Friday, 1 October 2021

Ceres Power - Interim Results

Ceres is a fuel cell technology and engineering company and is listed on AIM. It is a world leader in low cost, next generation fuel cell technology which can facilitate the transition to zero-carbon emissions. They aim to play a central role in the global transition to clean, affordable energy to help address the climate crisis and this is why Ceres Power was added my green portfolio in February 2020. The technology can be used in a variety of applications - transport, heavy industry, data centres and home heating.

Fuel cell technology is already a core component of energy strategies in Japan, Korea, Germany and the US. Ceres are working with global leaders such as Bosch to embed their technology in mass market products. The stationary global fuel-cell market is estimated to be worth over $40bn by 2030


In January 2020, German engineering giant Bosch increased its holding in Ceres from 4% to 18% citing their steel fuel cell technology as potentially the best in the business. Bosch say the market for the fuel-cell power station could be worth €20bn by 2030. It plans to invest €400m into its solid oxide fuel cell business between now and 2024 and will also install 100 small scale fuel cell power stations this year to generate power for industrial and residential customers as well as data centres.

Other partners include China's engines giant Weichai Power who hold a 20% equity stake.

The company has licence agreements signed up with four of the world's largest engineering and power companies including Japan's Miura and Doosan of S. Korea who are a global leader in the stationary fuel-cell market.


The company has this week released results for the half year to end June 2021 (link via Investegate).

Ceres is growing quickly. From just under £1m in 2015, they have increased revenues significantly in the past four years. Just in the past 6 months revenues increased by 95% to £17.4m (2020 £8.9m). They anticipate around £31.5m for the full year. Current market cap. is around £2bn with a share price of £10.80.

Gross profits increased to £12.2m (£7.1m) on margins of 72%.

The company has a strong balance sheet with no debt and cash in the bank of £263 million boosted by a placing of new shares in March which raised £180m.

The company plan to move to the main market next year and should enter the FTSE 250 which means they will be picked up by various index funds.

Share price past 12 months

Commenting on the results, CEO 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."

Huge Potential

The company are working on a first-of-a-kind 1MW solid oxide electrolyser which is hoped will be operational in 2022. This should unlock the potential for green hydrogen for use in industrial processes and energy generation.

Whilst there are many companies in the proton membrane fuel cell sector, global companies are signing up solely with Ceres in the solid-oxide fuel cell department where the company is a global market leader.

Solid Oxide Fuel Cell

The company doesn't want to focus on fuel cell manufacturing but rather a technology licensing company working closely with a range of partners who are looking to adapt their business' and address the huge challenges posed by climate change. Over the past 6 months these account for 60% of revenues.

Analysts at Berenberg have likened the companies licensing model to ARM Holdings whose RISC technology became the default during the smartphone revolution of the past decade. The broker suggests they could generate revenues of £800m each year from licensing agreements with their partners over the coming decade.

With the COP 26 climate gathering coming next month, the focus is on the ambition of decarbonisation and hydrogen technology. Ceres is well placed to play its part in the global transition to affordable clean energy supported by some of the world's most progressive players in those markets.

The shares currently account for 5% of my green portfolio.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation... investing in smaller companies can be rewarding but is higher risk - always DYOR!

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