Proton Power Systems plc

("Proton Power" or "the Group")

Interim Results 

Proton Power Systems plc (AIM:PPS), a leading designer, developer and producer of fuel cells and fuel cell electric hybrid systems, today announces its interim results for the six months ended 30 June 2009.  

John Wall, Executive Chairman of Proton Power, commented: "Proton is moving away from being an R&D focused company to an industrialised commercial provider of fuel cells and fuel cell systems for a wide range of applications.  The Group is now in a position to start volume production of its fuel cells.  We are taking an integrated approach which addresses our customers' demand for both the product and after-sales operation and maintenance service. With this approach and using our highly scalable fuel cells, we will be in a position in due course to offer large power system packages to original equipment manufacturers (OEMs), a vast market providing numerous opportunities for the Group.

"Further to Proton Power's £2.5 million of new share capital issued over the last 12 months and our share capital reorganisation, we are pleased to say that the Group is currently well funded. Thanks to the committed support of loyal shareholders such as our lead investor, Roundstone Properties, we have all the necessary capital to carry the business forward."

Highlights:

Highlights since the period end:

- Ends -

For further information:  

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  Chairman's and CEO's statement 

We are pleased to report our unaudited interim results for the half year ended 30 June 2009. 

Business development

Proton is in a phase of transition from a research and design focused company to an industrialised commercial provider of fuel cells and related technology. The business has made good progress in the last six months and has made changes to important positions within the Group bringing in experienced and qualified staff. The Group has also entered into new long-term agreements with contract manufacturers and suppliers. On 27 May 2009 Proton Motor signed a five-year collaboration agreement with Deutsche Mechatronics GmbH, a leading contract manufacturer to facilitate the volume production of the Group's fuel cell systems in Germany. We have also continued to invest in the Group's infrastructure, specifically our testing facilities. 

The Group has partnered with leading OEM companies and has developed new innovative products during the period including the world's first triple hybrid passenger bus with Skoda Electric and the Bucher Schoerlin street sweeper. The Group also continues to develop new innovative solutions for Auxiliary Power Units ("APU's") for small and large data centres, the market for which is showing strong growth. The Group remains focused and sees strong potential in the following areas:

We have further developed our modular concept, which allows the use of similar modules in different applications. This will lead to the cost savings necessary to make fuel cells and fuel cell hybrid systems an economic alternative to traditional power systems, thereby increasing our opportunities for mass-market sales. 

We have also strengthened our sales team and can now service and support new blue chip customers which will be important OEM partners in the near future. Our partnership with L3 Communications in the USA has been renewed and strengthened to better address and support the North American market.

Financial overview

In the six months to 30 June 2009 revenue was £289,000 (2008: £455,000) which was in line with Group expectations. The out-come for the half year was a loss of £2,052,000 which was also in line with Group expectations and compares with a loss for the first half year in 2008 of £1,286,000.

The second tranche of the £2 million share subscription announced in September 2008 was received on 13 of January 2009.

In addition, the Company agreed with Roundstone Properties Limited to accept the surrender of its warrants over 30,000,000 Ordinary Shares issued in February 2009, exercisable at 5 pence per Ordinary Share in return for a convertible loan facility of up to £1.5 million from Roundstone Properties Limited .The Convertible Loan is repayable by 30 June 2012 and is convertible into 75,000,000 new Ordinary Shares, pro-rata, in the capital of the Company at a price of 2 pence per share. The conversion of the loan was subject to a share capital re-organisation and obtaining the approval of shareholders at the Company's Annual General Meeting held in July 2009. The share capital reorganisation was approved and the first tranche was converted into new ordinary shares in the capital of the Company in July 2009. Thereafter, the Convertible Loan may be converted into new shares at Roundstone Properties Limited's request. The Convertible Loan attracts no interest if settlement is made by way of the issue of new shares. However, if by mutual agreement part of the loan is repaid in cash rather than converted to shares at 2 pence per share, then this portion will attract interest equivalent to 10% per annum.

