REG - Powerhouse Energy Gp - Audited Results for Year Ended 31 December 2023
03/06/2024 07:00
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RNS Number : 7473Q Powerhouse Energy Group PLC 03 June 2024
3 June 2024
Powerhouse Energy Group plc
("Powerhouse" or the "Company")
Audited Results for the Year Ended 31 December 2023
Powerhouse Energy Group plc (AIM: PHE), a company pioneering integrated
technology that converts non-recyclable waste into low carbon energy, is
pleased to announce its audited results for the year ended 31 December 2023.
Summary:
Corporate:
· Completed major strategic review. The business is now focused on
Licensing fees, Royalties and Engineering Services Revenues with the
successful acquisition of Engsolve.
· Strengthened Board with a group of Directors with appropriate
expertise in engineering and finance.
Financial:
· Revenue for 2023 was £181k (2022: £380k).
· The Group reported an operating loss (pre-exceptional items) in
2023 of £1.8m (2022: £2.1m). Significant savings in administrative expenses
driven by the Board.
· Cash at bank of £4.34m (2022: £5.9m).
Operational:
· Acquisition of the remaining shares in Engsolve brings the
Company's engineering capability fully in-house.
· Excellent progress on the new Powerhouse Technology Centre in
Bridgend, with the Centre becoming the Company's business headquarters and
Registered office.
Outlook:
· National Hydrogen (NH2), Australia - gained momentum in the latter
part of the year resulting in an agreement being signed since the period end,
that will bring with it a front end engineering design (FEED) contract during
2024 and has the potential for significant revenue opportunities.
· The manufacturing of the 2.5 tonne per day kiln for the Feedstock
Testing Unit (FTU) has been completed.
· The new kiln has been shipped and is due to arrive at the
Technology Centre in the coming weeks.
· Completion of the FTU is expected towards the end of the year which
will allow the Company to accelerate the development of commercial
applications for its technology.
· Resolution of European Patent Challenge, ensuring that no
additional challenge to Powerhouse patents worldwide can be raised by Onunda.
· Acquisition of Engsolve brings with it a history of successfully
delivering engineering services to the energy, oil and gas, manufacturing,
waste, and safety sectors.
· Long term pipeline of promising projects in the UK and overseas.
David Hitchcock, Acting Non-Executive Chairman, commented:
"The period under review has seen us re-assess where the focus of the business
should be going forward so that as a company we concentrate on strengths in
order to grow the business and deliver value for our shareholders. We
strongly believe that by focusing on licensing fees and royalties and
engineering services revenues we will deliver on this and ensure that we
realise the full value for Powerhouse.
"The actions we have taken in the last year have left the Company on a very
solid footing from which to further progress and grow in the year ahead."
Paul Emmitt, Chief Executive Officer, commented:
"Despite being a challenging year, the Company made excellent progress in
2023. Our business model of joint venture arrangements with project
development partners, giving Powerhouse more control, and providing greater
upside opportunity for our shareholders we believe is already gaining traction
and bearing fruit.
"This year will be an exciting one for Powerhouse and we look forward to
providing updates on our project pipeline as they progress but also on the
Technology Centre once it is fully operational as well as proving up our
technology in a commercial context."
A full copy of the Company's Report and Accounts for the year ended 31
December 2023 will be sent to shareholders shortly and available on the
Company's website www.phegroup.com (http://www.phegroup.com) together with the
Notice of Annual General Meeting to be held on 27 June 2024 at 11.00am at the
Company's registered office at Unit 3/3a Garth Drive, Brackla Industrial
Estate, Bridgend, Wales, CF31 2AQ.
For more information, contact:
Powerhouse Energy Group plc +44 (0) 203 368 6399
Paul Emmitt, Chief Executive Officer
Strand Hanson Limited (Nominated & Financial Adviser) +44 (0) 207 409 3494
Ritchie Balmer
James Harris
Rob Patrick
Turner Pope Investments (TPI) Ltd (Broker) +44 (0) 203 657 0050
Andrew Thacker
James Pope
Tavistock (Financial PR) powerhouse@tavistock.co.uk (mailto:powerhouse@tavistock.co.uk)
Simon Hudson
Nick Elwes
Saskia Sizen
About Powerhouse Energy Group plc
Powerhouse Energy has developed a process technology which can utilise waste
plastic, end-of-life-tyres, and other waste streams to convert them
efficiently and economically into syngas from which valuable products such as
chemical precursors, hydrogen, electricity, heat and other industrial products
may be derived.
Powerhouse Energy's process produces low levels of safe residues and requires
a small operating footprint, making it suitable for deployment at enterprise
and community level.
Powerhouse Energy Group also incorporates Engsolve Ltd, who offer Engineering
Services across all sectors with speciality services in the development of new
technologies and clean energy.
Powerhouse Energy is quoted on the London Stock Exchange's AIM Market under
the ticker: PHE and is incorporated in England and Wales.
For more information see www.phegroup.com (http://www.phegroup.com)
CHAIRMAN'S STATEMENT
I was delighted to join the Board of Powerhouse Energy Group plc
("Powerhouse", "PHE" or the Group") as an Independent Non-Executive Director
last year and to become Acting Non-Executive Chairman from 15 December 2023. I
am truly pleased to be able to report several very positive steps forward
during the short period of my tenure of office so far.
The Group has now reviewed its strategy and has adopted a model of joint
venture arrangements with project development partners, giving Powerhouse more
control, and providing upside opportunity for our shareholders we will
maintain the licencing option where it is most suited in commercial terms .
This change of direction is illustrated by our recent announcements on our
projects at County Longford in Ireland, and with a very exciting opportunity
with National Hydrogen in Australia and Asia.
Significantly, it also became clear that our partner at our historic Protos
site near Chester (originally the site owner and licensee of our technology)
no longer shared our vision for the project's development. We therefore took
full ownership and control of the project into Powerhouse on terms which
included acceptable lease provisions for the site.
Additionally, we were delighted to announce that we have brought our
engineering capability fully in-house, having now increased our ownership of
Engsolve Limited ("Engsolve"), our engineering partner, to 100%. Engsolve was
established and, until this most recent transaction majority owned, by the
Powerhouse Chief Operating Officer, Paul Emmitt. Powerhouse had acquired a 48%
interest in Engsolve in 2021. Although the former arrangement had worked well
in practice, it was not the optimal platform from which to build the business.
The new arrangement hugely simplifies the Group's access to its essential
engineering requirements. The Board sees it as a step forwards in presenting
Powerhouse to the market as a stand-alone business, which now has all the
essential components in-house. This will reduce reliance on third parties and
ensures maximum potential value for Powerhouse's shareholders.
We have continued to make excellent progress on the new Powerhouse Technology
Centre in Bridgend; a vitally important part of our ability to demonstrate
that Powerhouse intends to place itself at the forefront of businesses
aspiring for leading positions in the waste-to-energy sector. Hydrogen fuel is
actually only one part of the waste-to-energy picture though our Group has
maintained a watchful eye on the market for hydrogen, particularly in relation
to the publicity attracted by the use of hydrogen as a transport fuel. This
particular market remains in its infancy and as such we will continue to
develop our capabilities in electricity and heat production. This is fuelled
by raw materials (non-recyclable waste products with no use) that to others
are a growing problem but which, to us at Powerhouse, are very useful indeed.
We are now exploring the right mix of equity and project finance options,
given our growing list of project opportunities, to be ready on a case by case
basis.
As Acting Chairman, my focus is on planning the pathway to financial
sustainability, ensuring that we have the right skills and other resources
within the Group, on the right terms, and that Powerhouse continues to develop
and protect its intellectual property. I expect to see Powerhouse prove its
viability in a commercial context in late 2025, whilst we develop our working
relationships with third parties and maintain their confidence in order to
deliver our projects economically.
Our Board has been reshaped and strengthened with a highly experienced group
of Directors with long careers in Engineering and Finance. I would like to
thank them for all their efforts and wise counsel as we have worked through
the change in corporate strategy.
Finally, I wish especially to thank Paul Emmitt for stepping up to become
CEO post the acquisition of Engsolve, where he has already made a huge impact.
Above all, I would also like to thank all of our shareholders for their
continued support over the last few challenging years. The year ahead promises
to be an exciting one as we deliver on expectations and progress our vision
for Powerhouse.
David Hitchcock OBE
Acting Non-Executive Chairman
31 May 2024
CHIEF EXECUTIVE OFFICER'S REVIEW
The year under review was another challenging one for Powerhouse, however
overall a productive one. It was a year that started with a major
reconstruction of the board bringing in three new non-executive directors
(NEDs) and a Non-Executive Chairman. The new board brought with it much
needed experience in Finance, Infrastructure Project Management and
Technology. These changes have already shown they have and will move the Group
towards its goal of trading profitably and being at the forefront of the
waste-to-energy sector. The then Acting CEO informed us of his desire to step
down and I was asked to step in as Interim Chief Executive Officer (CEO).
After a probationary period I was appointed as full time CEO and the position
of Chief Operating Officer (COO) and Chief Technology Officer (CTO) were put
into stasis. The board enjoyed a productive and stable period until late in
the year when the Non -Executive Chairman resigned. David Hitchcock stepped up
from NED to become Acting Non-Executive Chairman with a permanent appointment
likely to be made in Q3 2024.
My objective both as the COO, and now as CEO, was to refocus the Group on the
goals of delivering its first projects and create a qualified pipeline. These
are projects that have met important criteria that includes, but is not
limited to, planning permissions, a feedstock agreement detailing what and how
much feedstock is available, an offtake agreement, an agreement that details
what the required output is (Syngas, heat, hydrogen). This enables the
Powerhouse team to assess technical commercial and financial viability and
before we invest time and capital developing them and to progress the Group
towards becoming a profitable enterprise. The first step to achieving this was
to re-evaluate the Group's "product and value proposition" and take that to
market and potential customers, clearing the deck of projects that would no
longer pass the "qualified opportunity" criteria. The primary potential
project that was therefore terminated as a result of this was the joint
venture (JV) with Peel NRE Ltd. This allowed us to dedicate time to more
viable opportunities whilst we retained an option on the site. We would also
continue to build a strong Group culture following on from the progress
introduced by the previous Acting CEO.
Pipeline Highlights
The prioritised and more importantly validated projects that progressed in
2023 and will remain the focus of operations are:
National Hydrogen, Australia
National Hydrogen (NH2) in Australia, which in the latter part of the year
gained momentum. Since the year end, our efforts have resulted in a five-year
framework agreement being signed with NH2, that will bring with it a Front-End
Engineering Design (FEED) study to be undertaken by Engsolve during 2024.
