Original
RNS Number:6366Q
Ceres Power Holdings plc
25 March 2008


                            Ceres Power Holdings plc

                    ('Ceres', 'Ceres Power' or 'the Group')


           Interim results for the six months ended 31 December 2007


Ceres Power Holdings plc announces its interim results for the six months ended
31 December 2007.


Highlights:


During the period:


  * Successful demonstration of an integrated wall-mountable CHP Unit
  * CHP Product value engineering programme commenced
  * Product design concept completed for residential energy security
application with EDF Energy Networks
  * Growth in commercial revenues to #0.3m
  * Volume cell manufacturing processes established in new Product Facility
  * Volume component and equipment suppliers selected for CHP Product
manufacture
  * #9.4m in cash and cash equivalents at 31 December 2007


Since the period end:


  * Centrica plc invests #20m for a 9.999% equity stake at 300 pence per
share
  * Volume forward order from British Gas for minimum 37,500 CHP Products
  * #5m funded development and trialling programme secured with British Gas
with #1m already received for the first phase
  * Chairmen of Siemens UK and Motorola UK join board as Non-Executive
directors


Brian Count, Chairman, commented:


'I am delighted to assume the Chairmanship of Ceres Power during a
transformational period for the Group. Ceres has developed a unique, innovative
and environmentally friendly technology which I am confident will deliver
significant shareholder value. The focus of the Group going forward is to
deliver a commercially viable product that can address the mass markets in the
UK and overseas. During this financial year we have made significant progress in
terms of product development, with the demonstration of a CHP Unit, and
commercial traction with a major new agreement with British Gas. We are now
extremely well positioned with leading technology, a clear plan for the
commercial roll out of our CHP Product, and a strong cash position.'


For further information contact:

Brian Count, Chairman
Peter Bance, Chief Executive
Rex Vevers, Finance Director +44 (0) 1293 400 404
Ceres Power

Patrick d'Ancona +44 (0) 207 153 1530
M: Communications


Chairman's Statement

Introduction


I am pleased to report that Ceres Power has made substantial progress in the
half year ended 31 December 2007. The successful demonstration in September of
an integrated wall-mountable CHP Unit marked the transition of Ceres into a
product business with the potential to address global market opportunities.
Following this demonstration, the Group announced in January 2008 that it had
signed a major new agreement with British Gas, including a funded trialling
programme and a volume forward order for residential CHP products. In addition,
Centrica subscribed for new shares representing 9.999% of the Company's enlarged
issued share capital at a price of 300 pence per share, providing a cash
injection of around #20 million.


Ceres' unique fuel cell technology at the core of the CHP Unit has enabled the
Group to design a compact, wall-mountable Unit capable of generating electricity
and all of the hot water and central heating required for a typical UK home,
without the need for a separate boiler. This achievement places the Group in an
ideal position to address developing micro-generation market opportunities.


The UK Government has estimated that over time micropower products have the
potential to supply over one-third of Britain's total electricity needs and to
help the country improve its energy security, meet its environmental obligations
and deliver energy savings to consumers. The Energy Saving Trust in a report on
micro-generation published in December 2007 recognised that a 1kW fuel cell CHP
is an important technology in delivering CO2 savings in the home.


In the announcement of the commercial agreement with Ceres, British Gas
estimated that based on 5.6 million UK homes having a fuel cell CHP unit
installed by 2020, savings would result equivalent to the CO2 emissions from
eight (750 MW) new Combined Cycle Gas Turbine power stations.


Financial Results


These interim financial results are the first results following the adoption of
International Financial Reporting Standards as adopted by the European Union
('IFRS').


I am pleased to report that for the six month period ended 31 December 2007 the
Group delivered growth in commercial revenues to #279,000 (2006: #30,000). This
growth in revenue has been achieved through the continued technical progress and
the successful delivery on the Group's commercial contracts. Other operating
income remains significant at #431,000 (2006: #469,000) with an increasing
proportion of the Group's overall income coming from commercial revenues
reflecting the commercialisation of the Group's technology.


Research and development and administration expenses increased 17% to #4,027,000
(2006: #3,434,000) reflecting the continued investment in the Group's product
development and commercial capabilities and the increase in headcount in 2007.
Interest receivable increased by 5% as the Group benefited from the effect of
rising short term interest rates on short term cash deposits held with financial
institutions. The loss for the period attributable to shareholders increased by
25% to #3,017,000 (2006: #2,406,000) as the Group continues to invest in
developing its engineering and manufacturing capabilities ahead of mass market
uptake of its fuel cell technology.


The net decrease in cash and cash equivalents for the period increased by
#879,000 to #1,785,000 (2006: #906,000). This increase is attributable to an
increase in cash used in operations of #225,000, a decrease in income tax
received of #320,000 and an increase in capital expenditure of #249,000
primarily due to the fit out of the Product Facility. The Group continues to
maintain a strong balance sheet with #9.4m in cash and cash equivalents. In
accordance with the Group's treasury policy, all funds are invested in short
term low risk cash deposits with financial institutions with the primary
objective being to preserve the Group's capital.


