The fuel cell technology in development by Ceres Power Holdings (CWR) offers the promise of distributed power products which can be run cheaply with low emissions. The investment proposition is being driven, at least in part, by regulatory change, along with "disruption in the energy and transportation markets", but these half-year figures suggest that wide-scale adoption of its technologies - and by extension profitability - is still some way off.
Shareholders can be encouraged by the increased clamour for its technologies, but their development places a heavy demand on capital. At the half-year mark, our main concern was that management admitted there was “no assurance” it would be able to obtain adequate funding. But it has taken decisive action in the intervening period. The group has been signing up high-profile partners to generate the cash it needs, with engineering giant Bosch, Chinese energy Group Weichai Power and others helping it to raise £49.3m. A further £28m is expected when Ceres finalises its joint venture with Weichai, and management says the group doesn’t need additional capital “for the foreseeable future”. Nevertheless, ensuring adequate levels of development capital will always be an issue as the group looks to cement a position in a rapidly growing market. That process is certainly apparent in its patented SteelCell technologies, which are gaining wider acceptance, partially due to their potential to be mass manufactured "in a cost-effective way".
The group remains loss-making, but there is a growing appetite for its technology. The order book rocketed tenfold to £30m in the period, and as it signs up new partners to joint-development projects, the licensing income may accelerate towards profitability. The group is investing £7m in a new manufacturing facility in the UK, which it hopes will serve as a “reference plant” for its partners to license manufacturing, driving further growth. In the meantime, chief executive Phil Caldwell points to the calibre of the group’s partners and investors - such as Lansdowne and Lombard Odier - as an indication of its potential, while a 45 per cent rise in the share price over the past 12-months shows the market shares that sentiment.
Broker Zeus Capital expects the group’s pre-tax losses to drop to £9.47m in FY2019, giving a loss per share of 5.46p, before declining to £7.67m and 4.04p in 2020.
CERES POWER HOLDINGS (CWR) | ||||
ORD PRICE: | 199p | MARKET VALUE: | £268m | |
TOUCH: | 197-200p | 12-MONTH HIGH: | 210p | LOW: 100p |
DIVIDEND YIELD: | nil | PE RATIO: | na | |
NET ASSET VALUE: | 9p | NET CASH: | £6.4m |
Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2014 | 1.22 | -8.5 | -1.4 | nil |
2015 | 0.32 | -11.6 | -1.3 | nil |
2016 | 1.11 | -12.6 | -1.4 | nil |
2017 | 3.12 | -11.4 | -1.0 | nil |
2018 | 6.33 | -11.9 | -1.0 | nil |
% change | +103 | - | - | - |
Ex-div: | na | |||
Payment: | na | |||