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TIDMIEH

RNS Number : 5020R

Intelligent Energy Holdings PLC

22 September 2017

Trading update

Released: 22(nd) September 2017 at 07:00

Intelligent Energy Holdings PLC

(LSE: IEH; ADR:INGYY)

22 September 2017

INTELLIGENT ENERGY HOLDINGS PLC: FINANCING TRADING UPDATE AND REVIEW OF STRATEGIC OPTIONS

Intelligent Energy Holdings plc, the energy technology group ("Intelligent Energy", "IE", the "Group" or the "Company"), provides the following update with respect to trading for the full year ending 30 September 2017, including the Company's high level financial estimates for the period. This announcement contains inside information.

 
 Financial KPI            2016/17     2015/16 
                          Forecast     Actual 
                         Unaudited     Audited 
                            GBPm        GBPm 
---------------------  ------------  --------- 
  Revenue(1)                c21         91.8 
---------------------  ------------  --------- 
  Adjusted EBITDA(2)        -c17        -33.4 
---------------------  ------------  --------- 
  Loss after tax(3)         -c24       -82.7m 
---------------------  ------------  --------- 
  Cash(4)                   c2.7        20.6 
---------------------  ------------  --------- 
 

(1) The revenue estimate includes GBP16.7m (2015/16 GBP85.1m) from the Indian GTL interim contract, which ceased at 30 November 2016

(2) EBITDA is a non-statutory measure often used by investors as a proxy for cash and to calculate the value of a business. The Company uses adjusted EBITDA (Earnings before Interest, impairment charges, Tax, Depreciation, Amortisation, share of joint venture results, equity fund raising costs and IFRS2 share-based payment charges) as an indicator of trading profitability and a proxy for operating cashflow, before any cash movements relating to investment, tax, funding and changes in working capital. It is not an IFRS measure, and therefore not shown in the Group income statement

(3) Loss after tax in 2015/16 is after GBP27.8m of exceptional items and the derecognition of a GBP21.9m deferred tax asset

   (4)        Cash is defined as cash and cash equivalents and short term deposits 

(5) The estimates for 2016/17 do not include those adjustments that would be required were the group no longer to continue as a going concern.

Summary

While the Group has made progress in advancing its commercial strategy, its constrained financial resources has led the Board to initiate a sale process for some or all of the businesses and/or assets held by the Company's subsidiaries as one of its strategic options, however there is no guarantee that any sale will be achieved. As detailed below, given the slower than expected development of the market and the Group's financial structure, the Group faces an uncertain outlook.

Trading related updates

-- The business remains focused on fuel cell product sales as one segment in global markets. Products comprise:

- the economically competitive Fuel Cell Module (FCM) 800 range, for 1kW to 4kW power output across three standard products; and

- lightweight fuel cell stack and system products for drones in the 650W to 2kW power output range which more than double conventional drone flight times.

-- The restructuring initiated in H2 2015/16 has reduced adjusted EBITDA losses from GBP(33.4)m in 2015/16 to an estimated GBP(17)m for 2016/17. Restructuring activities were extended further during H1 2016/17 to include the Group's Indian based activities, to support fuel cell product sales on the same commercial model as the rest of the Company. This followed the cessation of the interim energy management agreement with GTL on 30 November 2016.

   --        Contracts signed in the year include: 

- The supply of up to 600 1kW fuel cell modules for US based Luxfer-GTM Technologies. These are to be used in their portable, zero-emission lighting towers as part of a growing strategic relationship in the development of a line of integrated fuel cell products;

- The sale of demonstrators of the Group's lightweight stack technologies which have been delivered to drone market participants. This has included PINC, the US logistics group;

- The sale of showcase demonstrators of stationary power related fuel cell modules and systems that have been deployed in Japan, China, India and the US; and

- The Digiman grant funded program to reduce the cost of AC manufactured fuel cell stacks at volume which has been launched in collaboration with other industrial companies.

   --        In addition: 

- The Group's fuel cell stacks are being used in a trial of Suzuki Burgman scooters with the Metropolitan Police in London, announced in September 2017;

- A strategic partnership with US based FlightWave, announced in September 2017, will enable FlightWave to integrate Intelligent Energy's innovative lightweight 650W fuel cell power module into their UAV product range within North America. The first product from this partnership will be FlightWave's 'Jupiter-H2', a multi-rotor, endurance UAV capable of flying for up to two hours; and

- A strategic partnership with UK based Taylor Construction Plant Ltd was announced in September 2017 to supply its air cooled fuel cell modules for integration, testing and evaluation into power products for the construction industry.

