AFC Energy plc (LON:AFC), a leading provider of hydrogen power generation technologies, has announced its results for the year ended 31 October 2020. Highlights of those results are as follows.
Commercial
· Six-month engagement with global e-mobility leader, ABB, culminating in the post year-end formation of a Strategic Partnership to develop high power Electric Vehicle (EV) charging solutions with established route to a growing worldwide EV market.
· Achieved first commercial orders, including appointment as Official Charging Partner of FIA Accredited Extreme E in 2021, providing sustainable off-grid power for rapid vehicle charging.
· Confirmed initial order book of £1.1m at year end, with strong pipeline of commercial orders across prospective partners and distributors currently under development.
· Announced collaboration with global contractor ACCIONA, highlighting opportunities for sustainable construction and temporary power applications.
· Introduced potential for alkaline fuel cell adoptions in high growth micro grid applications with system sale to Forschungszentrum Jülich (“Jülich”) at its Living Lab Energy Campus (“LLEC”) showcase in Germany.
· Commenced strategic relationship with Ricardo plc post year-end to explore alkaline fuel cell deployment across global maritime, rail and stationary markets following growth in enquiries – all new target industries for the business.
· Oversubscribed £31.6m fundraise, strengthening balance sheet for accelerated growth.
Manufacturing
· Confirmation of capital light manufacturing and scale up strategy through supply chain strengthening in preparation for near term growth potential in commercial orders.
· Cemented partnership with BK Gulf through post year-end agreement for mass scale up of containerised and skid mounted fuel cell system fabrication.
· Agreement reached post year-end to lease 30,000 sq. ft UK based facility for the assembly, commissioning and dispatch of fuel cell systems to customers.
Technology
· Prototype design of high-density “S” series fuel cell system completed and work commenced to assemble and demonstrate “short stack” performance, prior to scaling up to full scale 10kW stack in 2021 and expected release of commercial-scale stacks to the market in late 2022.
· Initial supply of AlkaMem® membrane samples across multiple non-fuel cell applications demonstrating the diversity of revenue opportunities across non-core markets.
· Design and engineering of world class testing and research lab for high density fuel cell, launched after year-end in February 2021.
Key Financial Highlights
· Stronger year end cash balance of £31.6m (FY 2019: £1.6m), providing the basis for future growth.
· Growing investment in product range reflected in increased loss of £4.2m (FY 2019: £2.9m).
· Strong pipeline growth across all target markets post year-end with potential for commensurate revenue.
Outlook
· Unprecedented global investment in hydrogen, with $300bn project pipeline and 30 of the world’s largest economies already having national Hydrogen strategies in place.
· Principle of ‘building back better’ and the bringing forward of EV deployment post COVID-19 is driving strong Government action on decarbonisation.
· Leveraging the value of existing and new international partnerships to enhance commercial route to market remains central to driving growth in top line commercial revenue.
· Systems to be completed and deployed to reinforce political & regulatory support for industry’s viable transition away from diesel, with anticipated drive towards commercial sales.
· Stronger balance sheet to support further investment in containerised fuel cell systems to meet customer demand and hone supply chain and manufacturing scale up potential.
· Planned deployment of first integrated EV charger system alongside ABB in second half of 2021.
· Target delivery of first prototype high energy density “S” series fuel cell stack with adoption of AFC Energy’s new Alkamem® membrane technology in 2021.
· Continued international promotion of our work through the Hydrogen Council and the Ammonia Energy Association.
Adam Bond, Chief Executive of AFC Energy, said:
“2020 was the year that hydrogen took centre stage as a key enabler of a more sustainable future, fuelling a transformational year for AFC Energy. A growing order book, new strategic partnerships, a stronger cash position at year-end and a strong global political will, evidenced by record levels of investment in the sector, provides the basis for our future success.
Our outlook for the coming year is one of confidence, with both Governmental policies and industry sentiment driving sustainable change in our key target markets. The Company’s stronger balance sheet position enables us to invest in our people, products and technology and we therefore expect cash burn to increase in the coming year to deliver and grow our order book.
Leveraging the value of our existing international partnerships and collaborations remains central to our approach in 2021. With the required distribution channels, manufacturing and staffing being put in place to turn our enquiry pipeline into commercial sales with significant annuity revenue, I look forward to us making a growing contribution to delivering emissions-free solutions to the world’s energy challenges.”