The framework agreement sets out the terms on which the Group's technology and
engineering expertise would be provided, on a project-by-project exclusivity
basis, to NH2 for its intended roll out of multiple hydrogen-based projects
across Australia, Italy, Switzerland, and Hong Kong.
Ballymena, Northern Ireland
As with NH2, Ballymena is a validated project and has progressed steadily
during the year. There are certain administrative issues that need to be
overcome but we are confident in Ballymena progressing in 2024.
Longford, Ireland
In 2023 we informed Hydrogen Utopia International (HUI) that the Longford
project would be deferred, as the cost-benefit trade-off for the project no
longer fitted with the business focus. Following further negotiations and
discussions with our JV partner, HUI, we committed to adding the project back
into our active listing in 2024, as the terms and prospects of the project
became more favourable, in particular with the opportunity to progress its
development within a European Union Just Transition Fund area, which brings
with it the potential of grant funding for the development.
Plastics to Hydrogen No1 (Protos)
For a long time this was our "Totemic" project. This has now moved to lower
priority. PHE acquired 100% of Protos in 2023, with the JV itself being wound
up, with the assets of the SPV signed over to PHE, and the agreement that PHE
will retain the option (for a fee) until March 2025.
Corporate and Operational Highlights
We have had positive movement on our patents and IP, however toward the end of
the year, we met some headwinds when one of our pending patents was
challenged. This issue was resolved in early May 2024 to the Board's
satisfaction and our commercialisation plans are back on track.
The other hurdle we encountered was due to our proposed kiln supplier,
Mitchell Driers, entering into liquidation in October 2023, thus meaning our
scale up test facility was now at risk. We have since identified and qualified
a new supplier and have placed an order for an alternative kiln, that is
currently being shipped to the UK, and that will enable us to have the
Technology Centre available in Q4 2024.
Engsolve has provided engineering support to Powerhouse for many years, with
the Group holding 48% of the shareholding since August 2021. The Group
acquired the remaining shares in June 2023, such that Engsolve is now a wholly
owned subsidiary of the Group. Engsolve brings with it a history of
successfully delivering engineering services to the energy, oil and gas,
manufacturing, waste, and safety sectors. It is Powerhouse's intention to
build on this legacy, taking advantage of its specialist knowledge and the
R&D capability emerging from the Technology Centre, to become a
significant service provider. This will bring new revenue streams into the
Group and help build its reserves to support the capital projects.
Financial Highlights
The highlights from the financial report are as follows. Further information
is covered in the strategic report.
The Group reported an overall loss in 2023 of £1,427,648 as it continued to
develop the technology and pipeline. This was compared to a loss in 2022 of
£46,198,679 (with the majority of this being driven by an impairment charge).
Revenue for 2023 was £180,959 which was derived from Engsolve Limited which
became part of the Group in June 2023. This revenue was generated through
Engsolve providing Engineering Services to third party customers. The Group
will be looking to continue providing third party Engineering Services
through Engsolve Ltd and to further develop this revenue stream, both through
internal and external work. Non engineering revenues will be generated by
Powerhouse Energy as laid out in the business strategy below.
Business strategy
The strategy was revised in 2023 when it was agreed by the Board that waste to
hydrogen would not be the primary marketing focus of the Group and that it
would be waste to energy, based on the production of syngas. Hydrogen would be
an option for projects that have a validated feedstock and most importantly a
validated offtake. The successful and profitable production of hydrogen relies
heavily on the growth of demand to ensure offtake. Demand is growing, and we
continue to field a number of opportunities. The Board has every confidence
this demand will continue to increase and by the end of this decade, the use
of hydrogen as both a transport fuel and industrial natural gas substitute
will be common. Powerhouse is in an excellent position to take advantage of
this, and in parallel will leverage other sources of revenue. The recent full
integration of Engsolve into the Group provides this opportunity and in the
Strategic Report we set out the role Engsolve will play.
Our strategy is now one focussed on Licensing fees, Royalties and engineering
services revenues which include potentially providing third party testing of
waste streams at the Brackla Technology centre. This concentrates funding
needs to that of costs of operations, further research and development to
prove our technological capabilities, and de-risking the financial position of
the business, until such time that revenues generate sufficient free cash flow
to self-fund operations.
In summary, following a few years of instability, Powerhouse now has a strong
board with a focussed strategy. Projects that do not meet the strict criteria
set by the Board are declined and we have a pipeline of exciting project
opportunities that are commercially and financially suitable. In addition, we
have a good funnel of work via Engsolve from which we can grow our revenue,
and the integration of Engsolve with the wider Group continues to strengthen
our technical capabilities and improve efficiency in the business.
Paul Emmitt
Chief Executive Officer
31 May 2024
STRATEGIC REPORT
This strategic report presents the Directors' opinion regarding the future
direction of the Group and contains certain forward-looking statements. These
statements are made by the Directors in good faith, based on the information
available to them at the time of writing and such statements should be treated
with caution as they address uncertainties.
Path to revenue profit and valuation strategy
Revenue
During 2023 the Group received two main sources of income:
1. £180,959 of third party Group Revenue from Engsolve in the second
half of 2023 post acquisition of 100% of the share capital.
2. £76,206 arising from Engsolve profit share in the first half of
2023 (as a result of Powerhouse's then 48% interest in Engsolve).
Profit and Loss
Following the full acquisition of Engsolve in 2023 and the move to the
Bridgend Technology Centre the CEO and CFO have implemented a review and a
cost cutting exercise, removing or renegotiating duplicated contracts
resulting in a considerable reduction in the cost base.
Goodwill
The Directors reviewed last years key assumptions and came to the conclusion
that the Goodwill should remain at the same valuation of £2,300,000. The
Group acquired £573k of Goodwill in the year due to the acquisition of
Engsolve. The Group completed an impairment review and fair value review of
Engsolve Limited as part of our year end Accounts FY 2023. The outcome of this
impairment review was that we believe the Goodwill valuation at £573k should
not be impaired at the year-end December 23. The Key assumptions and
sensitivities of the above are set out in Note 11 intangible assets
The Vision and the Mission
Powerhouse's vision is to be a leader in technology solutions that utilise
non-recyclable wastes to produce sustainable energy whilst mitigating climate
change impacts.
The Group's mission is to provide flexible, innovative solutions to global
pollution and adverse environmental impacts by converting such non-recyclable
wastes into valuable end-products, including low carbon energy. We will work
with clients and partners to evaluate, design and develop facilities and will
license third party developers to deliver similar facilities that reduce
environmental impact.
The Commercial Offering
The commercial offering of Powerhouse is to apply its expertise in engineering
and technology delivery to the development of facilities that can generate
continuous profit streams for the Group through design consultancy and client
management fees, licensing and royalty agreements. It specialises in low
carbon energy production from waste materials but is able to apply its
know-how and expertise to any application that reduces the impacts to the
environment, both pollution and climate change.
The Group has developed as its core technology in Pyrolysis/gasification and
proprietary control system, based upon the Powerhouse Energy Rapid Modelling
System that can process organic or fossil-based carbonaceous materials using
pyrolysis and gasification. This produces a synthetic gas (or syngas) that can
produce a range of products including:
· Gaseous fuels
· Electrical power
· Heat
· Chemical feedstocks
· Char
· Liquid fuels
Sources of Revenue
Our revenue generation will be derived from:
· Licensing our technology to developers globally
· Royalties - revenue sharing from output of Powerhouse designed
solutions
· Engineering design
· Project and client engineer fees
Project Development
To develop an operating waste-to-energy facility based on the Powerhouse
solution requires a construction and commissioning programme of at least 18
months. Specialist materials are required for some of the equipment due to the
high operating temperatures, especially with hydrogen as the required output.
This means that some of the equipment can only come from specialist
manufacturers and the delivery periods are currently longer than historically
due to ongoing supply chain issues. Prior to construction, it is necessary to
obtain planning permission and the necessary environmental permits, so the
typical project cycle time from conception to reality of a Powerhouse
technical solution is around four years. With other configurations - for
example, an electricity generation only facility - it can be a few months
less, but not substantially shorter. Whatever the period of development,
construction and setting to work, the Group previously earned no revenue
during that period whatever business model was adopted. The new strategy will
include payment for feasibility and engineering designs before financial
close. Therefore, it is increasingly important that projects are validated
more stringently before heavy costs are incurred.
To date, shareholder funds have financed the Group's working capital. This
will remain the case until greater revenues are earned from design fees and
longer term licensing and profit share. As mentioned, Powerhouse will not
actively look to engage in developing projects, whether in partnership or
alone given the difficulty of a Group of our size being able to raise project
capital. This position could potentially change in the event of the right
project with the right partner who would give the markets sufficient
confidence that Powerhouse could go to the market and raise the additional
capital funding.
It is anticipated that Engsolve, which is now fully integrated within the
Powerhouse Group and bringing with it a history of providing engineering
services to third party clients, will continue to contribute to the Group's
revenue. It forms a more stable and less risky base on which the Group can
build a revenue stream, both internally and externally, whilst the capital
projects are developed. This will inevitably require recruitment of some new
personnel and a deliberate drive to sell these services as the business grows.
Engsolve has an existing base and a successful track record. With positioning
of the Group within its specialist areas, it will be possible to build the
client base rapidly, producing income from engineering services to reduce the
cash requirement from shareholder funds.
Research & Development (R&D)
The application of R&D has always been a key factor in Powerhouse's
development. Powerhouse initially tested its technological capabilities in
practice using the Demonstrator Unit in Thornton to convert feedstock into
syngas, at a relatively small scale but which provided the Group with
significant data and information on the process. The Demonstrator Unit has a
capacity of 750kg waste per day. In 2022, the Group announced its intention to
enhance its R&D capacity by establishing the Powerhouse Technology Centre
at Bridgend. A purpose-designed Feedstock Testing Unit (FTU) is in the
manufacture stage and will be installed within the Centre during 2024. The FTU
will have a capacity of 2.5 tonne per day of waste. This is 12 months behind
plan due to Mitchell Driers going into liquidation in late 2023 after months
of being assured that our kiln was being manufactured.
