TIDMVLS
RNS Number : 1149A
Velocys PLC
21 September 2022
News release
Velocys plc
("Velocys" or the "Company")
21 September 2022
Interim results for the six months ended 30 June 2022
Velocys plc (VLS. L), the sustainable fuels technology company,
announces its interim results for the six months ended 30 June
2022, during which period the Company has continued to successfully
pursue its commercialisation strategy against an increasingly
favourable legislative backdrop.
HIGHLIGHTS FOR THE SIX MONTHSED 30 JUNE 2022
FINANCIAL HIGHLIGHTS
-- T he Company recorded revenue of GBP48k (HY2021: GBP8.2m)
from engineering consulting services in respect of feasibility
studies. Prior period revenues were mainly in respect of
recognising the revenue from supplying reactors and catalyst to our
first major commercial client contract in the US which commenced in
2017. R evenues are expected to be uneven in the short-term due to
the concentrated number of projects.
-- T he Company recorded a loss before income tax of GBP5.7m
(HY2021: GBP2.2m loss ). The prior year loss was lower as it
included gross profit of GBP3.3m.
-- As at 30 June 2022, the net assets of the Company were GBP24.4m.
-- C ash balances of the Company as at 30 June 2022 were GBP18.
8 m (31 December 2021: GBP25.5m) which included GBP1.4m of
restricted cash.
-- N et cash outflow recorded for the six months to 30 June 2022
was GBP6.8m (HY2021: cash outflow GBP4.8m) which included
investment in the new technical facility in Ohio and deposits for
manufacturing equipment totalling GBP1.1m.
OPERATIONAL AND COMMERCIAL HIGHLIGHTS (INCLUDING POST PERIOD
UPDATES)
Legislative and Policy Frameworks
-- The US Inflation Reduction Act of 2022, signed into law on 16
August 2022 , allocates $369 billion to reducing greenhouse gas
emissions and incentivises expanded production and use of domestic
clean energy. Sustainable Aviation Fuel ("SAF") tax credits are an
integral part of the Act, together with other incentives and
mechanisms to accelerate the deployment of advanced fuel
technologies generating non-fossil fuels with a significantly
reduced carbon intensity.
-- The UK Government Department for Transport launched its " Jet
Zero " strategy on 19 July 2022 , which includes an ambition for a
minimum of five commercial-scale SAF plants to be under
construction in the UK by 2025, and a mandate for at least 10% SAF
to be blended into conventional aviation fuel by 2030 to reduce
greenhouse gas emissions.
Commercial SAF projects and business development
-- Collaboration with TOYO regarding biomass to SAF ("BtL") and
power to SAF ("PtL") solutions for the energy transition in Japan
has continued. The commercial scale NEDO2 BtL project is currently
in FEL2 stage and progressing to plan and the Power to Liquids
demonstration project is advancing as planned.
-- The legislative developments and increased awareness of the
vital need for SAF over the past few months has led to increased
enquiries for Velocys' technology offering.
-- The pipeline of potential opportunities continues to develop
and the Company is well placed to provide front end project
development consultancy, including feasibility studies and pre-FEED
project definition for SAF projects under consideration globally.
The Company is currently progressing a paid engineering study for a
client in Northern Europe and has been requested to quote for a
number of other global projects.
Reference projects update
-- Bayou Fuels ( Mississippi, US):
-- The local development authority in Mississippi is finalising
the levee construction protecting the biorefinery site. This is a
critical milestone required for insurance purposes and de-risking
of the site.
-- The project benefits from significant US legislative
progress. The biofuels that will be produced, should the project
proceed, will adhere to both the US Renewable Fuel Standard ("RFS")
and the Low Carbon Fuels Standard ("LCFS") and earn additional
incentives through the associated Renewable Identification Number
("RIN") and LCFS credits.
-- The project is being further optimised to achieve an even
lower carbon intensity to take advantage of the recently introduced
dedicated tax credits for US domestic SAF production (Clean Fuel
Production Tax Credits).
-- The feedstock capability and the power supply to the
biorefinery are being further assessed to ascertain optimal
output.
-- Altalto (Immingham, UK):
-- Site engineering, geotechnical work and integration of carbon
sequestration continued in readiness for connection into the East
Coast Carbon Capture and Storage cluster for the Immingham
site.
-- In March 2022, the Company welcomed Foresight Group LLP
("Foresight") into the Altalto municipal solid waste to jet fuel
project in Immingham, UK , where Velocys is providing project
development services, engineering and Fischer-Tropsch Synthesis
("FTS") technology.
-- The Company funded the GBP7.25m deferred consideration due
for the Immingham site purchase by selling the site owning company
to Foresight for GBP9.75m with an option to repurchase the company
in up to three years' time. Velocys paid GBP2.5m of the GBP9.75m
consideration in December 2021, so effectively recovered its cash
outlay in March 2022 whilst retaining control of the site.
-- The Company agreed with British Airways ("BA") to extend both
the UK Altalto project Joint Development Agreement and the Option
Agreement for BA to acquire 50% of Altalto Limited by one year to
31 March 2023.
-- An application was made to the UK's Department for Transport
(DfT) to obtain a share of the GBP165m funding available from the
Advanced Fuels Fund launched in July 2022 . The fund prioritises
commercial-scale sustainable aviation fuel plants that require
additional support to become ready for investment and construction.
The Company believes Altalto meets the eligibility requirements of
the Advanced Fuels Fund.
New Technical Centre (Ohio, US)
-- An a greement was entered into to construct a 52,000 square
foot site in Columbus, Ohio, suitable to house the Company's
reactor core assembly operations alongside its research and
development activities.
-- Terms of a 15-year lease were agreed with Velocys contribut
ing a maximum of $2m for construction out of a total cost of
approximately $10m.
-- An Enterprise Zone agreement was signed with Union County,
Ohio which provides property tax abatement of 75% once the building
is occupied from 2023, with commitments to the creation of new jobs
in the facility and support for the local community.
-- Construction commenced in May 2022 and is anticipated to complete in Spring 2023.
-- Orders were placed for the new equipment to support the
commissioning and production of reactor cores. GBP1.4m of
commitments have been made in the six months to June 2022 (in
addition to upfront deposits paid of GBP0.7m).
-- The total Net Present Value of local Ohio State incentives secured is approximately $600k.
Other highlights and post period events
-- Philip Sanderson was appointed as CFO and executive member of
the Board in June 2022 , bringing extensive project and commercial
finance experience to the Company.
-- During HY2022 the Company successfully filled several key
appointments in the in-house Catalysis group, strengthening our
expertise in catalysis development and continuing to build on our
extensive IP portfolio.
-- In July 2022, the Company concluded the sale of its
undeveloped Ashtabula site in Northern Ohio, acquired as part of an
acquisition in 2014, to the Ashtabula Port Authority.