After the period end, the Group has substantially strengthened the balance sheet
and liquidity position. In February 2008, the Group received #20,015,514 from
the issue of 6,671,838 new shares at a price of 300 pence per share to GB Gas
Holdings Limited (a subsidiary of Centrica plc). In addition, the Group received
#1,000,000 from British Gas Services Limited, being the first milestone payment
under the initial phase of the development, supply and distribution agreement
announced in January 2008. The Group now has a robust financial position to
commercialise its CHP design.


Commercial


The Group has continued to meet its obligations under commercial contracts with
British Gas Services Limited and EDF Energy Networks Limited, resulting in the
significant increase in commercial revenue during the half year. It is
anticipated that this progress will continue during the second half resulting in
further growth in commercial revenues.


Since the end of the period, the Group has secured a #5 million funded trialling
and development programme with British Gas, following on from the existing
contract with British Gas (part funded by the DTI, now BERR) to design, build
and test a CHP Unit. British Gas is committing its operational resources (in
addition to the financial payments) to support the programme including training,
installation, servicing and logistics.


Ceres has also secured a volume forward order from British Gas to deliver in
aggregate a minimum of 37,500 CHP Products on an escalating basis over a
four-year period. Both Ceres and British Gas have agreed to promote the Ceres
CHP Product with the intention of achieving substantially greater levels of
annual sales over the four-year period. Approximately 1.5 million boilers are
installed each year in the UK and it is forecast by industry bodies that
residential CHP could take 30% of this market by 2015 (see SBGI 2006).


The agreement with British Gas provides Ceres with a volume channel to the
residential market for its integrated CHP Product in Mainland UK. The Group
retains the right to sell and distribute the CHP Product anywhere else in the
world and is developing channels to market internationally as a key priority for
the Group.


During the half year, the Group completed the product design concept of a
prototype energy security device for use in residential applications in the UK,
under the contract for on-site power with EDF Energy Networks. The product
embodiment consists of a fuel cell power device hybridised with an electrical
storage unit. This is part of the Group's strategy to develop on-site power
generation from cylinder gas for applications such as uninterruptible power
supplies, load-shedding support, remote power generation and battery charging.


Technology and Product Engineering


During the half year, the Group completed the successful demonstration of an
industry-leading integrated wall-mountable CHP Unit, being a key deliverable
under the existing contract with British Gas (part-sponsored by the DTI, now
BERR). With more than 78% of all residential boilers sold in Western Europe
being wall-mounted, the Group's CHP design is a key differentiator, enabling the
Group to address the new build and replacement markets both in UK and overseas.


As previously announced at the CHP demonstration in September, the focus of
value engineering has been on fuel cell module component development and
integration. Significant part-count and weight reductions have already been
achieved for the fuel cell module to enable delivery of the 20% size and weight
reductions for the CHP Product.

Value engineering activities have also involved extensive evaluation and testing
of balance of plant components. This has resulted in selection of key components
from volume manufacturers that will enable achievement of product performance
and cost targets.


Based on the value engineering achievements to date the Group is on track to
deliver the first phase of the new development and trialling programme with
British Gas.


The Group will provide further updates on value engineering progress during
2008.


Manufacturing Operations


During the half year, the Group has successfully completed the commissioning of

the Product Facility. This facility has been fitted-out with key machines used
for the validation of key volume manufacturing processes for fuel cells and
stacks. Progress on manufacturing scale-up in the Product Facility has enabled
detailed planning for a new Mother Plant facility to be completed.


Manufacturing scale-up has been supported by the South East England Development
Agency ('SEEDA') in the form of grant funding towards manufacturing development
for assembly and testing of fuel cell stacks and complete CHP Units.


As previously announced it is anticipated that a site will be secured during
calendar year 2008.


Intellectual Property


Protection, management and exploitation of the Group's valuable intellectual
property portfolio remains a major focus. The Group continues to invest heavily
in ensuring that its unique technology is protected through patents, trademarks,
know-how and trade secrets. The Group, through its wholly-owned subsidiary Ceres
Intellectual Property Company Limited (CIPCO), is actively engaged in expanding
the IP portfolio to encompass materials, product designs, key components and
manufacturing processes.


To support the commercialisation of its products, the Group's investment in its
IP portfolio will increase with an increasing focus on branding and ensuring
clear channels to market. We continue to ensure that our IP is properly
protected in all our commercial contracts.


People


The Group has continued to recruit high calibre personnel with experience in
developing and managing a global supply chain, delivering on commercial
contracts and building a volume production capability. We will continue to build
our capability in all areas and this will be a key focus during 2008/09.


