the
financial year and total comprehensive loss attributable to the
owners of the company
|
|
|
|
(17,475)
|
|
(16,446)
|
|
|
|
|
|
|
|
Basic loss per share (pence)
|
|
13
|
|
(2.36)
|
|
(2.24)
|
Diluted loss per share (pence)
|
|
13
|
|
(2.36)
|
|
(2.24)
|
All amounts relate to continuing operations.
There was no other comprehensive income in the year (2022:
£nil).
Statement of financial
position
As at 31 October 2023
AFC Energy Plc
Registered number:
05668788
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
Note
|
|
£000
|
|
£000
|
Assets
|
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
|
|
Intangible assets
|
|
14
|
|
264
|
|
311
|
Right-of-use assets
|
|
15
|
|
1,097
|
|
976
|
Tangible fixed assets
|
|
16
|
|
3,756
|
|
3,282
|
|
|
|
|
5,117
|
|
4,569
|
Current
assets
|
|
|
|
|
|
|
Inventory
|
|
17
|
|
178
|
|
43
|
Trade and other receivables
|
|
18
|
|
1,231
|
|
1,160
|
Income tax receivable
|
|
12
|
|
2,088
|
|
4,075
|
Cash and cash equivalents
|
|
19
|
|
27,366
|
|
40,220
|
Restricted cash
|
|
19
|
|
258
|
|
612
|
|
|
|
|
31,121
|
|
46,110
|
Total
assets
|
|
|
|
36,238
|
|
50,679
|
Current
liabilities
|
|
|
|
|
|
|
Payables
|
|
20
|
|
3,728
|
|
3,644
|
Lease liabilities
|
|
21
|
|
477
|
|
298
|
|
|
|
|
4,205
|
|
3,942
|
Non-current
liabilities
|
|
|
|
|
|
|
Lease liabilities
|
|
21
|
|
647
|
|
698
|
Provisions
|
|
22
|
|
301
|
|
301
|
|
|
|
|
948
|
|
999
|
Total
liabilities
|
|
|
|
5,153
|
|
4,941
|
Capital and reserves
attributable to the owners of the company
|
|
|
|
|
|
|
Share capital
|
|
23
|
|
746
|
|
735
|
Share premium
|
|
23
|
|
118,520
|
|
116,487
|
Other reserve
|
|
|
|
3,779
|
|
4,073
|
Retained loss
|
|
|
|
(91,960)
|
|
(75,557)
|
Total equity
attributable to shareholders
|
|
|
|
31,085
|
|
45,738
|
Total equity and
liabilities
|
|
|
|
36,238
|
|
50,679
|
Statement of changes in
equity
For the year ended 31 October
2023
|
|
Share
capital
|
|
Share
premium
|
|
Other
reserve
|
|
Retained
loss
|
|
Total
|
|
|
£000
|
|
£000
|
|
£000
|
|
£000
|
|
£000
|
Balance at 1 November
2021
|
|
734
|
|
116,448
|
|
2,456
|
|
(59,752)
|
|
59,886
|
|
|
|
|
|
|
|
|
|
|
|
Loss after tax for the
year
|
|
-
|
|
-
|
|
-
|
|
(16,446)
|
|
(16,446)
|
Issue of equity shares
|
|
1
|
|
39
|
|
-
|
|
-
|
|
40
|
Equity-settled share-based
payments
|
|
|
|
|
|
|
|
|
|
|
- Lapsed or exercised in the
year
|
|
-
|
|
-
|
|
(641)
|
|
641
|
|
-
|
- Charged in the
year
|
|
-
|
|
-
|
|
1,682
|
|
-
|
|
1,682
|
Fair value of warrants accounted for
as equity
|
|
-
|
|
-
|
|
576
|
|
-
|
|
576
|
Balance at 31 October 2022
|
|
735
|
|
116,487
|
|
4,073
|
|
(75,557)
|
|
45,738
|
|
|
|
|
|
|
|
|
|
|
|
Loss after tax for the
year
|
|
-
|
|
-
|
|
-
|
|
(17,475)
|
|
(17,475)
|
Issue of equity shares
|
|
10
|
|
1,990
|
|
-
|
|
-
|
|
2,000
|
Equity-settled share-based
payments
|
|
|
|
|
|
|
|
|
|
|
- Lapsed or exercised in the
year
|
|
1
|
|
43
|
|
(1,072)
|
|
1,072
|
|
44
|
- Charged in the
year
|
|
-
|
|
-
|
|
778
|
|
-
|
|
778
|
Fair value of warrants accounted for
as equity
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Balance at 31 October 2023
|
|
746
|
|
118,520
|
|
3,779
|
|
(91,960)
|
|
31,085
|
Share capital is the amount subscribed for shares at
the nominal value.
Share premium represents the excess of the amount
subscribed for share capital over the nominal value of these shares
net of share issue expenses.
Other reserve represents the charge to equity in
respect of unexercised equity-settled share-based payments and
warrants granted.
Retained deficit represents the cumulative loss of
the Company attributable to equity shareholders.
Cash flow
statement
For the year ended 31 October
2023
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
Note
|
|
£000
|
|
£000
|
Cash flows from
operating activities
|
|
|
|
|
|
|
Loss before tax for the year
|
|
|
|
(19,561)
|
|
(19,488)
|
Adjustments for:
|
|
|
|
|
|
|
Amortisation of intangible assets
|
|
14
|
|
110
|
|
473
|
Impairment of intangible assets
|
|
14
|
|
-
|
|
294
|
Loss on disposal of intangible assets
|
|
14
|
|
1
|
|
-
|
Depreciation of right-of-use assets
|
|
15
|
|
455
|
|
379
|
Depreciation of tangible fixed assets
|
|
16
|
|
1,084
|
|
974
|
Impairment of tangible fixed assets
|
|
16
|
|
-
|
|
255
|
Loss on disposal of property and equipment
|
|
|
|
34
|
|
126
|
Depreciation of decommissioning asset
|
|
16
|
|
15
|
|
20
|
Equity-settled payments
|
|
24
|
|
778
|
|
1,682
|
Interest receivable
|
|
|
|
(428)
|
|
(143)
|
Lease finance charges
|
|
|
|
69
|
|
33
|
Cash flows from
operations
|
|
|
|
(17,443)
|
|
(15,395)
|
R&D tax credits received
|
|
|
|
4,073
|
|
546
|
Decrease in restricted cash
|
|
|
|
354
|
|
-
|
(Increase)/decrease in inventory
|
|
|
|
(135)
|
|
618
|
(Increase) in receivables
|
|
|
|
(109)
|
|
(145)
|
Increase in payable
|
|
|
|
121
|
|
1,948
|
(Decrease) in provisions
|
|
|
|
-
|
|
(353)
|
Cash absorbed by
operating activities
|
|
|
|
(13,139)
|
|
(12,781)
|
Purchase of plant and equipment
|
|
16
|
|
(1,607)
|
|
(2,388)
|
Additions to intangible assets
|
|
14
|
|
(63)
|
|
(334)
|
Interest received
|
|
11
|
|
428
|
|
151
|
Net cash absorbed by
investing activities
|
|
|
|
(1,242)
|
|
(2,571)
|
Proceeds from the issue of share capital
|
|
|
|
2,000
|
|
-
|
Proceeds from the exercise of options
|
|
|
|
45
|
|
40
|
Proceeds from the grant of warrants
|
|
25
|
|
-
|
|
576
|
Lease interest paid
|
|
21
|
|
(69)
|
|
(38)
|
Lease payments
|
|
21
|
|
(449)
|
|
(381)
|
Net cash from
financing activities
|
|
|
|
1,527
|
|
197
|
Net increase/(decrease) in cash and cash
equivalents
|
|
|
|
(12,854)
|
|
(15,155)
|
Cash and cash equivalents at the start of the
year
|
|
|
|
40,220
|
|
55,375
|
Cash and cash
equivalents at the end of the year
|
|
19
|
|
27,366
|
|
40,220
|
|
|
|
|
|
|
|
Notes forming part of the financial
statements
1. Corporate information
AFC Energy Plc (the Company) is a public limited
company incorporated in England & Wales. The address of
the registered office is Unit 71.4, Dunsfold Park, Cranleigh,
Surrey, GU6 8TB. The Company is quoted on the AIM Market of
the London Stock Exchange with the ticker symbol LSE:AFC.
The principal activity of the Company is the
development of fuel cell and fuel processing technology and
equipment.
2. Basis of preparation
These results are audited, however the financial
information does not constitute statutory accounts as defined under
section 434 of the Companies Act 2006. The financial information
for the year ended 31 October 2023 has been derived from the
Company's statutory accounts for that year. The auditors'
report on the statutory accounts for the year ended 31 October 2023
was unqualified with a material uncertainty
relating to going concern and did not contain statements
under section 498 of the Companies Act 2006.
Going
concern
The financial statements of AFC Energy plc have been
prepared in accordance with UK Adopted International Accounting
Standards (IASs).
The financial statements have been prepared on a
going concern basis notwithstanding the trading losses being
carried forward and the expectation that the trading losses will
continue for the near to medium future as the Company transitions
from predominantly undertaking research and development to a more
commercial basis.
In line with normal practice, and prior to signing
this report, the Directors are required to assess whether it is
appropriate to prepare the financial statements on a going concern
basis. In making this assessment the Directors need to be satisfied
that the Company can meet its obligations as they fall due for at
least 12 months from the date of this report.
As part of this assessment, the Directors reviewed
the Company's forecast cash position through to the end of the 2025
financial year. This was based on the agreed budget for the 2024
financial year and the forecast for the 2025 financial year. As the
period goes beyond the 12 months required it provides additional
information when making the assessment. To reach the end of
2025 with positive cash would require at least £7 million of
additional funding, however this amount would not be enough for the
Company to scale up at its preferred rate.