-- The Company has submitted a separate application with a group
of partners under the UK Advanced Fuels Fund competition for a
share of the GBP22m of funding specifically allocated for e-fuels
projects. This provides an opportunity to conduct feasibility,
technical validation and potentially site selection for such a
project in the UK.
-- Establishment of a Scientific Advisory Board with global
experts to provide a forum for science and technology-based
discussions based on independent, objective advice and
guidance.
OUTLOOK
-- Velocys is targeting completion of the fuel offtake
agreements for Bayou Fuels , taking into account the specific tax
credit mechanics set out in the Inflation Reduction Act. The
Company intends to confirm appointment of its US investment banks
to lead the front-end engineering design ("FEED") funding during
the fourth quarter of 2022. This is with a view to having FEED
project funding in place in mid-2023.
-- Globally, government policy support to accelerate SAF supply
continues , as evidenced by the recent US legislation, the European
Parliament's adoption of the ReFuel EU Aviation initiative and the
UK Government's SAF mandate consultation pro cess now assessing in
greater detail the administration of such mandates . Velocys looks
forward to the conclusion of the UK consultation process, the
results of which are targeted to be published by the end of
2022.
-- Velocys expects the construction and fit-out of the new Ohio
Technical Centre will remain on track, with operations moving into
the facility by mid-2023.
-- Velocys, through its 20 years of expertise in sustainable
fuels, is receiving a high level of enquiries from blue chip
potential customers and is focussing its active dialogue on
companies which operate in regions with favourable policy
environments.
-- Velocys is actively focussed on advancing its
commercialisation strategy through a targeted pipeline of
opportunities to deploy its technology and services.
Henrik Wareborn, CEO of Velocys, said:
"Our interim results show tangible progress with multiple
milestones reached over the course of the period. Our new Ohio
Technical Centre is well into its construction phase. Here, our
technology and licensing services will be consolidated under one
roof, providing a fully integrated client delivery and service
offering domestically and globally. The facility is on schedule to
be completed and commissioned next year.
"We welcomed Foresight Group who demonstrated their support for
Velocys and Altalto through the purchase of the Altalto site owner
giving the project permanent site control with an option for
repurchase. We continue to have a strong partnership with British
Airways and their commitment to the Altalto project represented
through their extension of our Joint Development Agreement and
Option Agreement.
"The launch in the UK of the "Jet Zero" strategy was
well-received and sets out the Government's approach to achieving
"net zero" aviation by 2050. This stated an ambition for a minimum
of five commercial-scale SAF plants to be under construction in the
UK by 2025, and a mandate for the equivalent of at least 10% SAF to
be blended into conventional aviation fuel by 2030. Both these
initiatives bode very well for Altalto which is exactly the type of
commercial-scale SAF plant the UK Government is seeking. We look
forward to the outcome of the Government's pledge to further work
with industry to create the long-term conditions for investable
projects in the UK.
"The landmark climate legislation passed in the US, the
"Inflation Reduction Act of 2022", focusses on the total amount of
avoided carbon and not solely on sustainable fuel supplied. Bayou
Fuels, our project in the US, is well positioned to benefit from
such legislation because of its low carbon footprint, and continues
to progress, exploring a route to achieving an even lower carbon
intensity score. The targeted commencement of FEED next year will
be a key milestone following which Velocys expects to generate
licence revenue from the project.
"We have strengthened the business and organisational design by
recruiting world class scientific and commercial talent in Ohio,
Houston and Oxford and continue to build our network of potential
partners to accelerate commercialisation.
"The progress we have made, alongside the policy tailwinds,
creates a solid platform for the Company to deliver. Our outlook
remains targeted and selective as we continue on the path of
capital-light scalable growth. The ultra-low negative carbon
intensity synthetic aviation fuel enabled by Velocys' IP-protected
technology provides a solution to fuel independence and a pathway
to sustainable aviation. We look to the future with
confidence."
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) prior to its release as part of this
announcement.
For further information, please contact:
Velocys
Henrik Wareborn, CEO
Philip Sanderson, CFO
Lak Siriwardene, Director of Communications & Sustainability
+44 1865 800821
Panmure Gordon (UK) Limited (Nomad and joint broker)
Hugh Rich (Corporate Broking)
Emma Earl (Corporate Finance)
John Prior (Corporate Finance)
+44 20 7886 2500
Shore Capital Stockbrokers Limited (Joint broker)
Henry Willcocks (Corporate Broking)
Toby Gibbs (Corporate Advisory)
James Thomas (Corporate Advisory)
+44 20 7408 4090
Radnor Capital (Investor Relations)
Joshua Cryer
Iain Daly
+44 20 3897 1830
Buchanan (Financial PR)
Helen Tarbet
Simon Compton
+44 20 7466 5000
Notes to Editors
Velocys is an LSE-listed, international sustainable fuels
technology company, traded on the AIM, providing customers with a
technology solution to enable the production of negative Carbon
Intensity synthetic, drop-in fuels from a variety of waste
materials. Synthetic fuel is the only commercially available,
permanent alternative to fossil aviation fuels. The Velocys
technology is IP-protected in all major jurisdictions.
Two reference projects (Bayou Fuels, US, and Altalto, UK) are
designed to accelerate the adoption and standardise the Velocys
proprietary Fischer Tropsch ("FT") technology with an integrated
end to end solution, including renewable power and carbon
sequestration.
Velocys is enabling commercial scale synthetic fuel production
in response to the clean energy transition, with significant
additional positive air quality impacts. www.velocys.com
CEO Report
Overview
We have made strong progress in the first half of 2022, moving
forward at pace with the key priorities set out in our December
2021 fund raise. We set ourselves targets to strengthen our
business development activities; to scale up our reactor
manufacturing capabilities; as well as specific goals for our two
reference projects designed to accelerate the delivery of our
technology. Alongside our operational progress, we have seen key
government policy developments in the US, UK, and the EU which
remain of critical importance to the speed with which our reference
projects and those of our potential clients will proceed to
financing and construction, crystalising a growing number of
commercial opportunities.
I would like to take this opportunity to thank all of our
employees for their commitment, innovative mindset and
professionalism.
Policy and market developments
The Inflation Reduction Act of 2022 ("the Act") was signed into
US law on 16 August and is of historic significance, putting the
United States on a path to significantly lower emissions by 2030,
and beyond. We believe this landmark legislation represents a
compelling model which other governments will seek to follow, in
particular the focus on the total amount of avoided carbon instead
of the volume of sustainable fuel supplied, thus prioritising those
technologies which offer routes to negative carbon-intensity
fuels.
The Act allocates approximately $369 billion to reducing
greenhouse gas emissions and incentivises expanded production and
use of domestic clean energy. SAF tax credits are an integral part
of the Act, together with other incentives and mechanisms to
accelerate the deployment of advanced fuel technologies, generating
non-fossil fuels with a significantly reduced carbon intensity.
