Dr. Henri Winand, Chief Executive Officer of Intelligent Energy Holdings plc, commented:

In many ways, it has been a very important year for Intelligent Energy, with key steps forward across each division. We have reported substantial revenue growth underpinned by DP&G’s GTL interim contract. In addition, we have a clear path to further revenue and margin expansion with the expected completion of the long term contracts with GTL in Q1 2016. Our Motive division continues to build relationships with leading vehicle manufacturers, while ‘Dieselgate’ and ‘Petrolgate’ are fundamental drivers for change in the automotive industry. Within Consumer Electronics, the integration of the BIC IP acquisition is progressing well and we are delighted with the broader applications of the acquired IP across other parts of the business. We continue to collect important customer data through the Upp product, which is a key part of our embedded technology strategy. With regard to our funding requirements, we continue to make progress on our announced two stage funding process.

OPERATIONAL HIGHLIGHTS

DP&G division

– Landmark £1.2bn revenue, 10 year power management contract for c. 27,400 telecom towers signed with GTL

– GTL contract is expected to complete in Q1 2016

– GTL contract was preceded by revenue generating interim agreements

– Good early progress regarding installation and commissioning of fuel cells on GTL sites with scheduled further roll out post contract completion

Motive division

– Continuing to build ever-closer relationships with leading vehicle manufacturers

In April 2015, a Joint Development Agreement (‘JDA’) was agreed with a new major Asian vehicle manufacturer

In September 2015, a £6.5m extension to an existing JDA with an Asian OEM was signed

– Important progress made in the on-going development of our market leading technology

In May 2015, an IE-led consortium won Government funding to develop a new class of zero-emission, range-extended light commercial vehicles

New 100kW engine architecture shown to automotive OEMs and other industry partners

– Post year end, in October 2015, announced as lead on a European public-private partnership to develop IE’s 90kW engine for mass production, with participation from BMW and Daimler

– Interest in our proprietary technology has continued to expand following the recent diesel and petrol emission standard issues

CE division

– Migrating to proven JDA model

– Industrial partnering discussions progress favourably

– Acquisition and integration of intellectual property assets from BIC

– Launch of Upp 1 across Apple’s United Kingdom retail store network in November 2014.

Consolidated income statement

Revenue and gross margin

Revenue for the year was £78.2m (2013/14: £13.6m). This reflect strong progression within the year, and year on year, with second half 2014/15 revenue of £50.8m (2013/14 H2: £10.1m), compared to H1 2014/15 revenue of £27.4m (2013/14 H1:£3.5m). In addition, the mix of revenue by division year on year changed materially, with Motive representing 63% of revenue in 2013/14, and DP&G 92% of revenue in 2014/15.

£72.2m of revenue was recorded in DP&G (2013/14 £5.0m) representing in particular strong growth in H2 from this new line of business. DP&G commenced trading in March 2014, and saw a material step change in its activities with the signing of an interim energy supply agreement with GTL in India in August 2014, covering approximately 10,000 telecoms tower sites. This expanded to approximately 27,400 sites from April 2015.

£5.9m of revenue was derived from the Motive division (2013/14: £8.6m), balanced towards the first half of the year due to the pattern of joint development activities entered into. Revenue was derived from joint development and public body funded project related activity only, with the expectation that this will develop in future periods into further licencing and royalty opportunities, some of which are already contracted as options or agreed royalties based on the volume of production at the time. This aspect of Motive’s revenue stream is expected to be variable and difficult to predict in terms of when such opportunities, which are expected to be material in revenue and margin terms, might occur.

For the year, CE generated less than £0.1m of revenue (2013/14: £nil). This was very disappointing and not in line with the original internal expectations for this business. A number of issues, including manufacturing concerns relating to fuel cartridge production meant that commercial take up in the period was limited, although the presence of UPP in UK Apple retails stores represented a significant technology validation point for IE. Action was taken during the year to reset the cost base of the CE business and accelerate the journey to embedded fuel cell technology where material value is considered to be concentrated.

Over 99% of revenue in the year related to activity for customers based outside of the UK.

Gross margin represents revenue less cost of sales. Cost of sales in the period reflects fuel costs in the DP&G division, labour costs, materials and direct facilities costs used in delivering contracted revenue-earning projects in Motive and the cost of production of orders for UPP. Gross margin for the year was £2.3m (2013/14: £3.7m) and in percentage terms, 3% of revenue (2013/14: 27%). The reduction in the percentage gross margin year on year reflected additional revenue in DP&G being incurred under a low margin interim agreement basis with GTL, and the lower absolute gross margin reflected lower revenue from higher margin Motive activity.

Research and development

In the year, R&D expenditure in the year amounted to £19.1m (2013/14: £21.3m). R&D costs mainly comprise staff costs, outsourced services and material costs related to fuel cell research and development, covering both air cooled and evaporatively cooled technology. The overall decrease year on year of £2.2m reflected the capitalisation of £2m of development costs for the 305 modular fuel cell systems deployed on telecom tower sites in India, a lower level of material usage and outsourced services supporting the R&D programs during the year. An average of 105 (2013/14: 104) directly employed staff have been engaged in R&D over the course of the year.

Operations and application engineering

Operations and Application Engineering expenditure in the year amounted to £24.9m (2013/14: £21.1m). The increase in costs year on year reflects higher headcount, with an average of 215 directly employed staff in the year (2013/14: 175). Activities covered include application engineering, solutions development, supplier management, logistics, facilities and IT.