The FTU is essentially a much larger version of the Demonstrator Unit and is a
scaled version of the proposed commercial Thermal Conversion Chamber (TCC)
which will allow testing of the commercial operating plant to be carried out
under controlled conditions. The commercial TCCs are expected to have
capacities in the range of 40 tonne per day. It is anticipated that this will
enable the Powerhouse technology to be demonstrated in practice, independent
of building the commercial unit and hence give comfort to potential investors
that the technical risk can be mitigated.
It is the directors' firm belief that the use of thermal processes such as
pyrolysis and gasification will grow in forthcoming years as chemical
recycling develops and overtakes, and possibly replaces for some materials,
physical recycling. Building the Group's expertise and knowledge in this field
will allow Powerhouse to be at the forefront of this transition. The ambition
is for the Group to be the go-to Group in the UK for these thermal treatments
and associated materials behaviour, and for the Powerhouse Technology Centre
to become a profit centre in its own right.
PRINCIPAL RISKS AND MITIGATIONS
The Board of Directors is responsible for ensuring that the risk register is
maintained and updated. This ensures a reasonable, but not absolute, assurance
that significant risks are mitigated and managed to an acceptable level.
The Executive Directors are responsible for establishing and maintaining the
risk register on all capital projects. This identifies risks and assesses
their potential impact using quantification techniques. Mitigations are then
considered, and the residual risk identified.
Significant risks are those which if materialise will have material impact on
the Group's long-term performance and delivery of its business strategy. These
are summarised in the following table.
Risk Description Mitigation
Operations Greater than anticipated increases in global pricing and pressures on supply All suppliers to be pre-qualified for their relevant experience and stability.
chain adversely impact financial viability of capital projects.
Regular review of supply chain and maintain competitive tension.
Supply chain manufacturing capacity is constrained and cannot meet required
delivery times.
General cost-side inflation will be reflected in offtake price escalation.
Longer development timescales than anticipated.
Contract security and performance requirements to be included in all major
supplier contracts, where possible.
Key contractors/suppliers are unwilling to provide required performance
guarantees.
In-house team to be strengthened with competent personnel, whilst also working
with experienced partners - eg strategic framework agreement with Petrofac.
Technical Risk Risk that the technical solution chosen does not perform to the standards Pyrolysis and gasification are well established technologies, widely reported
anticipated. in research literature.
Substantial testing of the feedstock conversion to syngas process has been
carried out by PHE using the Demonstrator Unit at Thornton.
Powerhouse works with academia to deploy latest computer-aided tools.
Independent due diligence on the process will be carried out prior to
implementation.
The new FTU to be installed at Bridgend will have the capability of simulating
the commercial kiln to enable predictive testing to be performed.
Intellectual Property Patent applications may not be granted. Patents give Powerhouse unique control over its technology, but knowhow and
expertise is considered to be more important and can mitigate against copying.
Patents may be contested.
Maintaining patents is costly and cannot cover the whole world.
Government Policy Drivers of demand for pollution reduction, recycling and climate change Maintain presence and communicate with government departments on Low Carbon
avoidance rely on support from Government policy. Fuels Standards.
Policy supports for reducing CO(2) emissions and counterfactuals are important Currently counterfactuals are not recognised within UK policy.
to provide Powerhouse with competitive advantage.
Competition Competition may depress revenues or even act as a barrier to Powerhouse's The evidence to establish and deliver commercial projects acts as a high
entry to the market. barrier to entry, which deters competition. Powerhouse is not aware of any
significant competitor within its business strategic area.
Once access to land is established, competitive pressures lie with waste gate
fees and offtake sales. PHE strategy now is to target waste streams that can
command adequate gate fees and adapt offtakes to match market demand - hence
the broadening of offering beyond plastics and hydrogen.
Funding of working capital/cash flow Cost of development significantly above ability of shareholder equity to fund. All capital projects are programmed, budgeted and the spend controlled. Most
of the development spend on Protos is already expensed.
Cash position inadequate to fund project development.
Cash flow is managed and reviewed monthly.
New business strategy of providing engineering services through Engsolve will
improve cash flow.
The Group considers various forms of funding at a Group and project specific
level.
Financing of capital projects Shareholder equity cannot finance capital projects. Project finance approach to be followed. Powerhouse will de-risk each element
required to achieve an investable project.
Cost of capital projects increase and depress IRR below investment level.
Engineering design completed. Specifications available for plant &
equipment to be contracted using model form contracts.
Projects value engineered to minimise cost prior to design freeze.
Capital costs to be fixed as early as possible. Currency risk to be hedged.
Feedstock supply risk Feedstock unavailable or only at negative gate fees. Feedstock supply risk will be held by developer / client. Powerhouse will only
validate projects that have feedstock supply agreements in place.
Offtake market risk Offtake market at different price point than anticipated. Offtake agreements will be outside scope of Powerhouse, other than when
Powerhouse carries out commercial feasibility study on behalf of a client. Off
take agreements will be required for validation. These studies will be paid
for by the client.
Lack of demand for offtake.
Regulatory and Compliance Risk Regulations may change. Projects designed to meet existing regulations. Change in law provisions
included in project contracts.
Key Performance Indicators (KPIs)
The Group now has five full time equivalent employees and will introduce KPIs
across all aspects of the business, including business development, operations
and finance. In particular, the appointment of a full time Chief Financial
Officer in December 2023 requires new KPIs that drive improvements in
financial management.
The top level KPIs
· Deliver fully functional FTU facility at Bridgend
· Sign and commence first licensed commercial project
· Develop and maintain technically and commercially qualified
project pipeline that will have five projects in design within the next six
years
Financial measures:
· Underlying profit and loss to measure the Group's profitability
for the year attributable to equity shareholders of the Group. It will exclude
exceptional items, remeasurements, timing and force majeure incidents from the
calculation;
· Research and Development spend. This will measure expenditure
invested in the development of decarbonisation of energy systems, and will
provide a transparent view of the Group's compatibility with reduction in
contamination, pollution and climate change mitigation.
· Return on capital employed (ROCE). The Group will provide a target
and forecast on the potential ROE of its capital investments to provide an
indication of its performance in generating value for shareholders.
Non-Financial Measures
· Contamination & Pollution Reduction. This is a projected measure
of the reduction the Group's projects will have on reducing contamination and
pollution by the waste products processed by the Group's capital projects and
engineering services provided to others.
· Business Development metrics such as a rolling pipeline of
opportunities being taken through from viability studies to FEED, financial
close and into build.
· Climate change mitigation. This is a projected measure of the
reduction the Group's projects and engineering services will have on reducing
climate change impacts.
· Stakeholder satisfaction. Customer and stakeholder satisfaction will
be measured with a view to maintaining engagement with these groups and
improving service levels.
· Employee Engagement. The Group will measure how engaged our employees
feel, based on the percentage of favorable responses to questions repeated
annually in our employee engagement survey. The target will be to increase
engagement compared with the previous year. A review of diversity within the
workforce will also be carried out a with view to increasing diversity as the
workforce grows.
Statement of Directors' Duties to Stakeholders under s.172 Companies Act 2006
The Directors acted in in good faith throughout the year with a view to
promoting the long-term success of the Group for the benefit of its members as
a whole, with due regard to stakeholders and the matters set out in section
172 of the Companies Act 2006.
The Board recognises its responsibilities to each of the Group's stakeholders
and to society, and have endeavoured to ascertain the interests and views of
its stakeholders and consider these when making decisions. The Board
acknowledges its responsibility for setting and monitoring the culture, values
and reputation of the Powerhouse Energy Group, and seeks to live by its
values.
When making decisions, the Directors have regard to all stakeholders but
acknowledge that not every decision will result in a preferred outcome for
all. The Group regards its shareholders, employees, customers, contractors,
consultants and advisors, business partners and suppliers as forming part of
the wider stakeholder group. The Board strives to balance the different and
competing priorities and interests of our stakeholders in a way compatible
with the long-term, sustainable success of the business and which maintains a
standard of business conduct aligned to our values and purpose.
The Directors are aware of their duty under section 172 of the Companies Act
2006 to act in the way which they consider, in good faith, would be most
likely to promote the success of the Group for the benefit of its members as a
whole and, in doing so, to have regards (amongst other matters) to:
· The likely consequences of any decision in the long term;
· The interests of the Group's employees;
· The need to foster the Group's business relationships with
suppliers, customers and others;
· The impact of the Group's operations on the community and the
environment;
· The desirability of the Group maintaining a reputation for high
standards of business conduct; and
· The need to act fairly between members of the Group.
The Board recognises that the long-term success of the Group requires positive
interaction with its stakeholders. Positive engagement with stakeholders will
enable our stakeholders to better understand the activities, needs and
challenges of the business and enable the Board to better understand and
address relevant stakeholder views which will assist the Board in its decision
making and to discharge its duties under Section 172 of the Companies Act
2006.
We reproduce here the Code of Conduct of the Group for easy reference, which
the directors believe meet the requirements of s172 of the Companies Act 2006.
Group's Code of Conduct
1. Introduction
This Powerhouse Energy Group (Powerhouse) Code of Conduct is a steering
document that defines how the Group will act towards its employees, towards
its clients, business partners, suppliers, competitors, and other
organisations in all situations related to our business. The Code of Conduct
is an integral part of the Group's Environmental, Social and Governance (ESG)
Strategy and defines our corporate responsibility in society.
It is mandatory that this Code of Conduct is understood and complied with by
all personnel working for the Group and its subsidiaries or on their behalf,
including Representatives.
The Powerhouse Board of Directors are ultimately responsible for the Code and
its implementation. The Board will monitor its compliance through annual
performance reviews, annual employee surveys and internal and external audits.
All Powerhouse officers, employees and those representing the Group represent
the Group's brand and reputation through the solutions and value we create and
through our behaviour.
2. Our People
Powerhouse will maintain a structured recruitment process with a structured
performance appraisal and talent management process. We will create
development opportunities and continuous learning for our employees. By
encouraging a feedback culture and working with the insights from our
employees, we increase their engagement.
It is the responsibility of each employee to look after their own personal and
professional development, but at all times supported by the Group. Employees
will be given equal opportunities for professional development both within
their existing fields and in new areas.
The Group believes that diversity is an important asset within the Group and
in our relationships with clients and stakeholders. We promote equal rights
and opportunities of employees in the workplace regardless of their gender
identity, age, ethnicity, religion or other belief, disability, or sexual
orientation.
3. Social Responsibility
The Group accepts continuing responsibility for its services to its clients
and thereby to society. The Group will permanently contribute to the benefit
of its clients and society through sustained technological development and
personnel training aimed at improving its performance.