I would like to thank Philip Holbeche, who retired as Executive Chairman on 2
January 2008, for his contribution to Ceres. Philip formed Ceres in 2001 to
develop and commercialise the unique materials technology transferred from
Imperial College. Philip, as executive chairman, oversaw the successful
development of Ceres from a small private company into a public company quoted
on AIM in 2004 and its continued development thereafter.


I would also like to thank John Gunn, who stepped down from the Board in
February 2008, for his contribution to Ceres. He and his family were founding
shareholders in Ceres in 2001 and his support has been a significant factor in
the successful development of the Group.


On behalf of the board, I would like to wish both Philip and John every success
in their future endeavours.


The board has now been re-shaped to meet the future challenges with the
appointments in February 2008 of Sir David Brown (Chairman of Motorola UK) and
Alan Wood (Chairman of Siemens UK) as Non-Executive Directors. Their experience
of building and running high growth technology businesses will be invaluable as
Ceres progresses towards mass market delivery of its products.


Outlook


Continued technical and commercial progress has provided the basis to deliver on
our priorities for calendar year 2008:


   *Value engineering of the CHP Unit to deliver performance, size and weight
improvements under the first phase of the new CHP programme with British Gas


   *Securing an appropriate site for the Mother Plant facility, based on
detailed planning completed during the period.


   *Demonstration of a prototype energy security device under the contract
with EDF Energy Networks


   *Growing revenues with existing partners and establishing new market
channels


Dr Brian Count
Chairman


CONSOLIDATED INCOME STATEMENT
For the six months ended 31 December 2007

                                   Six months        Six months    Year ended 30
                                     ended 31          ended 31        June 2007
                                December 2007     December 2006
                                    Unaudited         Unaudited        Unaudited
                        Note          #'000             #'000            #'000
                                     --------          --------         --------

Continuing operations

Revenue                                 279                30               98

Research and development
expenses                             (2,606)           (2,395)          (4,942)

Administrative expenses              (1,421)           (1,039)          (2,024)

Other operating income                  431               469              970
                                     --------          --------         --------
Operating loss                       (3,317)           (2,935)          (5,898)

Interest receivable and
similar income                          300               287              597
                                     --------          --------         --------
Loss before income tax               (3,017)           (2,648)          (5,301)

Income tax credit                         -               242              416
                                     --------          --------         --------
Loss for the period
attributable to
shareholders                         (3,017)           (2,406)          (4,885)
                                     --------          --------         --------

Losses per share expressed
in pence per share:

Basic and diluted
loss per share            2           (5.05)p           (4.10)p          (8.27)p
                                     --------          --------         --------


CONSOLIDATED BALANCE SHEET
As at 31 December 2007


                                   31 December     31 December           30 June
                                          2007            2006              2007
                                     Unaudited       Unaudited         Unaudited
                           Note          #'000           #'000             #'000
                                      --------        --------          --------
Assets

Non-current assets

Property, plant and
equipment                              1,836           1,800             1,842

Other receivable                          53              53                53
                                      --------        --------          --------
Total non-current assets               1,889           1,853             1,895
                                      --------        --------          --------
Current assets

Trade and other receivables              540             439               628

Cash and cash equivalents              9,357          13,115            11,142
                                      --------        --------          --------
Total current assets                   9,897          13,554            11,770
                                      --------        --------          --------

Liabilities

Current liabilities

Trade and other payables              (1,351)           (802)             (855)
                                      --------        --------          --------
Net current assets                     8,546          12,752            10,915
                                      --------        --------          --------

Non-current liabilities

Other payables                           (32)            (24)              (22)
                                      --------        --------          --------
Net assets                            10,403          14,581            12,788
                                      --------        --------          --------

Equity

Share capital              3           3,003           2,968             2,981

Share premium account                 15,854          15,470            15,594

Other reserves                         7,463           7,463             7,463

Profit and loss account              (15,917)        (11,320)          (13,250)
                                      --------        --------          --------
Total shareholders' equity            10,403          14,581            12,788
                                      --------        --------          --------


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2007

                          Share premium        Other      Profit and
            Share capital       account     reserves    loss account        Total
              (unaudited)   (unaudited)   (unaudited)     (unaudited)  (unaudited)
                  #'000         #'000          #'000           #'000        #'000
                 --------      --------        -------        --------      -------

At 1 July 2006    2,925        15,137          7,463          (9,535)      15,990

Issue of
shares, net
of costs             43           333              -               -          376

Net loss
for the period        -             -              -          (2,406)      (2,406)

Share-based
payments charge       -             -              -             621          621
                 --------      --------        -------        --------      -------

At 31 December
2006              2,968        15,470          7,463         (11,320)      14,581

Issue of shares,
net of costs         13           124              -               -          137

Net loss for
the period            -             -              -          (2,479)      (2,479)

Share-based
payments charge       -             -              -             549          549
                 --------      --------        -------        --------      -------
At 30 June 2007   2,981        15,594          7,463         (13,250)     
12,788


Issue of
shares, net
of costs             22           260              -               -          282

