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.
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