Saturday, 19 February 2011

Ceramic Fuel Cells Limited Interim Results Half Year to 31 December 2011

FY11 Half Year to 31 December 2010

Revenue: A$ 927k / £ 580k

• Switch from FY10 lumpy m-CHP ‘project’income to FY11 BlueGen product sales
• Revenue from mCHP product expected to increase in coming periods
• Backlog of contracted but unrecognised orders of A$ 8.8m / £5.5m (includes EWE order)

Net operating cash outflow: A$7.3m / £ 4.6m

• Higher in December quarter as inventory built up Other significant cash flow items

• Capex A$ 0.9m / £0.5m
• Financing, including fundraising –net cash inflow of A$ 28.9m / £18.1m

Net loss: A$(8.4)m / £(5.2)m

• Operational EBIT A$(10.1)m / £(6.3)m
• FX translation loss –A$(2.4)m / £(1.5)m –from appreciation of AUD
• Other income –legal settlement A$ 3.9m / £2.4m

BlueGen sales were the dominant source of revenue in this half year
• Product sales revenue replacing lumpy ‘project’ based revenue ƒ
Sales process is getting simpler, shorter and faster
• Additional local EU sales resources ƒ
• Appointing local installation and service agents ƒ
Utilities are taking the opportunity seriously
• 15 energy utilities are currently testing and demonstrating BlueGen ƒ
• Order backlog currently 241 units

Developing products with leading partners:
Germany EWE ƒ
France GdFSUEZ ƒ
December 2010, order from EWE for up to 200 units
• Total revenue of up to EUR 4.9m / AUD 6.6m over 2 years ƒ
• Largest product order the Company has received, significant ƒ
follow-on order from EWE
• Conditional on part-funding from German Government

BlueGen received full CE approval, April 2011
• “Type” approval – applies to all BlueGen products(not a limited “field trial” approval)

BlueGen received full CE approval, April 2010

• “Type”approval –applies to all BlueGen products (not a limited “field trial”approval)
BlueGen approved for German Feed in Tariff, 2010

• Approved by German Government authority (BAFA)

MCS certification for UK Feed in Tariff

• New standard written
• Successful test to PAS67 demonstrates BlueGen provides hot water for homes
reduces carbon emissions
• Melbourne site visit December 2010
• Finalising documentation & procedures (early Q2)

• Inverter approved by Clean Energy Council (complies with AS4777)
• Currently ‘type B’gas appliance, working on type A approval (as an ordinary gas appliance)

Operating Results
During the half-year the Company’s ‘Revenue from continuing operations’ decreased from AUD 1.5m to AUD 0.9m, however in contrast to previous periods, revenues during this period were primarily from actual product sales. Up until recently, most revenue has been earned from the Company’s utility partners in Germany, France and the United Kingdom for designing, developing and installing integrated mCHP products. This revenue has tended to be large and “one off” in nature, whereas the Company now foresees smoother revenue streams as sales of its BlueGen product increase substantially during 2011. Accordingly in the current half-year the majority of revenue has been earned from BlueGen sales.

The Company expects revenue from the integrated product to increase in the coming
year, particularly as a result of the order for up to 200 units placed by EWE in December 2010.

In accordance with accounting standards, the Company recognises revenue on BlueGen
sales when the unit is installed at the Customer’s site, and then progressively over the contracted support period. From when the Company signs the order with the Customer until the unit is delivered and installed, the Company has a ‘backlog’ of contracted orders worth AUD 8.8m (including the EWE deal). This amount will be progressively recognised as revenue in the Company’s accounts as the Company delivers these units. The EWE units will be delivered over 24 months.
Other income earned during the period rose from AUD 0.3m to AUD 4.1m. This is due to the settlement of legal action that had been taken against the Company’s former
investment and treasury advisor.

Expenditure on Research and Product Development during the period was AUD 5.8m
which was up by 4.8% on the prior period. The primary activity has been the development of commercial product for market. Expenditure on Sales & Marketing of AUD 0.7m was in line with the prior period.

Expenses relating to the General and Administrative functional area of AUD 4.5m were in line with the prior period however the current period figure included an increase in depreciation of AUD 0.5m relating to the plant in Germany. Excluding depreciation these expenses were down by 11% compared to the prior period.
The current period includes a net foreign exchange loss of AUD 2.4m compared to a
similar loss in the prior period of AUD 2.3m. These losses arise predominantly from the translation of foreign currency cash and investments to Australian dollars. The Group’s policy is to not hedge this foreign currency translation risk (other than the ‘natural’ hedge of holding cash in the same currency as expected expenditure). The translation loss in the current period has arisen from the appreciation of the Australian dollar against the pound sterling (16.2%) and the euro (9.6%).

During the prior half-year the Company disposed of the remaining financial securities that it had held. These securities had been previously treated as impaired and then sold for an amount greater than the book value, which gave rise to a gain last year of AUD 2.9m. No similar transaction has taken place in the current half-year.

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