Net loss
for the period        -             -              -          (3,017)      (3,017)

Share-based
payments charge       -             -              -             350          350
                 --------      --------        -------        --------      -------
At 31 December
2007              3,003        15,854          7,463         (15,917)      10,403
                 --------      --------        -------        --------      -------


CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 December 2007

                                        Six months     Six months         Year
                                          ended 31       ended 31     ended 30
                                     December 2007  December 2006    June 2007

                                         Unaudited      Unaudited    Unaudited
                                 Note        #'000          #'000        #'000
                                            --------       --------     --------
Cash flows from operating
activities
Cash used in operations           4         (1,887)        (1,662)      (3,894)
Income tax received                              -            320          494
                                            --------       --------     --------
Net cash used in operating
activities                                  (1,887)        (1,342)      (3,400)
                                            --------       --------     --------

Cash flows from investing
activities

Interest received                              301            285          597

Purchases of property,
plant and equipment                           (474)          (225)        (577)
                                            --------       --------     --------
Net cash (used in)/generated
from investing activities                     (173)            60           20
                                            --------       --------     --------

Cash flows from financing
activities

Proceeds of issue of
shares (net of expenses)                       275            376          501
                                            --------       --------     --------
Net cash from financing
activities                                     275            376          501
                                            --------       --------     --------

Net decrease in cash and
cash equivalents                            (1,785)          (906)      (2,879)

Cash and cash equivalents at
beginning of period                         11,142         14,021       14,021
                                            --------       --------     --------
Cash and cash equivalents at
end of period                                9,357         13,115       11,142
                                            --------       --------     --------


Notes to the interim financial statements for the six months ended
31 December 2007


1. Basis of preparation

These interim financial statements are the first interim financial statements
following the adoption of International Financial Reporting Standards as adopted
by the European Union ('IFRS'). As the Group has not previously published its
financial statements under IFRS, this announcement contains reconciliations from
previously reported amounts under UK Generally Accepted Accounting Principles
('UK GAAP') together with explanations of the changes. The comparative figures
in respect of prior periods have been restated to reflect the adoption of IFRS.
Also included in Appendix I are the restated Group accounting policies that the
Directors anticipate will be complied with in the annual financial statements
for the year ending 30 June 2008.

The financial information has been prepared in accordance with all IFRS and
International Financial Reporting Interpretations Committee ('IFRIC')
interpretations that had been published by 31 December 2007 as endorsed by the
European Union (EU). The Standards that will be applicable for the year ending
30 June 2008 are not known with certainty at the time of preparing the interim
results. Accordingly, the accounting policies for that accounting period will be
determined finally only when the annual financial statements for the year ending
30 June 2008 are prepared.

This interim report, which comprises the consolidated income statement, the
consolidated balance sheet, the consolidated statement of changes in equity, the
consolidated cash flow statement and the related notes, is unaudited and does
not constitute audited accounts within the meaning of the Companies Act 1985.
The accounts for the year ended 30 June 2007, on which the auditors gave an
unqualified audit opinion, were prepared in accordance with UK GAAP and not in
accordance with IFRS and have been filed with the Registrar of Companies.


2. Loss per share
                                   Six months        Six months    Year ended 30
                                     ended 31          ended 31        June 2007
                                December 2007     December 2006
                                    Unaudited         Unaudited        Unaudited
                                        #'000             #'000            #'000
                                     --------          --------          -------
Loss per #0.05 ordinary share
Loss for the period attributable
to shareholders                       (3,017)           (2,406)          (4,885)
                                     --------          --------          -------

Weighted average number
of shares in issue                59,753,341        58,625,285       59,057,064

Basic and diluted loss
per share                             (5.05)p           (4.10)p          (8.27)p
                                     --------          --------          -------


3. Called up share capital


Ceres Power Holdings plc had called-up share capital totalling 59,618,027
ordinary shares of #0.05 each at 30 June 2007 as disclosed in the statutory
financial statements of Ceres Power Holdings plc for the year ended 30 June
2007.

During the six months ended 31 December 2007, the Company issued 52,490 ordinary
shares of #0.05 each on the exercise of warrants for cash consideration of
#36,743, 380,062 ordinary shares of #0.05 each on the exercise of employee share
options for cash consideration of #238,598, and 2,638 ordinary shares of #0.05
each were issued as remuneration for non-executive director services. The value
of the shares on the days of issue totalled #7,276.