In addition, the Board reviewed possible downside
scenarios to establish the resilience of the Company's cash
reserves and identified the impact of continuing high levels of
cost inflation, particularly on employee remuneration and supply
chain, combined with delays of sales receipts as a particular
risk.
Based on this assessment, and the Company's intention
to capitalise on its growing market opportunities by scaling up its
manufacturing output and continuing to invest in research and
development, the Board has concluded that additional funding will
be required to deliver on these plans.
Whilst the Company is a going concern, the fact that
the additional funding required has not yet been sought and secured
indicates the existence of a material uncertainty that may cast
significant doubt on the Company's ability to continue as a going
concern.
Whilst the Board recognises the challenges of
fundraising in the current economic climate, it is confident that
when the Company does choose to seek additional funding that it
will be available. This view is based primarily on the:
· recent
technical successes of both the fuel cell and fuel processing
teams;
· UK
Government requirements for construction tenders to include a
non-diesel solution for onsite electricity generation;
· growing
levels of interest expressed by the construction market in the
recent joint venture with Speedy Hire plc;
· positive
feedback from external advisors; and
· growing
levels of institutional engagement, in both the fuel cell and fuel
processing value streams, particularly following recent site
visits.
Based on the above, the Directors have concluded that
the Company remains a going concern and these financial statements
have therefore been prepared on that basis.
The accounting policies set out below have, unless
otherwise stated, been applied consistently in these financial
statements.
Judgments made by the Directors in the application of
these accounting policies that have significant effect on the
financial statements and estimates with a significant risk of
material adjustment in the next year are discussed in note 3.
Standards, amendments
and interpretations to published standards not yet
effective
The following amendments to the accounting standards, issued by the
IASB and endorsed by the UK, were adopted by the Company from 1
November 2022 with no material impact on the Company's results,
financial position or disclosures:
·
Amendments to IFRS 3 Updating a Reference to the Conceptual
Framework.
·
Amendments to IAS 16 Property, Plant and Equipment: Proceeds before
Intended Use.
·
Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a
Contract.
·
Amendments to Annual improvements 2018-2020 - IFRS 9 - Fees in the
'10 per cent' Test and IFRS 16 - Lease incentives.
·
Amendments to IAS 12 International Tax Reform - Pillar Two Model
Rules.
The following standard and amendments issued by the
IASB have been endorsed by the UK and have not been adopted by the
Company:
· IFRS 17 -
Insurance contracts (effective from the year ending 30 June 2024)
is ultimately intended to replace IFRS 4. Based on a preliminary
assessment, management believes that the adoption of IFRS 17 will
not have a significant impact on the Company's results or financial
position.
·
Amendments to IAS 12 - Income taxes (effective from the year ending
30 June 2024) requires an entity to recognise deferred tax on
initial recognition of particular transactions to the extent that
the transaction gives rise to equal amounts of deferred tax assets
and liabilities. The proposed amendments would apply to
transactions such as leases and decommissioning obligations for
which an entity recognises both an asset and a liability.
Management believes that the adoption of these amendments will not
have a significant impact on the Company's results and financial
position.
There are a number of other amendments and
clarifications to IFRSs, effective in future years, which are not
expected to significantly impact the Company's results or financial
position.
Capital
policy
The Company manages its equity as capital.
Equity comprises the items detailed within the principal accounting
policy for equity and financial details can be found in the
statement of financial position. The Company adheres to the
capital maintenance requirements as set out in the Companies Act
2006.
Revenue
recognition
To determine whether to recognise revenue, a
five-step process is followed:
·
Identifying the contract with a customer;
·
Identifying the performance obligations;
·
Determining the transaction price;
·
Allocating the transaction price to the performance obligations;
and
·
Recognising revenue as the performance obligations are
satisfied.
Complex contracts include competing priorities such
as financial targets, support capabilities, and delivery
schedules. A complex contract will have multiple independent
issues which must all be negotiated individually.
Revenue is generated from complex contracts covering
the:
· Sale of
goods and parts,
· Sale of
services and maintenance, and
·
Short-term rental contracts which may be either single or multiple
contracts. Multiple contracts are accounted for as a single
contract where one or more of the following criteria are met:
o The contracts were
negotiated as a single commercial package,
o Consideration of one
contract depends upon the other contract, or
o Some or all the goods
and services comprise a single performance obligation.
The promises in each contract are analysed to
determine if these represent performance obligations individually,
or in combination with other promises. Performance
obligations in the contracts are analysed between either distinct
physical goods and services delivered or service level agreements.
The transaction price of the performance obligations is based upon
the contract terms considering both cash and non-cash
consideration. Non-cash consideration is valued at fair value
taking into consideration contract terms and known arm's length
pricing where available. In the event there are multiple
performance obligations in a contract, the price is allocated to
the performance obligations based on the relative costs of
fulfilling each obligation plus a margin.
Revenue is recognised either at a point in time or
over time, as the performance obligations are satisfied by
transferring the promised goods or services to its customers.
Deferred revenue is recognised for consideration received in
respect of unsatisfied performance obligations and the Company
reports these amounts as payables in the statement of financial
position.
Similarly, if a performance obligation is satisfied
in advance of any consideration, a receivable is recognised in the
statement of financial position.
Rental as service
and long-term service contracts
Revenue is recognised over time based on outputs
provided to the customer, because this is the most accurate
measurement of the satisfaction of the performance obligation as it
matches the consumption of the benefits obtained by the
customer. The customer is simultaneously receiving and
consuming the benefits as the Company performs its
obligations. Revenue can comprise a fixed rental charge and a
variable charge related to the usage of assets or other services
including pass-through costs where pass-through refers to the
variable charge, for example Hydrogen.
Sale (standard
products) contracts
Revenue from standard products will be recognised at
a point of time only when the performance obligation has been
fulfilled and ownership of the goods has transferred, which is
typically factory or site acceptance test, which is the official
handover of control of the goods to the customer. As the
products are not deemed to be bespoke, there are alternative uses
to the Company as the products would be able to be resold to other
customers.
During the product build, deposits and progress
payments will be reflected in the balance sheet as deferred
revenue.
Costs incurred on projects to date will not be
included in the statement of comprehensive income but will be
accumulated on the balance sheet as work in progress (as they are
considered recoverable) and transferred to cost of sales once the
revenue applicable to those costs can be recognised in the
accounts. Should anticipated costs exceed anticipated revenues, a
provision will be recognised and the surplus costs expensed with
immediate effect.
Sale (customised
products) contracts
Revenues for customised contracts will be recognised
over time according to how much of the performance obligation has
been satisfied. This is measured using the input method,
comparing the extent of inputs towards satisfying the performance
obligation with the expected total inputs required. Any
changes in expectation are reflected in the total inputs figure as
they become known. The progress percentage obtained is then applied
to the revenue associated with that performance obligation.
The revenue should be recognised over a point in time as the
products under these contracts would be bespoke and therefore not
have an alternative use. These contracts would have an
enforceable right to payment for performance completed to date.
Other
income
Other income represents sales of waste materials and
government contracts, and the accounting policy follows IFRS 15 for
point-in-time revenue recognition.
Development
costs
Identifiable non-recurring engineering and design
costs and other prototype costs incurred to develop a technically
and commercially feasible product are assessed. In accordance with
IAS 38 Development costs and capitalised if they meet all of the
criteria required as below:
· technical
feasibility of completing the asset for use or sale;
· intention
to complete the asset for use or sale;
· ability
to use or sell the asset;
·
generation of probable future economic benefits;
·
availability of adequate technical and financial resources; and
· ability
to measure the attributable expenditure reliably.
Foreign
currency
The financial statements of the Company are presented
in the currency of the primary economic environment in which it
operates (the functional currency) which is pounds sterling.
In accordance with IAS 21, transactions entered into by the Company
in a currency other than the functional currency are recorded at
the rates ruling when the transactions occur.
At each Statement of Financial Position date,
monetary items denominated in foreign currencies are retranslated
at the rates prevailing at the date of the Statement of Financial
Position.
Inventory
Inventory is recorded at the lower of actual cost and
net realisable value, applying the average cost methodology.
Work in progress comprises direct labour, direct
materials and direct overheads. Direct Labour will be allocated on
an input basis that reflects the consumption of those resources in
the production process.
Cash and cash
equivalents
For the purpose of the statement of cash flows, cash
and cash equivalents comprise cash balances and bank overdrafts
that form an integral part of the Company's cash management
process. They are recorded in the statement of financial
position and valued at amortised cost.
Restricted cash represents bank deposit accounts
where disbursement is dependent upon certain contractual
performance conditions.
Other
receivables
These assets are initially recognised at fair value
and are subsequently measured at amortised cost less any provision
for impairment.
Tangible fixed
assets
Property and equipment are stated at cost less any
subsequent accumulated depreciation and impairment losses.
Where parts of an item of property and equipment have different
useful lives, they are accounted for as separate items of property
and equipment.
Depreciation is charged to the statement of
comprehensive income within cost of sales and/or operating expenses
on a straight-line basis over the estimated useful lives of each
part of an item of plant, machinery and equipment. The
estimated useful lives are as follows:
Decommissioning asset
|
Life of
the lease
|
Plant, machinery and
equipment
|
1 to 3
years
|
Computer equipment
|
3
years
|
Manufacturing and test
stands
|
3
years
|
Motor vehicles
|
3 to 4
years
|
Demonstration equipment
|
3 to 10
years
|
Rental fleet
|
3 to 10
years
|
Expenses incurred in respect of the maintenance and
repair of property and equipment are charged against income when
incurred. Refurbishment and improvement expenditure, where
the benefit is expected to be long lasting, is capitalised as part
of the appropriate asset.
The useful economic lives of tangible fixed assets
are reviewed annually, and any revision is accounted for as a
change in accounting estimate and the net book value of the asset,
at the time of the revision, is depreciated over the remaining
revised economic life of the asset.
