Ceres Power Holdings PLC (AIM:CWR, OTC:CPWHF, FRA:CFJA) continued to make progress with commercial deals for its solid oxide technology for hydrogen fuel cells and electrolysis, with partnership deals resulting in a near-doubling of sales in the first half of 2021.
Operating a licensing and royalty model, the AIM-listed company’s partner deals in the period included a commitment from Bosch to invest €400mln into its fuel cell business by 2024 and to install up to 100 small-scale stationary fuel cell power plants this year; a joint development programme with Weichai for a 30kW stationary power system and ongoing talks about establishing a joint venture to produce solid oxide fuel cell (SOFC) systems; while Doosan is preparing for a soft commercial launch of its 10kW fuel cell system using Ceres' technology in 2022 as well as agreeing to team up with Hyundai Heavy Industries to develop a clean-energy marine propulsion and power generation system.
A strategic collaboration with engineering consultancy AVL List agreed late last year was also said to be progressing well, potentially enabling Ceres to reach into more end-market applications.
As of the 30 June half-year stage, Ceres’ order book stood at £42mln, with a further £43.8mln in the pipeline, being a combination of staged licensing payments and engineering services.
Sales of £17.4mln in the period were up 96% on a year ago, with the high proportion of licence fees supporting healthy gross margins of 72% and meaning the SOFC business was close to breakeven at the underlying earnings (EBITDA) level with a £0.4mln loss compared to £4.3mln a year ago.
With part of the net £179mln proceeds from March’s equity fundraising designated to support growth into electrolysis for green hydrogen and further SOFC applications, Ceres confirmed that a first-of-a-kind solid oxide electrolyser (SOEC) 1MW-scale demonstrator will be operational next year and that discussions are now in progress with several commercial partners.
A step-up in SOEC investment contributing to an increase in group research and development spending to £14.4mln from £10mln a year ago, with around 100 staff hired during the period, around half of whom are scientists and engineers.
At the end of June, Ceres had £263mln of net cash.
Chief executive Phil Caldwell said: “We are pleased to report a strong performance for the company in the first half of 2021, including a notable increase in our revenues at sector-leading gross margins.
“The outlook for clean technology innovation and hydrogen remains strong, buoyed by growth in strategies, regulation and green investment. Our partners continue to announce significant developments in the scale and application of our technology and the high level of interest and early engagement around its use for electrolysis to produce green hydrogen is very promising."
He said the group remained on track to achieve revenue in line with consensus estimates of £31.5mln for the calendar year, subject to no significant constraints on operations
Ceres shares, having risen over 96% over the past 12 months, rose in early trading on Thursay but flattened off to 1,113p by late morning.
Broker Berenberg said the results highlight the benefits of Ceres' high-margin, asset-light licensing and royalty model, saying it is "encouraged by Ceres' commercial progress" with Bosch, Doosan, AVL and Weichai.
On electrolyser commercialisation, analyst Anthony Plom was also encouraged by early interest, including several global majors across the oil and gas, industrial and clean energy sectors.
"We believe the current share price implies that Ceres will achieve sales of circa £350m by the end of 2035. We believe it could be double or even treble this from the fuel cell business alone, with electrolysis an additional upside driver," Plom said.