4. Cash used in operations

                          Six months            Six months                Year
                            ended 31              ended 31            ended 30
                       December 2007         December 2006           June 2007
                           Unaudited             Unaudited           Unaudited
                               #'000                 #'000               #'000
                              --------              --------             -------
Loss before income tax        (3,017)               (2,648)             (5,301)

Adjustments for:

Interest receivable             (300)                 (287)               (597)

Depreciation of property,
plant and equipment              371                   317                 674

Share-based payment
expense                          350                   621               1,170

Share-based remuneration
for services                       7                     -                  12
                              --------              --------             -------

Operating cash flows before
movements in working
capital                       (2,589)               (1,997)             (4,042)
                              --------              --------             -------

Decrease / (increase) in
trade and other receivables       90                    40                (129)

Increase in trade and
other payables                   612                   295                 277
                              --------              --------             -------

Decrease in working
capital                          702                   335                 148
                              --------              --------             -------

Cash used in operations      (1,887)               (1,662)             (3,894)
                              --------              --------             -------


Independent review report to Ceres Power Holdings plc


Introduction

We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
December 2007, which comprises the consolidated income statement, the
consolidated balance sheet, the consolidated statement of changes in equity, the
consolidated cash flow statement and the related notes. We have read the other
information contained in the half-yearly financial report and considered whether
it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.


Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the AIM Rules for Companies which require
that the financial information must be presented and prepared in a form
consistent with that which will be adopted in the company's annual financial
statements.


This interim report has been prepared in accordance with the basis set out in
Note 1. As disclosed in note 1, the next annual financial statements of the
company will be prepared in accordance with IFRS's as adopted by the European
Union. The accounting policies are consistent with those that the directors
intend to use in the next annual financial statements.


Our responsibility

Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. This report, including the conclusion, has been prepared for and only
for the company for the purpose of the AIM Rules for Companies and for no other
purpose. We do not, in producing this report, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our prior consent in
writing.


Scope of review

We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware

of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.


Conclusion

Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 31 December 2007 is not prepared, in all
material respects, in accordance with the basis set out in Note 1and the AIM
Rules for Companies.


PricewaterhouseCoopers LLP
Chartered Accountants
Cambridge


Notes:


(a) The maintenance and integrity of the Ceres Power Holdings plc website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the website.

(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.

Transition to International Financial Reporting Standards

These interim financial statements are the first financial statements following
the adoption of International Financial Reporting Standards ('IFRS').

As the Group has not previously published a full set of financial statements
under IFRS, this release contains reconciliations from previously reported
amounts under UK Generally Accepted Accounting Principles ('UK GAAP'). These
restated financial figures will be the principal comparative figures in the 2008
financial statements and have been released to provide a more detailed analysis
of the impact of adopting IFRS on the Group.


1.                    Introduction


For all periods up to and including 30 June 2007, the Group has prepared its
financial statements in accordance with UK GAAP. However, for accounting periods
commencing after 1 January 2007 AIM quoted Groups are required to prepare
consolidated accounts in accordance with IFRS. Therefore, the Group's first
published Interim Financial Statements under IFRS are in respect of the six
months ended 31 December 2007 and the first Annual Report and Accounts prepared
on this basis will be for the year ending 30 June 2008.


This document presents previously published UK GAAP information restated on an
IFRS basis. It is important to recognise that the move from UK GAAP to IFRS does
not change the cash flows of the Group nor does it impact Group strategy or
commercial decisions.


2.                    Summary of changes


The changes required to the financial statements of the Group arising from the
adoption of IFRS are:


   *the recording of a holiday pay accrual;
   *the restatement of treatment of lease incentives; and
   *the recording of forward foreign exchange contracts at fair value.


The restated accounting policies and reconciliations between financial
statements previously presented under UK GAAP and the IFRS presentation are
included in the following appendices:


Appendix 1: Restatement of Group accounting policies

Appendix 2: Restatement of the balance sheet as at 1 July 2006

Appendix 3: Restatement of the income statement for the year ended 30 June 2007

Appendix 4: Restatement of the balance sheet as at 30 June 2007

Appendix 5: Explanation of material adjustments to the cash flow statement


3.                    Summary of Impacts to Financial Statements


3.1 Summary income statement impact for the six months ended 31 December 2006


The table below shows the impact of IFRS adoption on the Group consolidated
income statement for the six months ended 31 December 2006:

                                           Before Tax  After Tax  Loss per share
                                            Unaudited  Unaudited       Unaudited
                                              #'000      #'000             Pence
                                             --------   --------        --------

Reported loss - UK GAAP                      (2,667)    (2,425)          (4.14)p

IFRS adjustments

IAS 19 'Employee Benefits'                       23         23            0.04p

IAS 17 'Leases'                                  (4)        (4)              -

IAS 39 'Financial Instruments:                    -          -               -
Recognition and Measurement'
                                             --------   --------        --------
Sub total of adjustments                         19         19            0.04p
                                             --------   --------        --------
Restated loss - IFRS                         (2,648)    (2,406)          (4.10)p
                                             --------   --------        --------


3.2 Summary income statement impact for the year ended 30 June 2007


The table below shows the impact of IFRS adoption on the Group consolidated
income statement for the year ended 30 June 2007:


                                   Before Tax     After Tax       Loss per share
                                    Unaudited     Unaudited            Unaudited
                                      #'000         #'000                  Pence
                                     --------      --------             --------