-- Continued improvement has taken place in the Group's fuel cell operating capabilities, which the Group continues to consider as industry leading with respect to power output per unit volume and power output per unit weight.

-- The Company has continued to note significant industrial interest in bringing IE's higher powered Evaporatively Cooled technology to market at scale on a funded basis. This has yet however to convert to contracted commitments, although discussions with various parties continue.

-- IE is in discussion with Suzuki regarding the restructuring and unwinding of SMILE, the 50/50 joint venture which contains a pilot production line for air cooled stacks. It is expected that:

- Suzuki will exit the joint venture, with IE receiving an expected net GBP0.9m of cash. This is not expected to conclude until December 2017 at the earliest.

- IE expects to continue its relationship with Suzuki with respect to fuel cell technology, including the scooter trial in the UK, post the restructuring of SMILE.

Future Financing and Sale process

As noted in the Company's announcement on 30 June 2017, the Company does not possess sufficient reserves of cash to continue to fund the current cash burn (of approximately GBP1.6m a month) from product sales alone. The Company will have an estimated cash balance of GBP2.7m at 30 September 2017. Material one off cash receipts are expected at the end of November 2017 for cGBP1.6m of cash R&D credits subject to IE being a going concern and cGBP0.9m from the restructuring of SMILE, which is expected no earlier than December 2017. Discussions with potential customers on trading related opportunities have been progressed, which, if they were secured, could offer funding to allow the Group to reach a free cash flow positive position. However, while promising and ongoing, such discussions have not to date translated to signed contracts. In consultation with advisers and significant shareholders the Board, in line with previous advice and indications, has concluded that that it is not viable for the Company to be able to access capital markets in a conventional manner.

The Board has therefore already initiated a sale process for some or all of the businesses and/or assets held by the Company's subsidiaries, which will include consultation with the principal holders of the Convertible Loan Notes who are also significant shareholders in the Company. The sale process has and continues to be managed on the Board's behalf by Deloitte. It should be noted that constraints exist in relation to that sale process, including the security granted (as part of the refinancing of the Company in 2016) in favour of the holders of the Convertible Loan Notes.

The Board will continue to review any other options available to the Company and the Group, whilst recognising the circumstances that the Company faces. There can be no certainty over the outcome of the sale process, or of any other options that might be available to the Company and the Group, and further announcements will be made as appropriate in due course.

Board Composition

In order to assist the Company during this process, Mike Muller, Non-Executive Director, will delay stepping down from the Board and Paul Heiden, Non-Executive Chairman, will continue to act in his capacity as Non-Executive Chairman of the Company until the process has concluded.

Outlook

The Board note their continued belief in the value of the Company's technology and the long-term viability of the market for fuel cell technology. However, given the slower than expected development of the market, the Company's financing position and the GBP30m interest bearing principal amount owed by the Company in respect of the Convertible Loan Notes, the Board has reluctantly concluded that there could be little (or potentially no) value remaining in the Company's ordinary shares.

This announcement contains inside information. The person responsible for the release of this announcement on behalf of the Group is John Maguire, Chief Financial Officer.

Enquiries:

   Intelligent Energy Holdings plc                                            +44 (0)1509 271271 

Martin Bloom Group Chief Executive Officer

John Maguire Chief Financial Officer

Forward-looking statements

Certain statements made in this announcement are, or may be, forward-looking statements. These represent expectations for the Company's business, and involve risks and uncertainties. The Company has based these forward-looking statements on current expectations and projections about future events. However, because they involve known and unknown risks, uncertainties and other factors, which in some cases are beyond the Company's control, actual results or performance may differ materially from those expressed or implied by such statements. No reliance should be placed on such forward-looking statements. Without limitation to the foregoing, nothing in this announcement is intended to constitute (or should be construed as) a profit forecast.

About Intelligent Energy

Intelligent Energy Holdings plc delivers clean energy solutions for the distributed energy, diesel replacement, automotive and aerial drone markets. Working with international companies, Intelligent Energy aims to embed its fuel cell stack technology into applications across its target market sectors.

With its principal facility and headquarters in Loughborough, UK, the Company also operates in Japan, India, China, Singapore, France and the US. Intelligent Energy Holdings plc is listed on the London Stock Exchange (LSE: IEH.L).

More information on Intelligent Energy is available at Twitter, YouTube and LinkedIn. Or visit http://www.intelligent-energy.com

This information is provided by RNS

The company news service from the London Stock Exchange

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September 22, 2017 02:00 ET (06:00 GMT)