Original
RNS Number:7517T
Ceres Power Holdings plc
27 March 2007


                            Ceres Power Holdings plc

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


           Interim results for the six months ended 31 December 2006


Ceres Power Holdings plc announces its interim results for the six months ended
31 December 2006.


Highlights:


   *British Gas CHP programme milestones achieved
   *Stack technology frozen, performance and durability demonstrated
   *Fuel Cell Module engineered for volume manufacture
   *Funded contract secured with EDF Energy Networks for on-site power
   *New Product Facility expansion and plans for mass manufacture on track
   *Brian Count, ex-Innogy plc CEO, appointed Non-Executive Director
   *Income from private and public sector contracts up 119% to #0.5 million
   *Strong balance sheet with cash and short term investments of #13.1
million


Interim Results Summary


                                         Six months                 Six months
                                           ended 31                   ended 31
                                      December 2006              December 2005
                                              #'000                      #'000
Turnover                                         30                         80
Other operating income                          469                        148
*Operating loss                              (2,333)                    (1,973)
Interest income                                 287                        334
*Adjusted Loss for the financial period      (1,804)                    (1,639)
**Adjusted diluted loss per share             (3.08)p                    (2.90)p
Net cash outflow                               (906)                    (1,643)

* calculated before FRS 20 Share-based Payments charge (operating loss and loss
for the financial period including share-based payments are #2,954,000 (2005:
#2,084,000) and #2,425,000 (2005: #1,750,000) respectively)

** Loss per share calculated before FRS 20 Share-based Payments charge (see note
3 to the interim financial information)


Philip Holbeche, Chairman, commented:

'I am delighted to report that the Group's continued technical progress has
resulted in key milestones being achieved for our core CHP programme with
British Gas, income growth from contracts and important manufacturing
improvements that should underpin our Company's future. Ceres' new funded
contract with EDF Energy Networks to design, build and evaluate prototype home
energy security products strongly endorses our commercially-led approach to
delivering cost-effective, efficient and reliable solutions using our advanced
fuel cell technology. It also highlights our ability to readily adapt Ceres'
core technology platform - the Fuel Cell Module - to different applications and
markets. We look forward to the future with confidence as Ceres approaches
commercialisation.'


For further information contact:


Philip Holbeche, Chairman

Peter Bance, Chief Executive

Rex Vevers, Finance Director                             +44 (0) 1293 400 404

Ceres Power


Patrick d'Ancona / Elly Williamson                       +44 (0) 207 153 1547

M: Communications


Chairman's Statement


Introduction


Ceres Power continued to make significant progress in the half year ended 31
December 2006. The technical capabilities in the Group, together with the unique
Ceres' fuel cell technology, have underpinned progress in our core CHP
programme, new commercial engagement, income growth, intellectual property
capture and facilities expansion.

Issues surrounding climate change, energy efficiency and security are high on
both national and global agendas, and the Group is ideally placed to provide the
solutions required in a variety of applications and markets. Ceres continues to
contribute to strategic energy initiatives through high-level engagement with
the UK government and major international companies. We believe that fuel cell
micro-power generation products, with high efficiencies and low carbon
footprints, can offer cost-effective solutions to mass markets worldwide.


Financial Results


Total income for the six month period ended 31 December 2006 increased by 40% to
#786,000 (2005: #562,000). Technical progress achieved by the Group helped
produce a 119% increase in income from private and public sector contracts to
#499,000 (2005: #228,000). Operating expenses (before share-based payments
charges) increased by 28% over the comparable period last year, reflecting the
continued investment in growing the Group's product development and commercial
capabilities. This investment also resulted in interest on cash balances falling
by 14% to #287,000 (2005; #334,000). The adjusted loss for the period (before
share-based payments) increased by 10% to #1,804,000 (2005: #1,639,000).

Capital expenditure during the period totalled #225,000, reflecting the
investment in the fit-out of the 'Product Facility'. Capital expenditure in the
second half of the financial year will relate to investment in machinery for the
key fuel cell manufacturing processes.