SAF is the only current commercially-scalable decarbonisation
route for the aviation sector. Multiple pathways to SAF production
are needed to satisfy the aviation industry's decarbonisation
targets towards "net zero". Velocys provides its clients with
integrated IP-protected technology enabling the production of
synthetic aviation fuel from a variety of sustainable feedstocks
with ultra-low to negative carbon intensity.
The SAF tax credits and associated incentives are expected to
underpin the financing of Bayou Fuels, Velocys' advanced SAF
reference project in Natchez, Mississippi, US. Bayou Fuels is a
planned cellulosic biofuels plant enabling the production of carbon
negative fuel through the use of biogenic feedstock, renewable
power, and carbon sequestration. The biorefinery will convert 3,000
tons/day of woody biomass forestry residues into 36 million
gallons/year (nameplate) of renewable transportation fuels,
predominantly SAF, with a negative carbon intensity. The biofuels
produced will adhere to both the US Renewable Fuel Standard ("RFS")
and the Low Carbon Fuels Standard ("LCFS") and earn additional
incentives via the associated Renewable Identification Number
("RIN") and LCFS credits.
This critical legislative development in the US follows the
launch by the UK Government's Department for Transport of its Jet
Zero strategy, setting out the Government's approach for achieving
net zero aviation by 2050. This includes an ambition for a minimum
of five commercial-scale SAF plants to be under construction in the
UK by 2025, and a mandate for the equivalent of at least 10% SAF to
be blended into conventional aviation fuel by 2030. Velocys and
British Airways are jointly developing the Altalto project, to
build a full-scale plant in Immingham, UK, to make SAF from
commercial and residential residual waste, in anticipation of UK
policy incentives similar to those announced by the US.
Importantly, the UK mandate is to be expressed in terms of
greenhouse gas reductions, rather than simple fuel volume, which
will benefit Altalto due to its ultra-low carbon intensity.
In July, the European Parliament voted to support the European
Commission's ReFuelEU Aviation proposal to introduce an obligation
to uplift an increasing percentage of sustainable aviation fuel for
all flights leaving the EU starting in 2025. European Parliament
members increased the commission's original proposal for the
minimum share of SAF made available at EU airports from 5 percent
in 2030, 32 percent in 2040, and 63 percent for 2050 to 6 percent,
37 percent, and 85 percent, respectively. The blending obligation
starts in 2025, with a SAF share of 2 percent, driving demand for
SAF uptake by airlines.
Growth and commercialisation strategy
We are actively focussed on advancing our commercialisation
strategy through a targeted pipeline of opportunities to deploy our
technology and services. We are seeing an increasing number of
enquiries, and through our 20 years of SAF industry experience, we
are well placed to provide front end project development
consultancy, including feasibility studies and pre-FEED project
definition for the potential SAF projects under consideration
globally.
Our collaboration with TOYO regarding biomass to SAF ("BtL") and
power to SAF ("PtL") solutions for the energy transition in Japan
has continued. The commercial scale NEDO2 BtL project is currently
in FEL2 stage and progressing to plan and the Power to Liquids
demonstration project is advancing as planned. The increased
awareness of the vital need for SAF over the past few months has
stimulated increased demand for Velocys' technology offering.
Velocys is currently progressing a paid engineering study for a
client in Northern Europe and has been requested to quote for a
number of other studies.
Ohio Technical Centre
Construction of our new facility in Columbus, Ohio is underway,
following the selection of a suitable site earlier this year. The
leasehold facility will be constructed to our specific
requirements, and we look forward to commissioning the reactor core
assembly operations during 2023. This project also involves the
relocation of our staff and equipment from our current Columbus
facility.
We have also concluded an Enterprise Zone agreement with Union
County, Ohio, which provides a package of investment incentives
such as abatement of property taxes over the lease term following
our commitment to create new jobs at the facility. We estimate that
these incentives could be worth approximately GBP0.5m in grants and
cost savings.
HSSE
During the first half year we have continued to place a high
degree of importance on maintaining a safe and healthy working
environment for our employees and visitors to our sites. There were
no Lost Time Accidents and no near misses reported during the
period. The COVID-19 response committee formed in 2020 has
continued to operate during 2022 facilitating the resumption to
pre-pandemic ways of working wherever possible.
Financial Review
Overview
During the six months to 30 June 2022, the Company proceeded
with its planned investment in a new Technical Centre in Ohio and
also secured control of the Altalto project site through an
agreement with Foresight Group LLP. Further details of these
activities are presented in more detail below. Operating expenses
and cash resources continue to be managed carefully throughout the
Group, with the Company benefitting from GBP1.5m of grant funding
in HY2022 to support engineering work on the Altalto project.
Revenues
Revenues of GBP48,000 in half-year 2022 related to engineering
consultancy services provided to third party customer projects
under development. In comparison, the Company recognised revenue of
GBP8.2m (and gross profit of GBP3.3m) in half-year 2021 for the
sales of reactors and catalyst, and licensing fees earned from our
first major commercial client contract which commenced in 2017 and
concluded in half-year 2021. Given the relatively early stage of
commercialisation, revenues will remain uneven in the short-term
due to the concentrated number of projects.
Operating expenses
Total operating expenses for the six months ended 30 June 2022
were 32% higher (GBP1.7m) at GBP7.1m (HY2021: GBP5.4m). Included
within the half-year 2022 operating expenses is a GBP1.3m credit
resulting from unrealised foreign exchange gains (HY2021: GBP0.3m
loss). Therefore, the underlying operating expenses at GBP8.4m are
approximately GBP3.3m higher in half-year 2022 compared to the same
period in 2021.
The key components of operating expenses are staff-related costs
of GBP4.0m (HY2021: GBP2.6m), reference projects spend of GBP1.8m
(HY2021: GBP0.4m), depreciation and amortisation of GBP0.6m
(HY2021: GBP0.6m) and other corporate running costs of GBP2.0m
(HY2021: GBP1.5m). Staff-related costs were GBP1.4m higher than
half-year 2021 as, in line with its commercial strategy, the
Company has recruited a number of key senior positions within the
last year. Therefore the results for half-year 2022 include a full
six months of these payroll related costs plus recruitment fees and
relocation expenses. The Company also took the decision to accrue
for the annual performance incentive plan throughout the year and
has recorded GBP0.7m for the six months to June 2022 (HY2021:
GBPnil).
The other main driver of operating expenses are the costs
incurred with our technical support partners for engineering and
related services on the Company's two reference projects. These
totalled GBP1.8m in half-year 2022 (HY2021: GBP0.4m). It should be
noted that in half-year 2021, GBP0.7m of partner funding received
under the Altalto co-development agreement was offset against
project costs. These development projects are designed to
accelerate the adoption of the Company's technology, and to the
extent possible, the Company has secured co-development funding or
applied for government grants available to support sustainable
aviation fuel projects. For half-year 2022, the majority of costs
incurred for the Altalto project were supported by the Green Fuels
Green Skies grant (for which GBP1.5m is included in other income).