Sustainability is a permanent goal in every project. The largest contribution
to sustainability lies in the projects Powerhouse develops and has three
facets:
1. Our projects must contribute to sustainable development;
2. We will strive to increase the sustainability performance of our
clients' projects; and
3. We will act sustainably in our own operations and performance.
Powerhouse is committed to improving the lives of people and to respect human
rights. We aim to always act in a socially and ethically responsible way,
within the laws of the countries in which we operate. We support and respect
human rights, as defined by the UN in the Universal Declaration of Human
Rights.
4. Quality of Service
The Group will only undertake project assignments in its areas of expertise
where it has the capabilities to deliver efficient and effective service to
its clients. We are committed to providing high quality services to clients
and will focus on quality management as a working methodology and on permanent
improvement as a means to improve that quality of service. It is our intent to
be certified in Quality, Environment and Health & Safety in accordance
with ISO 9001, ISO 14001 and ISO 45001 and we are committed to continuously
improve our management system. We should note that the integration of Engsolve
brings with it full ISO 9001 and 14001 accreditation and a robust management
system that can be adopted by Powerhouse.
Health and safety is a top priority for the Group, with a zero-incident
target. We are committed to eliminate hazards, reduce risk and ensure that
health and safety information, instruction, training, and supervision is
provided to all.
The Group is committed to the continual improvement of its knowledge base,
abilities and tools in the area of its expertise. The Group will focus on
technology management as a working methodology and shall extend to its clients
the benefits of its professional achievements.
5. Objectivity
Powerhouse will be loyal to its clients and will maintain the confidentiality
of any information from the client that is obtained in the process of
performing services. The Group will also keep confidential the documents and
reports prepared for the client.
The Group will avoid any conflict of interest and will inform a client
beforehand of any potential conflict of interest that could emerged during the
execution of its services.
The Group will only offer its services under contracting terms that do not
interfere with its independence, integrity and objectivity.
Powerhouse will not accept any remuneration that could encourage the offering
of a biased opinion.
6. Corporate integrity
Powerhouse complies with all applicable laws, regulations, and other
requirements applicable to operations in the countries where Powerhouse is
active. This Code applies to all parts of the organisation, irrespective of
where we are based, or where our projects are performed.
The Group will operate and compete in accordance with the legislation of each
territory in which it operates and will not accept fraud, corruption, bribes,
or unpermitted competition-restricting practices. We are committed to
supporting international and local efforts to eliminate corruption and
financial crime. We will not commit to activities that we cannot defend or
account for, and we must not make decisions based on improper relationships or
personal relationships. We also undertake to maintain correct and accurate
accounting and reporting in accordance with the accounting rules in each
territory in which we operate.
The Group will act at all times for the benefit of clients, and will carry out
services with professional integrity, whilst not jeopardising the interests of
society.
The promotional activity of the Group and its services will uphold the dignity
and reputation of the industry. Brochures and other formal documents
describing resources, experience, work and reputation will reflect the Group's
actual circumstances in a truthful manner.
The Group will manage with integrity its internal and external clients. It
will focus on business integrity management as a working methodology.
We respect the privacy of individuals and recognise the importance of personal
data entrusted to us by our employees, clients, and other parties.
Confidential information received by Powerhouse from clients and other
external parties must as a minimum be treated and protected in the same way as
the Group's own confidential information. It is the responsibility of every
employee and representative to process and protect all personal data compliant
with the applicable privacy legislation in a relevant and proper manner.
Employees and representatives must report any violations of business ethics or
human rights that arise in their course of work, even if the Group is not
directly involved or party to it. In addition, employees should report
incidents which could be a breach of business ethics and may remain anonymous
if they so wish.
7. Communications
Powerhouse employees are encouraged to communicate and share information but
must at the same time ensure that the Powerhouse brand is strengthened and not
weakened.
Our communications must always reflect, protect and develop the Group's
position in the market as well as show that we are available to our
stakeholders. Every Powerhouse employee and representative is an ambassador
for theGroup. Communications must support the Group's business goals and
profitable growth strategy while securing a cohesive brand identity in the
market. All managers are responsible for ensuring that they and their
employees comply with the guidance documents that apply for communication
within and from Powerhouse.
As a Group quoted on the AIM Market of the London Stock Exchange, we are
obliged to communicate anything related to, inter alia, the Powerhouse
business, financial condition and results in line with the laws and rules that
apply to such companies. We report transactions correctly and in a true and
fair way.
8. Competition
The Group will only solicit work and participate in private and public
competitive tendering under a high standard of corporate ethics and
competitive practices, and with total integrity in its transactions. The Group
will not participate in prohibited anti-competitive activities, illegal
price-fixing agreements, market sharing or abuse of dominant position.
The Group favours quality-based selection for the contracting of services.
If solicited to review the work performed by another Group, the Group will act
in accordance with its business integrity and objectivity policies.
The Group will not endorse compensation or contribution arrangements destined
to influence or secure work, nor seek commissions from suppliers of equipment
and services recommend it to the client as part of the Group's services.
The Group will not take part in activities that could damage the reputation of
its business or the business of others.
Paul Emmitt
Chief Executive Officer
31 May 2024
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF POWERHOUSE ENERGY GROUP PLC
Opinion
We have audited the financial statements of Powerhouse Energy Group PLC (the
'parent company') and its subsidiaries (the 'group') for the year ended 31
December 2023, which comprise the group Statement of comprehensive income, the
group and company Balance sheets, the group Statement of cash flows, the group
and company Statement of changes in equity and the related notes, including a
summary of significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and United
Kingdom Accounting Standards, including UK adopted International Accounting
Standards applicable in the UK and Republic of Ireland' (United Kingdom
Generally Accepted Accounting Practice).
In our opinion:
· the financial statements give a true and fair view of the state
of the group's and of the parent company's affairs as at 31 December 2023 and
of the group's loss for the year then ended;
· the group financial statements have been properly prepared in
accordance with UK-adopted International Accounting Standards;
· the parent company financial statements have been properly
prepared in accordance with UK-adopted International Accounting Standards and
as applied in accordance with the Companies Act 2006; and
· the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditors' responsibilities for the
audit of the financial statements section of our report. We are independent of
the group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the United Kingdom, including the
Financial Reporting Council's Ethical Standard and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Summary of our audit approach
Key audit matters Group
· Carrying value of goodwill
· Correct treatment of the acquisition of subsidiary undertakings.
Materiality Group
· Overall materiality: £100,000 (2022: £105,000)
· Performance materiality: £75,000 (2022: £78,750)
Parent Company
· Overall materiality: £95,000 (2022: £105,000)
· Performance materiality: £72,500 (2022: £78,750)
Scope Our audit procedures covered 100% of revenue, 100% of total assets and 100% of
loss before tax.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the group financial statements of the
current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on the overall audit strategy, the allocation of
resources in the audit and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the group financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key Audit Matter How the scope of our audit addressed the key audit matter
Carrying value of goodwill Our audit procedures:
A key balance on the statement of financial position is intangible fixed Parent Company Goodwill
assets of £2,533,284 (2021: £2,502,073) at 31 December 2023 in the parent's
single company accounts as detailed in note 11. We held various discussions and meetings with the client to review the
valuation model and the assumptions used therein. This was compared to
valuations completed in prior years undertaken by suitably qualified
independent advisors providing reassurance of the accuracy of opening balances
In addition to the above there is additional goodwill generated on for our audit.
consolidation with total consolidated goodwill amounting to £3,106,865 (2022:
£2,502,073) as at 31 December 2023
We evaluated critically the assumptions by reworking the calculations and
challenged the management by:
The carrying value of goodwill in accordance with IAS36 is required to be
tested for annual impairment along with whether there is any indication of
impairment of the other intangibles. The measurement of the recoverable amount
requires the preparation of detailed cash flow forecasts that are subject to a · Comparing the model to the actual performance for the year ended
number of highly sensitive assumptions surrounding the future trade of the 31 December 2023 noting that income was still not being generated
Group.
· Comparing the assumptions of the prior year to the actual
performance of the year ended 31 December 2023 again noting that projects had
been delayed.
During the year, the directors have assessed the valuation of goodwill
internally. · Comparing the assumptions used in the prior year to the current
year to identify any changes and obtaining explanations from management
· Recalculating the WACC and comparing the rates used.
· Comparison of the outcome to reports prepared by external
advisors
Valuation of Goodwill was deemed to be compliant with IAS 38, Intangible
Assets.
No indicators of impairment were noted during 2023, or events after the
reporting date that impact the valuation of Goodwill in accordance with IAS36.
Consolidated Goodwill
The goodwill arose as part of he acquisition of Engsolve Limited. The client
has prepared an impairment review of the goodwill totalling £573,781.
The method of ensuring no impairment was required was a review of the cash
generation of the entity. The judgements and assumptions have been reviewed
with management and challenged.
No indications of impairment were identified upon review.
Consolidation Our audit procedures:
In the previous year the company has claimed an exemption from preparing The Business combinations have been reviewed and discussed with management.
consolidated financial statements on the basis that the only UK subsidiary was Calculations for goodwill were received from Management and the acquisition
non trading and not material and there being long term restrictions on the balance sheet values have been challenged and audited to the same materiality
operations of the Company's subsidiaries in the US and Switzerland. as noted above. These balances have then been compared to the actual Fair
Values and any adjustments have been noted accordingly in accordance with
IFRS3.
This year the company has acquired material UK subsidiaries that result in a
consolidation being required. The US and Switzerland companies are still
subject to the same restrictions and therefore have been excluded from the Relevant disclosures have been verified and checked to the financial
consolidation. statements and reviewed accordingly.
We have reviewed the applicable legislation surrounding the exclusion of the
foreign entities on the basis that the company does not control these
entities.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which
help us to determine the nature, timing and extent of our audit procedures.
When evaluating whether the effects of misstatements, both individually and on
the financial statements as a whole, could reasonably influence the economic
decisions of the users we take into account the qualitative nature and the
size of the misstatements. Based on our professional judgement, we determined
materiality as follows:
Group materiality Parent company materiality
Overall materiality £100,000 (2022: £105,000) £95,000 (2022: £105,000)
Basis for determining overall materiality 6% of operating loss 6% of operating loss
Rationale for benchmark applied Whilst the Statement of Financial Position has material elements included Whilst the Statement of Financial Position has material elements included
namely the Goodwill and Bank, we do not feel a materiality that is based on namely the Goodwill and Bank, we do not feel a materiality that is based on
the Statement of Financial Position totals is appropriate as it is though that the Statement of Financial Position totals is appropriate as it is though that
the shareholders will consider the operating loss of utmost importance to the shareholders will consider the operating loss of utmost importance to
ascertain how long the company can continue to trade. ascertain how long the company can continue to trade.