The Group continues to maintain a strong balance sheet with #13.1m in cash and
short-term investments. Net cash outflow during the period fell by 45% to only
#906,000 (2005: #1,643,000). This reduction in net cash outflow is primarily
attributable to cash inflows of #320,000 from R&D tax credits, an increase of
#153,000 from the exercise of warrants and share options, a reduction in capital
expenditure of #371,000 and maintaining cash outflows from operating activities
in line with the comparable period last year.

The Group has adopted the newly introduced accounting standard FRS 20,
'Share-based Payment', in line with current reporting standards and has changed
its accounting policy with respect to equity-settled share-based payments
provided to employees under the Company's share option scheme. This has resulted
in a charge of #621,000 in the current period and a prior year adjustment of
#108,000 for the six months ended 31 December 2005. This charge has no impact on
the Group's cash flow or net assets.


Commercial Engagement


The Group's proven product engineering capabilities and commercially-driven
approach to business have enabled progress to be reported on existing
relationships and an important new contract to be secured. The core technology's
inherently attractive techno-economics and its proven ability to operate on
natural gas and LPG fuels have been important in establishing potential routes
to a number of mass market applications.

The Group's core Combined Heat and Power (CHP) programme with British Gas, part
funded by the DTI, continues to deliver all technical milestones on time
including:

   *Fuel Cell Module constructed and assembled
   *Components designed, procured and tested
   *Wall mountable CHP system design confirmed

The success of this project has resulted in a significant increase in income
from private and public sector contracts in the half year, with the current
programme expected to continue until the end of 2008. Future milestones include
the demonstration of a CHP unit during mid-year 2007. It is expected that as the
CHP opportunities are proven in the British market, consideration will be given
to expansion into international markets.

Work has also continued under a third contract with BOC. This has focused upon
on-site generation from cylinder gases available in a number of international
markets. The contract, together with the two previous pieces of work, confirmed
the technical capability of Ceres' fuel cells and the attractive market
opportunities available to this proposition. The results of recent work indicate
that a Ceres Power solution could provide advantages over existing products in
terms of efficiency, lifetime costs and emissions. The confirmation of this fuel
versatility and efficiency has already provided benefits in the form of a new
funded contract with a major European utility-owned network operator.

The Group has been awarded a funded contract by EDF Energy Networks (EDF) to
design, build and evaluate prototype 'energy security' products for the UK
residential market. The initial two year phase of the programme has a budget of
approximately #1.2 million and should deliver initial prototype units for
evaluation in 2008 and 2009. This will provide income of over #600,000 from EDF
to Ceres, representing 50% of the costs with all intellectual property arising
from the work being retained by Ceres. The product being developed for EDF is
based upon the Ceres' Fuel Cell Module, and is designed to provide reliable
back-up electricity from cylinder gas.

EDF Energy Networks is a division of EDF, an integrated energy operator present
in all sectors of the electricity industry with over 40 million customers
worldwide. In the UK it has approximately 5 million customers, and is also the
UK's largest electricity distributor, providing power to a quarter of the UK's
population via its distribution networks in London, the South East and the East
of England.

The residential product being developed will initially target the approximately
100,000 vulnerable or 'at risk' customers on EDF's UK network. Over time there
is the possibility of tailoring the product to meet the needs of European and
overseas customers. Building on this important niche, homeowners with small
office home office (SOHO) lifestyles dependant on reliable power can also be
targeted. An exciting growth opportunity for a variant of this product exists in
many parts of the affluent developing world, where demand for power is
outstripping supply - users are demanding more effective solutions to so-called
'load-shedding' where utilities are forced to disconnect their homes for hours
at a time.


Technical Review


Technical progress has been a key driver for increasing income from private and
public sector contracts. This trend reflects a growing recognition of the
potential benefits derived from the Ceres' differentiated technology in a broad
range of market applications. In addition to the Group's continued focus on
natural gas fed CHP, the technology's ability to provide high efficiency
solutions from cylinder gas fuels has recently stimulated significant interest
for on-site power applications.