Bayou Fuels pre-FEED engineering activities are borne wholly by the
Company, with total external services of GBP0.6m incurred in
half-year 2022 (HY2021: GBP0.4m).
Operating result
The operating loss for the six months to 30 June 2022 was
GBP5.5m (HY2021: GBP2.0m).
Loss before income tax
The loss before income tax for the six months to 30 June 2022
was GBP5.7m (HY2021: GBP2.2m).
Dividends
The Directors do not recommend an interim dividend for the six
months to 30 June 2022 (HY2021: GBPnil).
Net assets and cash
The net assets of the Company were GBP24.4m at 30 June 2022 (31
December 2021: GBP29.7m). The decrease was principally the result
of the GBP6.7m decrease in cash and cash equivalents as a result of
funding the Company's capital expenditure, development projects and
ongoing operating activities.
The Company used GBP6.8m of cash in the six months to 30 June
2022 comprising expenditure on operating activities of GBP8.6m
(HY2021: GBP4.1m) and investing activities of GBP7.8m (HY2021:
GBP0.4m) offset by an inflow from financing activities of GBP9.8m
(HY2021: GBP0.3m inflow due to new borrowings).
In March 2022, the Company signed a sale and purchase agreement
with a subsidiary of Foresight Group LLP (Foresight) to sell 100%
of shares held in Rula Developments Immingham Ltd ("RDIL"). The
Company received total consideration of GBP9.75m (included within
financing activities) which was used to pay deferred consideration
of GBP7.25m (included within investing activities) due to the
previous owners of RDIL arising from the Group's purchase of RDIL
in December 2021. Therefore, the Company recovered the GBP2.5m it
had paid in cash consideration in December 2021.
At the same time, the Company entered into a Call Option
agreement with Foresight which enables the Company to re-purchase
the RDIL shares in up to three years' time, therefore, in
substance, maintaining control over the Altalto development site at
Immingham. As a result, the Company has accounted for the Call
Option as a financing arrangement at amortised cost applying the
effective interest method under IFRS 9.
The Company continues to incur a significant proportion of its
expenses in US dollars and has exposure to the US dollar to GBP
exchange rate. This is hedged to the extent possible by holding a
proportionate cash balance in US dollars. In addition, the majority
of the Company's revenue is invoiced in US dollars.
Going concern and future funding
The condensed consolidated interim financial statements have
been prepared on a going-concern basis , which assumes the Company
will have sufficient funds available to enable it to trade for not
less than twelve months from the date of announcing these condensed
consolidated interim financial statements.
The nature of the Company's strategy means that the precise
timing of milestones and funds generated during the early years of
development projects are difficult to predict. The directors have
prepared financial forecasts to estimate the likely cash
requirements of the Company over the next twelve months from the
date of announcing these condensed consolidated interim financial
statements. These forecasts show that the Company will require
additional external funding within the twelve-month forecast period
to be able to continue as a going concern.
The directors are confident that the funding required for the
Company to continue as a going concern will be secured with a
period of twelve months and therefore have prepared the condensed
consolidated interim financial statements on a going concern basis.
However, as at the date of announcing the condensed consolidated
interim financial statements no additional funding has been
committed.
Should additional funding not be secured within twelve months
from the date of announcing these condensed consolidated interim
financial statements, the Company would not be a going concern. As
such, these conditions indicate the existence of a material
uncertainty that may cast significant doubt over the Company's
ability to continue as a going concern.
The condensed interim financial statements do not include any
adjustments that would arise if the Company were unable to continue
as a going concern.
Principal risks and uncertainties
The Company has continued to maintain its framework and
processes to identify, assess and manage risks. The principal risks
and uncertainties that could potentially have a material impact on
the Company's long-term performance and delivery of strategy are
detailed on pages 16 to 19 of our Annual Report and Accounts
2021.
The Company has provided an update on the key developments in
the policy and legislative frameworks above, which remain a key
driver of the future commercial opportunities for SAF projects. The
US Inflation Reduction Act was a major step forward, as the
announced tax credits and associated incentives are expected to
underpin the financing of the Bayou Fuels project. The Company has
already secured long-term offtake arrangements for 100% of the SAF
output expected from the Bayou Fuels facility with Southwest
Airlines (a 15-year agreement) and IAG/British Airways (MOU for a
10-year agreement). This new climate legislation is expected to
allow finalisation of these offtake agreements.
At a corporate level, the risks associated with access to
capital remain a key consideration which is kept under review, and
particularly relevant given the challenging global economic and
capital market conditions experienced in the first six months of
the year. However, the Company assesses that the availability of
funds for clean energy projects and technology solutions remains
positive for the medium to long term and will enable it to secure
the external funding required before the Company is generating
sufficient working capital from its commercial operations.
The war in Ukraine has substantially intensified geopolitical
risks that relate to sourcing of energy and other
products from Russia and Eastern Europe. The ongoing war may
result in further trade sanctions, continue to impact supply chains
or further accelerate the cost inflation being experienced
throughout the global economy. It may also have a material effect
on the global energy markets, development of regulation, cyber risk
landscape, and overall market supply and demand conditions. Whilst
the Company has no operations in these territories, it is mindful
of these pricing pressures and mitigates the risk where possible,
for example in fixing the contractual cost of equipment purchased
for the new technical facility.
The prolonged duration of the COVID-19 pandemic driven by waves
of variants has caused the Company to keep its COVID-19 response
continually under review, and our dedicated COVID-19 response
committee has met regularly to assess the safety of employees
attending both the Company's and third-party sites. Overall, the
Company has not experienced any specific operational issues in
HY2022 as a result of the pandemic.
Condensed consolidated statement of profit or loss
Six months Six months
ended 30 ended
June 30 June
2022 2021
Note GBP'000 GBP'000
Revenue 4 48 8,237
Cost of sales (33) (4,895)
---------------------------------- ----- ----------- -----------
Gross profit 15 3,342
Administrative expenses (7,090) (5,384)
Other income 5 1,609 -
---------------------------------- ----- ----------- -----------
Operating loss (5,466) (2,042)
Finance income 36 -
Finance costs 6 (287) (180)
---------------------------------- ----- ----------- -----------
Loss before income tax (5,717) (2,222)
Income tax credit 7 576 396
---------------------------------- ----- ----------- -----------
Loss for the period attributable
to the owners of Velocys plc (5,141) (1,826)
Loss per share attributable to
the owners of Velocys plc Pence Pence
Basic and diluted loss per share 8 (0.37) (0.17)
---------------------------------- ----- ----------- -----------
The above condensed consolidated statement of profit or loss
should be read in conjunction with the accompanying notes.