Performance materiality £75,000 (2022: £78,750) £72,500 (2022: £78,750)
Basis for determining performance materiality 75% of overall materiality 75% of overall materiality
Reporting of misstatements to the Audit Committee Misstatements in excess of £5,000 and misstatements below that threshold Misstatements in excess of £5,000 and misstatements below that threshold
that, in our view, warranted reporting on qualitative grounds. that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
The group consists of the parent company, two trading companies and 5 other
entities which were dormant or non-trading. All entities are based in the UK
The coverage achieved by our audit procedures was:
Number of components Revenue Total assets Profit/Loss before tax
Full scope audit 1 0% 82% 94%
Specific audit procedures* 2 100% 18% 6%
Total 3 100% 100% 100%
* Specific audit procedures were performed in order to obtain sufficient and
appropriate coverage over the group's loss before tax and borrowings.
A full scope audit was performed for the parent company, with specific audit
procedures being performed for the subsidiary company. The subsidiary
companies were exempt from audit in their own right under section 479A of the
Companies Act 2006.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the group's and parent company's ability to continue to adopt
the going concern basis of accounting included:
· obtaining an understanding of management's going concern
evaluation and reviewing cashflow forecasts;
· evaluating management's ability to accurately forecast
performance through comparison of historic performance against forecast;
· performing sensitivity analysis to understand the impact of
reasonably possible outcomes, or changes to assumptions; and
· testing the integrity and mechanical accuracy of the forecast
model.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group's or the parent
company's ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the Strategic Report and the Directors'
Report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the Strategic Report and the Directors' Report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent
company and their environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report or the Directors'
Report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received from
branches not visited by us; or
· the parent company financial statements are not in agreement with
the accounting records and returns; or
· certain disclosures of directors' remuneration specified by law
are not made; or
· we have not received all the information and explanations we
require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement set out
on page 32, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the group's and the parent 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 group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance but is
not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
The extent to which the audit was considered capable of detecting
irregularities, including fraud
Irregularities are instances of non-compliance with laws and regulations.
The objectives of our audit are to obtain sufficient appropriate audit
evidence regarding compliance with laws and regulations that have a direct
effect on the determination of material amounts and disclosures in the
financial statements, to perform audit procedures to help identify instances
of non-compliance with other laws and regulations that may have a material
effect on the financial statements, and to respond appropriately to identified
or suspected non-compliance with laws and regulations identified during the
audit.
In relation to fraud, the objectives of our audit are to identify and assess
the risk of material misstatement of the financial statements due to fraud, to
obtain sufficient appropriate audit evidence regarding the assessed risks of
material misstatement due to fraud through designing and implementing
appropriate responses and to respond appropriately to fraud or suspected fraud
identified during the audit.
However, it is the primary responsibility of management, with the oversight of
those charged with governance, to ensure that the entity's operations are
conducted in accordance with the provisions of laws and regulations and for
the prevention and detection of fraud.
In identifying and assessing risks of material misstatement in respect of
irregularities, including fraud, the group audit engagement team:
· obtained an understanding of the nature of the industry and
sector, including the legal and regulatory framework that the group and parent
company operate in and how the group and parent company are complying with the
legal and regulatory framework;
· inquired of management, and those charged with governance, about
their own identification and assessment of the risks of irregularities,
including any known actual, suspected or alleged instances of fraud;
· discussed matters about non-compliance with laws and regulations
and how fraud might occur including assessment of how and where the financial
statements may be susceptible to fraud.
The most significant laws and regulations were determined as follows:
Legislation / Regulation Additional audit procedures performed by the Group audit engagement team
included:
UK-adopted IAS and Companies Act 2006 including IFRS, Companies Act 2006 and Review of the financial statement disclosures and testing to supporting
AIM Rules documentation;
Completion of disclosure checklists to identify areas of non-compliance.
Tax compliance regulations Inspection of advice received from external tax advisors specifically
surrounding the application of the Research and Development Tax Credit scheme.
The areas that we identified as being susceptible to material misstatement due
to fraud were:
Risk Audit procedures performed by the audit engagement team:
Revenue A sample of bank receipts have been reviewed and challenged with management to
identify if the group has received any revenue in the year.
In addition the underlying contracts have been reviewed regarding the ongoing
projects of the group to ensure these are still pre revenue.
Management override of controls Testing the appropriateness of journal entries and other adjustments;
Assessing whether the judgements made in making accounting estimates are
indicative of a potential bias; and
Evaluating the business rationale of any significant transactions that are
unusual or outside the normal course of business.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
http://www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Mario Cientanni (Senior Statutory Auditor)
for and on behalf of
Barnes Roffe LLP
Chartered Accountants
Charles Lake House
Claire Causeway
Crossways Business Park
Dartford
Kent
DA2 6QA
Date: 31 May 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For The Year Ended 31 December 2023
31 December 31 December
Note 2023 2022
£ £
Revenue 2 180,959 380,277
Cost of sales (118,294) (295,912)
Gross Profit 62,665 84,365
Engineering costs (799,909) (512,504)
Administrative expenses 4 (1,109,150) (1,745,673)
Acquisition costs (31,457) -
Share of associate 5 76,206 60,326
Operating loss (pre exceptional items) (1,801,645) (2,113,486)
Exceptional Items
Exclusivity Impairment 6 - (500,000)
Goodwill Impairment 6 - (40,660,000)
Loan Impairment 7 - (2,159,274)
Revenue Impairment 7 - (986,392)
Fair Value Gain on Associate (Engsolve Limited) 13 270,381 -
Operating Loss (post exceptional items) (1,531,264) (46,419,152)
Net finance income/(cost) 8 (6,200) 65,448
Loss before taxation (1,537,464) (46,353,704)
Income tax credit 9 109,817 155,025
Total comprehensive loss (1,427,647) (46,198,679)
Loss per share (pence) 10 (0.04) (1.17)
All activities are in respect of continuing operations and there are no other
items of comprehensive income.
The notes numbered 1 to 32 are an integral part of the financial information.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2023
Note 2023 2022
£ £
ASSETS
Non-current assets
Intangible fixed assets 11 3,106,865 2,502,073
Tangible fixed assets 12 1,159,636 5,795
Investments in subsidiary undertakings 13 - 1
Investments in associated undertakings 13 - 187,638
Total non-current assets 4,266,501 2,695,507
Current Assets
Trade and other receivables 15 325,834 403,247
Corporation tax recoverable 16 168,527 166,318
Cash and cash equivalents 17 4,348,887 5,882,897
Total current assets 4,843,248 6,452,462
Total assets 9,109,749 9,147,969
LIABILITIES
Current liabilities
Creditors: amounts falling due within one year 18 (506,258) (279,306)
Total current liabilities (506,258) (279,306)
Total assets less current liabilities 8,603,491 8,868,663
Creditors: amounts falling due after more than one year 19 (122,475) -
Net assets 8,481,016 8,868,663
EQUITY
Share capital 22 23,940,856 22,900,856
Share premium 23 61,220,809 61,291,710
Accumulated deficit 24 (76,680,649) (75,323,903)
Total surplus 8,481,016 8,868,663
The financial statements of Powerhouse Energy Group Plc, Company number
03934451, were approved by the Board of Directors and authorised for issue on
31 May 2024 and signed on its behalf by:
Paul Emmitt
Director
The notes numbered 1 to 32 are an integral part of the financial information.
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 December 2023
Note 2023 2022
£ £
ASSETS
Non-current assets
Intangible fixed assets 11 2,533,284 2,502,073
Tangible fixed assets 12 816,244 5,795
Investments in subsidiary undertakings 13 1,109,987 1
Investments in associated undertakings 13 - 187,638
Total non-current assets 4,459,515 2,695,507
Current Assets
Trade and other receivables 15 454,087 403,247
Corporation tax recoverable 16 168,527 166,318
Cash and cash equivalents 17 3,775,250 5,882,897
Total current assets 4,397,864 6,452,462
Total assets 8,857,379 9,147,969
LIABILITIES
Current liabilities
Creditors: amounts falling due within one year 18 (1,056,183) (279,306)
Total current liabilities (1,056,183) (279,306)
Total assets less current liabilities 7,801,196 8,868,663
Creditors: amounts falling due after more than one year 19 (122,475) -
Net assets 7,678,721 8,868,663
EQUITY
Share capital 22 23,940,856 22,900,856
Share premium 23 61,220,809 61,291,710
Accumulated deficit 24 (77,482,944) (75,323,903)
Total surplus 7,678,721 8,868,663
The financial statements of Powerhouse Energy Group Plc, Company number
03934451, were approved by the Board of Directors and authorised for issue on
31 May 2024 and signed on its behalf by:
Paul Emmitt
Director
The notes numbered 1 to 32 are an integral part of the financial information.
CONSOLIDATED STATEMENT OF CASHFLOWS
For The Year Ended 31 December 2023
Note 2023 2022
£ £
Cash flows from operating activities
Operating Loss (1,531,265) (46,419,152)
Adjustments for:
Share based payments 40,000 (18,629)
Amortisation 16,997 10,263
Depreciation 41,885 27,970
Goodwill & Exclusivity impairment (712,751) 41,160,000
Loan Impairment - 2,077,600
Share of associate result (76,206) (49,033)
Loan Interest Charge - 81,674
Fair value gain on Associate (270,381) -
Tax Paid (58,710) -
Other none cash movements - 3,006
-Changes in working capital:
Decrease/(Increase) in trade and other receivables 646,745 560,401
Increase/(Decrease) in trade and other payables 62,514 (284,475)
Tax credits received 166,318 166,318
Net cash used in operations (1,674,854) (2,684,057)
Cash flows from investing activities
Cash paid for investment in subsidiary 27 (575,761) -
Cash acquired on acquisition of subsidiary 27 472,580 -
Loans advanced 14 - (927,600)
Purchase of intangible fixed assets 11 (48,207) (117,838)
Purchase of tangible fixed assets 12 (671,415) (673)
Net cash flows from investing activities (822,803) (1,046,111)
Cash flows from financing activities
Proceeds from issue of shares 1,000,000 -
Payments of principal under leases 20.3 (30,153) (23,455)
Net finance costs 8 (6,200) (940)
Net cash flows from financing activities 963,647 (24,395)
Net increase/(decrease) in cash and cash equivalents (1,534,010) (3,754,563)
Cash and cash equivalents at beginning of year 5,882,897 9,637,460
Cash and cash equivalents at end of year 4,348,887 5,882,897
The notes numbered 1 to 32 are an integral part of the financial information.