Reported loss - UK GAAP              (5,282)       (4,866)               (8.24)p

IFRS adjustments

IAS 19 'Employee Benefits'              (10)          (10)               (0.02)p

IAS 17 'Leases'                          (8)           (8)               (0.01)p

IAS 39 'Financial Instruments:
Recognition and Measurement'             (1)           (1)                   -
                                     --------      --------             --------
Sub total of adjustments                (19)          (19)               (0.03)
                                     --------      --------             --------
Restated loss - IFRS                 (5,301)       (4,885)               (8.27)p
                                     --------      --------             --------


3.3 Net asset adjustments


The table below shows the impact of IFRS adoption on the Group consolidated net
assets at 1 July 2006, 31 December 2006 and 30 June 2007:

                       As at 1 July              As at 31        As at 30 June
                               2006         December 2006                 2007
                          Unaudited             Unaudited            Unaudited
                              #'000                 #'000                #'000
                             --------              --------             --------

Total shareholders'
equity - UK GAAP             16,060                14,632               12,877

IFRS adjustments

IAS 19 'Employee Benefits'      (52)                  (29)                 (62)

IAS 17 'Leases'                 (18)                  (22)                 (26)

IAS 39 'Financial

Instruments: Recognition
and Measurement'                  -                     -                   (1)
                             --------              --------             --------
Sub total of adjustments        (70)                  (51)                 (89)
                             --------              --------             --------
Total shareholders'
equity - IFRS                15,990                14,581               12,788
                             --------              --------             --------


4.                    Details of changes


4.1 IAS 19 'Employee Benefits'

IAS 19 requires companies to make an accrual for holiday pay. At the date of
transition a #52,000 holiday pay accrual was recognised with a corresponding
adjustment being made to retained earnings.


4.2 IAS 17 'Leases'

IAS 17 requires that any benefits received and receivable as an incentive to
sign an operating lease are spread from the inception to the termination of the
lease, whereas under UK GAAP the incentives are spread over the period to the
first rent review. At the date of transition a #18,000 non current liability was
recognised with a corresponding adjustment being made to retained earnings.


4.3 IAS 39 'Financial Instruments: Recognition and Measurement'

Ceres uses forward foreign exchange contracts to hedge against foreign currency
denominated purchase commitments. Under UK GAAP, these forward foreign exchange
contracts were held off balance sheet at period ends. Under IFRS, the fair value
of all forward foreign exchange contracts is recognised on the balance sheet. At
the date of transition, no fair value adjustment was required. During the year
ended 30 June 2007, a fair value payable of #1,000 was recognised with a
corresponding debit to the income statement.


Appendix 1: Restatement of Group accounting policies


Introduction

The following are the restated Group accounting policies that the Directors have
established in order to produce the interim financial statements in accordance
with IFRS, as adopted by the EU, and which the Directors anticipate will be
complied with in the annual financial statements for the year ending 30 June
2008, the Group's first IFRS financial statements. There is, however, a
possibility that the directors may determine that some changes are necessary
when preparing the full annual financial statements for the first time in
accordance with accounting standards adapted for use in the EU. The IFRS
Standards and IFRIC interpretations that will be applicable and adopted for use
in the EU at 30 June 2008 are not known with certainty at the time of preparing
this financial information.


The consolidated financial statements will be prepared on a historical cost
basis except for certain items which will be measured at fair value, as
discussed in the accounting policies below.


Basis of consolidation

The consolidated financial statements include the financial statements of Ceres
Power Holdings plc and all of its subsidiary undertakings.


The financial statements of Ceres Power Limited have been consolidated under
merger accounting rules. The financial statements of Ceres Intellectual Property
Company Limited have been consolidated under acquisition accounting rules.


Intra-group transactions, profits, losses and balances are eliminated in full on
consolidation.


The Group has taken the exemption not to apply IFRS 3, 'Business Combinations',
retrospectively to business combinations that took place before 1 July 2006.


Property, plant and equipment

Property, plant and equipment is stated at historical cost less depreciation.

Historical cost includes expenditure that is directly attributable to the
acquisition of the assets. Subsequent costs are included in the asset's carrying
amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the asset will flow to
the Group and the cost of the asset can be measured reliably. All other repairs
and maintenance are charged to the income statement during the financial period
in which they are incurred.


Depreciation is calculated using the straight-line method to allocate their cost
over their estimated useful lives, as follows:


Leasehold improvements 10%

Plant and machinery 33%

Computer equipment 33%

Fixtures and fittings 33%


Depreciation for assets under construction commences when the asset is installed
and ready for its intended use.


Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with
banks and other short-term highly liquid investments with original maturities of
three months or less.


Trade and other receivables

Trade receivables are recognised and carried at the original invoice amount less
an allowance for any uncollectible amounts that is made when the full amount is
no longer considered probable. Actual bad debts are written off when identified.


Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for
the sale of goods and services in the ordinary course of the Group's activities.
Revenue is shown net of value-added tax and after eliminating sales within the
Group. Revenue in respect of the sale of goods is recognised to the extent that
it is probable that the economic benefits will flow to the Group and the revenue
can be measured reliably. Revenue in respect of the sale of services is
recognised over the period that the related work is performed and when the
specific conditions in the agreement have been met.


Foreign currencies

The consolidated financial statements are presented in pounds sterling, which is
the Company's functional and presentational currency. Transactions denominated
in foreign currencies are translated into sterling at the actual rate of
exchange ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated into sterling at rates ruling
at the balance sheet date. Exchange differences are included in the income
statement.


Derivative financial instruments

The Group's activities expose it primarily to the financial risks of changes in
foreign currency exchange rates. The Group uses forward foreign exchange
contracts to hedge against foreign currency denominated purchase commitments.


Changes in the fair value of derivative financial instruments that do not
qualify for hedge accounting are recognised in the income statement as they
arise.


Government grants

Revenue grants are credited to the income statement (as other operating income)
on a case-by-case basis. For revenue grants with no technical milestones, and
where recovery is assured, the revenue is recognised on an accruals basis in
order to match the associated expenditure with the grant income. For revenue
grants with technical milestones, revenue is recognised only when the relevant
milestone has been achieved and the associated cash has been received.


Pension scheme arrangements

The Group operates a defined contribution pension scheme for employees. The
assets of the scheme are held separately from those of the Group. The pension
costs charged represent contributions paid by the Group to individual pension
plans and are charged to the income statement as they become payable.

In addition, a stakeholder pension scheme is also available to employees.

Deferred taxation

Deferred tax is provided in full, using the liability method, on temporary
differences between the tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements. Deferred tax assets are
recognised to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.


Share-based payments

Employees receive remuneration in the form of equity-settled share-based
payments. The fair value at the date of grant of equity-settled, share-based
payments is expensed on a straight-line basis over the vesting period, based on
the Group's estimate of shares that will eventually vest. The charge is then
credited back to reserves.


Fair value is measured by the use of a Black-Scholes model. The expected life
used in the model has been adjusted, based on the directors' best estimate, for
the effects of non-transferability, exercise restrictions, and behavioural
considerations.


Research and development expenditure

Research costs are expensed as incurred. Development expenditure is capitalised
when it can be separately measured and its future recoverability can be
reasonably regarded as assured. Following initial recognition, the related asset
is amortised over the period of expected future sales with impairment reviews
being carried out at least annually. The asset is carried at cost less any
accumulated amortisation and impairment losses. The Group has not yet
capitalised any development costs as the criteria set out in IAS 38, 'Intangible
assets', have not been met.


Operating leases

Leases in which a significant portion of the risks and rewards of ownership are
retained by the lessor are classified as operating leases. Payments made under
operating leases (net of any incentives received from the lessor) are charged to
the income statement on straight-line basis over the period of the lease.
Benefits received and receivable as an incentive to sign an operating lease are
amortised over the full lease term.


New accounting standards

The following new standards, amendments to standards or interpretations are
mandatory for the first time for the year ending 30 June 2008:


IFRIC 10, 'Interim financial reporting and impairment', is effective for annual
periods beginning on or after 1 November 2006. This interpretation has not had
any impact on the timing or recognition of impairment losses.


IFRIC 11, 'IFRS 2 - Group and treasury share transactions', is effective for
annual periods beginning on or after 1 March 2007. Management do not expect this
interpretation to have any effect on the Group as it already accounts for group
share transactions using principles consistent with IFRIC 11.


IFRS 7, 'Financial instruments: Disclosures', is effective for annual periods
beginning on or after 1 January 2007. As this interim report contains only
condensed financial statements, the full IFRS 7 disclosures are not required at
this stage. The full IFRS 7 disclosures will be given in the annual financial
statements.


Amendment to IAS 1, 'Capital disclosures', is effective for annual periods
beginning on or after 1 January 2007. As this interim report contains only
condensed financial statements, the full disclosures relating to the amendment
to IAS 1 are not required at this stage. The full disclosures will be given in
the annual financial statements.


Use of assumptions and estimates

The preparation of the consolidated financial statements requires management to
make judgements, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgements about
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.


The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised.


Material estimates and assumptions are made in particular with regard to
establishing uniform depreciation and amortisation periods for the Group and in
recognising grant revenue where there are no technical milestones in the
agreement.


