REG - Invinity Energy Sys - Trading Update

Invinity Energy SystemsAnnouncement

06/09/2024 07:15

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RNS Number : 1571D  Invinity Energy Systems PLC  06 September 2024

The information contained within this Announcement is deemed by Invinity
Energy Systems plc to constitute inside information as stipulated under the
Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK law by virtue
of the European Union (Withdrawal) Act 2018 ("MAR").

 

 

6 September 2024

Invinity Energy Systems plc

 

("Invinity" or the "Company")

 

Trading Update

 

Invinity Energy Systems plc (AIM: IES) (AQSE: IES) (OTCQX: IESVF), a leading
global manufacturer of utility-grade energy storage, provides an update on
current trading and strategy.

 

Commercial Positioning

 

The market for Long Duration Energy Storage ("LDES") continues to develop
favourably for the Company as alternative battery technologies and domestic
supply chains become an increasing priority for decision makers in the UK, EU,
North America and Australia. As such, Invinity has noted a growing number of
proposed projects which specifically exclude lithium-ion as the energy storage
technology, a trend the Company views as positive in the context of future
demand for its vanadium flow batteries.

 

The Company's VS3 products have now been in service for a year or more at a
number of customer sites, demonstrating that Invinity's batteries can generate
customer returns across diverse geographies and applications by addressing one
or many revenue streams. This achievement has supported growing acceptance of
Invinity's technology as the leading proven alternative to lithium-ion
batteries, and despite disappointing delays in closing sales in the year to
date, customer interest in Invinity's products remains strong.

 

Furthermore, commercial operating data from these VS3 projects has also
provided Invinity with valuable information on performance which has fed into
the design process for the Company's next-generation product, code-named
"Mistral".

 

As at 30 June 2024, the Company had cash reserves of £49.2m. This strong
balance sheet positions the Company strongly in the market to be able to
deliver products for its customers.

 

Next-Generation Product

 

The development of Mistral is progressing strongly and the production
prototype has achieved its performance targets. Commercial launch, which will
see Mistral become available for general sale by Invinity alongside the first
pilot customer shipment, remains on schedule to occur by the end of the year.

 

Driving cost out of the Mistral manufacturing process and component supply
chain is crucial to achieving targeted gross margins, and thus to supporting
Invinity's fundamental corporate goal of reaching cashflow break-even and
profitability. Such cost reduction is expected to come through a combination
of continuous design improvements, supplier efficiencies and increased
production volume.

 

Although Mistral has already demonstrated performance in-line with or ahead of
expectations, the Board has decided that additional time is needed to complete
the cost reduction exercise ahead of volume rollout, while maintaining a level
of manufacturing sufficient to commence the drive to volume-based
efficiencies. Accordingly, whilst this exercise completes, the Company
believes a more cautious increase in Mistral deliveries during H1 2025 is
prudent and will set the stage for further growth in volumes in H2 2025 before
commencing full volume production in 2026 when the Company intends to achieve
EBITDA break-even.

 

2024 Guidance

 

The Company previously advised that it expected 2024 revenue to be
significantly second half weighted and in line with this guidance, expects H1
2024 revenues to be circa £1.6m. The H1 loss is also in line with
expectations at circa £11.2m (subject to final review and approval of the
Board).

 

Global market and policy developments, and the recent change of government in
the UK, are positive indicators for Invinity. However, they have led to a more
protracted sales cycle as the Company's prospective customers assess the
impact on their projects. Examples include the final outcome of the
consultation on a proposed LDES Cap and Floor mechanism in the UK and the
confirmation of further details around the role and mandate of newly launched
GB Energy. The upcoming U.S. election has also slowed decision making in this
market as certain project developers await the outcome before committing
capital into green energy projects. Therefore, the Company now expects this
will delay the closing of deals which it previously expected would contribute
to H2 2024 revenues.

 

Invinity's commercial team is focused on concluding the LODES project and is
in advanced tripartite discussions with a major international renewable energy
project developer and the Department for Energy Security and Net Zero
("DESNZ") to finalise that project's structure and conclude contracts. The
timing of the conclusion of such negotiations will have a material impact on
whether associated revenues will be recognised in 2024 or 2025.

 

Whilst the delay in closing deals will have a significant impact on full year
2024 revenues, the Company's anticipated loss position is not expected to be
materially different from its expectations.