Right-of-use
assets
At inception each contract is assessed as to whether
it conveys the right to control the use of an identified asset and
obtain substantially all the economic benefits from the use of that
asset, for a period in exchange for consideration. If so, the
contract should be accounted for as a lease and the Company should
recognise a right-of-use asset, and related lease liability, at the
lease commencement date.
The right-of-use asset comprises the corresponding
lease liability, lease payments made before the commencement date,
less any lease incentives received and any initial direct
costs. They are subsequently measured at cost less
accumulated depreciation and impairment losses. The lease
liability is initially measured at the present value of the lease
payments and discounted using the interest rate implicit in the
lease or, if that rate cannot be determined, the incremental
borrowing rate is used. The lease liability continues to be
measured at amortised cost using the effective interest
method. It is remeasured when there is a change in the future
lease payments. When the lease liability is remeasured in
this way, a corresponding adjustment is made to the carrying amount
of the right-of-use asset.
At lease commencement date, a right-of-use and lease
liability are recognised on the statement of financial
position. The right-of-use asset is measured at cost, which
comprises the initial measurement of the lease liability, any
initial direct costs incurred, an estimate of costs to dismantle
and remove the asset at the end of the lease term and any lease
payments made in advance of the lease commencement date.
Lease payments included in the measurement of the
lease liability are made up of fixed payments (including
in-substance fixed), variable payments based on an index or rate,
amounts expected to be payable under a residual value guarantee and
payments arising from options reasonably certain to be
exercised.
After initial measurement, the liability will be
reduced for payments made and increased for interest. It is
remeasured to reflect any reassessment or modification, or if there
are changes to in-substance payments.
When the lease liability is remeasured, the
corresponding adjustment is reflected in the right-of-use asset, or
profit and loss if the right-of-use asset is already reduced to
zero.
Short-term leases and low value assets are accounted
for using the practical expedients set out in IFRS 16 and the
payments are recognised as an expense in profit or loss on a
straight-line basis over the lease term.
The Company has elected not to recognise right-of-use
assets and lease liabilities for leases of less than 12-months and
leases of low value assets. These largely relate to short-term
rentals of equipment. The lease payments associated with
these leases are expensed on a straight-line basis over the lease
term.
Intangible
assets
The useful economic lives of intangible fixed assets
are reviewed annually, and any revision is accounted for as a
change in accounting estimate and the net book value of the asset,
at the time of the revision, is amortised over the remaining
revised economic life of the asset.
Other intangible assets that are acquired by the
Company are stated at cost less accumulated amortisation and
impairment losses. Amortisation of intangible assets is
charged using the straight-line method to operating expenses over
the following periods:
Development costs
|
5
years
|
Patents
|
10 to 20
years
|
Commercial rights
|
5
years
|
Impairment testing of
intangible assets and property, plant and equipment
At each statement of financial position date, the
carrying amounts of the assets are reviewed 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 to determine the
extent of the impairment loss (if any). In assessing whether an
impairment is required, the carrying value of the asset is compared
with its recoverable amount. The recoverable amount is the
higher of the fair value less costs of disposal (FVLCD) and value
in use (VIU).
Financial
instruments
Financial instruments are measured on initial
recognition at fair value, plus, in the case of financial
instruments other than those classified as fair value through
profit or loss (FVTPL), directly attributable transaction
costs. Receivables are initially recognised at transaction
price. Financial instruments are recognised when the Company
becomes a party to the contracts that give rise to them and are
classified as amortised cost, fair value through profit or loss or
fair value through other comprehensive income, as
appropriate. The Company considers whether a contract
contains an embedded derivative when the entity first becomes a
party to it. The embedded derivatives are separated from the
host contract if the host contract is not measured at fair value
through profit or loss and when the economic characteristics and
risks are not closely related to those of the host contract.
Reassessment only occurs if there is a change in the terms of the
contract that significantly modifies the cash flows that would
otherwise be required.
In the periods presented the Company does not have
any financial assets categorised as FVTPL or FVOCI.
Financial assets at
amortised cost
A financial asset is measured at amortised cost if it
is held within a business model whose objective is to hold assets
to collect contractual cash flows and its contractual terms give
rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding and is
not designated as FVTPL. Financial assets classified as
amortised cost are measured after initial recognition at amortised
cost using the effective interest method. Cash, restricted
cash, trade receivables and certain other assets are classified as,
and measured at, amortised cost.
Financial
liabilities
Financial liabilities are classified as measured at
amortised cost or FVTPL. A financial liability is classified as at
FVTPL if it is classified as held-for-trading, it is a derivative
or it is designated as such on initial recognition. Financial
liabilities at FVTPL are measured at fair value and net gains and
losses, including any interest expense, are recognised in profit or
loss.
Other financial liabilities are subsequently measured
at amortised cost using the effective interest method. Gains
and losses are recognised in net earnings when the liabilities are
derecognised as well as through the amortisation process.
Borrowing liabilities are classified as current liabilities unless
the Company has an unconditional right to defer settlement of the
liability for at least 12 months after the statement of financial
position date. Accounts payable and accrued liabilities and
lease liabilities are classified as, and measured at, amortised
cost.
Impairment of
financial assets
A loss allowance for expected credit losses is
recognised in the Statement of Comprehensive Income for financial
assets measured at amortised cost. At each balance sheet
date, on a forward-looking basis, the Company assesses the expected
credit losses associated with its financial assets (such as trade
receivables) carried at amortised cost.
The expected loss rates are based on the historical
credit losses adjusted to reflect current and forward-looking
information on economic factors affecting the ability of the
customers to settle the receivables.
The impairment methodology applied depends on whether
there has been a significant increase in credit risk. The
expected credit losses are required to be measured through a loss
allowance at an amount equal to the 12-month expected credit losses
(expected credit losses that result from those default events on
the financial instrument that are possible within 12 months after
the reporting date), or full lifetime expected credit losses
(expected credit losses that result from all possible default
events over the life of the financial instrument). A loss
allowance for full lifetime expected credit losses is required for
a financial instrument if the credit risk of that financial
instrument has increased significantly since initial
recognition.
Derecognition of
financial assets and liabilities
A financial asset is derecognised when either the
rights to receive cash flows from the asset have expired or the
Company has transferred its rights to receive cash flows from the
asset or has assumed an obligation to pay the received cash flows
in full without material delay to a third party. If neither
the rights to receive cash flows from the asset have expired nor
the Company has transferred its rights to receive cash flows from
the asset, the Company will assess whether it has relinquished
control of the asset or not. If the Company does not control
the asset, then derecognition is appropriate. A financial
liability is derecognised when the associated obligation is
discharged or cancelled or expires.
When an existing financial liability is replaced by
another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such
an exchange or modification is treated as the derecognition of the
original liability and the recognition of a new liability.
The difference in the respective carrying amounts is recognised in
the statement of Comprehensive Income.
Share-based payment
transactions
The fair value of options granted under the Employee
Share Option Plan, the Employee Performance Share Plan and the
Save-As-You-Earn scheme are recognised as an employee benefits
expense, with a corresponding increase in equity. The total
amount to be expensed is determined by reference to the fair value
of the options granted:
* Including
any market performance conditions (e.g., the Company's share
price)
* Excluding
the impact of any service and non-market performance vesting
conditions (e.g., profitability, sales growth targets and remaining
an employee for a specified time)
* Including
the impact of any non-vesting conditions (e.g., the requirement for
employees to save or hold shares for a specific period)
The total expense is recognised over the vesting
period, which is the period over which all the specified vesting
conditions are to be satisfied. At the end of each period,
the entity revises its estimates of the number of options that are
expected to vest based on the non-market vesting and service
conditions. It recognises the impact of the revision to original
estimates, if any, in profit or loss, with a corresponding
adjustment to equity.
Modifications after the vesting date to terms and
conditions of equity-based payments which increase the fair value
are recognised over the remaining vesting period. If the fair value
of the revised equity-based payments is less than the original
valuation, then the original valuation is expensed as if the
modification never occurred.
The fair value of warrants issued is also recognised
as a share-based payment expense with a corresponding increase in
equity.
Provisions
Provisions are recognised when the Company has a
present obligation as a result of a past event and it is probable
that the Company will be required to settle the obligation.
Provisions are measured at the present value of management's best
estimate of the expenditure required to settle the present
obligation at the Statement of Financial Position date and are
discounted to present value where the effect is material.
Provisions include onerous contracts (see later under
note 3) where, if unavoidable costs of meeting a contract exceed
the expected revenue, a provision is recognised immediately through
profit and loss.
Taxation
Tax on the profit or loss for the year comprises
current and deferred tax. Tax is recognised in the statement
of comprehensive income except to the extent that it relates to
items recognised directly in equity, in which case it is recognised
in equity.
Tax due for the current and prior periods is
recognised as a liability, to the extent that it has not yet been
settled, and as an asset if the amounts already paid exceed the
amount due. The benefit of a tax loss which can be carried
back to recover current tax of a prior period is recognised as an
asset.
Current tax assets and liabilities are measured at
the amount expected to be paid to/ recovered from taxation
authorities, using the rates/laws that have been enacted or
substantively enacted by the balance sheet date.
A deferred tax asset is recognised for deductible
temporary differences, unused tax losses and unused tax credits to
the extent that it is probable that taxable profit will be
available against which the deductible temporary differences can be
utilised, unless the deferred tax asset arises from the initial
recognition of an asset or liability other than in a business
combination which, at the time of the transaction, does not affect
accounting profit or taxable profit.
The carrying amount of deferred tax assets are
reviewed at the end of each reporting period and 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 utilised. Any such reduction is
subsequently reversed to the extent that it becomes probable that
sufficient taxable profit will be available.
A deferred tax asset is recognised for an unused tax
loss carry forward or unused tax credit if, and only if, it is
considered probable that there will be sufficient future taxable
profit against which the loss or credit carry forward can be
utilised.
