Proton Mtr Pwr Share News (PPS)

(Sharecast News) - Fuel cells and electric hybrid systems developer and producer Proton Power Systems reported lower sales in its first half on Monday, at £0.27m, which was down from £0.51m year-on-year, which included delivery in the first half of 2018 of an additional order from Deutsche Bahnbau, in line with the cooperation agreement signed in 2015.
The AIM-traded firm said that excluding the impact of the embedded derivative, together with exchange losses, the operating loss for the six months ended 30 June was £2.75m, widening from £2.19m in the first half of last year, which was in line with its budgeted expectations.

It noted that certain elements of accrued interest on the loan financing to the group was convertible to equity at a predetermined price per share.

According to IFRS 9, that convertible interest was regarded as an embedded derivative, which must be valued at fair value, with the resulting valuation movement being passed through the profit and loss statement.

That valuation was carried out by an external independent valuation appraiser, with Proton saying that due to the substantial increase in the share price as at 30 June in comparison to 31 December, the fair value charge to the profit and loss for the first half of 2019 amounted to £332.9m, compared to the annual charge of £19.9m for 2018.

That charge was non-operational, the board said, and did not represent any payment obligation.

Due to the volume of incoming orders in the first half of 2019, the firm said it had an order backlog at sales value of £5.1m, including ongoing eight years of warranty income.

Cash burn from operating activities increased during the period to £2.95m from £1.03m in the first half of 2018.

Proton Power said cash flow was its key financial performance target, and its objective was to achieve a positive cash flow in the shortest time possible.

Current contracts were quoted with up-front payments, reducing the company's reliance on working capital as it continued to invest in its manufacturing capability.

The firm's cash position as at 30 June was £0.93m, compared to £0.84m as at 30 June.

On the operational front, Proton Power said the automated stack assembly machine, funded by an EU project, which can produce annually up to 5,000 fuel cells, was delivered in the second quarter.

It said that would further reduce its product cost, and would allow its to meet increasing demand and bring its technology quicker to the market.

In the first quarter, Proton Power and Skoda Electric in the Czech Republic signed a letter of intent, with the objective of entering into a cooperation to develop, sell and service fuel cell electric buses using Proton's modular 'HyRange' systems.

The first prototype buses should be brought into operation for European bus operators, it added.

In April, Proton Power announced the agreement of a 50-50 profit sharing cooperation agreement with MTSA Technopower, to design, manufacture and sell large power systems based on hydrogen fuel cell stacks, ranging between 0.5 MW and 10 MW.

The company added that in the first quarter, it received a confirmed order from ebe EUROPA in Memmingen, Germany, for 15 hydrogen powered fuel cells of 60kW of generating capacity each.

It said the ultimate customers were four city councils in Germany - Frankfurt am Main, Mainz, Muenster and Wiesbaden - with the total value of the order standing at €4.1m, with secured payment conditions including a further eight years warranty.

In May, Proton Power received a confirmed order for a value of €0.63m to provide a 150kw fuel cell package.

That, it said, was to participate in a project in line with the Paris agreement to reduce carbon dioxide emissions through the use of renewable energies for the production of hydrogen and the provision of further power through hydrogen fuel cells, in order to avoid overloading the power grid.

Subsequent to the period end in August, Proton Power announced that it had entered into a joint venture agreement with Schäfer Elektronik, whereby the two companies would integrate Proton's larger industrial fuel cells with Schäfer's power electronics, battery and a hydrogen storage systems in one integrated plug and play power unit.

That unit would provide in excess of 1 MW of power to supply electric vehicle charging stations, and would be available either as a standalone unit or as a grid-connected unit, which would also be able to support the local grid if required.

"Proton Power has made further progress in the period with delivery of commercial contracts in proven technology, strategic co-operations and building our sales pipeline," said chairman Helmut Gierse.

"Further investment in our manufacturing capability has put us in a stronger strategic position to capitalise in the marketplace and to deliver financial performance."

Gierse said the company had strengthened its organisation to be able to deliver complete power supply solutions.

"We add value to our clients through our fuel cell expertise and with our system and solution know-how."