H-Power (LSE:HPOW) — Investor Update

0:01 Good morning, and welcome to the AFC Energy PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. Given the significant attendance on today's call, the company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses what is appropriate to do so. Before we begin,

0:33 I would like to submit the following poll. And I would now like to hand you over to CEO, Adam Bond. Good morning to you. Good morning, Alex, and good morning, everyone, and thank you for your time on this call today. We're here to basically present the results of the interim accounts that were released a week ago. I'm Adam Bond, Chief Executive at AFC Energy, and this is my colleague, Peter Dixon Clark, our our chief financial officer. And today, the plan is just to go through a quick overview of what we have achieved, what we've been doing over the last, six months, and I guess in the in the months that followed after the the the half year end in in April. And then go into some of the financial results and then just conclude with some some outlook for for the company.

1:19 I think before we start to to address the the the small elephant in the room, I guess, many many of you will realize or know that I I reluctantly and after a lot of thought, I handed in my notice last week to express my my decision to go back to Australia, my where where I'm from, driven predominantly by family reasons. That was not an easy decision to make. Most of you some of you will know that when I joined AFC in December 2014, it was originally for a six month period. And then that was extended to two years, and it's now nearly been ten years. So I feel that now is probably the right time to to to to consider my position at at both both personally and and also as part of the wider AFC energy. And I think on reflection, the the progression and the successes of the last ten years, they've often been slower than hoped. They've been, sometimes, a little bit, you know, difficult in terms of the the markets and the technology developments and and and getting the right people, but I can sort of leave now knowing full well that AFC is in an excellent position, with, with a with an excellent group of, a 130 odd people, up from 18 people a couple of years ago.

2:30 And with the technology that is, is is in demand in the market, we're moving towards manufacturing capability that we've never had before. And and and we've got a customer base that's underpinning some of the growth opportunities at AFC. So my hope and aspirations is my my time at AFC, whilst it's been ten years, will not actually finish this at the at this point. I'll continue to keep watch of AFC, support from the sidelines as as a shareholder, and and and leave on exceptionally good terms with with the company. The company is in the process of recruiting a new chief executive. Korn Ferry have been appointed to support that, and I think we've been really excited by the quality of candidates that are already starting to appear after a fairly short period of time. And so the nominations committee at AFC Energy, led by our chairman, Gary Bullard, is is leading that process at the moment.

3:23 We are we as I said, we are excited by some of the candidates that have started to express interest in joining AFC. The the person that we're we're we're looking for, if you like, will basically have a probably more of a a focused manufacturing scale up experience, background to basically underpin some of the experiences that are needed to take AFC to the next level. So AFC as a company will be in touch with with with the market shortly and and provide feedback on on that on that process, but please rest assured it's in good hands, and and it looks it looks to be a very exciting time coming with with with the candidates and the quality of people that are expressing interest. So on that note, I'll leave it at there. There may be some questions at the end, which I'm happy to to answer. But on that note, let's get into the to the slides. The pass through some of the highlights.

4:13 I guess starting off with the highlights of the year is is really driven by a lot of the the the announcements around Speedy Hire, our joint venture with Speedy Hire and the formation of Speedy Hydrogen Solutions. Speedy Hire, as many of you will know, is is The UK's leading plant and and equipment hire business. It has several thousand diesel generators in its in its stock at the moment, which it currently leases out to tier ones and and a a number of customers within the construction industry. And our business model is very much to work with the plant hire and and dealership market to explore explore and exploit the opportunities emerging to to displace diesel generators as part of the off grid power network. Just to provide maybe some context, and we get asked lots of questions on are you are you meeting expectations of Speedy Hire? Where you know, are you are you are you behind schedule? Are you ahead of schedule? I And think it's important to remember that this this Speedy Hydrogen Solutions was formed in actually, in the six months that we're reporting on now.

5:16 It was formed in November 2023 where we we incorporated Speedy Speedy Hydrogen Solutions, and a £2,000,000 order commitment was made. As most of you in the manufacturing and and, you know, industry will understand, you have to basically buy your components and and and we ordered components for our first drop of hydrogen HPOWER generators. Some items have up to a six month lead time, so it's important that we place those orders quite quick in the process. So most of those orders were placed around November, December time. And then as a prerequisite, I guess, to sale, we needed to secure a form of third party certification. So the CE Mark attestation of conformity was awarded in March. So a lot of effort and work went into achieving that attestation awarded by in Germany, basically back in March, so a couple of months ago now.

6:10 We accelerated the deployment or the the build of the first few generators such that the first factory acceptance test was achieved basically around April time and or March, April time. And then we had our first sales of of those HPOWER generators to Speedy Hydro solution having satisfied the factory acceptance testing in April. So I guess if you look at it in that context, the time frame between award of the the the effectively or incorporation of the joint venture with Speedy Hydrogen Solutions and actually delivery of our first generator was almost spot on six months. And that is an exceptionally good and accelerated time frame to have something that actually didn't exist into the hands of a customer and accepted by that customer in accordance with its contractual terms within six months. So you'll notice that in the revenue numbers for the six months that we've just reported on, which Peter will talk about shortly, the revenue numbers reflect exactly that time frame that most of the revenue was actually started in in in or around April 2024.

7:12 So what you can expect is that that revenue generation for subsequent sales of generators will continue into the second half of the financial year up to the October 31. So, you know, for those who are who are doing their their calculations, please do not just double the revenue number of the first six months and assume that that will be the year end. That is not the case. We're still moving towards a targeted revenue number of around or above £4,000,000. So the and sorry. And that's for the twelve months. The highlights for the year, I guess, as I mentioned earlier, the first sales to Speedy Hydrogen Solutions have been completed, and our first revenues was recognized in the accounts for the for the year for the half year. Sorry. The next drop of generators is currently in build. If you were to walk around AFC's factory today, you will see probably something in the order of 10 to 12 generators being built as as we speak.