Condensed consolidated statement of comprehensive income
6 months
6 months ended ended
30 June 30 June
2022 2021
GBP'000 GBP'000
Loss for the period (5,141) (1,826)
Other comprehensive income/(expense)
Items that may be reclassified to the income
statement in subsequent periods
Foreign currency translation differences (512) 183
---------------------------------------------- --------------- ---------
Total comprehensive income/(expense) for
the period attributable to the owners of
Velocys plc (5,653) (1,643)
---------------------------------------------- --------------- ---------
The above condensed consolidated statement of comprehensive
income should be read in conjunction with the accompanying
notes.
Condensed consolidated balance sheet
30 June 2022 31 December
2021
Note GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 9 11,103 11,006
Right-of-use assets 408 500
Intangible assets 10 1,271 1,086
Total non-current assets 12,782 12,592
------------------------------------- ----- ------------- ------------
Current assets
Inventories 851 767
Trade and other receivables 2,961 1,274
Current income tax asset 1,681 1,100
Cash and cash equivalents 12 18,790 25,506
------------------------------------- ----- ------------- ------------
24,283 28,647
------------------------------------ ----- ------------- ------------
Assets classified as held for sale 13 164 -
------------------------------------- ----- ------------- ------------
Total current assets 24,447 28,647
------------------------------------- ----- ------------- ------------
Total assets 37,229 41,239
------------------------------------- ----- ------------- ------------
LIABILITIES
Non-current liabilities
Lease liabilities 80 189
Other financial liabilities 14 9,419 -
------------------------------------- ----- ------------- ------------
Total non-current liabilities 9,499 189
------------------------------------- ----- ------------- ------------
Current liabilities
Trade and other payables 2,138 2,969
Lease liabilities 406 397
Deferred consideration - 7,250
Other financial liabilities 14 476 -
Other liabilities 32 431
Deferred revenue 312 326
------------------------------------- ----- ------------- ------------
Total current liabilities 3,364 11,373
------------------------------------- ----- ------------- ------------
Total liabilities 12,863 11,562
------------------------------------- ----- ------------- ------------
Net assets 24,366 29,677
------------------------------------- ----- ------------- ------------
EQUITY
Called up share capital 16 13,962 13,936
Share premium account 16 221,111 221,059
Merger reserve 369 369
Share-based payments reserve 2,902 2,638
Foreign exchange reserve 2,639 3,151
Accumulated losses (216,617) (211,476)
------------------------------------- ----- ------------- ------------
Total equity 24,366 29,677
------------------------------------- ----- ------------- ------------
The above condensed consolidated balance sheet should be read in
conjunction with the accompanying notes.
Condensed consolidated statement of changes in equity
Called
up Share Share-based Foreign
share premium Merger payment exchange Accumulated Total
capital account reserve reserve reserve losses equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January 2022 13,936 221,059 369 2,638 3,151 (211,476) 29,677
Loss for the period - - - - - (5,141) (5,141)
Other comprehensive
income
Foreign currency translation
differences - - - - (512) - (512)
----------------------------- -------- -------- --------- ------------ --------- ------------ --------
Total comprehensive expense - - - - (512) (5,141) (5,653)
----------------------------- -------- -------- --------- ------------ --------- ------------ --------
Transactions with owners
Share-based payment -
value of employee services - - - 264 - - 264
Proceeds from options
exercised 26 52 - - - - 78
Total transactions with
owners 26 52 - 264 - - 342
----------------------------- -------- -------- --------- ------------ --------- ------------ --------
Balance at 30 June 2022 13,962 221,111 369 2,902 2,639 (216,617) 24,366
----------------------------- -------- -------- --------- ------------ --------- ------------ --------
Called Share Share-based Foreign
up share premium Merger payment exchange Accumulated Total
capital account reserve reserve reserve losses equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January 2021 10,642 199,701 369 16,345 3,038 (217,035) 13,060
Loss for the period - - - - - (1,826) (1,826)
Other comprehensive
expense
Foreign currency translation
differences - - - - 183 - 183
----------------------------- --------- --------- --------- ------------ --------- ------------ --------
Total comprehensive expense - - - - 3,221 (1,826) (1,643)
----------------------------- --------- --------- --------- ------------ --------- ------------ --------
Transactions with owners
Share-based payments -
value of employee services - - - 145 - - 145
Proceeds from options
exercised 16 32 - - - - 48
Total transactions with
owners 16 32 - 145 - - 193
----------------------------- --------- --------- --------- ------------ --------- ------------ --------
Balance at 30 June 2021 10,658 199,733 369 16,490 3,221 (218,861) 11,610
----------------------------- --------- --------- --------- ------------ --------- ------------ --------
The above condensed consolidated statement of changes in equity
should be read in conjunction with the accompanying notes.
Condensed consolidated statement of cash flows
6 months 6 months
ended 30 ended
June 30 June
2022 2021
Note GBP'000 GBP'000
----------------------------------------------------- ----- ---------- ---------
Cash flows from operating activities
Cash used in operations (8,501) (4,079)
Interest received 36 -
Interest paid (142) (63)
Net cash outflow from operating activities (8,607) (4,142)
----------------------------------------------------- ----- ---------- ---------
Cash flows from investing activities
Payments for property, plant and equipment (7,614) (131)
Payments for intangible assets (259) (284)
Proceeds from sale of property, plant and equipment 97 -
Net cash outflow from investing activities (7,776) (415)
----------------------------------------------------- ----- ---------- ---------
Cash flows from financing activities
Proceeds received from financing arrangement 9,750 -
Proceeds received from exercise of share options 78 48
Principal elements of lease payments (264) (279)
Net cash inflow/(outflow) from financing activities 9,564 (231)
----------------------------------------------------- ----- ---------- ---------
Net decrease in cash and cash equivalents (6,819) (4,788)
Cash and cash equivalents at beginning of the
half-year 25,506 13,051
Exchange movements on cash and cash equivalents 103 86
----------------------------------------------------- ----- ---------- ---------
Cash and cash equivalents at end of the half-year 12 18,790 8,349
----------------------------------------------------- ----- ---------- ---------
The above condensed consolidated statement of cash flows should
be read in conjunction with the accompanying notes.
Notes to the condensed consolidated interim financial
statements
1. Significant changes in the current reporting period
The Company has undertaken a detailed going concern assessment,
reviewing its current and projected financial performance and
position, the conclusion of which is presented in note 2 below.
Worldwide economic conditions affecting prices and supply chains
following Russia's invasion of Ukraine and the lasting effects of
the global pandemic have increased operational risks. Whilst
Velocys does not have any operations directly impacted by the war
in Ukraine, the Company has experienced an increase in inflationary
pressures on operating expenses and regularly updates its
projections to take this into account.
The Company has also reviewed its exposure to climate change and
concluded that this did not have a significant impact on the
financial performance and/or position of the Company for the period
and as at 30 June 2022, respectively.