Appendix 2

Restatement of the balance sheet as at 1 July 2006 from UK GAAP to IFRS

                         Reformatted UK     Employee   Leases   As restated in
                                GAAP as     Benefits   IAS 17  accordance with
                             previously       IAS 19                      IFRS
                               reported

                                  #'000        #'000    #'000            #'000
                                ---------     --------  -------         --------
Assets
Non-current assets
Property, plant and
equipment                         1,870            -        -            1,870

Other receivable                     53            -        -               53
                                ---------     --------  -------         --------
Total non-current assets          1,923            -        -            1,923
                                ---------     --------  -------         --------
Current assets

Trade and other receivables         554            -        -              554

Cash and cash equivalents        14,021            -        -           14,021
                                ---------     --------  -------         --------
Total current assets             14,575            -        -           14,575

Liabilities

Current liabilities

Trade and other payables           (438)         (52)      7              (483)
                                ---------     --------  -------         --------
Net current assets               14,137          (52)      7            14,092
                                ---------     --------  -------         --------
Non-current liabilities
Other payables                        -            -      (25)             (25)
                                ---------     --------  -------         --------
Net assets                       16,060          (52)     (18)          15,990
                                ---------     --------  -------         --------

Equity

Share capital                     2,925            -        -            2,925

Share premium account            15,137            -        -           15,137

Other reserves                    7,463            -        -            7,463

Profit and loss account          (9,465)         (52)     (18)          (9,535)

                                ---------     --------  -------         --------
Total shareholders' equity       16,060          (52)     (18)          15,990
                                ---------     --------  -------         --------

Appendix 3

Restatement of the income statement for the year ended 30 June 2007 from UK GAAP
to IFRS


                Reformatted UK     Employee  Leases    Financial  As restated in
                       GAAP as Benefits IAS  IAS 17  instruments accordance with
                    previously           19               IAS 39            IFRS
                      reported

                       #'000        #'000   #'000        #'000           #'000
                     ---------      -------  ------     --------         -------
Continuing operations

Revenue                   98            -       -            -              98

Research and development
expenses              (4,922)         (12)     (8)           -          (4,942)

Administrative
expenses              (2,025)           2       -           (1)         (2,024)

Other operating
income                   970            -       -            -             970
                     ---------      -------  ------     --------         -------
Operating loss        (5,879)         (10)     (8)          (1)         (5,898)

Interest
receivable and
similar income           597            -       -            -             597
                     ---------      -------  ------     --------         -------
Loss before
income tax            (5,282)         (10)     (8)          (1)         (5,301)
Income tax credit        416            -       -            -             416
                     ---------      -------  ------     --------         -------
Loss for the period
attributable
to shareholders       (4,866)         (10)     (8)          (1)         (4,885)
                     ---------      -------  ------     --------         -------

Losses per share
expressed in
pence per share:
Basic and diluted
loss per share         (8.24)p      (0.02)p (0.01)p           -          (8.27)p
                     ---------      -------  ------     --------         -------

Appendix 4

Restatement of the balance sheet as at 30 June 2007 from UK GAAP to IFRS

                Reformatted UK     Employee  Leases    Financial  As restated in
                       GAAP as Benefits IAS  IAS 17  instruments accordance with
                    previously           19               IAS 39            IFRS
                      reported

                       #'000        #'000   #'000        #'000           #'000
                      --------      -------  ------     --------        --------
Assets
Non-current assets
Property, plant and
equipment              1,842            -       -            -           1,842

Other receivable          53            -       -            -              53
                      --------      -------  ------     --------        --------
Total non-current
assets                 1,895            -       -            -           1,895
                      --------      -------  ------     --------        --------
Current assets

Trade and other
receivables              628            -       -            -             628

Cash and cash
equivalents           11,142            -       -            -          11,142
                      --------      -------  ------     --------        --------
Total current
assets                11,770            -       -            -          11,770

Liabilities
Current liabilities

Trade and
other payables          (788)         (62)     (4)          (1)           (855)
                      --------      -------  ------     --------        --------
Net current assets    10,982          (62)     (4)          (1)         10,915
                      --------      -------  ------     --------        --------
Non-current liabilities
Other payables             -            -     (22)           -             (22)
                      --------      -------  ------     --------        --------
Net assets            12,877          (62)    (26)          (1)         12,788
                      --------      -------  ------     --------        --------

Equity

Share capital          2,981            -       -            -           2,981

Share premium account 15,594            -       -            -          15,594

Other reserves         7,463            -       -            -           7,463

Profit and
loss account         (13,161)         (62)    (26)          (1)        (13,250)
                      --------      -------  ------     --------        --------
Total shareholder's
equity                12,877          (62)    (26)          (1)         12,788
                      --------      -------  ------     --------        --------


Appendix 5

Explanation of material adjustments to the cash flow statement

Income taxes received of #320,000 in the six months ended 31 December 2006 and
#494,000 in the year ended 30 June 2007 are classified as part of operating cash
flows under IFRS's, but were included in a separate category of Taxation under
UK GAAP. Cash and cash equivalents includes short-term deposits under IFRS's.
Under UK GAAP movements in short-term deposits were included under a separate
management of liquid resourses category. There are no other material differences
between the cash flow statement presented under IFRS's and the cash flow
statement presented under UK GAAP.


                      This information is provided by RNS
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