8:05 So we've increased the number of of units being pushed through the the manufacturing process and and and very quickly building up an inventory position to grow that number of generators into into the second half of the year and and into into next year. There's a lot of effort put into the harmonization of the generators with the Speedy Hire batteries systems, which which if if you follow Speedy Hire, you'll know that they acquired a battery tech company earlier in the in or last year it was. And so making sure that our fuel cell generators work seamlessly with the battery solutions offered by Speedy Hire was something that required quite a little well, quite a lot of work in terms of the the the harmonization and ensuring the control systems work. For those who don't sort of know how how the systems work, the the basically, the battery acts as the master to the fuel cell. So the fuel cell basically is controlled by the battery and is operated and the and the battery is operated by the end end customer or or operator of the site. So it's important those two those two bits of kit work seamlessly together.

9:11 And, of course, as part of our relationship with Speedy Hire and Speedy Hydrogen Solutions, we have been negotiating hydrogen offtake agreements with suppliers based on the fact that AFC will be one of the largest hydrogen consumers in The UK once we have a number of these generators being deployed into the market. So our revenue for the half year, as I mentioned before before, it's it's it's relatively nominal because the sales actually started towards the end of that six month period of of £400,000. Our first order was for £2,000,000 under the contract with with Speedy Hire. But I guess the important point there we have at the end is we've had over 40 people visiting ASC over the over the first six months of this year. And and those those customers include, I've mentioned probably before, companies like Balfour Beatty and and the like. And, not only have those customers come, to understand how our technology works, but also a number have actually come second time or third time around to actually undertake two day training on how to deal with hydrogen, how you manage hydrogen, how you you you interface a fuel cell system with a hydrogen source, what are the regulations around hydrogen. For most people in the construction industry, this is a completely new area of of of work and expertise.

10:26 And so we see as part of our role and as part of our investment into the relationship with Speedy Hire that we are supporting customers in the in the in gaining new knowledge. And you can see at the bottom there a photograph of one of our recent training sessions with with a tier one construction group. So there's been a lot going on behind the scenes. Some of you will actually reference and some of you frequently reference comments that I've made in previous discussions where we've looked at qualified interest from up to 50 people. I guess what it's important to understand is that in most cases, those 50 customers are also customers of Speedy Hire. So, one of the questions we get asked is, are those still live inquiries? Are they still live? Yes. Many of those 50 have actually been to site with Speedy Hire, and we're working with them at the moment to, to look at future deployments.

11:20 This morning, we announced our first deployment of of generators to Axiona. It's our first 45 kVA generator. So that is actually a fuel cell coupled with a battery giving you a 45 kVA rating. It's the first of its kind that we've deployed. We have undergone an extensive factory acceptance testing process with Axione. They actually came to site for much of that testing to witness firsthand its performance, to run it through its courses, to make sure that it did everything that it it would be expected to to do in the field. And and, you know, we we we we passed that with with with flying colors. So, again, our our relationship with Axiona, which started a couple of years ago with our first power tower deployment.

12:08 And for for those who remember, they they you know, part of that task was to gain a lot of information, experience, and try and build some of that experience into our next generation of of of of HPOWER generators. That is now being reflected in today's system, is on the back of a truck. Ideally, that system would have been operational today in Madrid, the construction site in Madrid. At the moment, it's sitting with with the borders, just getting through the through the Spanish borders, but we expect it to be deployed and operational next week. So we we wanted to make sure that that update was reflected in our presentation today.

12:47 The relationship with Tamgo, which was signed in September 2023. So last year, it was our first international dealership. We have been working with Tamgo, with a an initial focus on the Saudi market. We have weekly engagements with Tamgo. I think this week, we probably had three or four already phone calls with them. And that's based on the number of inquiries and interest that they are receiving from customers. I get a lot of questions, and I think we had some preemptively submitted as part of this. You know, why haven't Tango placed orders yet? The the dealership model doesn't quite work in that way in the sense that Tango are working working with and marketing our technology to their end customers. Some of the Saudi mega projects, some of the big oil and gas companies in Saudi who are interested in starting to move towards diesel alternative generators. And so we are actively working with Tamgo and their clients to ensure a a a well understood path to, to fuel cell deployments in Saudi Arabia. And we're we're starting to see some of the fruits of those those discussions.

13:51 We're expecting, to to to to receive orders from the Saudi customers of Tamgo shortly. Tamgo will not place the orders preemptively. They will respond to their customers' demand. That is the nature of the dealership agreement we have with them. So so we're we're for every proposal that goes in to a Saudi customer, there's an opportunity there for for for a generator to be to be sold. We, I guess, wanted to emphasize, again, we've been asked this by a few investors. Does the relationship with Tamgo extend to both the s and the s plus series, generators? S is, for those who don't know, 10 to 50 kilowatts. S plus is a 100 kilowatts plus. The answer is yes. Tamgo are actively pursuing both of those technology platforms in the Saudi market, and and so we are working with them actively on on both of those technologies.

14:44 But very, very exciting opportunities that we expect to see coming from from The Middle East very soon. A couple weeks ago, we announced our first operation of a 200 kilowatt s plus series HPOWER generator, which you can see a photograph there in our in our factory here in in Surrey. This technology that you can see in the photograph is a 200 kilowatt generator, which was the development of that technology was part funded by ABB in Mobility to basically support high power charging of vehicles. So so the relationship with with ABB remains on on foot. They remain a shareholder in ASC, and we have been, as I said, we've been sort of engaging with not only them, but other users of high power needs to basically unlock this new technology.