Technical progress continues to build on the Group's unique fuel cell technology
position. This has enabled the development of a differentiated fuel cell stack
and module technology which provides a common platform as the basis of

compelling propositions for a range of mass market opportunities.

The Group announced in December 2006 that following the successful testing
programme, the core stack technology had been frozen. On-going extended testing
beyond the 7,500 hours reported has continued to reinforce the robustness and
durability of the patented stack design. The innovative stack sealing
architecture has demonstrated its ability to withstand repeated thermal cycling
over extended use and so meet the needs of demanding residential micro-CHP
applications. The design has been value engineered to minimise raw material
requirements and part count which are reflected in its compact size, low mass
and commercial cost.

Development of a compact Fuel Cell Module for volume manufacture has involved
highly beneficial collaboration with major component suppliers. Development of
relationships with key suppliers has enabled extensive experience in component
design, materials, and volume manufacturing processes to be harnessed, thereby
minimising development lead time, cost and technical risk.

This supplier engagement for key balance of plant (BOP) has enabled important
progress to be made towards development of a cost-effective micro-CHP product
for mass market residential applications. All technical milestones have been met
under the collaborative programme with British Gas. Building on earlier
prototype systems, successful testing of Fuel Cell Module components at the
heart of the CHP product has demonstrated the basis of a commercially viable
wall-mounted design.


Manufacturing Scale-up


Preparation of a new Product Facility has been completed on time and within
budget and the effectiveness of the planning and delivery process is important
as more substantial expansion is planned. This facility now accommodates
expanded design and manufacturing resources to develop customer-tailored
products for target market applications. A main function of this facility is to
scale-up and thoroughly test volume manufacturing processes, before transfer to
a fuel cell mass manufacturing plant, and also to produce prototype products for
field trials.

Significant progress has been made towards developing key fuel cell and stack
manufacturing processes for volume manufacture. Major reductions in processing
times of up to twenty-fold have recently been achieved, for example in the laser
drilling process. Ceres is working with key machinery suppliers to configure the
equipment to Ceres' specification. Initial equipment will be installed and
commissioned during 2007 and will be used to validate these key manufacturing
processes during the second half of the year.

A new 'Mother Plant', expected to initially have the capacity to manufacture one
million fuel cells per annum, is in the planning phase which will continue
throughout 2007. It is expected that commissioning will take place in 2008 with
operations commencing in 2009. Initial financial and technical projections
indicate that it will be possible to have step-wise capacity increases as demand
for the fuel cells increases, thereby limiting the initial financial commitment
and on-going scale-up expenditure.


Intellectual Property (IP)


Ceres' fuel cells are based on a unique technology, operating in the range
500-600 degrees C using ceramic layers deposited on stainless steel. These
attributes allow very efficient delivery of electrical power and heat, combined
with a competitive cost base and suitability to mass production.

From the time of the company's formation in 2001, a major focus has been to
protect this valuable intellectual property in a highly professional manner.
Much of the technology has been protected legally with patents filed and granted
in relevant countries around the world, whilst other technology is protected as
know-how and retained as trade secrets. The IP portfolio continues to expand
rapidly and attention has also been given to trademarks and branding.

The uniqueness of the technology has allowed the Group to establish a strong IP
position, not only in its core technology but also encompassing product design,
key components and manufacturing processes and market applications. A
wholly-owned subsidiary, Ceres Intellectual Property Company Limited (CIPCo) has
been formed to hold all of the patents and trademarks for the Group and to help
professionally manage, protect and exploit the Group's IP.


People


The Group has continued to strengthen its capabilities by attracting high
calibre people with both the expertise and experience to develop products,
manage technical and commercial relationships with supply chain partners,
deliver major revenue bearing contracts and to expand manufacturing operations.

Appointments to the Ceres Power board reflect the strategic direction of the
business and relationships being developed with public and private
organisations, key to the Group's success.