The Company does not currently recognise a deferred
tax asset, as near-term taxable profits, against which to offset
the asset, are not considered probable.
R&D tax
credits
The Company's research and development activities
allow it to claim R&D tax credits from HMRC in respect of
qualifying expenditure; these credits are reflected in the
statement of comprehensive income in the taxation line.
Pension
contributions
The Company operates a defined contribution pension
scheme which is open to all employees and makes monthly employer
contributions to the scheme in respect of employees who join the
scheme. These employer contributions are capped at 5% of the
employee's salary and are reflected in the statement of
comprehensive income in the period for which they are made.
The amount recognised in the period is the
contribution payable in exchange for services rendered by employees
during the period.
3. Critical accounting judgments and key sources
of estimation uncertainty
In the preparation of the financial statements,
management makes certain judgments and estimates that impact the
financial statements. While these judgments are continually
reviewed, the facts and circumstances underlying these judgments
may change, resulting in a change to the estimates that could
impact the results of the Company. In particular:
Critical accounting
judgments
The following are the judgments made by management in
applying the accounting policies of the Company that have the most
significant effect on the financial statements:
Customer contracts
and revenue recognition
Customer contracts typically include the provision of
goods or services related to the provision of off-grid power
generated from the conversion by fuel cells of hydrogen to
electricity.
Customer agreements can be complex, involve multiple
legal documents and have a duration covering multiple accounting
periods including different performance obligations and payment
terms designed to manage cash flow rather than the underlying arm's
length transaction price. Management uses judgment to
identify the specific performance obligations and allocate the
total expected revenue to the identified performance
obligations. These judgments are made based on the
interpretation of key clauses and conditions within each customer
contract.
Project reviews covering cost forecasts and technical
progress are monitored periodically to ensure that any potential
losses are recognised immediately in the accounts in accordance
with IAS 37.
Capitalisation of
development expenditure
The Company uses the criteria of IAS 38 to determine
whether development expenditure should be capitalised.
Management identifies separately non-recurring engineering, design
costs and prototype costs incurred to develop demonstration units
used in marketing activities and customer trials. Management
believes that the Development Expenditure will continue to support
marketing and customer trials for the foreseeable future.
This assessment relies upon judgments about future customer
behaviour taking in to account the feedback received from
prospective customers and future product improvements which
influence the economic useful life and residual value of said
assets.
For the current year, all development costs have been
expensed as they do not yet meet all six of the criteria set out
within the policy (see note 2) on development costs.
Following the end of the financial year, the
Company's Technical Advisory Board (TAB) reviewed the 38 technical
and commercial projects that had incurred expenses during the
financial year. Of these, 17 were classified as research
projects and therefore unable to be capitalised under IAS 38.
Eight projects were commercial in nature and expenses were
therefore treated as cost of sales. Two projects were
discontinued and thus did not qualify for capitalisation.
Four projects did not demonstrate future economic benefits.
One project was not completed due to lack of budget, one project
was out-of-scope for intangible assets and to be assessed under IAS
16 Tangible Assets and one project was deemed not to be below the
threshold to warrant capitalisation. There was an inability
to accurately measure the cost reliably for four projects.
Key source of
estimation uncertainty
Share-based
payments
Certain employees (including Directors and senior
Executives) of the Company receive remuneration in the form of
share-based payment, whereby employees render services as
consideration for equity instruments (equity-settled
transactions).
The fair value is determined using either the
Black-Scholes valuation model or a Monte Carlo model for
market-based conditions. Both are appropriate for considering
the effects of the vesting conditions, expected exercise period and
the dividend policy of the Company.
The cost of equity-settled transactions is accrued,
together with a corresponding increase in equity over the period
the Directors expect the performance criteria will be
fulfilled. For market performance criteria this estimate is
made at the time of grant considering historic share price
performance and volatility. For non-market-based performance
criteria, an estimate is made at the time of grant and reviewed
annually thereafter considering progress on the operational
objectives set, plans and budgets.
The estimation uncertainty relating to share-based
payments is not at risk of material change in future years other
than in relation to management's estimate of the extent to which
the non-market-based performance criteria will be met.
Onerous
contracts
Throughout the year, the performance of each open
contract is reviewed and expected cost of delivering that contract
is compared to the expected revenue from doing so. Where the
expected costs suggest a loss the contract is treated as an onerous
contract and a provision is recognised immediately through the
profit and loss. No such provisions were made.
4. Segmental analysis
Operating segments are determined by the chief
operating decision maker based on information used to allocate the
Company's resources. The information as presented to internal
management is consistent with the Statement of Comprehensive
Income. It has been determined that there is one operating
segment, the development of fuel cells. In the year to 31
October 2023, the Company operated mainly in the United
Kingdom. All non-current assets are in the United
Kingdom.
Revenue for the period was all generated from fuel
cell systems.
5. Revenue
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
Revenue from
contracts with customers
|
|
|
|
£000
|
|
£000
|
Rental revenue
|
|
|
|
137
|
|
225
|
Other revenue
|
|
|
|
90
|
|
357
|
|
|
|
|
227
|
|
582
|
Being:
|
|
|
|
|
|
|
Cash consideration
|
|
|
|
161
|
|
367
|
Consideration in kind
|
|
|
|
66
|
|
215
|
|
|
|
|
227
|
|
582
|
One customer (FY22: one customer) accounted for more
than 10% of revenue:
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
£000
|
|
%
|
|
£000
|
|
%
|
Customer A
|
|
130
|
|
57.1
|
|
475
|
|
81.6
|
The majority of the other revenue relates to sales of
hydrogen to the rentee of the fuel cell generators.
Unsatisfied performance obligations were:
|
|
Total
|
|
Within one year
|
|
Within two to five years
|
|
|
£000
|
|
£000
|
|
£000
|
31 October 2022
|
|
96
|
|
96
|
|
-
|
31 October
2023
|
|
-
|
|
-
|
|
-
|
The aggregate amount of the transaction price
allocated to contracts that are fully unsatisfied as of 31 October
2023 was £Nil (2022: £96,000).
The consideration in kind relates to marketing
services received from the customer and fair valued in accordance
with the contract.
6. Operating costs
|
|
Year ended 31 October
2023
|
Year ended 31 October
2022
|
|
|
Qualifying R&D
Spend
|
Indirect
|
Total
|
Qualifying R&D
Spend
|
Indirect
|
Total
|
|
Note
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
|
|
|
Product development costs
|
|
|
|
|
|
|
|
Materials
|
|
3,349
|
1,330
|
4,679
|
4,654
|
451
|
5,105
|
|
|
3,349
|
1,330
|
4,679
|
4,654
|
451
|
5,105
|
|
|
|
|
|
|
|
|
Payroll costs
|
|
|
|
|
|
|
|
Payroll (excluding
directors)
|
|
4,361
|
2,329
|
6,690
|
3,660
|
1,247
|
4,907
|
Directors' costs
|
|
151
|
1,744
|
1,895
|
-
|
1,642
|
1,642
|
Other employment costs
|
|
220
|
813
|
1,033
|
251
|
796
|
1,047
|
|
|
4,732
|
4,886
|
9,618
|
3,911
|
3,685
|
7,596
|
|
|
|
|
|
|
|
|
Other administrative expenses
|
|
|
|
|
|
|
|
Occupancy costs
|
|
214
|
670
|
884
|
-
|
772
|
772
|
Other administrative
expenses
|
|
192
|
2,178
|
2,370
|
440
|
2,310
|
2,750
|
|
|
406
|
2,848
|
3,254
|
440
|
3,082
|
3,522
|
|
|
|
|
|
|
|
|
Non-cash costs
|
|
|
|
|
|
|
|
Amortisation of intangible
assets
|
|
-
|
110
|
110
|
-
|
474
|
474
|
Depreciation of right-of-use
assets
|
|
-
|
455
|
455
|
-
|
379
|
379
|
Depreciation of tangible fixed
assets
|
|
-
|
1,099
|
1,099
|
-
|
994
|
994
|
Less depreciation of rental asset
charged to cost of sales
|
|
-
|
(65)
|
(65)
|
-
|
(218)
|
(218)
|
Consideration in kind
|
|
-
|
66
|
66
|
-
|
215
|
215
|
Share-based payments
charge
|
|
-
|
778
|
778
|
-
|
1,682
|
1,682
|
|
|
-
|
2,443
|
2,443
|
-
|
3,526
|
3,526
|
|
|
|
|
|
|
|
|
|
|
8,487
|
11,507
|
19,994
|
9,005
|
10,744
|
19,749
|
7. Other employment costs
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
|
|
£000
|
|
£000
|
External consultants
|
|
|
|
521
|
|
161
|
Recruitment costs
|
|
|
|
375
|
|
704
|
Private Healthcare and Life
Insurance
|
|
|
|
108
|
|
101
|
Other
|
|
|
|
29
|
|
81
|
|
|
|
|
1,033
|
|
1,047
|
8. Other administrative
expenses
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Professional fees
|
|
|
|
619
|
|
889
|
Audit and tax costs
|
|
|
|
237
|
|
312
|
Information technology
|
|
|
|
750
|
|
753
|
Travel & entertainment
|
|
|
|
177
|
|
486
|
Insurance
|
|
|
|
417
|
|
260
|
Other
|
|
|
|
170
|
|
50
|
|
|
|
|
2,370
|
|
2,750
|
Fees paid to the auditors included within the
operating costs were:
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Audit
|
|
|
|
218
|
|
244
|
Other assurance services
|
|
|
|
17
|
|
9
|
9. Employee numbers and costs, including
directors
The average number of employees in the year were:
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Support, operations and technical
|
|
|
|
113
|
|
77
|
Directors
|
|
|
|
7
|
|
7
|
|
|
|
|
120
|
|
84
|
The aggregate payroll costs for directors and
employees were:
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Wages and salaries
|
|
|
|
7,290
|
|
5,961
|
Social security
|
|
|
|
1,000
|
|
392
|
Employers' pension contributions
|
|
|
|
295
|
|
196
|
|
|
|
|
8,585
|
|
6,549
|
Equity-settled share-based payments expense
|
|
|
|
778
|
|
1,682
|
|
|
|
|
9,363
|
|
8,231
|
10.
