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Ceramic Fuel Cells Limited Cashflow Report for the September Quarter
29 October 2014
Ceramic Fuel Cells Limited (ASX/AIM: CFU), today released its quarterly cashflow report for the September 2014 quarter.
Summary of the Quarter
-- Sales volume - 23 units sold this quarter.
-- Significantly expanded CFU's distribution and installation network in Germany, enabling much greater potential for market penetration.
-- Fundraising - issued equity of A$0.62M (GBP0.34M) and convertible notes of A$0.38M (GBP0.21M) under the Investor Agreement (as announced to the market on 24 March 2014).
-- Announcement of pro-rata Renounceable Rights Issue with offer of Options - on 29 September theCompany announced a 3 for 5 Rights Issue at an offer price of $0.009 (0.9 cents) per share and the granting of one option for every two New Shares subscribed for at an exercise price of $0.011 (1.1 cents) per share exercisable on or before 30 October 2015.
-- Installed two units in China - The Company installed its first 2 BlueGEN units in China at a company, listed on the Hong Kong Stock Exchange, which is focussed on the energy sector. Both units are currently running at greater than 60% electrical efficiency.
-- Operational costs - these continue to be managed at a level that is 20% below those of 7 months ago.
-- Cash position at 30 September 2014 - A$1.44M (GBP0.79M).
CFU makes small-scale generators that use proprietary fuel cell technology to convert natural gas into electricity and heat for homes and small commercial buildings. CFU has fully commercialised its technology into products, and in addition to selling these products to commercial customers in Europe, is focussing on developing a product that can undertake thermal cycling.
The research and product development team continues to refine the product in order to improve both its robustness to thermal cycling events and the unit's ability to continuously power modulate across the entire operating range. In-house validation testing of enhanced stack technology has demonstrated successful thermal and power cycling under a range of operating conditions. Significant progress continues to be made to fully validate and deliver these refinements into production. A limited number of stacks with enhanced thermal and power cycling performance have commenced being produced in our Heinsberg facility for early introduction to selected customer sites.
Market Developments and Sales
During the September quarter 23 BlueGEN units were sold which is less than the previous September quarter's 49 units. This reduction in unit sales is likely to be due to the restructuring that took place in February/March 2014 when it was decided to reduce the direct sales force in Germany and concentrate resources on appointing distributors and installers to do the direct selling as well as concentrate on large, project-based sales. The Company has previously acknowledged that this level of sales will not sustain the business and continues to focus its limited sales resources on large, project-based sales. Development of these large-scale projects is progressing and the Board remains confident that a number of these targeted projects will be converted into orders in the near future. It is also anticipated that bringing a number of these to a successful conclusion will demonstrate clear market potential for this type of contractual structure.
As mentioned in previous announcements the Company acknowledges that, whilst there is the basis to significantly increase sales volumes through project-based schemes, there is also the opportunity to secure the business' future viability through actively pursuing strategic partnerships with a number of key distribution partners in Europe, Asia and North America. In addition to distribution partners, the Company has been approached to develop larger capacity units for certain markets. Such developments require additional resources and discussions continue with a number of organisations to secure the appropriate financial support. These activities may lead to the Company becoming a multiple product business.
A summary of the Company's sales performance by quarter since FY11 is as follows:
During the September quarter two installation partners in Germany sold three units each, a further two sold two units each, and one partner in the Netherlands sold two units. The remainder were single unit sales. CFCL sold its first unit to Poland during the quarter.
September Quarter Cash Flows
Net operating cash outflow for the September quarter was A$4.59M (GBP2.52M). During the quarter, receipts from customers amounted to A$0.60M (GBP0.33M) and operating expense cash outflow was A$5.34M (GBP2.94M). The quarter's net operating cash outflow compares to the June 2014 quarter's net operating cash outflow of A$2.95M (GBP1.62M). The operating expense cash outflow for the two quarters was similar, however, the customer receipts in the June quarter were significantly higher due to the receipt of the proceeds from the 45 unit Ameland sale. March 2014 quarter's operating cash outflow was A$8.06M (GBP4.43M), December 2013 quarter's outflow was A$1.22M (GBP0.67M) and September 2013 quarter's outflow was A$6.03M (GBP3.32M). December 2013 quarter's net operating cash outflow was materially reduced by the receipt of a tax refund of A$4.02M (GBP2.21M) for research and development expenditure for FY2013, hence the operating cash outflow before the tax receipt was A$5.24M (GBP2.88M). It is anticipated that a research and development tax refund of approximately A$4.10M (GBP2.26M) will be received for FY2014 in the last quarter of CY2014.
The Board continues its strategic review of the Company's financial and operational needs along with its pursuit of joint venture possibilities with partners who are willing to pay for the Company's technology or can add significant synergies to the Company's operations.
Net investing cash flow for the quarter was an outflow of A$5K (GBP3K). The outflow was for the acquisition of plant and equipment.
Net financing cash flow for the quarter was an inflow of A$0.62M (GBP0.34M). Of the gross amounts, A$0.62M (GBP0.34M) was received from the issue of shares under the Investor Agreement and A$0.38M (GBP0.21M) from the issue of an unsecured convertible note under the same agreement. The capital raise expenses disclosed in the Appendix 4C relate mainly to the June quarter's Share Placement and the cost of issuing shares under the Investor Agreement.
Cash on hand at 30 June 2014 was A$5.31M (GBP2.92M).
Cash on hand at 30 September 2014 was A$1.44M (GBP0.79M).
Ceramic Fuel Cells Limited (AIM/ASX: CFU), a world leader in developing and manufacturing fuel-cell-based, micro power plants, announces that it has recently received a refund of circa $4.1M (GBP2.3M) from the Australian Taxation Office for research and development activities relating to FY2014. The expectation of this refund was announced on 29 October 2014 in the Company's September Quarterly Cashflow announcement and in the Rights Issue Prospectus dated 29 September 2014.