I am pleased to report that Rex Vevers joined the Group in September 2006 as
Finance Director. He provides a wealth of experience from senior financial roles
in global companies and of particular importance for Ceres is his extensive
involvement in the expansion of manufacturing facilities and commercial joint
ventures in international locations. Rex is a qualified accountant and corporate
treasurer, and has substantial expertise in the financing of business expansion.

The board has also been strengthened by the appointment in March 2007 of Brian
Count as a Non-Executive Director. He rose to become Managing Director of
National Power's UK business, and subsequently Chief Executive of Innogy plc.
Following the acquisition of Innogy plc by RWE, Brian then became CEO of RWE
Trading in Essen, Germany before retiring in 2005. He is currently a
Non-Executive Director of Eskom, the South African electricity utility and
Chairman of the clean coal venture Progressive Energy. He is a member of the
Department of Trade and Industry's Industrial Development Advisory Board in
Britain. He is an advisor to Climate Change Capital and the Amsterdam Power
Exchange, and is a well-respected figure in the European utility sector. His
insights, advice and guidance will be invaluable as Ceres progresses towards
commercialization and mass market delivery.

I would like to thank Harry Fitzgibbons, who stepped down from the Board in
March 2007, for his contribution to Ceres during its transition from a private
to a substantial public company.


Review and Outlook


During the last six months, Ceres has made substantial technical and commercial
progress, and has continued to put in place the facilities, equipment and
personnel necessary to move towards substantial production and commercial
uptake. The freezing of the core stack technology and the successful
construction of an integrated Fuel Cell Module using balance of plant developed
with volume component suppliers, has demonstrated that Ceres' unique technology
has the ability to deliver durable, efficient, compact cost effective mass
market solutions.

The key focus for the Group for the remainder of 2007 involves:

   *Demonstration of a natural gas fed micro-CHP unit
   *Validation of the key fuel cell volume manufacturing processes and
machines
   *Delivery of contract milestones with British Gas, BOC, EDF and other
partnerships
   *Completion of planning for the Mother Plant

I look forward to reporting upon further progress throughout 2007.


Philip Holbeche, Chairman


CONSOLIDATED PROFIT AND LOSS ACCOUNT

for the six months ended 31 December 2006


                              Six months         Six months      Year ended 30
                                ended 31           ended 31          June 2006
                           December 2006      December 2005
                               Unaudited          Unaudited            Audited
                                              (as restated)      (as restated)
                            Note   #'000              #'000              #'000

Turnover                              30                 80                110
Operating expenses including
share-based payments              (3,453)            (2,312)            (5,235)
Other operating income               469                148                636
                                --------           --------           --------
                                --------           --------           --------
Operating loss before
share-based payments              (2,333)            (1,973)            (3,888)
Share-based payments
charge                       3      (621)              (111)              (601)
                                --------           --------           --------

Operating loss                    (2,954)            (2,084)            (4,489)
Interest receivable and
similar income                       287                334                630
Loss on ordinary activities
before taxation                   (2,667)            (1,750)            (3,859)
Tax credit on loss on
ordinary activities          5       242                  -                 78
Loss for the financial
period / year                3    (2,425)            (1,750)            (3,781)

Weighted average number of
shares in issue               58,625,285         56,432,218         57,039,938
Basic and diluted loss
per share                    4     (4.14)p            (3.10)p            (6.63)p


CONSOLIDATED BALANCE SHEET

as at 31 December 2006


                                  31 December     31 December      30 June 2006
                                         2006            2005
                                    Unaudited       Unaudited           Audited
                           Note         #'000           #'000            #'000
Fixed assets
Tangible assets                         1,800           1,728            1,870

Current assets
Debtors: amounts falling due after
more than one year                         53              53               53
Debtors: amounts
falling due within one year               439             344              554
Short term investments                 11,500          14,100           11,900
Cash at bank and in
hand                                    1,615           1,301            2,121

                                       13,607          15,798           14,628
Creditors: amounts
falling due within one year              (775)           (758)            (438)
Net current assets                     12,832          15,040           14,190
Total assets less

current liabilities                    14,632          16,768           16,060
Creditors: amounts falling
due after more than one year                -             (5)                -
Net assets                             14,632          16,763           16,060