15:36 Technology has taken a little bit longer than we thought to get to this point. There was no real reason for that other than it just takes a little bit longer to do to do all the wiring, and I I think I've mentioned that before. The wiring took a bit longer. And now we're in the process of running this this technology through the CE attestation of conformity with a certification agency, again, in Germany. For those who remember the air cool technology took about six months, we are we are partway through the six months already on the on the liquid cool. So we're we're still aiming to have that certification by by the end of this year. But a very neat looking bit of technology, 200 kilowatts. And, you know, as I said, we're we're working with a number of customers who are expressing interest in that technology today.

16:25 On the topic of certification, I think a quite a a proud moment for the company was to be issued with our first CE Mark, our testation of conformity on the air cooled system. You can see here the nameplate of of that now sits proudly on all of our generators that go into the market. This was our first generator with the CE Mark on it. The symbols basically is compliance ensures we are compliant with all relevant EU directives and standards, which are also now applicable here in The UK due to grandfathering rules after the Brexit separation. It took us about six months to achieve, as I said earlier, but importantly, for both Axione and for, and for, Speedy Hire, it is a prerequisite that we have this mark, as a as a precursor to commercial sales. So the six months and the effort that went into getting these certification agencies comfortable, you know, we're we're not sitting on our hands, sort of waiting for people to make decisions. We're actively, you know, pursuing these these, certification marks as as part of our commercialization plan. So we've, you know, we've achieved a lot in the six months.

17:29 On the manufacturing side of our business, you know, we at the moment, we have you can see some photos, at the bottom there of of some of our stacks that we've had, we're we're building, some of the modules that that house the stacks, and, of course, some of the generators there. I think probably in that photo, can see roughly five generator casings, which are are already for fitting out. We have basically over the course of the the the six first six months, been working quite intensively with a number of contract manufacturing partners. Our strategy has and continues to be one of outsourcing to, professional contract manufacturing,

18:08 partner companies. And that strategy saw two partners announced over the over the first six months of this year. And and admittedly, the the ZOLLNER one was just after the year end, but but most of the work was done during the course of the first six months. Zolnar Electronic, a one of the Europe's largest mech electrical manufacturing companies. They have, I think, something in the order of 13 offices. We we visited a couple of them. Their offices host something like 7,000 employees. They are amazing in terms of what they're able to do and the scale up that they can bring to our business in very short term. ZOLNAR are the type of organization that, you know, have have so much worth it.

18:53 They're prepared to say no to you if they don't believe in your business model or they don't believe in your technology. And, you know, we managed to secure them as a as an as an excellent addition to our manufacturing team. And then Illuming, which we announced a couple of months ago now, Illuming Power based in North America, they are manufacturing our fuel cell stacks. You can see in the bottom left hand photo there a number of the stacks that have been built and have arrived from Illuming over the course of the last couple of weeks, which are now going into generators. Each generator at the moment has 12 stacks, and and so you you can see there the number of stacks that we're gonna be building is quite quite large. The the scope now for material production growth is is there with our partners, both of which if if if if for those who at the Capital Markets Day a couple months ago, you will have heard the CEO of a looming power say that if at that point in time, if AFC received an order for a thousand generators, they would be able to deliver a sufficient fuel cell stacks for those thousand generators by the end of the year. So that's the type of scale up capability that we're working with at the moment.

19:55 Alumina currently producing all of our stacks for our HPOWER generators, both the air cooled and liquid cooled, and Zulner are basically going to be transitioning to full module production over the course of the next twelve months, and that's done intentionally over a number of phases of technology transfer to them. So in addition to having a third party manufacturing strategy, we do believe the right decision is to also maintain some internal capability as well, whether that be to help support manufacturing of new prototypes or whether that's actually to maintain quality and health sorry, quality assurance of of the of the technology before it gets handed over to, to third parties. So within our internal business, we're expecting to maintain a cap capability of producing about 200 HPOWER generators per annum, based on the the the current infrastructure that we have.

20:50 A new application for AFC that we announced a couple of months ago was a a partnership with NiftyLift. NiftyLift are one of the world's largest providers of as you can see, they're like cherry pickers for want of better term. Lifts. As part of their journey to sustainability and and and that of their customers, they're looking to remove diesel generators from a large number of their of their of their lifts. Now nifty this, I don't have the number to hand, but they they produce tens of thousands of these lifts per annum. So a very large market penetration that they have, and we will be working with them to support some of the smaller ranges to start with of their lifts moving into the higher ranges where those higher ranges can go sort of up to five kilowatts plus first worth of power.

21:39 The interesting thing is that there is already strong demand for those hydrogen to electric versions of the of the lifts worldwide. At the moment, they're making them in The UK exclusively for SpeedyHire. So, again, another value proposition, if you like, of our relationship with SpeedyHire is that we were introduced to Nifty Lift as a result of that of that partnership. But this opens up a completely new market for AFC Energy. It's a market which is consistent with our drive to decarbonize construction and and off grid equipment. But in this case, it allows us to sell fuel cell stacks and modules as a component to a bigger piece of kit, is not our own. In this case, it's nifty lifts. And so that presents us with opportunities to deploy our stacks into other equipment. We're we're we're just in discussions with a couple of different manufacturers looking at things like electric lighting on the side of motorways, temporary lighting as as just as an example. So this is a completely new market, opens up new avenues for revenue and and and also opportunities to to support the the margin of and and production of the business over the over the coming coming years.