The financial position and performance of the Company was
particularly affected by the following events and transactions
during the six months to 30 June 2022:
-- In March 2022 Altalto Immingham Ltd ("Altalto"), a wholly
owned subsidiary of Velocys plc sold its 100% interest in Rula
Developments (Immingham) Ltd (RDIL) for GBP9,750,000 to a
subsidiary of the Foresight Group LLP and at the same time took out
a call option for Altalto to repurchase RDIL within a three-year
period. This enabled the Company to settle deferred consideration
of GBP7,250,000 due to the previous owners of RDIL. As Altalto
continues to have significant control over the development land
asset owned by RDIL, the Company has not recorded a disposal of
property, plant and equipment and has recorded a financial
liability in respect of the new call option arrangement (see note
14).
-- The Company agreed the terms of a new 15-year lease on a
building currently under construction to house its manufacturing
and technical activities in Ohio, US. The exact start date for the
lease will be confirmed nearer the completion of construction. The
Company has committed to contribute a total of GBP1,776,000 towards
the cost of construction, of which GBP420,000 was paid during the
period ended 30 June 2022. The Company has also spent GBP670,000
under its manufacturing upgrade programme on upfront deposits when
placing orders for long lead-time equipment that will be installed
at the new site (see note 11).
2. Going concern
The condensed consolidated interim financial statements have
been prepared on a going-concern basis , which assumes the Company
will have sufficient funds available to enable it to trade for not
less than twelve months from the date of announcing these condensed
consolidated interim financial statements.
The nature of the Company's strategy means that the precise
timing of milestones and funds generated during the early years of
development projects are difficult to predict. The directors have
prepared financial forecasts to estimate the likely cash
requirements of the Company over the next twelve months from the
date of announcing these condensed consolidated interim financial
statements. These forecasts show that the Company will require
additional external funding within the twelve-month forecast period
to be able to continue as a going concern.
The directors are confident that the funding required for the
Company to continue as a going concern will be secured with a
period of twelve months and therefore have prepared the condensed
consolidated interim financial statements on a going concern basis.
However, as at the date of announcing the condensed consolidated
interim financial statements no additional funding has been
committed.
Should additional funding not be secured within twelve months
from the date of announcing these condensed consolidated interim
financial statements, the Company would not be a going concern. As
such, these conditions indicate the existence of a material
uncertainty that may cast significant doubt over the Company's
ability to continue as a going concern.
The condensed interim financial statements do not include any
adjustments that would arise if the Company were unable to continue
as a going concern.
3. Critical estimates and judgements
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results might differ from these estimates.
In preparing these condensed interim financial statements, the
significant judgements made by management in applying the Company's
accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the consolidated financial
statements for the year ended 31 December 2021, with the exception
of a new judgement made in determining the appropriate accounting
treatment for other financial liabilities (see note 14).
4. Segment and revenue information
The Company has one operating segment as the business comprises
a single activity, which is the design, development, marketing and
sale of technology for the production of sustainable transport
fuels.
The Company's operating segment operates in two main
geographical areas. Revenue is allocated based on the country in
which the customer is located.
6 months 6 months
ended ended
30 June 2022 30 June 2021
GBP'000 GBP'000
--------------- -------------- --------------
Americas - 8,130
Asia Pacific 48 107
Total revenue 48 8,237
---------------- -------------- --------------
The Company generates revenue through contracts in which it (i)
sells Fischer-Tropsch ("FT") reactors, (ii) sells FT catalyst,
(iii) provides licence agreements and (iv) performs engineering
services. In general, contracts with the Company provide a licence
agreement for the use of its intellectual property associated with
the catalyst and reactors both of which have been specifically
designed and over which the Company holds a significant number of
patents. The majority of the Company's revenue is derived from a
small number of significant commercial customers and development
partners.
Revenue is recognised when the Company satisfies a performance
obligation by transferring promised goods or services to a
customer. The sales income related to sales of reactors and
catalyst is recognised as the performance obligations are
satisfied. Revenue from engineering services is earned on a time
and materials basis and is recognised as the work is performed
provided that it does not relate to the sale of equipment and
therefore bound by the performance obligations of that sale.
In the six months ended 30 June 2022, the revenue was in respect
of engineering services.
In the six months ended 30 June 2021, the Company recorded
revenue from sales of reactors and catalyst, and licensing fees
earned from a contract which commenced in 2018. The Company
satisfied the performance conditions within the contract in 2021
following the expiry of all contractual obligations and therefore
determined that it was appropriate to recognise the revenue and the
associated cost of goods in the six months ended 30 June 2021.
5. Other income
Income from government grants was in respect of a grant awarded
to the Altalto project under the UK government's Green Fuels Green
Skies competition in 2021, the work under which was completed in
June 2022.
6 months 6 months
ended ended
30 June 2022 30 June 2021
GBP'000 GBP'000
------------------------------- -------------- --------------
Income from government grants 1,512 -
Profit on sale of fixed assets 97 -
Total 1,609 -
------------------------------- -------------- --------------
6. Finance costs
6 months 6 months
ended ended
30 June 2022 30 June 2021
GBP'000 GBP'000
----------------------------------------- -------------- --------------
Interest on lease liabilities 42 63
Interest on other financial liabilities 245 -
Foreign exchange losses - 117
------------------------------------------ -------------- --------------
Total 287 180
------------------------------------------ -------------- --------------
7. Income tax credit
Due to the losses incurred in the period, there is no charge to
corporate tax. The Company recognised GBP576,000 for estimated
R&D tax credits for the six months ended 30 June 2022 (HY1
2020: GBP396,000). The estimate is prepared on an accruals basis,
and is based on an assessment of the Company's projects, to
determine which ones qualify under HMRC rules, and to estimate the
level of allowable expenses within each, based on the nature of the
costs.
8. Loss per share
The basic loss per share is calculated by dividing the loss
attributable to owners of the parent company by the weighted
average number of ordinary shares in issue during the period.
6 months ended 6 months ended
30 June 2022 30 June 2021
-------------------------------------------- --------------- ---------------
Loss attributable to owners of Velocys plc
(GBP'000s) (5,141) (1,826)
Weighted average number of ordinary shares
in issue ('000) 1,394,487 1,064,635
--------------------------------------------- --------------- ---------------
Basic and diluted loss per share (pence) (0.37) (0.17)
--------------------------------------------- --------------- ---------------
Diluted loss per share is calculated by adjusting the weighted
average number of shares in issue to assume conversion of all
potential dilutive shares. Share options have not been included in
the number of shares used for the purpose of calculating diluted
loss per share since these would be anti-dilutive for the period
presented.
9. Property, plant and equipment
There has been no change in the types of property, plant and
equipment held in the six months ended 30 June 2022. Further
details are disclosed the Company's Annual Report and Accounts
2021, pages 69 to 71.
The Company has reclassified a plot of land that was previously
impaired as available for sale as at 30 June 2022 (see note
13).