Capital and reserves
Called up share
capital                      6          2,968           2,838            2,925
Share premium account                  15,470          14,386           15,137
Other reserve                           7,463           7,463            7,463
Profit and loss account               (11,269)         (7,924)          (9,465)
Total shareholders'
funds                        8         14,632          16,763           16,060


CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 31 December 2006
                                       Six months     Six months  Year ended 30
                                         ended 31       ended 31      June 2006
                                    December 2006  December 2005
                                        Unaudited      Unaudited        Audited
                              Note         #'000         #'000           #'000
Net cash outflow from
operating activities          7          (1,662)        (1,604)         (3,613)

Returns on investments and
servicing of finance
Interest received                           285            334             630
Net cash inflow from returns on
investments and servicing
of finance                                  285            334             630
Taxation                                    320              -               -

Capital expenditure
Purchase of tangible fixed
assets                                     (225)          (596)         (1,099)
Net cash outflow for
capital expenditure                        (225)          (596)         (1,099)
Net cash outflow before
management of liquid
resources and financing                  (1,282)        (1,866)         (4,082)

Management of liquid resources
Decrease in short term
deposits with banks                         400          1,500           3,700

Financing
Issue of ordinary share
capital                                     376            173           1,009
Net expenses of share issue                   -             50              50
Net cash inflow from financing              376            223           1,059
(Decrease) /increase in net cash           (506)          (143)            677

Reconciliation to net funds
Opening net funds                        14,021         17,044          17,044
(Decrease) / increase in net cash          (506)          (143)            677
Movement in short term deposits            (400)        (1,500)         (3,700)
Closing net funds                        13,115         15,401          14,021


Notes to the interim financial statements for the six months ended 31 December
2006


1. Basis of preparation


These interim financial statements do not constitute statutory financial
statements within the meaning of Section 240 of the Companies Act 1985.


The results for the six months ended 31 December 2006 and 31 December 2005 have
not been audited. The results for the year ended 30 June 2006 have been
extracted from the statutory financial statements of Ceres Power Holdings plc
for that year, that have been filed with the Registrar of Companies and upon
which the auditors have reported without qualification.


2. Principal accounting policies


These interim financial statements for the six months ended 31 December 2006
have been prepared in accordance with the accounting policies set out in the
statutory financial statements of Ceres Power Holdings plc for the year ended 30
June 2006, with the exception of the adoption of Financial Reporting Standard
(FRS) 20, 'Share-based Payment'. The adoption of FRS 20 constitutes a change in
accounting policy. Therefore, the impact has been reflected as a prior year
adjustment in accordance with FRS 20. Note 3 sets out the effect of adopting FRS
20.


3.       FRS 20 Share-based Payments


The Group is required to adopt FRS 20, 'Share-based Payment', for the first time
for accounting periods commencing on or after 1 January 2006. In accordance with
the transitional provisions of FRS 20, the Group is required to recognise an
expense in respect of options granted after 7 November 2002 that were unvested
as of 1 January 2006. This expense, which is calculated by reference to the fair
value of the options granted, is recognised on a straight line basis over the
performance period based on the Group's estimate of options that will eventually
vest. The charge is then credited back to reserves. The adoption of this
Standard has no effect on the Group's cash flow or net assets.


Comparative figures for the six months ended 31 December 2005 and the year to 30
June 2006 have been restated to apply the provisions of FRS 20, increasing
expenses and the loss for those periods as shown below:

                                  Six months       Six months    Year ended 30
                                    ended 31         ended 31        June 2006
                               December 2006    December 2005
                                   Unaudited        Unaudited          Audited
                                                 (as restated)    (as restated)
                                       #'000            #'000            #'000

Loss for the financial
period / year                         (2,425)          (1,750)          (3,781)
FRS 20
Share-based payments                     621              111              601

Adjusted loss for the
financial period / year
before FRS 20
Share-based
payments                              (1,804)           (1,639)         (3,180)