22:53 Our first modules are expected to be supplied to Nifty Lift at the beginning of next year. The the the systems that we supply will be engineered to fit within the mobile elevating work platform. So we will basically be designing a plug and play component for for Nifty Lift. And, of course, at a point in time when those fuel cells need to be replaced, it also creates an annuity opportunity for replacement fuel cell stacks over over time. And then lastly, one thing we we we we don't maybe talk enough about is the work that we've and the successes that we've achieved in the ammonia cracking industry. We have, in in December of of last year, successfully commissioned the world's largest modular ammonia cracker system.

23:45 That system is today producing 400 kilograms of hydrogen per day of fuel cell grade hydrogen. We've just in just close to installing a compressor on-site as well so that it can refuel tube trailers and the like as part of a a more integrated hydrogen supply network. Interestingly, we're we're working with partners to scope out potential pilot projects at the moment across a number of different applications. We are progressing nicely with those discussions, and, you know, we've we've said that we hope to be making announcements in the second half of this year with partners on on those projects. One again, a question we get asked a lot is why haven't you generated revenue from the ammonia cracking technology? We've said this actually on several occasions over several years.

24:34 We do not expect to be making revenue from the cracker until 2025. We are on target to be making revenue from the cracker in 2025, but, we we have no intention of actually driving cracker revenue this this year. And one of the reasons for that is ammonia is a toxic, gas. We have to be very careful to make sure that all of the work we do is very compliant with health and safety. There are no leaks. There are the systems are are safe to operate. And and so for us, you know, that is far more important branding wise than than trying to accelerate a small volume of revenue earlier than it is needed. So we are we are working towards revenue generation next year and and the partners that we're talking to support that that time frame at the moment.

25:20 Over the six months, we've generated a number of patents with regards to the next generation cracker technology that we're working on, and and we've successfully in an RNS a couple weeks ago announced the first successful operation of our cracker working alongside an ammonia combustion engine where our cracker provides a pilot fuel. If you think about diesel engines, and I'm thinking more the bigger, you know, megawatt scale plus, which don't necessarily overlap with our fuel cell, there is an opportunity there to start looking at retrofitting diesel engines for ammonia combustion. And that combustion engine for the larger scale products will all need pilot fuels or or generally be benefit beneficial.

26:06 They'll they will have a beneficial use of hydrogen pilot fuels. So there is a very large scale opportunity to maximize the deployment of crackers alongside today's diesel engines megawatt scale plus. And that's exactly the work we're doing at the moment with Nottingham University to support that that demonstration. We expect the stationary applications to move faster than marine. For those who've been with AFC for a while, you'll know that we talked about crackers originally in the context of marine. We continue to do so. But in terms of accelerating revenue, not before 2025, but accelerating revenue, we we we see the stationary applications moving faster than the maritime applications at this stage. So with that background and that overview, I'll hand over to Peter to go through some of the financials.

26:58 Great. Thanks, Adam. So, essentially, the story of the six months we're talking about is scaling up and then the dual transition from research, which is where the company started, through to development, through to commercial. And and and all of this is is happening simultaneously. And when you're scaling up and when you're investing, the the the best way to tell the story is nearly always through the cash flow. Certainly, that's the case here. So I've I've started with a a summary cash flow, and there are sort of three three areas I'd like to call out and and get into a little bit more detail. So, obviously, there's the loss before tax. That's up by 1,500,000 on the prior period, and that's essentially the increase in headcount.

27:47 So, you know, again, that's what part of scaling up. Now we're pretty comfortable that our headcount's at or about where it needs to be for the, you know, foreseeable future, next three three plus years, but obviously, we had to get to that to that level. The next area I think is worth calling out is working capital movement, negative 3,100,000. And in there for the first time, we have a a buildup of inventory. And obviously, that's very much part of transitioning to being a commercial organization, and and and that that is about sort of supporting the speedy the speedy agreement and and our contract with Axione. And then the third area I'll call out and get into activities. Investing activities of 3,800,000, significantly up on the prior period of 1,100,000.

28:40 So again, I'll I'll

28:43 get into that. I think the last point to draw attention to on this page is, you know, these numbers are clearly at at the half year. Post year end, we raised further 15,800,000. So that fundraise is not shown in the 12,300,000 balance above, clearly. Great. So in terms of the the other question I get asked a lot is is around cash burn. So if we take the cash absorbed from operating activities, which is is on the prior page if you want to see the workings. So we start with our 11,100,000, adding back inventory purchases. So in this period, we purchased inventory of 2,200,000 worth.

29:28 Closing inventory was £2,400,000 worth, but but this is the amount purchased in the period. The prior period, we purchased no inventory. So you can see the shift, the transition, you know, you purchase inventory when you're becoming commercial, when you're scaling up to become commercial. And then the other adjustment I've made is on the r and d tax credits. And the reason for that is we receive our r and d tax credits in a single in a single go, and we always receive them in the second half. So if we look at the year and what how the year may pan out by allocating six months worth of r and d credits to the first half year, it it it it gives a better feel for the underlying cash burn of the company.

30:16 And that gives us a monthly cash burn of 1,300,000. So that's essentially is the the fixed cost if you like, you know, The costs we incur whether we stand still in terms of commercialization or push really hard. And you'll see 1,300,000 for this period, 1,300,000 for the prior period. So cash burn is a, as expected and and guided in prior reporting and b, is still very much consistent with the prior year. And then those R and D tax credits, they're generated by the previous financial year. So I just popped in the figure down there, 2,100,000 and we expect to be receiving that in the next few months. So working capital movement, as I say, this is an indicator of a company changing from development to commercial.

