Ceres Power Holdings plc

and welcome to the Ceres Power Holdings PLC interim results investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged, and they can be submitted at any time using the Q&A tab just situated on the right-hand corner of your screen. Before we begin, we'd like to submit the following poll, and I'm sure the company would be most grateful for your participation. And I'd now like to hand over to CEO Phil Caldwell. Good morning.

Good morning, everybody, and thank you for joining. I'm joined by Eric Lakin, CFO, and this morning we're going to talk you through what I believe is a very strong set of interim results for Ceres Power. So we've been having a fantastic year this year. We've signed two new stack license partners, major manufacturers, and one system license partner this year to date. That's resulted in a record first half year revenue, increasing by 144% to 28.5 million. and gross profit increasing also by more than 200% to 22.9 million. That's backed by a record order intake of just under 47 million in the first half. And we've been busy since then as well. So order intake as we stand at the end of August is actually over 100 million. We now have four global stock manufacturing license partners progressing towards scale production. And it's not just that we have four, but it's the quality of these people that we're working with with the addition of Delta and Denso this year on top of Bosch and Doosan. As a licensing business, it's essential we maintain technology leadership. And I'm very pleased that our development on SOEC has gone very well. We have the one megawatt demonstrator currently being commissioned with Shell as we speak. And we've entered into a joint development with them on scaling that to 10 megawatt pressurized electrolyzer modules and then enabling scale up to 100 megawatts to gigawatt scale plants. So this year has been all about commercial acceleration. We started the year in January in Taiwan with Delta Electronics. This is a manufacturing collaboration for both SOFC and SOEC. So that's very important. It's the first one we did for SOEC, but also has the SOFC side to the license as well. We followed that up with the second manufacturing license for purely for SOEC with Denso Corporation in Japan. And then since then we've also signed a system level license. So a smaller level license, but equally important with Thermax Limited in India. This provides us entry into the dynamic high growth Indian market. So three new major partners taking us into three new geographies. On top of that, we continue to support both Bosch and Doosan as they continue to implement their initial volume manufacturing and there's great progress there as well. And we have strong business momentum going into this year with additional license agreements leading to what we believe will be record order intake revenue and gross profit, not just at the half year, but at the full year also. I mentioned the technology leadership. It's been a relatively short period since we entered into the SOEC market. And I think this year is the first year where we start to see the benefit of the investments we've been making over the past few years coming through now in commercial agreements. So as I mentioned, I was in India just a few weeks ago for the inauguration of the one megawatt electrolyzer at Shell Center in Bangalore, India. And we're very busy getting on with the next level of the design of pressurized SOEC modules, which I think is quite unique in the industry. This architecture scales readily to 100 megawatt plus building blocks that can take us into gigawatt scale. And we've done some work there with Atkins Realis that we shared, I think, earlier this year as well. And also we're sustaining our leadership position in fuel cell technology. You know, there's very few players in the SOFC market and we have that leading position and we've been working obviously with Bosch and Doosan and Weichai on that technology and we've added Delta to the SOFC portfolio as well this year. So very strong progress on technology and on the commercial acceleration. And that's really underpinned the results that we're going to take you through this morning. So with that, I'll hand over to Eric, our CFO, to talk you through the finances.

Thanks very much, Phil, and good morning. I'm very pleased to announce a first half financial results, which are consistent with the high end of the trading update guidance we gave in July this year. And also, as Phil said, these are record sets of financial results in Serra's history. We have revenue of £28.5 million. relative to the guidance we gave at 27 to 29. And that represents 144% increase from the first half last year. With the high growth and the stock strong revenue mix with a high contribution from license fees that resulted in an 80% gross margin at the high end of the trading update guidance. And that represents a significant increase from the margin in the prior year period. As a consequence, gross profit of 22.9 million pounds is over three times higher than the first half of last year. As a result of high revenue and margin and whilst maintaining the cost base at comparable levels to last year, there's a significant reduction in the EBITDA losses from 23.5 million last year to 9 million loss in the first half of this year. We finished the half with a cash balance, including short term investments of 126.1 million pounds compared to 140 million at the end of December last year. That represents a cash outflow of approximately 14 million pounds. So significant reduction in the outflow in the same period last year of 21.1 million pounds. And as Phil mentioned, as a consequence of the Delta contract, plus some other orders, the total order intake for the half was 46.9 million pounds compared to 15.4 million order intake in the first half of last year. And on the back of the Denso contract that's won at the beginning of the second half, we're today reaffirming the upgraded guidance of revenue for the full year to the range 50 to 60 million pounds. So just wanted to talk through the development of revenue and gross profit for the last four six month periods. And as can be seen, there's a significant uptick in the first half of this year. And that was largely driven by the recognition of revenue from the technology transfer for the Delta contract, as well as revenue contributions from other existing partners. As a reminder, our revenue segments are comprised three elements. At the moment, we have engineering services, which is effectively consultancy for our partners to support them to start a production in their stack manufacturing licenses, but also providing support for system development. There is supply, which is provision of prototype stacks and components from our manufacturing excellence center in the UK to our partners. And then we also have license fee revenue, which is very high margin, and that can be recognized upfront in the form of technology transfer, but also elements over time through development license, through the period of the manufacturing collaboration license arrangements we have. As shown here, the significant growth in the half was due to the license fee revenue recognition from the Delta contract. The fourth element of revenue in the future will come from royalties and that'll be effectively 100 margin and that's derived when our partners sell stacks or systems to third parties on commercial terms and we get a royalty from that and we expect the first royalties to occur by the end of next year as doosan stack factory comes online and they have commercial sales from their existing pipeline Despite the very strong growth, we were also ensuring we're managing our cost base. And that's a good example of the operational leverage of the business and also the asset light model. And as can be seen from this chart, which shows the last seven, six month periods, the evolution of our costs. And by costs, we include everything, including operating costs, capitalized development, and CapEx. We have invested a significant amount in our SOEC and SOFC technology in recent years. And during that time, we've met a number of important milestones through in R&D and also in our new product introduction. for both sides of the business. And that's enabled us to a position where there's a natural reduction in spend on some of those projects, some of which are non-recurring in nature, such as test and infrastructure build, the investment into our prototype factory, and also the first of a kind one megawatt demonstrator that Phil talked about, which is in the commissioning phase. So as a result, we're in the position, as we indicated earlier in the year, that our cost base will stabilize this year compared to growth in prior years. But in addition, we're in a position to optimize our cost base. And we're announcing today we have effectively implementing a restructuring in the business in this quarter, which will result in a approximately 15% reduction in headcount and also our overall cost base, which will reduce our run rate of costs through into next year. And again, demonstrating the ability of the business to grow the top line whilst also managing its cost base. As a result of that, we finished the half on a confident note and we are well funded for future growth. With that, I'll hand over back to Phil. I'm sorry, one more slide. So as a result of the revenue growth and margin improvement and also managing the cost base, we show the cash outflow of the business is reducing and the 14 million outflow in the first half of this year compares favorably to the 21 million in the first half of last year. I should note in the second half of this year, we expect the cash outflow to be more than the first half. There's a number of variables within that. It also includes the one-off restructuring costs in the half. But I should emphasize the overall cash outflow this year is expected to be less than the total cash outflow last year. So with that, I'll hand back to Phil. Thank you.