Chairman’s report
The year ended 31 October 2020 was a transformational one for AFC Energy. A supportive public policy environment, commercial opportunity, strong customer engagement and product readiness all converged and gave rise to our first commercial orders. The profile of the company was also significantly heightened through becoming the official charging partner for the inaugural Extreme E season, alongside the forging of close ties with global partners in the EV Charging (ABB) and Construction (Acciona) markets to grow our international footprint and reputation.
The successful £31.6m fundraising that took place in July was also a critical milestone in the development of the company, directly supporting the transition from the development of our products and technology into the manufacture and commercialisation of them whilst providing significant financial headroom for long-term planning. The company is in a strong position for future growth.
Financial Overview
The successful restructuring of our finances in this financial year provides a robust platform to accelerate the deployment of our products into our key target markets. The year began with several small fundraises which avoided the need for a drawdown from our £4m convertible loan facility and provided sufficient liquidity for the company to deliver against our customer commitments during the first lockdown.
The successful conclusion of our July fundraise brought the total funds raised for the year to £34 million. Careful use of this funding prior to period end meant that we ended the year with a cash balance of £31.6 million (FY 2019: £1.6 million). This strong cash position supported our decision after period end to cancel our Convertible Loan Note facility, having not drawn any amounts from it during the eighteen months it was in place.
The operating loss for the year was £4.2 million (FY 2019: £2.9 million), whilst cash absorbed by operations and investing activities was £4.1 million (FY 2019: £2.8 million). This directly reflected our increased investment in our operational and technical headcount, tooling, demonstration equipment and costs associated with assembling Extreme E’s charging system.
Our commercial strategy has begun to be successfully demonstrated by closing the year with an order book of £1.1 million (2019: £ nil); more detail is provided within the Operational Review.
People, culture and values
Our people have worked tirelessly throughout this financial year to deliver our projects against tight deadlines within the backdrop of social distancing and remote working. The way that our employees have risen to the challenge of maintaining our research, product development, manufacturing and assembly programmes to support our projects despite the challenges posed by the COVID-19 pandemic has made me immensely proud. On behalf of the Board, I would like to thank them all for their professionalism, dedication and understanding during a year like no other.
During the year we reviewed our remuneration policy to align with our stakeholder objectives. The first step was a grant of options to existing and new staff to align them with value creation and our principal commercial targets. During the coming year we will roll out further actions to ensure that we attract and retain the right staff and that their objectives and interests are aligned with our stakeholders.
Investor communications
The COVID-19 pandemic also directly affected how we communicated with our shareholders during the period. Whilst many of our institutional and private investors were present at our Electric Vehicle Charging demonstration in December 2019, social restrictions meant that our annual investor day – planned to coincide with our Annual General Meeting – was postponed. The Board remains committed to regular communication with the market and our investors and is keen to resume its investor day activities in line with Government guidelines.
We appointed Iain Thomson as Head of Communication and Stakeholder Management in January 2021 and he will be facilitating a virtual Capital Markets Morning in the Spring to bring us closer to our investors. This event will be one of four key touchpoints across the year where investors can learn more about the company and its strategy, alongside our Annual General Meeting (AGM) and materials relating to our Full Year and Half Year results.
The Board is also committed to high standards of public reporting and will put a formal ESG reporting framework in place in 2021 to support investors to measure the positive impact the company has on wider society and in successfully future proofing itself. We believe that the company supports at least nine of the UN’s 17 Sustainable Development Goals but also recognise that investors require further detail; a formal update will be provided as part of our Half Year results.
Thank you
The continued hard work and technical ability of our staff has ultimately set the foundation for what the company will achieve in coming years. My thanks also to our executive team for their leadership, to my colleagues on the Board for their counsel, to our shareholders for their support and commitment, to our customers who recognise the quality of the products we provide, and to all of our other stakeholders who provide input and guidance into our projects.
Having served as Chairman for nearly four years it is my intention to retire at the end of the forthcoming Annual General Meeting and I shall therefore not be seeking re-election. It has been a challenging and often exciting period for the company and following the most recent fund raising and the excellent new relationships with Acciona, ABB and Ricardo the company is well placed to accelerate its commercialisation in 2021 and beyond. The Board is progressing a process to identify a successor Chairman and once that person has been appointed I wish them and the company every success in the exciting years ahead.
John Rennocks
Chairman
26 February 2021