Plant and
Land machinery Total
At 31 December 2021 GBP'000 GBP'000 GBP'000
-------------------------------------- -------- ----------- --------
Cost or fair value 11,049 9,181 20,230
Accumulated depreciation and
impairment 1,081 8,143 9,224
Net book amount 9,968 1,038 11,006
--------------------------------------- -------- ----------- --------
6 months ended 30 June 2022
Opening net book amount 9,968 1,038 11,006
Exchange differences 16 95 111
Additions - 364 364
Depreciation charge - (214) (214)
Reclassification to assets available
for sale (164) - (164)
Closing net book amount 9,820 1,283 11,103
--------------------------------------- -------- ----------- --------
At 30 June 2022
Cost or fair value 9,820 10,553 20,373
Accumulated depreciation and
impairment - (9,270) (9,270)
Net book amount 9,820 1,283 11,103
--------------------------------------- -------- ----------- --------
10. Intangible assets
There has been no change in the types of intangible assets held
in the six months ended 30 June 2022. Further details are disclosed
the Company's Annual Report and Accounts on pages 67 to 69.
Management did not identify any significant changes to the
indicators of impairment or changes in circumstances that could
cause the Company to impair or consider reversing prior period
impairments of its intangible assets during the six months ended 30
June 2022.
Patents,
In-process licence
Goodwill technology and trademarks Software Total
At 31 December 2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------------- ------------ ---------------- --------- ---------
Cost or fair value 7,398 23,681 2,491 101 33,671
Accumulated amortisation
and impairment (7,398) (23,681) (1,410) (96) (32,585)
Net book amount - - 1,081 5 1,086
-------------------------- -------------- ------------ ---------------- --------- ---------
6 months ended 30 June
2022
Opening net book amount - - 1,081 5 1,086
Exchange differences - - 34 - 34
Additions - - 252 7 259
Amortisation charge - - (108) - (108)
Closing net book amount - - 1,259 12 1,271
-------------------------- -------------- ------------ ---------------- --------- ---------
At 30 June 2022
Cost or fair value 7,398 23,681 2,777 12 33,868
Accumulated amortisation
and impairment (7,398) (23,681) (1,518) - (32,597)
Net book amount - - 1,259 12 1,271
-------------------------- -------------- ------------ ---------------- --------- ---------
11. Commitments and contingencies
(a) Commitments
Commitments are not held on the Company's balance sheet as these
are executory arrangements that relate to amounts that the Company
is contractually required to pay in the future as long as the other
party meets its contractual obligations.
The Company has committed to making a contribution of
GBP1,776,000 towards the construction costs of the new leased
premises in Ohio which will house the Company's manufacturing and
technical facilities currently under construction and expected to
be completed in the first half of 2023. The Company has already
made a stage payment of GBP420,000 in the half-year to 30 June
2022, and further stage payments totalling GBP1,356,000 will be due
over the construction period based on construction milestones being
completed. The Company has provided a letter of credit in respect
of this commitment, with cash provided as collateral, and therefore
has presented this amount as restricted cash as at 30 June
2022.
The Company has also paid deposits to suppliers of GBP670,000
for property, plant and equipment comprising long lead-time
manufacturing equipment in the half-year to 30 June 2022, with
commitments to make further payments of GBP1,394,000 under these
contracts.
Therefore, total capital expenditure contracted for during the
half-year ended 30 June 2022, but not yet recognised was as
follows:
30 June 31 December
2022 2021
GBP'000 GBP'000
-------------------------------------- --------- ------------
Leasehold property construction costs 1,356 -
Reactor core manufacturing equipment 1,394 -
Total 2,750 -
-------------------------------------- --------- ------------
(b) Contingent liabilities
The Company has no contingent liabilities.
12. Cash and cash equivalents
30 June 31 December
2022 2021
------------------- -------- ------------
Unrestricted cash 17,434 25,506
Restricted cash 1,356 -
------------------- -------- ------------
Total 18,790 25,506
-------------------- -------- ------------
Restricted cash as at 30 June 2022 relates to the total undrawn
amount of a cash secured letter of credit provided by the Company
as part of its commitment towards the construction costs of the new
leasehold premises (see note 10).
13. Assets available for sale
As at 30 June 2022, the Company has reclassified property, plant
and equipment with a net book value of GBP164,000 comprising an
80-acre site in Ashtabula County, Ohio, US acquired as part of an
acquisition in 2014 for which the Company has no future use. The
decision was taken to proceed with the disposal and the purchaser's
due diligence was well advanced as at 30 June 2022. The transaction
was completed in July 2022.
14. Other financial liabilities
Financial liabilities that are not (i) contingent consideration
of an acquirer in a business combination, (ii) held-for-trading, or
(iii) designated as at fair value through profit and loss, are
measured subsequently at amortised cost using the effective
interest method.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial liability, or (where appropriate) a shorter period, to
the amortised cost of a financial liability.
Critical estimates and judgements
The Company has determined that the cash consideration of
GBP9,750,000 received from Foresight (see note 1) for the purchase
of 100% of RDIL ordinary shares in March 2022, which enabled
Velocys to settle deferred consideration due from the acquisition
of RDIL in December 2021, meets the criteria of a financial
liability measured subsequently at amortised cost using the
effective interest method.
The Company signed a Call Option agreement with Foresight which
gives Velocys the right to re-purchase RDIL over a period of up to
three years from the effective date of 23 March 2022. If the option
is exercised on or before the 2(nd) anniversary date, the purchase
price is GBP11,250,000. If the option is exercised after the 2(nd)
anniversary date and before the expiry date, the purchase price is
GBP11,750,000. Quarterly option fees of GBP100,000 are due
throughout the option period. Because Velocys maintains significant
control over RDIL's asset, namely the Immingham development site,
throughout the option period, management assessed that the most
appropriate accounting treatment is to continue recognising the
asset and to account for a financing liability to Foresight.
Financial liabilities at amortised cost
GBP'000
As at 1 January 2022 -
Initial fair value recognised 9,750
Interest expense 245
Payments made (100)
As at 30 June 2022 9,895
---------------------------------- --------
Current 476
Non-current 9,419
Total 9,895
---------------------------------- --------
15. Financial instruments
Details of the classification of financial assets and financial
liabilities following the guidance in IFRS 9 and the Company's
exposure to various risks associated with the financial instruments
is disclosed on pages 74 to 77 of the Company's Annual Report and
Accounts 2021.
The Company's main financial asset at 30 June 2022 and 31
December 2021 is cash and cash equivalents which comprise bank
current accounts and short-term cash deposits.