31:07 So total working capital movement of £3,100,000 of which 2,200,000, the vast majority relates to an inventory buildup. The balance is an increase in receivables and obviously part of that is the other side of the revenue. We made our sales near the end of the period and the receivables increased. Clearly, those have been paid since. And then the other movement is an increase in restricted cash. We have a facility which requires a bond, and we've adjusted that bond to reflect inflation. So that's the balance. Inventory movements, as I said, are consistent with scaling up. And I've you can see from the graph the increase in inventory, you know, and and this graph goes back to financial year 2021.

32:00 So, you know, there is a very, very significant change. The other thing I've highlighted is of that inventory balance, so this is closing inventory balance now. I've I've shown the split between raw materials. So we buy a sub assembly, we put it on the shelf in our inventory store, that's a raw material. We take that sub assembly, we put it into a fuel cell module, we wire it up and so on and so on. It's ready to go and get placed into a in into a generator. That's work in progress. And you can see so what what the ratio between those two values gives you is a sort of a sense of progress. And that 2,400,000 of inventory closing balance at the end of half year is turning into revenue in the second half of the year.

32:52 More will turn into revenue. We're still buying inventory and we're still sort of moving it through the system. But that gives you an indicator of your likely revenue in the next in the next period. So as Adam says, you know, do not look at 400,000 of revenue times it by two and go, okay, 800,000 for a year because that's that's not a valid assumption. Great. Okay. So on to investing activities. And, again, this is part of scaling up. So of the 3,800,000, 0.6 was the initial investment into Speedy Hydrogen Solutions. So this is a standalone company. We invest into it and to finance some of its working capital to get it going over time as it leases out the the equipment and provide services and sells hydrogen, it will generate its own profits, it will generate its own financing and ultimately become self financing. But this is the first tranche of the sort of the startup capital, if you like.

33:55 The other thing that's worth mentioning because, you know, we do get questions on it is having something like this, having a a unit operating like this is a is an opportunity to bring in non equity forms of finance because it creates a unit with its own sort of with its own p and l effectively, if you like. And it's much easier to sit sit and negotiate with external lenders and so on and so on. Okay. So that's that's the point six. 1,700,000, I'll talk about in a minute. That's intangible assets. And then the balance, the 1,500,000. So point eight to support Speedy Hydrogen Solutions. Those are the formerly Octopus logistics assets we bought essentially to move hydrogen from site to site because the speedy relationship creates an opportunity to sell hydrogen.

34:48 There's also an opportunity to sell services as well, but this this capital purchase supports that. And then no point 7,000,000 to build the manual assembly pilot line. And the reason the block is part green and part orange is the orange represents assets under construction. So that's the part of the pilot line that hasn't yet hadn't been completed at the end of the period, but over top or in the second half of the year, essentially the orange will become green and that green represents the manual pilot line. Okay. So investing activities onto intangible assets. So I talked about this dual transition, and I've talked about a movement from development to commercial and how that is supported by or, you know, how we can demonstrate progress there by by the inventory build up.

35:43 The other part of the transition was from a research company to a development company because we've got these two value streams going on in parallel. And this this graph essentially illustrates the change or the progress toward that transition. So in the period, 1,700,000 of of effectively an investment capitalizes intangible assets. And we need to emphasize that, you know, under current account exams, there are six pretty tough tests that we need to pass. And as a sort of additional discipline, we have an internal technical advisory board, and we sort of we go to the technical advisory we, the finance team, goes to the technical advisory board having talked to the CTOs and etcetera, etcetera, you know, with our recommendation and the the the tab signs off. So this is a there's there's a rigorous process around this.

36:38 So of that 1,700,000, 1,000,000 related to fuel cell projects, point seven related to fuel processing projects. And this is a real valuation of validation of the value that is being created. The fact we're now sufficiently confident to capitalize and place it into our balance sheet. So just just by way of sort of conclusion, quick look at the post balance sheet events. The main financial highlight, of course, was the fundraising, 15,800,000, of which the majority was from an institutional placing, 13,700,000. But, you know, we felt it was important to create a retail facility as well. And so 2,000,000 was subscribed for by by the retail placing, something called a Rex offer. And finally, you know, the directors, both Adam and I, you know, put put some of our own money into this as well.

37:37 That 15.8 represents about 14% of the existing share capital and the use of proceeds, you know, again, which we communicated at the time, but it doesn't You know, the use of proceeds was very much about this move to commercialization. So the investment in the HPOWER generators to service the Speedy relationship and the TAMGO relationship, you know, once those orders start to flow.

38:28 The production equipment I've talked about, so we're already deploying

38:52 Ladies and gentlemen, please do bear with me as I reconnect Adam and Peter to the room. Hi there, Adam. Peter, sorry. We lost you there momentarily. It's okay. Are we back? Yeah. You are back. Please do continue. Excellent. Great. Thank you.

39:08 So I'm not sure what happened there. But, look, just the last slide, just on the outlook for the year for the remainder of this year and and and, you know, we've talked about AFC being a focus on delivery. And, hopefully, some of that delivery has been articulated in the slides. Delivery on revenue growth, delivery on scale up and manufacturing, delivery on generators being built and out the door. We've sold our first few generators to Speedy Hydrogen Solutions. We've sold and shipped out we've shipped our first shipment to generated to Axiona in Spain this week. And, and so we are delivering on a number of the aspirations that we have for the company over the over the current twelve months.

39:57 We are expecting to see revenue growth from our tier one partners in the second half of the year, including an expectation that you'll start to see contract orders coming through from the from The Middle East via Tamgo. Our production capacity is both internal and external to support that growth. We've talked about our our our our partners, our growth partners in Illumina and and Zola. And, you know, we're very excited at the progress that we've made over the twelve months over the six months, sorry, to this to the half year and the work that is happening in the in the second half of this year that we're already, you know, a few months through.