Directors' costs
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
Directors'
emoluments
|
|
|
|
£000
|
|
£000
|
Short-term employee
benefits:
|
|
|
|
|
|
|
Wages and salaries including bonuses
|
|
|
|
1,526
|
|
1,380
|
Accrual for untaken holiday
|
|
|
|
1
|
|
37
|
Other compensation
|
|
|
|
73
|
|
77
|
Social security
|
|
|
|
278
|
|
98
|
|
|
|
|
1,878
|
|
1,592
|
Post-employment
benefits:
|
|
|
|
|
|
|
Defined contribution pension plans
|
|
|
|
46
|
|
50
|
|
|
|
|
1,924
|
|
1,642
|
Share-based
payments
|
|
|
|
629
|
|
1,474
|
Total
remuneration
|
|
|
|
2,553
|
|
3,116
|
Social security and accrued holiday pay are included
in the table above and reconcile to note 9.
Aggregate gains made by directors on the exercise of
share options and warrants was £129,225.
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
Highest paid
director
|
|
|
|
£000
|
|
£000
|
Wages and salaries
|
|
|
|
601
|
|
538
|
Other compensation
|
|
|
|
44
|
|
43
|
|
|
|
|
645
|
|
581
|
Employers' pension contributions
|
|
|
|
16
|
|
16
|
|
|
|
|
661
|
|
597
|
11.
Net finance
income/(cost)
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Lease interest
|
|
|
|
(69)
|
|
(38)
|
Exchange rate differences
|
|
|
|
22
|
|
21
|
Bank charges
|
|
|
|
(6)
|
|
(2)
|
Total finance
cost
|
|
|
|
(53)
|
|
(19)
|
Bank interest receivable
|
|
|
|
512
|
|
143
|
Net finance
income
|
|
|
|
459
|
|
124
|
12.
Taxation
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Recognised in the statement of comprehensive
income
|
|
|
|
|
|
|
R&D tax credit - current year
|
|
|
|
2,088
|
|
3,050
|
R&D tax credit - prior year
|
|
|
|
(2)
|
|
(8)
|
Total tax
credit
|
|
|
|
2,086
|
|
3,042
|
|
|
|
|
|
|
|
Reconciliation of effective tax rates
|
|
|
|
|
|
|
Loss before tax
|
|
|
|
(19,561)
|
|
(19,488)
|
Tax using the
domestic rate of corporation tax at 22.52% (2022: 19%)
|
|
|
|
4,405
|
|
3,703
|
|
|
|
|
|
|
|
Effect of:
|
|
|
|
|
|
|
Change in unrecognised deferred tax resulting from
tax losses
|
|
|
|
(2,443)
|
|
(1,767)
|
Non-deductible items
|
|
|
|
(43)
|
|
101
|
Depreciation in excess of capital allowances
|
|
|
|
(6)
|
|
(299)
|
R&D enhanced deduction on qualifying R&D
expenditure
|
|
|
|
1,959
|
|
2,259
|
R&D rate adjustment on surrendered losses
|
|
|
|
(1,784)
|
|
(947)
|
R&D tax credit - prior year
|
|
|
|
(2)
|
|
(8)
|
Total tax
credit
|
|
|
|
2,086
|
|
3,042
|
|
|
|
|
|
|
|
Potential deferred tax assets have not been
recognised but are set out below:
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Property, plant and equipment and intangible
assets
|
|
|
|
431
|
|
(187)
|
Share-based payments
|
|
|
|
57
|
|
477
|
Other differences
|
|
|
|
11
|
|
-
|
Losses carried forward
|
|
|
|
14,389
|
|
12,037
|
Unrecognised
deferred tax assets
|
|
|
|
14,888
|
|
12,327
|
The cumulative tax losses in the amount of £57.6
million (2022: £47.6 million) that are available indefinitely for
offsetting against future taxable profits have not been recognised
as the Directors consider that it is unlikely that they will be
realised in the foreseeable future.
The 2021 Finance Act increased the UK corporation tax
rate to 25% from 1 April 2023, which will affect any future tax
charges.
13.
Loss per share
The calculation of the basic loss per share is based
upon the net loss after tax attributable to ordinary shareholders
and a weighted average number of shares in issue for the year.
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
Basic loss per share (pence)
|
|
|
|
(2.36)
|
|
(2.24)
|
Diluted loss per share (pence)
|
|
|
|
(2.36)
|
|
(2.24)
|
Loss attributable to equity shareholders £000
|
|
|
|
(£17,475)
|
|
(£16,446)
|
Weighted average
number of shares in issue
|
|
|
|
741,451
|
|
734,745
|
Diluted earnings per
share
As set out in note 24, there are share options and
warrants (accounted for under IFRS 2: Share based payments)
outstanding as at 31 October 2023 which, if exercised, would
increase the number of shares in issue. Given the losses for
the year, there is no dilution of losses per share in the year
ended 31 October 2023 nor the previous year.
14.
Intangible
assets
|
|
Development
costs
|
|
Patents
|
|
Commercial
rights
|
|
Total intangible
assets
|
|
|
£000
|
|
£000
|
|
£000
|
|
£000
|
Cost
|
|
|
|
|
|
|
|
|
At 1 November 2021
|
|
229
|
|
886
|
|
121
|
|
1,236
|
Additions
|
|
-
|
|
334
|
|
-
|
|
334
|
At 31 October 2022
|
|
229
|
|
1,220
|
|
121
|
|
1,570
|
Additions
|
|
-
|
|
63
|
|
-
|
|
63
|
Disposals
|
|
(229)
|
|
-
|
|
-
|
|
(229)
|
At
31 October 2023
|
|
-
|
|
1,283
|
|
121
|
|
1,404
|
|
|
|
|
|
|
|
|
|
Amortisation
|
|
|
|
|
|
|
|
|
At 1 November 2021
|
|
74
|
|
384
|
|
33
|
|
491
|
Charge for the year
|
|
34
|
|
422
|
|
18
|
|
474
|
Impairment charge
|
|
121
|
|
173
|
|
-
|
|
294
|
At 31 October 2022
|
|
229
|
|
979
|
|
51
|
|
1,259
|
Charge for the year
|
|
-
|
|
70
|
|
40
|
|
110
|
Disposals
|
|
(229)
|
|
-
|
|
-
|
|
(229)
|
At
31 October 2023
|
|
-
|
|
1,049
|
|
91
|
|
1,140
|
|
|
|
|
|
|
|
|
|
Net
book value
|
|
|
|
|
|
|
|
|
At 31 October 2022
|
|
-
|
|
241
|
|
70
|
|
311
|
At 31 October 2023
|
|
-
|
|
234
|
|
30
|
|
264
|
15.
Right-of-use assets
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
£000
|
Cost
|
|
|
|
|
|
|
|
|
At 1 November 2021
|
|
|
|
|
|
|
|
1,415
|
Additions
|
|
|
|
|
|
|
|
470
|
At 31 October 2022
|
|
|
|
|
|
|
|
1,885
|
Additions
|
|
|
|
|
|
|
|
576
|
Disposals
|
|
|
|
|
|
|
|
(476)
|
At
31 October 2023
|
|
|
|
|
|
|
|
1,985
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
At 1 November 2021
|
|
|
|
|
|
|
|
530
|
Charge for the year
|
|
|
|
|
|
|
|
379
|
At 31 October 2022
|
|
|
|
|
|
|
|
909
|
Charge for the year
|
|
|
|
|
|
|
|
455
|
Disposals
|
|
|
|
|
|
|
|
(476)
|
At
31 October 2023
|
|
|
|
|
|
|
|
888
|
|
|
|
|
|
|
|
|
|
Net
book value
|
|
|
|
|
|
|
|
|
At 31 October 2022
|
|
|
|
|
|
|
|
976
|
At 31 October 2023
|
|
|
|
|
|
|
|
1,097
|
16.
Tangible fixed
assets
|
Leasehold
improvements
|
Decommissioning
Asset
|
Plant, machinery and
equipment
|
Assets under
construction
|
Total tangible fixed
assets
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
Cost
|
|
|
|
|
|
At 1 November 2021
|
958
|
300
|
3,318
|
-
|
4,576
|
Additions
|
1,620
|
-
|
362
|
406
|
2,388
|
Disposals
|
(8)
|
-
|
(118)
|
-
|
(126)
|
At 31 October 2022
|
2,570
|
300
|
3,562
|
406
|
6,838
|
Additions
|
985
|
-
|
334
|
288
|
1,607
|
Disposals
|
(9)
|
-
|
(25)
|
-
|
(34)
|
At
31 October 2023
|
3,546
|
300
|
3,871
|
694
|
8,411
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
At 1 November 2021
|
302
|
265
|
1,740
|
-
|
2,307
|
Charge for the year
|
444
|
20
|
530
|
-
|
994
|
Impairment charge
|
-
|
-
|
255
|
-
|
255
|
At 31 October 2022
|
746
|
285
|
2,525
|
-
|
3,556
|
Charge for the year
|
648
|
15
|
436
|
|
1,099
|
Disposals
|
-
|
-
|
-
|
-
|
-
|
At
31 October 2023
|
1,394
|
300
|
2,961
|
-
|
4,655
|
|
|
|
|
|
|
Net
book value
|
|
|
|
|
|
At 31 October 2022
|
1,824
|
15
|
1,037
|
406
|
3,282
|
At 31 October 2023
|
2,152
|
-
|
910
|
694
|
3,756
|
17.