£0.5 million of the Convertible Loan was converted into new Proton shares after the period end, in July 2009.

Since the Annual General Meeting a further loan facility of €1.5m has been provided by Roundstone Properties Limited to fund the future growth of the Group. The term of the facility is three years from 30 July 2009 and interest is charged at 10% per annum and is to be settled by the issue of one share for every €0.02 in interest due.

People

On behalf of the Board we would like thank all our employees for their hard work and dedication to the Group. We would also like to welcome Dr. Christian Meyne as the new Chief Operating Officer of Proton Motor Fuel Cell GmbH and would like to take this opportunity to thank Benedikt Eska for his contribution as the outgoing Chief Operating Officer.

Outlook

We will continue to put resources into marketing our existing fuel cell solutions, although we will be focusing on supplying packages to OEM partners in the future. We have made strenuous efforts in marketing our products and we will further strengthen our sales team with experienced staff who have strong market experience and knowledge. The potential volume uptake of fuel cells in the different markets we are addressing is significant. Proton is working to produce systems to meet the individual requirements of each market to ensure we are able to take full advantage of the opportunities ahead.

We will also continue to develop our service team. After sales service capabilities are vital for the success of our business and are expected from our customers.

Industrialised manufacturing of our stacks and system will start in the second half of 2009. Our contract manufacturing partner Deutsche Mechatronics is currently assembling our stack as well as modules for our solutions. 

Despite the difficult global economic conditions, we continue to see growing interest and demand for clean tech solutions. Governments' initiatives worldwide support new technologies and now with the necessary funding. We expect the second half of 2009 to bring the first volume orders for our new products and solutions.

Looking to the near future, rising energy prices and the demand for environmentally friendly solutions for transportation as well as stationary power will support the growth of our business. The task is to start volume production of fuel cell systems and to be able to offer attractive prices to our customers. Volume manufacturing and future service business will also support profitability and cash. We would like Proton to be a leader in the fuel cell industry in regard to both size and profit. Overall we are delighted about the progress we have seen so far and we are very confident that Proton will play a important role in the exciting hydrogen fuel cell technology.

Finally may we thank the Proton team and our advisors for their hard work and effort, and our customers and suppliers for their continued confidence and support.  Importantly, our further business growth would not have been possible without the loyal support of our major shareholders, such as Roundstone Properties. On behalf of our Board and staff we would like to thank them for their unrelenting commitment to the Group.

  Consolidated income statement

Consolidated statement of comprehensive income

  Consolidated balance sheet

  Consolidated statement of changes in equity

  Share premium account

Costs directly associated with the issue of the new shares have been set off against the premium generated on issue of new shares.

Merger reserve

The merger reserve of £15,656,000 arises as a result of the acquisition of Proton Motor Fuel Cell GmbH during 2006. The merger reserve represents the difference between the nominal value of the share capital issued by the Company and their fair value at 31 October 2006, the date of the acquisition.

Reverse acquisition reserve

The reverse acquisition reserve arises as a result of the method of accounting for the acquisition of Proton Motor Fuel Cell GmbH by the Company. In accordance with IFRS 3 the acquisition has been accounted for as a reverse acquisition.

Share option reserve

The Group operates an equity settled share-based compensation scheme. The fair value of the employee services received for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference fair value of the options granted. At each balance sheet date the Company revises its estimate of the number of options that are expected to vest. The original expense and revisions of the original estimates are reflected in the income statement with a corresponding adjustment to equity. The share option reserve represents the balance of that equity.

  Consolidated statement of cash flows

  Notes to the interim report

1.  Share based payments

The Group has incurred an expense in respect of share options and shares issued to employees as follows:

2.  Loss per share

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares, share options, however these have not been included in the calculation of loss per share because they are anti dilutive for these periods. 

The adjustment to the weighted average number of shares used in the calculation of diluted loss per share reflects share options in issue where the exercise price exceeds the average market price of shares in the period.