40:35 The addressable markets that we're we're targeting, which is really around displacing diesel, you know, that market is not getting smaller. It it it is is only growing. You know, we talk about our our our order book of just under 27,000,000, and those, you know, heavily weighted in favor of some of the customers we've already announced. But but there is a tremendous amount of growth opportunity that is is still to be on you know, is untapped. Our intention is to focus on delivering that order book, delivering it to the satisfaction of our of our customers and partners. But recently, we've had a new sales director join us who has joined us. He he he used to lead a lot of the power sales from from Sunbelt, and he's joined us. He's actually joined from The United States where he has a tremendous rep, you know, network.

41:28 And so there are new markets in which we can tap into through his network in in the world's largest off grid power market being being North America. So, you know, slowly, we will start to tap into other markets. These are quite exciting markets. We we do get inquiries from from from all parts of the world, and we we hope to making further announcements on that shortly. And then the on the ammonia cracking front, the the the traction progresses at pace. We are still receiving a lot of,

42:00 partners coming to site. I guess some of them we can probably start to call partners. We are working with them on on deployment projects, some pilot projects to see the cracker in play in different applications. Once we've once we finalize some of those partner discussions, we'll be making further announcements into the market to to to to to sort of provide you with some context as to who we're discussing this with and and what the opportunities are. But that is an extremely exciting part of our of our business opportunity going going into the future. So I think the outlook is actually extremely positive. We've positioned the first six months for a very successful second six months, and and we we look forward to to making further announcements into into you all over the coming weeks and months. So on that note, I think we open it up to questions.

42:55 Perfect. Adam, Peter, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Adam, Peter, as you know, we have received a number of pre submitted questions as well as live questions for today's meeting. And Adam, if I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, Go through as many questions as you can, and I'll pick up from you both at the end. Right. So sorry. You want me to read through the questions? You're not gonna read them through? Would you like me to read them out for you? Sorry. I I think I've got a copy here.

43:43 Sorry. I wasn't wasn't prepared for that. Right. So these are all sort of sequenced in groups. So I guess I've got a couple of questions on management, which I guess generally relate to to to myself. Does Adam's departure imply that the short to medium term outlook for AFC is worse than expected? Absolutely not. It it looks better than ever. I'm I'm I'm, you know, continue to be a strong advocate of AFC, and and I believe that the team we have in place at AFC is very well positioned to capitalize on the opportunities that have been created over the last few years. So, I do not think the opportunities or the medium term outlook is any worse. I think it is as bright today as it has ever been. And I guess that's something that I really wanna emphasize because my decision to head back home to Australia is is personal.

44:40 It's not related to the success of AFC. What is the process and time scale for replacing Adam Bond? Well, that process has started. As I mentioned earlier, we have begun recruitment processes with with with headhunters. We are going through a number of CVs. Discussions are being coordinated at the moment. That is being run by the nominations committee, and and it will be basically a process that sits with the nominations committee. I will support it in every which way I can. I am involved in some of the discussions with the candidates. As you can imagine, they will have some questions for myself, which which is is is only fair and reasonable. So so we will process that as quickly as possible.

45:25 Obviously, the you know, we we can't give an exact timeline on it, but but the process is being dealt with expeditiously. What characteristics are you looking for in a new CEO? Well, I think the characteristics again, I've probably mentioned some of this in the in the presentations earlier. You know, we are looking for someone that has the experience in scaling up successful businesses here in The UK and overseas. And, you know, there are a lot of success stories in in UK manufacturing scale up. There are a lot of successful stories that we can build on in terms of some of the experiences that we we we can bring into the role. And, you know, as as Peter said earlier, as as the company progresses from research to to development to commercialization, you know, there's different skill sets that are required along that journey. And so, you know, we're looking to basically position the company with with a leadership that that is consistent with the positioning of of of AFC.

46:21 So I I it may it may have some slightly different experiences to myself, but I think that's for the for all the right reasons. Will Adam's departure affect current partnerships and client relationships? No. Not at all. In in all the discussions I have, you know, we have communicated the circumstances. Absolutely fine. We are in most cases, there's multiple people who have multiple access points into our partners, and so I don't imagine this is going to create any form of issue with the current partners or client relations. I've had some great great feedback from institutional investors who have very much appreciated the last few years and and and are reassured that the next few years will be even brighter still. So I I think in terms of relationships and partnerships and investors, we're we're in a good good place again.

47:19 How confident are you this is moving to fuel cells. How confident are you on delivering first batch of units to Speedy on schedule, and how many have been deployed to date? So the schedule with with Speedy Hire, agreed to spot Speedy Hire is is a function of of a couple of different things. And, obviously, you saw the schedule, the timeline that we presented at the beginning. We have started to sell generators to Speedy Hydrogen Solutions. Those those generators are now legally part of the joint venture. There is a raft of other generators that are about to become part of the joint venture. We are moving to meet the timelines of of the Speedy Hire customers. The Speedy Hire Speedy Hire manages the marketing and customer engagement. That's that's part of the the value they bring to the joint venture.

48:07 So, you know, they they are working with a number of of customers to see systems deployed into the market as soon as possible. A number of those customers have asked for training sessions before they've deployed them. So we've had been hosting those, as I mentioned. And so we are, you know, in a fairly advanced state to getting those systems into the market as, you know, in as soon as soon as possible. But at the moment, that that that sort of the marketing of the generators is is is since we're speedy higher. There was a question that I saw that no generators are actually advertised on Speedy Hire's website. I I don't control the Speedy Hire website. I I I can't say why they do or don't do things on their website. That's completely not my gift to to respond to. However, they do actively market the technology into their top tier contractors, which is basically where the most of the demand is going to come from.