Inventory
|
|
|
|
31 October 2023
|
|
31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Raw materials
|
|
|
|
185
|
|
173
|
Work-in-progress
|
|
|
|
405
|
|
-
|
Provision
|
|
|
|
(412)
|
|
(130)
|
Inventory
|
|
|
|
178
|
|
43
|
Inventory expensed as cost of sales during the year
was £nil (2022 £nil). During the year, £412,000 (2022:
£488,000) of brought forward inventory was written off as research
and development costs on projects that did not subsequently meet
the anticipated level of commerciality.
18.
Receivables
|
|
|
|
31 October 2023
|
|
31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Trade receivables
|
|
|
|
107
|
|
142
|
VAT receivables
|
|
|
|
383
|
|
401
|
Other receivables
|
|
|
|
217
|
|
303
|
Prepayments
|
|
|
|
524
|
|
314
|
|
|
|
|
1,231
|
|
1,160
|
There is no significant difference between the fair
value of the receivables and the values stated above.
19.
Cash and cash
equivalents
|
|
|
|
31 October 2023
|
|
31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Cash at bank
|
|
|
|
303
|
|
285
|
Bank deposits
|
|
|
|
27,063
|
|
39,935
|
|
|
|
|
27,366
|
|
40,220
|
Cash at bank and bank deposits consist of cash.
There is no material foreign exchange movement in respect of cash
and cash equivalents.
Restricted cash of £258,000 (2022: £612,000) is not
included within cash and cash equivalents and is held in escrow to
support bank guarantees provided under contractual obligations to
suppliers and customers.
20.
Payables
|
|
|
|
31 October 2023
|
|
31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Trade payables
|
|
|
|
931
|
|
445
|
Deferred revenue
|
|
|
|
1,423
|
|
1,600
|
Other payables
|
|
|
|
416
|
|
349
|
Accruals
|
|
|
|
958
|
|
1,250
|
|
|
|
|
3,728
|
|
3,644
|
Included in Accruals as of 31 October 2023 is an
amount of £690,000 in relation to bonuses (2022: £514,000).
Deferred revenue under the ABB contract is reduced by
the fair value of the warrants granted on the same day, 15 November
2021, as the two contracts are considered to be linked.
21.
Lease
liabilities
Changes in liabilities arising from financing
activities:
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Opening position
|
|
|
|
996
|
|
906
|
Cash
flows
|
|
|
|
|
|
|
Repayment
|
|
|
|
(516)
|
|
(419)
|
Non-cash
|
|
|
|
|
|
|
Additions
|
|
|
|
575
|
|
471
|
Interest expense
|
|
|
|
69
|
|
38
|
|
|
|
|
1,124
|
|
996
|
|
|
|
|
31 October 2023
|
|
31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Lease liabilities less than 12 months
|
|
|
|
477
|
|
298
|
Lease liabilities more than 12 months
|
|
|
|
647
|
|
698
|
|
|
|
|
1,124
|
|
996
|
All of the Company's leases are for the occupancy of
the campus at Dunsfold Park and are disclosed as 'Buildings' in
note 15. A number of buildings are occupied under licences
and these have not been recognised as right-of-use assets. Of
the leases recognised as right-of-use assets, the Company has a
commitment on one lease until February 2027 with a break clause in
February 2025. The Company has a commitment on one lease
until November 2025 with no break clauses. Two leases were
renewed in January 2023 until January 2026 with no break
clauses.
Leases are renewed as opposed to being extended and
are granted outside of the 1954 Act. They therefore do not
have security of tenure.
22.
Provisions
|
|
National insurance on unapproved share
options
|
|
Decommissioning provision
|
|
Total
|
|
|
£000
|
|
£000
|
|
£000
|
|
|
|
|
|
|
|
Balance at 1 November 2021
|
|
353
|
|
301
|
|
654
|
Utilisation
|
|
(353)
|
|
-
|
|
(353)
|
Balance at 31
October 2022
|
|
-
|
|
301
|
|
301
|
Additions
|
|
-
|
|
-
|
|
-
|
Utilisation
|
|
-
|
|
-
|
|
-
|
Balance at 31
October 2023
|
|
-
|
|
301
|
|
301
|
23.
Issued share
capital
|
|
Ordinary
shares
|
|
Price
|
|
Share
capital
|
|
Share premium before costs of
issue
|
|
Costs of
issue
|
|
Share premium net of costs of
issue
|
|
|
|
|
£
|
|
£000
|
|
£000
|
|
£000
|
|
£000
|
At 1 November 2021
|
|
734,484,668
|
|
|
|
734
|
|
119,718
|
|
(3,269)
|
|
116,448
|
Exercise of options 14 March
2022
|
|
60,000
|
|
9,240
|
|
-
|
|
9
|
|
-
|
|
9
|
Exercise of options 5 July
2022
|
|
110,000
|
|
12,320
|
|
-
|
|
12
|
|
-
|
|
12
|
Exercise of PSP award 21 July
2022
|
|
583,169
|
|
583
|
|
1
|
|
-
|
|
-
|
|
1
|
Exercise of options 26 July
2022
|
|
60,000
|
|
9,240
|
|
-
|
|
9
|
|
-
|
|
9
|
Exercise of options 7 September
2022
|
|
53,334
|
|
8,213
|
|
-
|
|
8
|
|
-
|
|
9
|
At 1 November 2022
|
|
735,351,171
|
|
-
|
|
735
|
|
119,756
|
|
(3,269)
|
|
116,487
|
Issue of shares
5 April 2023
|
|
10,000,000
|
|
2,000,000
|
|
10
|
|
1,990
|
|
-
|
|
1,990
|
Exercise of options
1 June 2023
|
|
10,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Exercise of warrants
14 June 2023
|
|
900,000
|
|
44,325
|
|
1
|
|
43
|
|
-
|
|
43
|
Exercise of PSP award
22 September 2023
|
|
255,136
|
|
255
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
746,516,307
|
|
-
|
|
746
|
|
121,789
|
|
(3,269)
|
|
118,520
|
The Company considers its capital and reserves
attributable to equity shareholders to be the Company's
capital. In managing its capital, the Company's primary
long-term objective is to provide a return for its equity
shareholders through capital growth. Going forward the
Company will seek to maintain a gearing ratio that balances risks
and returns at an acceptable level and to maintain a sufficient
funding base to enable the Company to meet its working capital
needs. The Company has no debt, other than property leases, and
therefore a target debt to equity ratio is not relevant at the
time.
Share premium is shown before the permitted deduction
of costs of issue. After such deduction the value equals
£118,520,000.
Details of the Company's capital are disclosed in the
statement of changes in equity.
There have been no other significant changes to the
Company's management objectives, policies and processes in the year
nor has there been any change in what the Company considers to be
capital.
24.
Share-based
payments
Share-based payment charge:
|
|
|
|
31 October 2023
|
|
31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Employee Share Option Plan
|
|
|
|
48
|
|
193
|
Employee Performance Share Plan
|
|
|
|
612
|
|
1,400
|
Warrants
|
|
|
|
-
|
|
70
|
SAYE
|
|
|
|
118
|
|
19
|
|
|
|
|
778
|
|
1,682
|
Employee Share
Option Plan
The establishment of the Employee Share Option Plan
was approved by the Board on 1 August 2018 and amended on 10
October 2018. The Plan is designed to attract, retain and
motivate employees. Under the Plan, participants can be granted
options which vest unconditionally or conditionally upon achieving
certain performance targets. Participation in the Plan is
solely at the Board's discretion and no employee has a contractual
right to participate in the Plan or to receive any guaranteed
benefits.
Options are granted under the Plan for no
consideration and carry no dividend nor voting rights.
When exercisable, each option is convertible into one
ordinary share.
Set out below are summaries of options granted under
the Plan:
|
|
Average exercise price per
share option
2023
|
|
Number of
options
2023
|
|
Average exercise price per
share option
2022
|
|
Number of
options
2022
|
|
|
£
|
|
|
|
|
|
|
At 1 November
|
|
0.35
|
|
13,717,167
|
|
0.35
|
|
14,952,167
|
Granted during the year
|
|
0.16
|
|
2,125,000
|
|
0.19
|
|
215,000
|
Exercised during the year
|
|
0.09
|
|
(10,000)
|
|
0.14
|
|
(283,334)
|
Lapsed during the year
|
|
0.17
|
|
(2,861,667)
|
|
0.35
|
|
(1,166,666)
|
Amended during the year:
|
|
|
|
|
|
|
|
|
Options at original exercise
price
|
|
0.62
|
|
(1,000,000)
|
|
-
|
|
-
|
Options at rebased exercise
price
|
|
0.11
|
|
1,000,000
|
|
-
|
|
-
|
At
31 October
|
|
0.32
|
|
12,970,500
|
|
0.35
|
|
13,717,167
|
Vested and exercisable at 31
October
|
|
9,630,500
|
|
|
|
11,700,637
|
Share options outstanding at the end of the year have
the following expiry dates and exercise prices:
Grant date
|
Expiry date
|
|
Exercise
price
|
|
Share options
2023
|
|
Share options
2022
|
|
|
|
£
|
|
|
|
|
07
November 2012
|
07
November 2022
|
|
0.3575
|
|
-
|
|
95,000
|
02
December 2013
|
01
December 2023
|
|
0.3400
|
|
120,000
|
|
120,000
|
17 July
2015
|
17 July
2025
|
|
0.2200
|
|
6,000,000
|
|
6,000,000
|
10
September 2018
|
01 August
2024
|
|
0.0880
|
|
190,000
|
|
216,667
|
15 October
2018
|
15 October
2024
|
|
0.0880
|
|
2,500,000
|
|
2,500,000
|
31
December 2019
|
20 April
2030
|
|
0.1635
|
|
-
|
|
2,750,000
|
20 April
2020
|
20 April
2030
|
|
0.1540
|
|
820,500
|
|
820,500
|
24 June
2021*
|
28 June
2031
|
|
0.6170
|
|
-
|
|
1,000,000
|
09 June
2023*
|
28 June
2031
|
|
0.1000
|
|
500,000
|
|
-
|
09 June
2023*
|
28 June
2031
|
|
0.1250
|
|
500,000
|
|
-
|
09 June
2023
|
28 June
2031
|
|
0.1526
|
|
1,500,000
|
|
-
|
04 July
2022
|
04 July
2032
|
|
0.1900
|
|
215,000
|
|
215,000
|
27 April
2023
|
27 April
2033
|
|
0.0188
|
|
625,000
|
|
-
|
|
|
|
|
|
12,970,500
|
|
13,717,167
|
* Award amended by Deed of Variation in 2023.