The detail of the Company's financial instruments at 30 June
2022 and 31 December 2021 by nature and classification for
measurement purposes is as follows:
At 30 June 2022 Financial assets
-----------------------------------------------------
Fair value
Fair value through
Amortised through income Total carrying
cost OCI statement amount
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---------- ----------- ----------- ---------------
Trade receivables 6 - - 6
Cash and cash equivalents 18,790 - - 18,790
Total 18,796 - - 18,796
--------------------------- ---------- ----------- ----------- ---------------
At 31 December 2021 Financial assets
-----------------------------------------------------
Fair value
Fair value through
Amortised through income Total carrying
cost OCI statement amount
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---------- ----------- ----------- ---------------
Trade receivables 6 - - 6
Cash and cash equivalents 25,506 - - 25,506
Total 25,512 - - 25,512
--------------------------- ---------- ----------- ----------- ---------------
At 30 June 2022 Financial liabilities
-----------------------------------------------------
Fair value
Fair value through
Amortised through income Total carrying
cost OCI statement amount
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ---------- ----------- ----------- ---------------
Financing arrangement with Foresight
(note 14) 9,895 - - 9,895
Trade and other payables excluding
non-financial liabilities 650 - - 650
Accruals 1,171 - - 1,171
Lease liabilities 486 - - 486
Other liabilities 32 - - 32
Total 12,234 - - 12,234
-------------------------------------- ---------- ----------- ----------- ---------------
At 31 December 2021 Financial liabilities
-----------------------------------------------------
Fair value
Fair value through
Amortised through income Total carrying
cost OCI statement amount
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---------- ----------- ----------- ---------------
Trade and other payables excluding
non-financial liabilities 593 - - 593
Accruals 2,173 - - 2,173
Lease liabilities 586 - - 586
Other liabilities 431 - - 431
Total 3,783 - - 3,783
------------------------------------ ---------- ----------- ----------- ---------------
16. Equity securities issued
Number of Ordinary Share Premium
shares shares GBP'000
(thousands) GBP'000
--------------------------------- ------------- --------- --------------
At 1 January 2022 1,393,571 13,936 221,059
Proceeds from options exercised 2,600 26 52
At 30 June 2022 1,396,171 13,962 221,111
--------------------------------- ------------- --------- --------------
Number of Ordinary Share Premium
shares shares GBP'000
(thousands) GBP'000
--------------------------------- ------------- --------- --------------
At 1 January 2021 1,064,156 10,642 199,701
Proceeds from options exercised 1,600 16 32
At 30 June 2021 1,065,756 10,658 199,733
--------------------------------- ------------- --------- --------------
17. Related-party transactions
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
There were no transactions with other related parties in the
half-year ended 30 June 2022.
18. Events occurring after the reporting period
In July 2022, the Company completed the disposal of the
Ashtabula site, receiving total consideration of GBP164,000 which
equated to the net book value of the asset shown as available for
sale as at 30 June 2022 (see note 13).
19. General information and basis of preparation of half-year
report
General information
Velocys plc is a company incorporated and domiciled in the UK.
It operates through a number of subsidiaries in the UK and the US,
and collectively they are referred to in these condensed
consolidated interim financial statements as the "Company" or
"Velocys", with Velocys plc as "Velocys plc" or the "parent
company. The parent company's securities are traded on the
Alternative Investment Market ("AIM") of the London Stock Exchange
under the symbol VLS.
These condensed interim financial statements were approved for
issue on 20 September 2022.
These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for the year ended 31
December 2021 were approved by the board of directors on 16 May
2022 and delivered to the Registrar of Companies. The report of the
auditors on these accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain a statement under
section 498 of the Companies Act 2006.
The financial statements have been reviewed, not audited.
Basis of preparation
This condensed consolidated interim financial report for the
half-year reporting period ended 30 June 2022 has been prepared in
accordance with UK-adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosures Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
The interim report does not include all of the notes of the type
normally included in an annual financial report. Accordingly, this
report is to be read in conjunction with the annual report for the
year ended 31 December 2021, which has been prepared in accordance
with UK-adopted international accounting standards and with the
requirements of the Companies Act 2006, and any public
announcements made by Velocys plc during the interim reporting
period.
New and amended standards adopted by the Company
A number of new or amended standards and interpretations became
applicable for the current reporting period. The Company did not
change its accounting policies or make retrospective adjustments as
a result of adopting these standards
Statement of directors' responsibilities
The directors confirm that these consolidated interim financial
statements have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and that the
interim management report includes a fair review of information
required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of the important events that have occurred
during the first six months and their impact on the condensed set
of financial statements, and a description of the principal risks
and uncertainties for the remaining six months of the financial
year; and
-- material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The directors of Velocys plc are listed in the Velocys plc
annual report for 31 December 2021, with the exception of the
following changes in the period: Andrew Morris resigned on 21 June
2022, and Philip Sanderson was appointed on 22 June 2022. A list of
current directors is maintained on the Velocys plc website:
www.velocys.com .
By order of the board
Henrik Wareborn
20 September 2022
Chief Executive Officer
Independent review report to Velocys plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Velocys plc's condensed consolidated interim
financial statements (the "interim financial statements") in the
Interim results of Velocys plc for the 6 month period ended 30 June
2022 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the AIM Rules for Companies.
The interim financial statements comprise:
-- the condensed consolidated balance sheet as at 30 June 2022;
-- the condensed consolidated statement of profit or loss and
condensed consolidated statement of comprehensive income for the
period then ended;
-- the condensed consolidated statement of cash flows for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim results
of Velocys plc have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the AIM Rules for Companies.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council 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,
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.
We have read the other information contained in the Interim
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Material uncertainty related to going concern
In forming our conclusion on the interim financial statements,
which is not modified, we have considered the adequacy of the
disclosure made in note 2 to the interim financial statements
concerning the Company's ability to continue as a going concern.
Due to the nature of the Company's activities, and based on the
forecasts prepared by management, the Company needs to secure
additional external funding within 12 months from the date of
approval of the financial statements in order to continue as a
going concern. At the time of the approval of the interim financial
statements no such funding is committed. These conditions, along
with the other matters explained in note 2 to the interim financial
statements, indicate the existence of a material uncertainty which
may cast significant doubt about the Company's ability to continue
as a going concern. The interim financial statements do not include
the adjustments that would result if the Company were unable to
continue as a going concern.
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
applied the going concern basis of accounting in the preparation of
the interim financial statements.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Interim results, including the interim financial statements,
is the responsibility of, and has been approved by the directors.
The directors are responsible for preparing the Interim results 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. In preparing the Interim results, including
the interim financial statements, the directors are responsible for
assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the Company's or to cease operations, or
have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the Interim results based on our review.
Our conclusion is based on procedures that are less extensive than
audit procedures, as described in the Basis for conclusion
paragraph of this report. This report, including the conclusion,
has been prepared for and only for Velocys plc for the purpose of
complying with the AIM Rules for Companies and for no other
purpose. We do not, in giving this conclusion, 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.
PricewaterhouseCoopers LLP
Chartered Accountants
Reading
20 September 2022
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END
IR PPUWCBUPPUAG
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September 21, 2022 02:02 ET (06:02 GMT)
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