49:04 And we see the evidence of that by the number of people visiting our site and and the caliber and quality of those those customers. So the fact that it doesn't appear on the on the website may suggest that it's not a technology that's being marketed to to their 68,000 customers just yet. They're focusing very much on the on the larger tier ones. But but, you know, rest assured that that that marketing is is taking place. Are you confident that we will see a meaningful increase in orders over the next two years? Yes. I am confident of that. We we are seeing, you know, growth in not only The UK orders that will come through our our joint venture with Speedy, some of which is included in the in the order book that we've we've published. But, you know, we are extremely enthused by the opportunities coming out of out of the, you know, the The Middle East. I mentioned those earlier. I mentioned some of the inquiries we're we're currently working with customers on in in The United States, in North America.

50:03 I mean, we just as an example, this morning, we took an inquiry from a dealer in South Africa. We had conversations with dealers in Australia. So the conversations are vast and wide. I think there is a risk that ASC spreads itself too thin if it tries to become, you know, caterpillar overnight. And I think it's important that we deliver on our order book. Our order book underpins analyst revenue forecast over the next few years. So so, you know, we're we're we're not trying to create a an environment which we will struggle to deliver generators into. We're we're we're basically doing this, I think, the right way in in in addressing the market that we currently have in front of us and and available to us. So, yes, I do expect to see growth in generator orders over the next few years.

50:49 When will the Axione unit be delivered? Well, it's being delivered now. So you'll you'll see it in Madrid next week. What is happening with the development of the 200 kilowatt units for ABB, and when will this trigger further payments? If why is it so delayed? Well, I I mentioned earlier that it it was it it was delayed partly because, you know, this is the first time we've ever delivered this technology. When you're dealing with technology, you don't always control the timeline. We had a number of wiring delays. We had a number of components that need to be replaced, and those components have been then got, you know, x month lead time on them. The the the the reality is, though, if if you look at the agreement with ABB, you know, the actual generator with CE certification isn't due for delivery until the end of this year. So, actually, we're not behind schedule on that generator.

51:39 Perhaps our aspirations for getting it delivered a bit sooner haven't haven't quite been met, but but, contractually, we're we're aligned with what we're what we're saying we're going to do. So so we, you know, we will we will continue to to work towards the CE marking on that and hand that over to ABB at the right time. Does AFC Energy actually have any orders with TAMGO at the moment, and where do we stand regarding production of units in Saudi Arabia? So, again, I probably alluded to this question as well. The TAMGO orders will follow customer orders of TAMGO. TAMGO are actively working with their customers to grow an order book. We are supporting TAMGO in in delivering that. So we have firsthand knowledge of who they are presenting to, who they are proposing to, what what proposals are going out, and and so we are we are excited by that. However, we will be I I imagine we will be required to announce via RNS the first orders received from The Middle East as and when they come.

52:43 In terms of production capacity in Saudi Arabia, look, there have been some early discussions on that. Clearly, the the the the production will follow the order book. So first thing for us to focus on is the order book. We're not focusing on the production capability in Saudi Arabia just at this minute, albeit there have been some some early preliminary discussions on that on that in that regard. Financials. Maybe I'll I'll take it just a couple, then I'll hand over to Peter. Is there any plan to take AFC Energy private? No. I think it addresses that. Why has the order book not increased since the 2023 end? Well, the order book we've defined in a particular way that basically can be cross referenced to signed contracts that we've entered into.

53:32 To the extent we would have entered into new signed contracts with new customers, they would have been our nest. There is a a pipeline that sits behind the order book, which is substantially bigger than the the the 26.1 of a million we we've we've announced. We don't allude to that pipeline because, you know, it it becomes a hostage to fortune, so we say, we if we start asserting how big the pipeline is, but it is substantial. And so so our pipeline, I guess, in that sense has probably grown, but the order book we're keeping to our contractual commitments at this stage. I'll hand over to Peter. That's alright. Yes. Of course. So there there were two other questions on the financials. Can AFC Energy as a stand alone company generate sufficient revenue over the next two years to support expanding production without annual capital increases and slightly connected to when do you expect to become profitable.

54:30 So clearly, you'll appreciate we have to be very careful about any forward looking statements we make, and, you know, we haven't specifically guided on some of those key financial milestones. But, you know, suffice to say that overheads are pretty much where they need to be. So we expect overheads to remain pretty stable for the next, you know, three three plus years. Revenue, Adam's talked about a lot. You know, we expect to see that growing fast and, you know, growing convincingly. So really, it all comes down to our gross margin assumptions, I. E, how quickly can we get the costs of units down? And that's a function of two things. That scale that we've talked about, you know, on this call, and also there's the underlying value engineering. That's more a function of time.

55:18 But you get the value engineering from having the right team, the right motivated team, the team working together, and so on and so on. And we've got all of that. So, really, it's, you know, without sort of going beyond what I'm sort of allowed to or able to say it at this stage, You know, that is the if if you wanna sort of calculate some of this stuff yourself, that's the way to approach it. Stable overheads, strong revenue growth, and, you know, market consensus for the next three years as as Alan mentioned is sort of $44.04 plus million for '24, 11 for '25, about 30 for '26, and then you can you can project from there. The other the only other point here is one of the other many opportunities the speedy relationship creates, and I talked about it earlier on, is, you know, the opportunity to bring in non equity financing.