COMPANY STATEMENT OF CASHFLOWS
For The Year Ended 31 December 2023
Note 2023 2022
£ £
Cash flows from operating activities
Operating Loss (2,386,537) (46,419,152)
Adjustments for:
Share based payments 40,000 (18,629)
Amortisation 16,997 10,263
Depreciation 41,885 27,970
Goodwill & Exclusivity impairment - 41,160,000
Loan Impairment - 2,077,600
Share of associate result (76,206) (49,033)
Fair Value Gain on Associate (270,381) -
Loan Interest Charge - 81,674
Other none cash movements - 3,006
-Changes in working capital: - -
Decrease/(Increase) in trade and other receivables (50,840) 560,401
Increase/(Decrease) in trade and other payables 748,586 (284,475)
Tax credits received 166,318 166,318
Net cash used in operations (1,770,178) (2,684,057)
Cash flows from investing activities
Purchase of interest in associate 13 (575,761) -
Loans advanced 14 - (927,600)
Purchase of intangible fixed assets 11 (48,207) (117,838)
Purchase of tangible fixed assets 12 (671,416) (673)
Net cash flows from investing activities (1,295,384) (1,046,111)
Cash flows from financing activities
Proceeds from issue of shares 1,000,000 -
Payments of principal under leases 21.3 (30,153) (23,455)
Net finance costs 8 (11,932) (940)
Net cash flows from financing activities 957,915 (24,395)
Net increase/(decrease) in cash and cash equivalents (2,107,647) (3,754,563)
Cash and cash equivalents at beginning of year 5,882,897 9,637,460
Cash and cash equivalents at end of year 3,775,250 5,882,897
The notes numbered 1 to 32 are an integral part of the financial information.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For The Year Ended 31 December 2023
Ordinary share capital Share premium Merger Accumulated deficit
£ Deferred shares £ relief £ Total
£ reserve £
£
Balance at 1 January 2022 19,787,071 3,113,785 61,291,710 36,117,711 (65,224,306) 55,085,971
Transactions with equity parties:
- Share issues on exercise warrants - - - - - -
- Share issues to exercise options - - - - - -
- Share issues in year - - - - - -
Share based payments - - - - (18,629) (18,629)
Share issue costs - - - - - -
Reserve transfer- goodwill impairment - - - (36,117,711) 36,117,711 -
Total comprehensive loss - - - - (46,198,679) (46,198,679)
Balance at 31 December 2022 19,787,071 3,113,785 61,291,710 - (75,323,903) 8,868,663
Transactions with equity parties:
- Share issues on exercise warrants - - - - -
- Share issues to exercise options - - - - - -
- Share issues in year 1,040,000 - - - - 1,040,000
Share based payments - - (70,901) - 70,901 0
Share Issue costs - - - - - -
Total comprehensive loss - - - - (1,427,647) (1,427,647)
Balance at 31 December 2023 20,827,071 3,113,785 61,220,809 - (76,680,649) 8,481,016
The following describes the nature and purpose of each reserve within equity:
Deferred shares: Represents the combined total
of all deferred shares (0.5p, 4p and 4.5p)
Share premium: Amount subscribed for share
capital in excess of nominal value
Merger relief reserve: Amount subscribed for share capital in
excess of nominal value where merger relief applies (Note 1.1)
Accumulated deficit: Accumulated deficit represents the
cumulative losses of the Group and all other net gains and losses and
transactions with shareholders not recognised elsewhere
The notes 1 to 32 are an integral part of the financial information.
COMPANY STATEMENT OF CHANGES IN EQUITY
For The Year Ended 31 December 2023
Ordinary share capital Share premium Merger Accumulated deficit
£ Deferred shares £ relief £ Total
£ reserve £
£
Balance at 1 January 2022 19,787,071 3,113,785 61,291,710 36,117,711 (65,224,306) 55,085,971
Transactions with equity parties:
- Share issues on exercise warrants - - - - - -
- Share issues to exercise options - - - - - -
- Share issues in year - - - - - -
Share based payments - - - - (18,629) (18,629)
Share issue costs - - - - - -
Reserve transfer- goodwill impairment - - - (36,117,711) 36,117,711 -
Total comprehensive loss - - - - (46,198,679) (46,198,679)
Balance at 31 December 2022 19,787,071 3,113,785 61,291,710 - (75,323,903) 8,868,663
Transactions with equity parties:
- Share issues on exercise warrants - - - - -
- Share issues to exercise options - - - - - -
- Share issues in year 1,040,000 - - - - 1,040,000
Share based payments - - (70,901) - 70,901 -
Share Issue costs - - - - - -
Total comprehensive loss - - - - (2,229,942) (2,229,942)
Balance at 31 December 2023 20,827,071 3,113,785 61,220,809 - (77,482,944) 7,678,721
The following describes the nature and purpose of each reserve within equity:
Deferred shares: Represents the combined total
of all deferred shares (0.5p, 4p and 4.5p)
Share premium: Amount subscribed for share
capital in excess of nominal value
Merger relief reserve: Amount subscribed for share capital in
excess of nominal value where merger relief applies (Note 1.1)
Accumulated deficit: Accumulated deficit represents the
cumulative losses of the company and all other net gains and losses and
transactions with shareholders not recognised elsewhere
The notes 1 to 32 are an integral part of the financial information.
NOTES TO THE ACCOUNTS
For The Year Ended 31 December 2023
1. Accounting Policies
Powerhouse Energy Group Plc is a company incorporated in England and Wales.
The Group is a public limited company quoted on the AIM market of the London
Stock Exchange. The address of the registered office is Unit 3/3a Garth Drive,
Brackla Industrial Estate, Bridgend, Wales, CF31 2AQ. The principal activity
of the Group is to continue the development of its technology and to support
its customers in order to achieve its full commercial roll-out. The Principal
acativity of the group also includes the provision of Engineering services by
a subsidiary company. The following accounting policies have been applied
consistently in dealing with items which are considered material in relation
to the financial information.
1.1. Basis of consolidation
The consolidated and parent company financial statements for the year ended 31
December 2023 have been prepared in accordance with International Financial
Reporting Standards ("IFRS") issued by the International Accounting Standards
Board (IASB), as adopted for use in the United Kingdom (UK) and with those
parts of the Companies Act 2006 applicable to companies reporting under IFRS
(except as otherwise stated). These accounting policies and methods of
computation are consistent with the prior year, unless otherwise stated.
The consolidated group financial statements consist of the financial
statements of the parent company Powerhouse Energy Group PLC together with all
other entities controlled by the parent company (its subsidiaries) and the
groups share of its interests in joint ventures and associates. Control is
achieved where the Group is exposed to, or has the rights to, variable returns
from its investments with the entity and has the ability to affect those
returns through its power over the entity. The Group obtains and exercised
control through voting rights.
All financial statements are made up to 31 December 2023. Where necessary,
adjustments are made to the financial statements of subsidiaries to bring the
accounting policies used into line with those used by other members of the
group.
All intra group transactions, balances and unrealised gains on transactions
between group companies are eliminated on consolidation. Unrealised losses are
also eliminated unless the transaction provided evidence of an impairment of
the asset transferred.
Subsidiaries are consolidated in the Groups financial statements from the date
the control commences until the date that control ceases. Acquisitions of
subsidiaries are dealt with using the acquisition method. The acquisition
method involves the recognition at fair value of all identifiable assets and
liabilities, including contingent liabilities of the subsidiary, at the
acquisition date, regardless of whether or not they were recorded in the
financial statements of the subsidiary prior to acquisition. On initial
recognition, the assets and liabilities of the subsidiary are included in the
Consolidated Statement of Financial Position at their fair values, which are
also used as the cost bases for subsequent measurement in accordance with the
Group accounting policies.
Goodwill is stated after separating out identifiable intangible assets.
Goodwill represents the excess of acquisition costs over the fair value of the
Group's share of the identifiable net assets of the acquired subsidiary at the
date of acquisition.
Entities in which the group holds an interest and which are jointly controlled
by the Group and one or more other ventures under a contractual arrangement
are treated as joint ventures. Entities other than subsidiary undertakings or
joint ventures, in which the group has a participating interest and over whose
operating and financial policies the Group exercises a significant influence,
are treated as associates.
Investments in joint ventures and associates are carried in the group
statement of financial position at cost plus post acquisition changes in the
Groups share of the net assets of the entity, less any impairment in value.
The carrying value of investments in joint ventures and associates include
acquired goodwill.
If the Groups share of losses in a joint venture or associate equals or
exceeds its investment in the joint venture or associate, the group does not
recognise further loses unless it has incurred obligations to do so or has
made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates
are eliminated to the extent of the groups interest in the entity.
The Group's UK subsidiaries are both trading and non-trading. There are
long-term restrictions on the operations of the Group's subsidiaries in the US
and Switzerland. With these restrictions in place, the Group is also unable to
exert control over the subsidiaries. As such the Group has claimed exemptions
applicable to it under Companies Act section 405 (2) and 405 (3b) and IFRS 10
to not include these subsidiaries located in the US and Switzerland in the
Consolidated Financial statements for the year ended 31 December 2023.
Investments in subsidiaries that are not consolidated are carried at cost less
any provision for impairment.
The acquisition of Waste2Tricity Limited during 2020 was transacted by way of
a share for share exchange and qualifies for merger relief, meaning that no
share premium is recorded on the issue of the consideration shares. The excess
of the fair value of consideration shares over their nominal value has been
recorded in a merger relief reserve.
Associates are entities over which the Group has significant influence but not
control or joint control as defined under IAS 28. This is generally the case
where the Group holds between 20% and 50% of the voting rights. Investments in
associates are accounted for using the equity method of accounting.
Under the equity method of accounting, investments are initially recognised at
cost and adjusted thereafter to recognise the Group's share of the
post-acquisition profits or losses of the investee in the Income statement.
Dividends received or receivable from associates and joint ventures are
recognised as a reduction in the carrying value of the investment.
Accounting policies of the equity accounted investees are changed where
necessary to ensure consistency with the policies adopted by the Group. The
carrying value of equity accounted investments is tested for impairment in
accordance with the policy described in Note 1.20 (ii).