The table below sets out the inputs used in
determining the fair value of the grants of options per the
previous table as well as the expense recognised in the accounts in
the current year. The grants in the previous table are linked
below based on the exercise price and grant date.
Grant date
|
Exercise
price
|
Average grant date share
price
|
Average expected volatility
per annum
|
Average risk-free interest
rate per annum
|
Average dividend yield per
annum
|
Average implied option life
in years
|
Average fair value per
option
|
Amount expenses in
2023
|
|
£
|
£
|
|
|
|
|
£
|
£000
|
|
|
|
|
|
|
|
|
|
31
December 2019
|
0.1635
|
0.1635
|
95.50%
|
0.54%
|
0.00%
|
2.0
|
0.8100
|
-
|
04 July
2022
|
0.1900
|
0.1900
|
95.00%
|
1.83%
|
0.00%
|
3.0
|
0.1140
|
8
|
27 April
2023
|
0.1880
|
0.1882
|
78.00%
|
3.82%
|
0.00%
|
3.0
|
0.0990
|
11
|
09 June
2023
|
0.1000
|
0.1682
|
72.00%
|
4.51%
|
0.00%
|
0.7
|
0.0791
|
3
|
09 June
2023
|
0.1000
|
0.1682
|
72.00%
|
4.51%
|
0.00%
|
0.9
|
0.0825
|
3
|
09 June
2023
|
0.1250
|
0.1682
|
72.00%
|
4.51%
|
0.00%
|
1.7
|
0.0817
|
9
|
09 June
2023
|
0.1250
|
0.1682
|
72.00%
|
4.51%
|
0.00%
|
1.9
|
0.0847
|
3
|
09 June
2023
|
0.1530
|
0.1682
|
72.00%
|
4.51%
|
0.00%
|
2.7
|
0.0856
|
3
|
09 June
2023
|
0.1530
|
0.1682
|
72.00%
|
4.51%
|
0.00%
|
2.9
|
0.0883
|
8
|
Total charge for the year (2022: £193,000)
|
48
|
Performance Share
Plan
The establishment of the Performance Share Plan was
approved by the Board on 1 September 2021. The Plan is
designed to attract, retain and motivate employees. Under the
Plan, participants can be granted options which vest
unconditionally or conditionally upon achieving certain performance
targets. Participation in the Plan is solely at the Board's
discretion and no employee has a contractual right to participate
in the Plan or to receive any guaranteed benefits. Award
holders are not required to make payment for the grant of an award
unless the board determines otherwise.
Options are granted under the Plan for no
consideration and carry no dividend nor voting rights.
When exercisable, each option is convertible into one
ordinary share.
Set out below are summaries of options granted under
the Plan:
|
|
Average exercise price per
share option
2023
|
|
Number of
options
2023
|
|
Average exercise price per
share option
2022
|
|
Number of
options
2022
|
|
|
£
|
|
|
|
|
|
|
At 1 November
|
|
0.001
|
|
6,131,266
|
|
-
|
|
-
|
Granted during the year
|
|
0.001
|
|
4,664,000
|
|
0.001
|
|
7,493,317
|
Exercised during the year
|
|
0.001
|
|
(255,136)
|
|
0.001
|
|
(583,169)
|
Lapsed during the year
|
|
0.001
|
|
(2,939,226)
|
|
0.001
|
|
(778,882)
|
At
31 October
|
|
0.001
|
|
7,600,904
|
|
0.001
|
|
6,131,266
|
Vested and exercisable at 31
October
|
|
|
|
-
|
|
|
|
-
|
Share options outstanding at the end of the year have
the following expiry dates and exercise prices:
Grant date
|
Expiry date
|
|
Exercise
price
|
|
Share options
2023
|
|
Share options
2022
|
|
|
|
£
|
|
|
|
|
19
November 2021
|
19
November 2031
|
|
0.001
|
|
620,970
|
|
2,971,582
|
12 July
2022
|
12 July
2032
|
|
0.001
|
|
2,315,934
|
|
3,159,684
|
1 June
2023
|
1 June
2033
|
|
0.001
|
|
4,664,000
|
|
-
|
|
|
|
|
|
7,600,904
|
|
6,131,266
|
The table below sets out the inputs used in
determining the fair value of the grants of options per the
previous table as well as the expense recognised in the accounts in
the current year. The grants in the previous table are linked
below based on the exercise price and grant date.
Grant date
|
Exercise
price
|
Average grant date share
price
|
Average expected volatility
per annum
|
Average risk-free interest
rate per annum
|
Average dividend yield per
annum
|
Average implied option life
in years
|
Average fair value per
option
|
Amount expenses in
2023
|
|
Pence
|
Pence
|
|
|
|
|
Pence
|
£000
|
19
November 2021
|
0.001
|
53.80
|
76.00%
|
0.05%
|
0.00%
|
0.40
|
0.43
|
-
|
19
November 2021
|
0.001
|
53.80
|
76.00%
|
0.35%
|
0.00%
|
1.40
|
0.42
|
205
|
19
November 2021
|
0.001
|
53.80
|
76.00%
|
0.05%
|
0.00%
|
3.00
|
0.45
|
133
|
15 July
2022
|
0.001
|
20.70
|
95.00%
|
1.76%
|
0.00%
|
3.00
|
12.70
|
91
|
15 July
2022
|
0.001
|
20.70
|
95.00%
|
1.76%
|
0.00%
|
3.00
|
16.60
|
119
|
01 June
2023
|
0.001
|
17.91
|
74.00%
|
4.29%
|
0.00%
|
3.00
|
8.79
|
29
|
01 June
2023
|
0.001
|
17.91
|
74.00%
|
4.29%
|
0.00%
|
3.00
|
10.92
|
35
|
Total charge for the year (2022: £1,400,000)
|
612
|
Three grants were made on 19 November 2021. The
first two, of the three disclosed above, related to the
Transitional LTIP, and was made in two tranches. The first tranche
had a risk free rate of 0.05% whilst the second tranche had a
risk-free rate of 0.35%. The third, of the three above,
related to the PSP LTIP and had a risk free rate of 0.05%.
SAYE
Save-as-you-earn (SAYE) 'Sharesave' schemes are open to all
eligible employees. The SAYE schemes allows eligible
employees to commit to making a deduction from salary on a monthly
basis over three years. At the end of the three-year period,
employees can purchase the Company's ordinary shares of 0.1 pence
each ("Ordinary Shares") using the funds saved.
The first AFC Energy SAYE scheme was launched in
August 2022 at an exercise price of 20.48 pence per Ordinary Share,
representing a 20% discount to the closing market price of the
Ordinary Shares prior to the scheme being launched on 3 August
2022.
The second AFC Energy SAYE scheme was launched in
September 2023 at an exercise price of 14.304 pence per Ordinary
Share, representing a 20% discount to the closing market price of
the Ordinary Shares prior to the scheme being launched on 6
September 2022.
The discounts to the closing market prices are in
line with the limits of the SAYE scheme as defined by HMRC.
|
Average exercise price per option
2023
|
Number of options 2023
|
Average exercise price per option
2022
|
Number of options 2023
|
|
Pence
|
|
£
|
|
01 November
|
20.48
|
2,007,400
|
-
|
-
|
Granted during the year
|
14.30
|
1,937,201
|
20.48
|
2,007,400
|
31
October
|
17.44
|
3,944,601
|
20.48
|
2,007,400
|
Vested and exercisable at 31 October
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Grant date
|
Expiry date
|
Exercise price
Pence
|
Share options 2023
|
Share options 2022
|
|
|
|
|
|
03 August 2022
|
31 March 2026
|
20.480
|
2,007,400
|
2,007,400
|
19 October 2023
|
30 April 2027
|
14.304
|
1,937,201
|
-
|
Grant date
|
Exercise
price
|
Average grant date share
price
|
Average expected volatility
per annum
|
Average risk-free interest
rate per annum
|
Average dividend yield per
annum
|
Average implied option life
in years
|
Average fair value per
option
|
Amount expenses in
2023
|
|
Pence
|
Pence
|
|
|
|
|
Pence
|
£000
|
03 August
2022
|
20.480
|
25.60
|
95.00%
|
2.93%
|
0.00%
|
3.08
|
17.700
|
115
|
19 October
2023
|
14.304
|
13.97
|
73.00%
|
4.72%
|
0.00%
|
3.03
|
7.060
|
3
|
|
|
|
|
|
|
|
|
|
Total charge for the year (2022: £19,000)
|
118
|
25.
Financial
instruments
Warrants
While the Board issues share options to employees,
the Board has the discretion to award warrants from time to time to
non-employees, such as non-executive directors and third
parties. Typically, warrants are granted and vest upon
certain performance targets. Grant of warrants is solely at
the Board's discretion.
Warrants are granted for no consideration and carry
no dividend nor voting rights. When exercisable, each warrant
is convertible into one ordinary share.