Administration costs

Administration costs in the year amounted to £12.1m, (2013/14: £16.9m), the reduction year on year mainly reflecting the absence of IPO and equity raising related costs in 2014/15. Administration costs comprise commercial and corporate activities, including sales, marketing, HR, finance, legal and procurement. An average of 116 (2013/14: 75) directly employed staff have been engaged in this area over the course of the year.

Adjusted EBITDA

EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) is a non-statutory measure that is widely used as an indicator of trading profitability and a proxy for a company’s operating cashflow, before any cash movements relating to investment, tax, funding and changes in working capital. It is not an IFRS measure, and not therefore shown in the Group income statement.

For Intelligent Energy, EBITDA is measured as revenue less cost of sales less R&D and Operations and Application Engineering costs and administration costs, adjusted for depreciation, one off fund raising costs and the IFRS 2 share based payments charge, which is predominantly non cash based. On this measure, adjusted EBITDA for the year was a loss of £46.2m (2013/14: loss £39.4m). The movement in EBITDA reflected the impact of £1.4m of lower gross margin, and planned higher operating costs of £5.4m to support increased activity across the three divisions.

(Loss)/profit for the year

The loss for the year was £42.8m (2013/14 loss: £48.2m), being a reflection of the adjusted EBITDA reported above, and the following items:

The Group’s share of the loss on joint ventures accounted for under the equity method of £0.8m (2013/14: £1.0m). This was offset by the receipt of an earn out of £1.5m in the year of from the sale of the Company’s 50% share in Emerald Automotive in 2013/14, for which the Group recorded an initial profit on disposal of £1.0m.

Net interest charges of £1.3m (2013/14: £4.0m), with no interest accruing in 2014/15 for the convertible loan notes issued in H2 2012/13. These notes were converted to equity in July 2014 and no further interest charges are recorded post conversion.

An income tax credit of £11.6m (2013/14: £11.4m) reflects the net impact of R&D tax credits and deferred tax credits relating to the trading losses in the UK.

Equity issue costs of £0.3m (2013/14: £7.0m) and an IFRS 2 share based payments charge of £2.3m (2013/14: £6.0m).

Consolidated statement of financial position

Non-current assets

Property, plant and equipment at £8.5m (2014: £6.9m) represented additions of £4.8m in the year, offset by

depreciation of £3.2m. Additions included test rigs and chambers and other equipment for the commercialisation programmes. Intangible assets at £27.0m (2014: £11.5m) reflected additions of £17.3m and amortisation of £1.8m. Intangible assets primarily represent the Group’s intellectual property patent portfolio of over 1,000 patent, including patents pending. The BIC acquisitions in the year contributed materially to additions in the year.

Investments using the equity method

The Group accounts for joint ventures using the equity method, and include the carrying value of its share of positive net assets in the statement of financial position. Joint ventures comprise IE CHP, Aquapurum Water in India and SMILE FC System Corporation. In the year, the carrying value of the joint ventures moved from £1.4m to £1.1m, mainly reflecting Intelligent Energy’s share of net costs and the retranslation of the net assets of SMILE FC System Corporation.

Current assets

Inventory at £5.3m (2014: £4.1m) was higher year on year due to the production of Upp fuel cell chargers with the initial year end stocks of Upp planned to be deployed in India. Inventory includes material used for DP&G fuel cell units and Motive activities.

Trade and other receivables at £11.9m (2014: £12.9m) were slightly down year on year. The cash and short term deposits balance at £24.2m (2014: £88.9m) represents the funding of EBITDA losses in the year, adjusted for movements in working capital, together with capital and other investments and interest movements.

Current liabilities

Trade and other payables at 30 September 2015 were £14.2m (2014: £17.6m).

Convertible loan notes

Intelligent Energy Holdings plc issued unsecured convertible loan notes in August 2013 for £32.5m with a coupon rate of 5 per cent, compounding annually, which was due to mature in 2017. The loan note was a compound financial instrument and for accounting purposes was split into a debt component (£18.5m at 30 September 2013) and an equity component of £12.3m.

The loan note converted into shares at IPO in July 2014 and the debt component was retired, including accrued interest. The equity component remains as a frozen balance.

Commitments

At 30 September 2015, outstanding purchase orders amounted to £6.2m (2014 £16.2m). Intelligent Energy is also contractually committed to a further ¥500m (£2.8m) investment in SMILE FC System Corporation, expected in 2016.

Going concern

The Group meets its day to day working capital requirements through its cash resources. The current position of the group and its development plans result in cash consumption for the foreseeable future. As noted above, the business has plans for significant expansion. The cash balance at the year-end of £24.2m is not sufficient to allow the Company to implement its business plan in full without additional funding. As previously announced, IE intends to raise additional funds through a two tier process. Both transactions are consistent with IE’s objective of protecting existing shareholders. Firstly, this involves a proposed issue of a convertible instrument to industrial partners. Secondly, the Company realises there is significant value in aspects of its DP&G Indian operations and has therefore appointed Jefferies, the investment bank, to assist the Company in realising some of this value to finance its current and future growth plans and notes that it has been in discussions with potential investors since the early summer. As a result the Board have sufficient reason to believe that additional funding will be forthcoming within the required time frame to support the planned expansion of the business.

The Board have also carefully considered the company’s position in the event that the additional financing to fund the planned expansion is not forthcoming. In that scenario, the Board is satisfied that they retain sufficient discretion over costs linked to expansion plans, and the ability to manage the business in a way which allows it to fulfil its appropriate commitments and settle its obligations as they fall due. It is on this basis that the Directors have formed their opinion that the company remains a going concern and the financial statements should, and have been, drawn up on that basis.