As of 31 December 2023 the Group has two subsidiaries included in the Groups
consolidated accounts, Engsolve Limited, the balance of the interest in which
was acquired on 20 June 2023 and Protos Plastics to Hydrogen No.1 Limited that
was acquired on 30 April 2023.
Other investments, which are not publicly traded, are initially measured at
cost and subsequently measured at cost less accumulated losses.
1.2. Judgements and estimates
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts in the financial statements.
Areas involving a higher degree of judgements or complexity, or areas where
assumptions or estimates are significant to the financial statements such as
the exercise to assess the fair value of goodwill, share based payments (share
options and warrants) and going concern are disclosed within the relevant
notes.
1.3. Going concern
The financial statements have been prepared on a Going Concern basis. The
Directors' views are based upon working capital projections which take into
account the intended use of the funds in hand over the next 12 months.
As at 31 December 2023 the Group is pursuing a business strategy of selling
licences for use of its technology. As at 31 December 2023, the Group had one
project under development - Protos in Cheshire - with others still in
prospect.
In looking forward to determine the Going Concern status, the business
planning of the Group post the current reporting period, is based on the
following:
· The acquisition of Engsolve, giving the Group the ability to earn
revenues from engineering services. Engsolve had an existing client base, a
history of providing such services and was integrated into the Group with an
existing bank balance. This provides an immediate and ongoing revenue stream
to the Group, extending its positive cash position;
· The development of a series of capital projects addressing
contamination, pollution and climate change mitigation and deploying where
possible, but not exclusively, the Group's proprietary technology. The Group
will focus on a business strategy of selling licences and receiving royalty
fees for the use of its technology.
Adopting this approach:
· The Group will have an ongoing revenue stream;
· Investment in the development of the capital projects will be via
shareholder loans to the SPV, repayable at financial close; and
· In the event development of the project does not look viable (for
example, failing to obtain the necessary permissions), expenditure will be
curtailed and a replacement project identified.
The Directors consider therefore that other than fixed costs, the cash spend
looking forward can be managed within the 13-month cashflow projection (May
2024 - May 2025)
A cash inflow of £0.5m is also anticipated following securing asset financing
(although this is not guaranteed) of the Feedstock Testing Unit and associated
equipment to be installed in the Powerhouse Technology Centre at Bridgend
later in 2024, offsetting this capital purchase. In the event that the Group
does not receive the asset finance it will need to reduce expenditure on
capital projects, offset by income from Engsolve activities.
It was noted in the prior year's accounts that there were loans totalling
£3.34m due from the Protos SPV, a company now under PHE's control. On review
of the projects at acquisition it was determined that the projects were not
expected to progress and as a result the amounts capitalised relating to these
projects were fair valued to £330k - being materials transferred to stock for
either sale or use in future projects - and the corresponding loan amounts
which had been used to fund the project development and were repayable on the
success of the projects were fair valued to £nil. This aligns with PHE's
assessment of the recoverability of the loan in FY22 where it was deemed
irrecoverable and written down to £nil also.
It is the view of the Directors, however, that should Protos generate future
cash inflows from similar projects that they reserve the right to reinstate
the loans and demand repayment.
1.4. Foreign currency translation
The financial information is presented in sterling which is the Group's
functional currency.
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies are revalued to the
exchange rate at date of settlement or at reporting dates (as appropriate).
Exchange gains and losses resulting from such revaluations are recognised in
the Statement of Comprehensive Income.
Foreign exchange gains and losses are presented in the Statement of
Comprehensive Income within administrative expenses.
1.5. Revenue
(i) Engineering services
The Group has provided engineering services to various third party customers.
Revenue from providing services is recognised in the accounting period in
which services are rendered. For fixed-price contracts, revenue is recognised
based on the actual service provided to the end of the reporting period as a
proportion of the total services to be provided to the extent to which the
customer receives the benefits. This is determined based on the actual labour
hours spent relative to the total expected labour hours.
Where contracts include multiple performance obligations as specified by the
work scope, the transaction price will be allocated to each performance
obligation based on estimated expected cost-plus margin.
Estimates of revenues, costs or extent of progress toward completion of
services are revised if circumstances change. Any resulting increases or
decreases in estimated revenues or costs are reflected in profit or loss in
the period in which the circumstances that give rise to the revision become
known by management.
In case of fixed-price contracts, the customer pays the fixed amount based on
a payment schedule. If the services rendered by the Group exceed the payment,
a contract asset is recognised. If the payments exceed the services rendered,
a contract liability is recognised.
If a contract includes an hourly fee, revenue is recognised in the amount to
which the Group has a right to invoice.
(ii) Exclusivity fees
Where the Group grants a developer exclusive rights to utilise its technology
in a particular territory for an exclusivity fee, the fee is recognised in the
income statement over the agreed exclusivity period.
1.6. Leases
For any new contracts entered into, the Group considers whether a contract is,
or contains, a lease. A lease is defined as 'a contract, or part of a
contract, that conveys the right to use an asset for a period of time in
exchange for consideration'. To apply this definition the Group assesses
whether the contract meets three key evaluations which are whether:
(i) the contract contains an identified asset which is either explicitly
defined in the contract or implicitly specified by being identified at the
time the asset is made available to the Group;
(ii) the Group has the right to obtain substantially all of the economic
benefits from use of the asset throughout the period of use, considering its
rights within the defined scope of the contract;
(iii) the Group has the right to direct the use of the identified asset
throughout the period of use.
Where the above evaluations are met, at lease commencement date, the Group
recognises a right of use asset and a lease liability on the balance sheet.
The right of use asset is measured at cost, which is made up of the
measurement of the initial lease liability, any direct initial costs incurred
by the Group, an estimate of any costs to dismantle and remove the asset at
the end of the lease, and any lease payments made in advance of the lease
commencement date.
The Group depreciates right of use assets on a straight-line basis from the
lease commencement date to the earlier of the end of the useful life of the
right of use asset or the end of the lease term. The Group assesses the right
of use asset for impairment when such indicators exist.
At the commencement date the Group measured the lease liability at the present
value of the lease payments unpaid at that date, discounted using the interest
rate implicit in the lease if that rate is readily available or the Group's
incremental borrowing rate. For the assessment of the lease entered into in
2020 the Group applied a rate of 7.5%.
Subsequent to initial measurement the liability will be reduced for payments
and increased for interest. It is remeasured to reflect any reassessment or
modification or if there are any changes to the repayment schedule.
1.7. Finance income and expenses
(i) Income
Interest income is calculated by applying the effective interest rate to the
gross carrying amount of a financial asset except for financial assets that
subsequently become credit impaired. For credit impaired financial assets, the
effective interest rate is applied to the net carrying amount of the financial
asset (after deduction of the loss allowance).
(ii) Expense
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 through the expected life of the financial
liability, or, where appropriate, a shorter period, to the net carrying amount
on initial recognition.
1.8. Income tax expense
The tax expense for the period comprises current and deferred tax.
UK corporation tax is provided at amounts expected to be paid (or recovered)
using the tax rates and laws that have been enacted or substantively enacted
by the balance sheet date.
Deferred tax is recognised in respect of all temporary differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right
to pay less tax in the future have occurred at the balance sheet date.
Temporary differences are differences between the Group's taxable profits and
its results as stated in the financial statements that arise from the
inclusion of gains and losses in tax assessments in periods different from
those in which they are recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised
only to the extent that, on the basis of all available evidence, it can be
regarded as more likely than not that there will be suitable taxable profits
from which the future reversal of the underlying temporary differences can be
deducted.
Deferred tax is measured at the average tax rates that are expected to apply
in the periods in which the temporary differences are expected to reverse,
based on tax rates and laws that have been enacted or substantively enacted by
the balance sheet date. Deferred tax is measured on a non-discounted basis.
1.9. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation.
Cost represents the cost of acquisition or construction, including the direct
cost of financing the acquisition or construction until the asset comes into
use.
Depreciation on property, plant and equipment is provided to allocate the cost
less the residual value by equal instalments over their estimated useful
economic lives of 3 years, once the asset is complete.
The expected useful lives and residual values of property, plant and equipment
are reviewed on an annual basis and, if necessary, changes in useful life or
residual value are accounted for prospectively.
1.10. Assets under construction
Assets under construction are stated at cost. Cost represents the cost of
acquisition or construction, including the direct cost of financing the
acquisition or construction until the asset comes into use.
Depreciation is not charged until the asset is complete and bought into use
at which point it is transferred into a distinct category of property plant
and equipment.
1.11. Right of Use Assets
At inception, the Group assesses whether a contract is, or contains a lease
within the scope of IFRS 16. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a
period of time in exchange for consideration. Where a tangible asset is
acquired through a lease, the group recognises a right-of-use asset and lease
liability at the lease commencement date. Right of use assets are included
within property, plant and equipment, apart from those that meet the
definition of investment property.
A right-of-use asset is recognised at the commencement date of a lease. The
right-of-use asset is measured at cost, which comprises the initial amount of
the lease liability, adjusted for, as applicable, any lease payments made at
or before the commencement date net of any lease incentives received and any
initial direct costs incurred.
Right-of-use assets are depreciated on a straight-line basis over the
unexpired period of the lease or the estimated useful life of the asset,
whichever is the shorter. Where the Group expects to obtain ownership of the
leased asset at the end of the lease term, the depreciation is over its
estimated useful life. Right-of use assets are subject to impairment or
adjusted for any remeasurement of lease liabilities.
The group has elected not to recognise right-of-use assets and lease
liabilities for short term leases of machinery that have a lease term of 12
months or less, or for leases of low value assets including IT equipment. The
payments associated with these leases are recognised in profit or loss on a
straight line basis over a lease term.
1.12. Intangible assets
Goodwill represents the future economic benefits arising from a business
combination that are not individually identified and separately recognised.
Goodwill is carried at cost less accumulated impairment losses. Refer to note
1.20 for impairment testing procedures. Goodwill impairment losses are not
reversible as explained in note 1.20 (iii).
Goodwill on acquisitions has been calculated by taking the cost less the fair
value of the assets and liabilities at acquisition. The Group will review the
value of goodwill on their financial statements at least once a year and
record any impairments. Where the goodwill generated results on a gain on
bargain purchase this is credited to the Statement of Comprehensive Income in
the year of recognition.
Exclusivity rights acquired in a business combination that qualify for
separate recognition are recognised as intangible assets at their fair value
and subsequently assessed for impairment loss.