4. Loss per share
                                    Six months      Six months   Year ended 30
                                      ended 31        ended 31       June 2006
                                 December 2006   December 2005
                                     Unaudited       Unaudited         Audited
                                                  (as restated)   (as restated)
                                        #'000            #'000            #'000

Loss per #0.05 ordinary share
Loss for the financial
period / year                          (2,425)          (1,750)         (3,781)
FRS 20
Share-based payments                      621              111             601

Adjusted loss
for the
financial
period / year
before FRS 20
Share-based
payments                               (1,804)           (1,639)        (3,180)

Weighted
average number
of shares in
issue                               58,625,285        56,432,218    57,039,938

Basic and
diluted loss
per share                                (4.14)p            3.10)p       (6.63)p
Adjusted basic
and diluted
loss per share
before FRS 20
Share-based
payments                                 (3.08)p           (2.90)p       (5.58)p


5. Tax credit on loss on ordinary activities

The tax result for the period has arisen as a result of tax losses surrendered
in respect of research and development expenditure in 2005.

6. Called up share capital

Ceres Power Holdings plc had called-up share capital totalling 58,504,885
ordinary shares of #0.05 each at 30 June 2006 as disclosed in the statutory
financial statements of Ceres Power Holdings plc for the year ended 30 June
2006.

During the six months ended 31 December 2006, the Company issued 729,795
ordinary shares of #0.05 each on the exercise of warrants for cash consideration
of #337,076, and 126,325 ordinary shares of #0.05 each on the exercise of
employee share options for cash consideration of #39,150.

7. Net cash outflow from operating activities

Reconciliation of operating loss to net cash outflow from operating activities:

                          Six months            Six months         Year ended 30
                            ended 31              ended 31             June 2006
                       December 2006         December 2005
                           Unaudited             Unaudited               Audited
                                             (as restated)         (as restated)
                             #'000                 #'000                 #'000
Operating loss              (2,954)               (2,084)               (4,489)
Depreciation charge            317                   239                   494
FRS 20 Share-based
payments                       621                   111                   601
Loss on disposal of
fixed assets                     -                     -                     1
Decrease /(increase) in
debtors                         40                   (83)                 (213)
Increase /(decrease) in
creditors                      314                   213                    (7)
Net cash outflow from
operating activities        (1,662)               (1,604)               (3,613)


8. Reconciliation of movements in shareholders' funds

                         Six months            Six months         Year ended 30
                           ended 31              ended 31             June 2006
                      December 2006         December 2005
                          Unaudited             Unaudited               Audited
                                            (as restated)         (as restated)
                            #'000                 #'000                 #'000
Loss for the financial
period / year              (2,425)               (1,750)               (3,781)
Proceeds of issue of
ordinary share capital        376                   171                 1,009
FRS 20 Share-based
payments                      621                   111                   601
Share issue costs               -                    50                    50
                           --------             --------               -------
Net change in
shareholders'funds         (1,428)               (1,418)                (2,121)
Opening shareholders'
funds                      16,060                18,181                 18,181
Closing shareholders'
funds                      14,632                16,763                 16,060


Independent review report to Ceres Power Holdings plc


Introduction


We have been instructed by the company to review the financial information for
the six months ended 31 December 2006 which comprises the consolidated interim
balance sheet as at 31 December 2006 and the related consolidated interim

statements of income and cash flows for the six months then ended and related
notes. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.


Directors' responsibilities


The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the AIM Market
Rules 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.


Review work performed


We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the disclosed accounting policies have
been applied. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially less
in scope than an audit and therefore provides a lower level of assurance.
Accordingly we do not express an audit opinion on the financial information.
This report, including the conclusion, has been prepared for and only for the
company 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.


Review conclusion


On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 December 2006.


PricewaterhouseCoopers LLP
Chartered Accountants
Cambridge
27 March 2007


Notes:


(a) The maintenance and integrity of the Ceres Power Holdings plc web site 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 web site.

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


                      This information is provided by RNS
            The company news service from the London Stock Exchange

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