56:16 So, you know, that there is clearly an interplay there and and and other other discussions or decisions around capitalization sorry, around around capital required. So if I can hand back to Adam because I think there's a question on the cracker as well. Yes. Actually, there's one there are there's one question, actually, which we have answered. So I I on on revenues. Analysts are expecting for around £4,000,000 in revenue for the year. Is this still achievable? So the the short answer is yes. That is achievable. We are still working towards that as a as a as a benchmark of of revenue for the year. There are some variables that can impact that, but but at at the moment, that is still positioning it for for the year end. On the cracker, there's there's a question. When do you think you might be generating profits from the commercialization of the cracker?

57:11 Well, generating profits and generating revenue are two different things, which are quite an important distinction in this in answering this question. I think I've said revenues forecast to start from next year. That doesn't mean we can't be seeing announcements preempting those revenues this year. So we're still working towards towards some more information news flow into the market this year. In terms of generating profits from the commercialization of the cracker, look, I I think it's it's it's too early to say when when we'll be generating profits. What I can say is that at the moment, we're trying to model or or or assess different business models, which can create short term immediate value to to the shareholder through the way in which we we commercialize this technology.

57:56 And, you know, I think there is some real scope to make margin positive margin on the cracker sooner than later. So, you know, we have to we we're we're assessing that that at the moment. That's a that's a very non answer to a to a question, but I think it's probably a bit too early to to say at this stage. Those are the questions that I've I've been handed. So there might be others, which, Alex, I'll hand back to you if you've if you've got any more. We've got probably a couple of minutes from one or two more questions if if they have if you have them. Yeah. So we do have a couple of live questions. Questions. Would you like me to read them up, or would you like to choose them from the q and a tab? Go for it. Okay. Perfect. Has the company given up completely on EV charger and the modular stack power systems?

58:42 Absolutely not. And modular power systems, mean, our our whole business is modular power systems. So I I think no. It's it's it's unequivocally the answer. We are actually very much very part of the modular power systems business. And and I'd I'd encourage the the the person that asked that question to maybe look at some of the announcements as to what our business is and what industries we're targeting. We've been very clear on EV charging as a market where that is available, accessible to us. I think at the moment, you know, there are grids that are able to meet some of the demand for EV charging, and there is a growing number of grid constrained environments, which will continue to grow as EVs grow. And so the relationships with companies like e ABB, for example, that is all around the e mobility space.

59:30 So, no, that is definitely still part of our of our of our agenda. The construction industry, however, unashamedly, is where we're focusing our efforts at the moment and our relationships with companies like Speedy Hire. I'll be honest, a lot of the construction industry applications actually are for EV charging, where you have a a a fleet of construction vehicles that have to go to site in remote locations and those electric could be charged up on-site. We are already charging vehicles in construction locations that are off grid. So very much consistent with our with our strategy. Perfect. Thank you very much. And perhaps one last question as we do come up to the hour. You've announced the number of key manufacturing partners over the past few months and confirmed again this morning capacity of potential 1,000 generators if demand is there. What's next to announce?

1:00:22 And is there any gap left to fill on the operations front in the near term? Look. We we've we've always said that our our manufacturing partners will have to have the capacity to grow with us and and meet our projected demand. That that thousand generator question was actually a a reference to a question that was made at at the Capital Markets Day if if hypothetically, AFC received an order for a thousand generators. But but, you know, that is very much consistent with with our strategy. Our the the the two main third party contract manufacturers were for the stack and for the the module, and we've announced both of those. The actual generator chassis itself, which I guess is the third part of the equation, there's a lot of people that can that can bash metal and and that we can, you know, purchase generated chassis from.

1:01:17 So that's not for me a a a constraint to deployment, but we have relationships and partnerships with companies that manufacture those for us. So AFC still assembles them altogether, but at the moment, the two key relationships we have now announced with they're in the market now. I would say in terms of internal capability, we've said that we will look to have a capability of up to 200 generators. I I probably should caveat that by saying it is not necessarily our intention to make 200 generators on-site. It is to have the capacity to do so if if needed. And so we have we have a team of people. I I I don't actually have the direct number to hand, but I think it's somewhere in the order of 25 people who are across both manufacturing and quality assurance on on components. So they're basically investigating the quality of all of the bits that we we receive before we manufacture and assemble them.

1:02:11 So we have built up a a a resource internally to support manufacturing and deployment. And at the moment, they probably have I think they're probably pushing out around four generators a month, potentially a little bit more on a on a one shift basis. So for us, you know, if if the demand grows, we want to start externalizing that to the greatest extent possible as part of our strategy. At the moment, I don't see a massive scale up in our internal resourcing, both capital or or or human resource to to to go much beyond where we where we are today. That's great. Adam, Peter, thank you for adjusting those those questions for investors today. And, of course, the company can view all questions submitted today, and we will publish those responses on the Investor Meet company platform.

1:02:57 But Adam, before we direct investors to provide you with their feedback, which one is particularly important to yourself and the company, can I please ask you for a few closing comments? Sure. Well, thanks, Alice Alex. Sorry. And, you know, again, I appreciate everyone's time on this call today. Look. AFC has taken probably longer than it expected to get to where it is today. And but but I can rest assured I do rest assured that we are in an excellent position to capitalize on the groundwork, particularly over the last five, six years that we have done in in our technology, our our our our go to market strategy, our partners, and and now revenue. And so, you know, whilst this may be my last investor me company presentation at AFC, I can rest assure that there's been a lot of support and and and and the company is in great hands. And I I look forward to the successes of the second half of this year and and and for the following years going forward. So thank you very much for everyone for your support, and I look forward to to keeping in touch with many of you. Thank you.

1:04:02 Fantastic. Adam, Peter, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide a feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of AFC Energy PLC, we'd like to thank you for attending today's presentation, and good morning to you all.