Ceres Power (CWR) is banking on fuel cells playing a big role in the decarbonisation of the global economy. Looking to commercialise its technology, its strategy is to sign joint development and licensing agreements in key markets such as China, Japan and South Korea. So far, it has secured partnerships with the likes of Bosch and Chinese engine maker Weichai, among others.
Sales growth in the six months to 31 December 2019 was driven by revenue from engineering services and the provision of technology hardware, which increased from £3m to £7.2m. But these services generate lower margins than licensing fees, so the gross margin fell from 82 per cent a year earlier to 67 per cent. So, while overall sales jumped by a third, the operating loss only narrowed by 5 per cent to £2.8m, further shackled by administrative costs almost doubling.
Since the period-end, Bosch has increased its stake in Ceres from 4 per cent to 18 per cent, purchasing 11.9m new shares worth £38m. Weichai has also opted to acquire £11m-worth of new shares to maintain a 20 per cent stake. Ceres plans to use the proceeds to expand its UK manufacturing capacity and develop electrolysis capability – the ability to produce hydrogen from water.
While the coronavirus may impact the timing of partner programmes in the short term, Ceres expects to meet market expectations in 2020. Liberum forecasts pre-tax losses of £8.55m for the full year, giving a loss per share of 4.2p, narrowing to £5.91m and 2.3p in 2021.
| CERES POWER (CWR) | ||||
| ORD PRICE: | 303p | MARKET VALUE: | £466m | |
| TOUCH: | 302-304p | 12-MONTH HIGH: | 532p | LOW: 137p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 55p | NET CASH: | £59.8m* | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 8.11 | -2.81 | -1.44 | nil |
| 2019 | 10.0 | -2.79 | -1.07 | nil |
| % change | +23 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes £4.8m in lease liabilities | ||||