Set out below are summaries of warrants granted under
the Plan:
|
Average exercise price per warrant
2023
|
Number of warrants 2023
|
Average exercise price per warrant
2022
|
Number of warrants 2022
|
|
£
|
|
£
|
|
01 November
|
0.540
|
15,702,720
|
0.51
|
8,900,000
|
Granted during the year
|
-
|
-
|
0.59
|
6,802,720
|
Exercised during the year*
|
0.049
|
(900,000)
|
-
|
-
|
Lapsed during the year
|
0.210
|
(3,000,000)
|
-
|
-
|
31
October
|
0.670
|
11,802,720
|
0.54
|
15,702,720
|
Vested and exercisable at 31 October
|
|
3,101,300
|
|
4,001,300
|
The warrants exercised during the year all relate to
a serving non-executive director and are discussed further within
the Remuneration Committee Report.
Grant date
|
Warrant
price
|
Average grant date share
price
|
Average expected volatility
per annum
|
Average risk-free interest
rate per annum
|
Average dividend yield per
annum
|
Average implied warrant life
in years
|
Average fair value per
warrant
|
Amount expenses in
2023
|
|
Pence
|
Pence
|
|
|
|
|
Pence
|
£000
|
13 October
2020
|
19.5
|
18.56
|
102.76%
|
(0.02)%
|
0.00%
|
1
|
7.01
|
-
|
Total charge for the year (2022: £70,000)
|
-
|
Grant date
|
Warrant
price
|
Average grant date share
price
|
Average expected volatility
per annum
|
Average risk-free interest
rate per annum
|
Average dividend yield per
annum
|
Average implied warrant life
in years
|
Average fair value per
warrant
|
Accounted as equity in
2023
|
|
Pence
|
Pence
|
|
|
|
|
Pence
|
£000
|
15
November 2021
|
58.8
|
58.8
|
59.1%
|
0.65%
|
0.00%
|
2
|
6.3
|
-
|
15
November 2021
|
58.8
|
58.8
|
59.1%
|
0.65%
|
0.00%
|
2
|
11.3
|
-
|
15
November 2021
|
58.8
|
58.8
|
59.1%
|
0.65%
|
0.00%
|
2
|
9.9
|
-
|
Accounted as equity (2022: £576,000)
|
-
|
In the case of the ABB warrants, the warrant life is
two years from the date of vesting. The first tranche of 3.4
million warrants have fully vested and expired on 4 February 2024
without having been exercised. Under the revised agreement
signed on 28 March 2023, ABB will invest the £2.0 million balance
into newly issued share capital, which means that the original
milestones 1 and 2 will no longer apply and so the related warrants
will not vest and therefore expire in due course.
Warrants outstanding at the end of the year have the
following expiry dates and exercise prices.
Grant date
|
Expiry date
|
Exercise price
|
Warrants 2023
|
Warrants 2022
|
|
|
|
|
|
09 September 2019
|
09
September 2029
|
0.050
|
-
|
900,000*
|
19 October 2020
|
13 October
2021
|
0.195
|
-
|
1,000,000*
|
19 October 2020
|
13 April
2021
|
0.210
|
-
|
1,000,000*
|
19 October 2020
|
13 October
2022
|
0.230
|
-
|
1,000,000*
|
13 January 2021
|
13 March
2025
|
0.770
|
5,000,000
|
5,000,000*
|
15 November 2021
|
04
February 2024
|
0.590
|
3,401,360
|
3,401,360
|
15 November 2021
|
24 months
after vesting
|
0.590
|
1,700,680
|
1,700,680
|
15 November 2021
|
24 months
after vesting
|
0.590
|
1,700,680
|
1,700,680
|
|
|
|
11,802,720
|
15,702,720
|
*
These warrants represent share-based payments which have been
accounted for under IFRS 2 and disclosures have been made which are
required for share based payments and can be found in note 24.
In common with other businesses, the Company is
exposed to risks that arise from its use of financial
instruments. This note describes the Company's objectives,
policies and processes for managing those risks and the methods
used to measure them. Further quantitative information in
respect of these risks is presented throughout these financial
statements.
Principal financial
instruments
The principal financial instruments used by the
Company, from which financial instrument risk arises, are as
follows:
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
Note
|
|
£000
|
|
£000
|
Financial
instruments held at amortised cost:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
19
|
|
27,366
|
|
40,220
|
Receivables
|
|
18
|
|
324
|
|
445
|
Total financial
assets held at amortised cost
|
|
|
|
27,690
|
|
41,380
|
Payables
|
|
20
|
|
2,304
|
|
2,044
|
Leases
|
|
21
|
|
1,124
|
|
996
|
Total financial
liabilities held at amortised cost
|
|
|
|
3,428
|
|
3,040
|
There is no difference between the fair value and
book value of financial instruments.
The Company does not enter forward exchange contracts
or otherwise hedge its potential foreign exchange exposure.
The Board monitors and reviews its policies in respect of currency
risk on a regular basis.
VAT receivables and prepayments have been removed
from financial assets and deferred revenue from financial
liabilities.
Financial instruments that are measured subsequent to
initial recognition at fair value are grouped into three levels
based on the degree to which the fair value is observable as
defined by IFRS 7:
· Level 1
fair value measurements are those derived from unadjusted quoted
prices in active markets for identical assets and liabilities.
· Level 2
fair value measurements are those derived from inputs, other than
quoted prices included within Level 1, that are observable either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
· Level 3
fair value measurements are those derived from valuation techniques
that include inputs for the asset or liability that are not based
on observable market data.
Other than the ABB warrants, granted on 15 November
2021, which also incorporate managements inputs to the fair
valuation, all financial instruments are Level 1 and none have been
transferred between Levels during the year.
General objectives,
policies and processes
The Board has overall responsibility for the
determination of the Company's risk management objectives and
policies and, while retaining ultimate responsibility for them, it
has delegated part of the authority for designing and operating
processes that ensure the effective implementation of the
objectives and policies to the Company's finance team. The
Board receives reports from the financial team through which it
reviews the effectiveness of the processes put in place and the
appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies
that seek to reduce ongoing risk as far as possible without unduly
affecting the Company's competitiveness and flexibility.
Further details regarding these policies are set out below.
Credit
risk
Credit risk arises principally from the Company's
other receivables and cash and cash equivalents. It is the risk
that the counterparty fails to discharge its obligation in respect
of the instrument. The maximum exposure to credit risk equals
the carrying value of these items in the financial statements as
shown below:
|
|
|
|
Year ended 31 October 2023
|
|
Year ended 31 October 2022
|
|
|
|
|
£000
|
|
£000
|
Cash and cash equivalents
|
|
|
|
27,366
|
|
40,220
|
Receivables
|
|
|
|
324
|
|
445
|
The Company's principal other receivables arose
from:
a) customers, and
b) trade and other receivables
Credit risk with cash and cash equivalents is reduced
by placing funds with banks with acceptable credit ratings and
government support where applicable and on term deposits with a
range of maturity dates. At the year end, most cash were
temporarily held on short-term deposit. The credit risk
provision is estimated on a case by case basis taking into account
public information of the counterparty and payment history and no
loss is expected. No expected credit loss accrual has been
made as at 31 October 2023 and 2022 as they are estimated to be de
minimis.
Liquidity
risk
Liquidity risk arises from the Company's management
of working capital and the amount of funding required for the
development programme. It is the risk that the Company will
encounter difficulty in meeting its financial obligations as they
fall due. The Company's policy is to ensure that it will
always have sufficient cash to allow it to meet its liabilities
when they become due.
The principal liabilities of the Company are trade
and other payables in respect of the ongoing product development
programme. Trade payables are all payable within two months.
The Board receives cash flow projections on a regular basis as well
as information on cash balances.
The following table shows the Company's financial
liabilities by relevant maturity grouping based on contractual
maturities. The amounts included in the analysis are
contractual, undiscounted cashflows.
|
Less than one year
|
One to two years
|
Two to five years
|
Total contracted cash flows
|
Carrying amount
|
31 October
2023
|
£000
|
£000
|
£000
|
£000
|
£000
|
Trade payables
|
2,304
|
-
|
-
|
2,304
|
2,304
|
Lease liabilities
|
518
|
518
|
151
|
1,187
|
1,124
|
Total financial
liabilities
|
2,822
|
518
|
151
|
3,491
|
3,428
|
|
Less than one year
|
One to two years
|
Two to five years
|
Total contracted cash flows
|
Carrying amount
|
31 October
2022
|
£000
|
£000
|
£000
|
£000
|
£000
|
Trade payables
|
2,044
|
-
|
-
|
2,044
|
2,044
|
Lease liabilities
|
328
|
308
|
423
|
1,059
|
996
|
Total financial
liabilities
|
2,372
|
308
|
423
|
3,103
|
3,040
|
See also note 21, which sets out the lease
liabilities for less than 12 months and more than 12 months.
Interest rate
risk
The Company is exposed to interest rate risk in respect of surplus
funds held on deposit and, where appropriate, uses fixed interest
term deposits to mitigate this risk.
26.
Related party
transactions
There were no transactions with any related parties
during the year ended 31 October 2023 (2022: £Nil) other than key
management compensation, details of which can be found in note
10.
27.
Ultimate controlling
party
There is no ultimate controlling party.
28.
Events occurring after the end of
the reporting period
Details of the following events since
the financial year end are provided as follows:
·
launch of Speedy Hydrogen Solutions, a joint
venture with Speedy Hire plc, the near-term financial impact of
which will be an investment by the Company into the JV of
£0.625m;
·
build and commission of modular ammonia to
hydrogen cracking plant, the near-term financial impact of which
will not be material;
·
acquisition of certain UK mobile hydrogen storage
and distribution assets from Octopus Hydrogen, the near-term
financial impact of which, along with some other post year end
capital purchases, will be less than £1.0m;
·
attestation of conformity of CE Mark, the
near-term financial impact of which will not be material;
and
·
first factory acceptance test of 30kW generator,
the near-term financial impact of which will not be
material.
None of the above are considered to
be adjusting events.