 

Outlook

 

Including the UKIB investment for UK projects, as at 30 June 2024, the Company
had cash reserves of £49.2m. By maintaining strict capital discipline and a
focus on targeted sales in 2025 as referenced above, the Company believes it
will enter 2026 in a position to deliver Mistral at industry standard margins
and an ever-growing production rate, together sufficient to achieve EBITDA
breakeven and set the Company on a sustainable future.

 

 

Jonathan Marren, Chief Executive Officer at Invinity said:

 

"The development team, in collaboration with our joint development and
commercialisation partner, have rightly focused on ensuring that Mistral is
capable of delivering the performance characteristics being demanded by
customers and the market; I am very pleased with the results to date. We
aren't yet where we wanted to be on working through the identified initiatives
aimed at reducing production costs to the level we believe we can attain but
have confidence this can be achieved in 2025 ahead of material volumes at
sustainable margins in 2026 and beyond.

 

We are very fortunate to have dedicated staff within Invinity who are
committed to building Invinity to be a successful and profitable business and
my role is to guide, support and enable them to use their skills for the
benefit of all of our stakeholders. There are however areas which need to be
addressed and which we can significantly improve on and my new role is to
ensure we are laser focused on identifying solutions and implementing these
improvements across a number of focus areas as soon as feasible.

 

-     Commercial

o  Renewed focus on commercial targeting, utilising a data driven approach

o  Expand our use of partners to reach new customers outside our core markets
to enable us to scale in a fast and cost-effective manner

 

-     Operational

o  Utilise our geographic centres of excellence in the UK, U.S. and Canada to
drive greater efficiency within the organisation

§ In the UK - continue to invest in expanding our operations through
increasing automation at our factories to bring production costs down

§ In the U.S. - ensure that we are able to manufacture products in the U.S.
which are capable of benefiting from the full suite of available subsidies

§ In Canada - utilise existing facilities and expertise to create a global
centre of excellence for flow battery product development, supporting the
launch of Mistral and future products

 

When we report our interims at the end of this month, I look forward to
highlighting our progress in addressing these priorities."

 

 

Stay up to date with news from Invinity. Join the distribution list for the
Company's monthly investor newsletter here
(https://invinity.com/newsletter/?utm_source=iesrns) .

 

Enquiries:

 

 Invinity Energy Systems plc                                               +44 (0)20 4551 0361
 Jonathan Marren, Chief Executive Officer

 Joe Worthington, Director of Communications and Investor Relations

 Canaccord Genuity (Nominated Adviser and Joint Broker)                    +44 (0)20 7523 8000
 Henry Fitzgerald-O'Connor / Harry Pardoe / Charlie Hammond

 VSA Capital (AQSE Corporate Advisor, Financial Adviser and Joint Broker)  +44 (0)20 3005 5000
 Andrew Monk / Andrew Raca

 Tavistock (Financial PR Advisor)                                          +44 (0)20 7920 3150
 Simon Hudson / Saskia Sizen / Adam Baynes                                 invinity@tavistock.co.uk (mailto:invinity@tavistock.co.uk)

 

Notes to Editors

 

Invinity Energy Systems plc (AIM: IES) (AQSE: IES) (OTCQX: IESVF) manufactures
vanadium flow batteries for large-scale, high-throughput energy storage
requirements of business, industry and electrical networks.

 

Invinity's factory-built flow batteries run continually with no degradation
for over 25 years, making them suitable for the most demanding applications in
renewable energy production. Energy storage systems based on Invinity's
batteries are safe, reliable, and economical, and range in size from less than
250 kilowatt-hours to tens of megawatt-hours.

 

Invinity was created in April 2020 through the merger of two flow battery
industry leaders: redT energy plc and Avalon Battery Corporation. With 75 MWh
of systems already deployed or contracted for delivery across 82 sites in 15
countries, Invinity is active in all major global energy storage markets and
has operations in the UK, Canada, USA, China and Australia. Invinity Energy
Systems plc is quoted in the UK on AIM and AQSE and trades in the USA on
OTCQX.

 

To find out more, visit invinity.com (https://invinity.com/?utm_source=rns) ,
sign up to our monthly Investor Newsletter here
(https://invinity.com/newsletter/?utm_source=iesrns) or contact Investor
Relations on via +44 (0)20 4551 0361 or ir@invinity.com
(mailto:ir@invinity.com) .

 

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