Costs associated with patent applications are capitalised in the year of spend
and amortised over their estimated useful lives of 20 years on a straight-line
basis commencing from the date of patent application. Any cost associated with
the upkeep of a patent is amortised over the remaining useful life of that
patent.
An internally generated intangible asset arising from development is only
recognised where all of the following have been demonstrated: (i) the
technical feasibility of completing the asset; (ii) the intention to complete
the asset and the ability to use or sell it; (iii) the availability of
resources to complete the asset; and (iv) the ability to reliably measure the
cost attributable to the asset during its development.
Research and development
In all other instances research and development expenditure is recognised as
an expense as incurred. Development costs previously recognised as an expense
are not recognised as an asset in a subsequent period.
1.13. Other non-current assets
Other non-current assets represent investments in subsidiaries. The
investments are carried at cost less accumulated impairment. Where a step
acquisition occurs and control of a subsidiary company is achieved in stages
the initial investment in associate is treated as being disposed of and
reacquired at the considered fair value with any gain or loss arising being
allocated to the Statement of Comprehensive Income. This is then treated as
the deemed cost. Subsequently the Investment is held at deemed cost less
impairment.
Financial assets
The Group classifies financial assets as loans and receivables within current
assets, except for maturities greater than 12 months after the balance sheet
date. These are classified as noncurrent assets. Assets are initially
recognised at fair value plus transaction costs. Loans and receivables are
subsequently carried at amortised cost using the effective interest rate
method.
1.14. Contract costs
The Group recognises costs incurred in fulfilling contracts with customers
that are directly associated with the contract as an asset if those costs are
expected to be recoverable. Contract costs are amortised on a basis consistent
with the transfer of goods and services to which the asset relates.
1.15. Trade and other receivables
Trade receivables are initially recognised at fair value. Subsequently they
are carried at amortised cost less any provision for impairment.
1.16. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits and are
recognised and subsequently carried at fair value. For the purpose of
presentation in the statement of cashflows, cash and cash equivalents include
cash on hand, deposits held at call with financial institutions, other short
term, highly liquid investments with original maturities of three months or
less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities in the
balance sheet.
1.17. Trade and other payables
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Trade and other
payables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method.
1.18. Financial assets and liabilities
i) Financial assets
Loans receivable, where forward receivables comprise solely of payments of
principal and interest, are measured at amortised cost. Interest income from
these financial assets is included in finance income using the effective
interest rate method.
ii) Financial liabilities
Loans payable are financial obligations arising from funding received and used
to support the operational costs of the Group. These are initially recognised
at fair value. Loans are subsequently carried at amortised cost using the
effective interest method.
1.19. Adoption of new and revised standards
i) New and amended standards adopted by the Group
New and amended standards for the current period and effective from 1 January
2023 have been applied by the Group, including:
IFRS 17 Insurance Contracts
IAS1 & IFRS practice statement 2
Definition of Accounting Estimates - Amendments to IAS 8
IAS 12 - Deferred Tax related to Assets and Liabilities arising from a single
transaction
IAS 12 International Tax reform - pillar two Model Rules
There are no transitional adjustments relating to the adoption of these
standards.
ii) Standards issued but not yet effective
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2023 reporting periods and have not been
adopted early by the Group. These standards are not expected to have a
material impact on the entity in the current or future reporting periods and
on foreseeable future transactions.
1.20. Impairment
(i) Goodwill
Goodwill and intangible assets that have an indefinite useful life are not
subject to amortisation and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be
impaired. This is detailed in note 1.12 above.
(ii) Other assets
At each balance sheet date, the carrying amounts of assets are reviewed to
determine whether there is any indication that those assets have suffered an
impairment loss. An impairment loss is recognised whenever the carrying amount
of an asset or its cash generating unit exceeds its recoverable amount.
Impairment losses recognised in respect of cash generating units are allocated
first to reduce the carrying amount of any goodwill allocated to cash
generating units and then to reduce the carrying amount of the other assets in
the unit on a pro-rata basis. A cash generating unit is the group of assets
identified on acquisition that generate cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. The
recoverable amount of assets or cash generating units is the greater of their
fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. For an asset that does not
generate largely independent cash inflows, the recoverable amount is
determined for the cash generating unit to which the asset belongs.
(iii) Reversals of impairments
An impairment loss in respect of goodwill is not reversed. In respect of other
assets, an impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had been
recognised.
1.21. Share based payments
Share based payments are made to employees and third parties and all are
equity settled.
(i) Third party provision of services
a) Via issue of shares
Contractors receive remuneration in the form of share-based payments, whereby
services are provided and settled by the issue of shares. The cost of equity
settled transactions is determined at the fair value of the services provided,
based upon invoiced amounts or formal agreements in place with suppliers.
b) Via issues of share warrants
The Group also issues share warrants to third parties in relation to services
provided by suppliers. The cost of equity settled transactions is determined
at the fair value of the services provided, based upon invoiced amounts or
formal agreements in place with suppliers. Where no fair value of services can
be directly obtained, the fair value at the grant date is determined using the
Black Scholes valuation model. At each reporting date the Group revises its
estimates of the number of options that are likely to be exercised with any
adjustment recognised in the income statement.
(ii) Directors and employees
c) Via issues of share options
The Group has issued share options to Directors and employees through approved
and unapproved option plans. The fair value of options issued is determined at
the date of grant and is recognised as an expense in the Income Statement. The
fair value at the grant date is determined using the Black and Scholes
valuation model. At each reporting date the Group revises its estimates of the
number of options that are likely to be exercised with any adjustment
recognised in the income statement.
Where share-based payments give rise to the issue of new share capital, the
proceeds received by the Group are credited to share capital and share premium
when the share entitlements are exercised.
1.22. Employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual
leave and accumulating sick leave that are expected to be settled wholly
within 12 months after the end of the period in which the employees render the
related service are recognised in respect of employees' services up to the end
of the reporting period and are measured at the amounts expected to be paid
when the liabilities are settled. The liabilities are included within
creditors in the balance sheet.
For defined contribution pension plans, the Group pays contributions to
publicly or privatley administered pension insurance plans on a mandatory,
contractual or voluntary basis. The Group has no further payment obligations
once the contributions have been paid. The contributions are recognised as
employee benefit expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in the
future payments is available.
The Group does not contribute to any defined benefit pension plans.
1.23. Segmental reporting
An operating segment is a component of the Group:
• that engages in business activities from which it may earn revenues
and incur expenses (including revenues and expenses relating to transactions
with other components of the Group);
• whose operating results are reviewed regularly by the Group's chief
decision maker to make decisions about resources to be allocated to the
segment and assess its performance; and
• for which discrete financial information is available.
The Group considers it has two business segments, being a UK based technology
company intending to license its technology to projects in the UK and
internationally and a UK based multi disciplined Engineering Consultancy with
significant experience in undertaking engineering design and support for third
party customers.
The Engineering segment, Engsolve Limited, generated all of the Group
£180,959 Revenue in 2023. Engsolve became part of the Group in June 2023.
This revenue was generated through Engsolve providing Engineering Services to
third party customers. The Group will be looking to continue providing third
party Engineering Services through Engsolve Limited and to further develop
this revenue stream, both through internal and external work.
The Technology/Licensing segment (The Company), did not generate any licence
income in 2023. The Group is focusing on developing this license revenue
stream in future years.
2. Revenue
Group Company
2023 2022 2023 2022
£ £ £ £
Engineering and related services 180,959 341,293 - 341,293
Exclusivity fees - 38,984 - 38,984
Other - - - -
180,959 380,277 - 380,277
During the year, the Group billed for engineering work carried out on
projects. All revenue generated has arisen in the UK.
3. Employee costs
Group Company
2023 2022 2023 2022
£ £ £ £
Directors' fees 474,671 581,072 419,671 581,072
Wages and salaries 316,128 174,769 135,625 174,769
Social security costs 50,012 75,609 31,990 75,609
Pensions 71,655 16,817 23,207 16,817
912,466 848,267 610,493 848,267
Highest Paid Director - refer to note 29
The number of average monthly employees (including Directors) are as
follows:
Group Company
2023 2022 2023 2022
Management 7 6 6 6
Operations 4 3 1 3
11 9 7 9
The figures in the table above includes the average number of employees
throughout the year based on the acquisition of Engsolve in June 2023. The
total number of employees as at 31 December 2023 (including Directors) was 15
(2022: 9) comprising 7 in management and 8 in operations (2022: 6 in
management, 3 in operations). All Directors are classed as management
4. Administrative expenses
Included in administrative expenses are: 2023 2022
£ £
Research and development costs 561,474 431,185
Amortisation 16,997 10,263
Depreciation 11,732 5,397
Depreciation - right of use asset 30,153 22,573
Gain on bargain purchase (see note 27) (712,751) -
Share based payments 40,000 (18,629)
Foreign exchange (gains)/losses - 162
Auditor's remuneration for audit services:
Fees payable to the group's auditor for the audit of the group's annual 43,500 25,000
financial statements
Fees payable to the group's auditor and their associates for other services: 1,000
Non-audit fees paid to auditors
R & D Taxation advisory and compliance services - 10,000
5. Share of associate
2023 2022
£ £
Share of profits 76,206 60,326
76,206 60,326
The Group acquired a 48.39% stake in Engsolve on 12 August 2021 as explained
in note 13. The Group acquired the balance of 51.61% stake in Engsolve on 20
June 2023. The above result represents both the Group and Companies share of
the associate's profits arising post acquisition.
6. Goodwill & Exclusivity impairment
2023 2022
£ £
Goodwill Impairment - 40,660,000
Exclusivity impairment - 500,000
- 41,160,000
In 2020, Goodwill of £57,152,699 was recognised on the acquisition and hive
up of Waste2tricity Limited. An independent fair value assessment is
commissioned by the Directors on the carrying value at each balance sheet date
as explained in note 11. Impairments are made based upon the results of those
assessments plus input from the Board. No impairment was made in relation to
the goodwill carrying value ad 31 December 2023
7. Loan & Revenue impairment
2023 2022
£ £
Loan Impairment/(write off) - 2,159,274
Revenue impairment - 986,392
- 3,145,666
The 2022 write off is a Company only write off. Further description on the
impairment of the Loan impairment ("loan debtor") and Revenue impairment
("trade debtor") is disclosed in Note 14.
In 2020, Exclusivity of £500,000 was recognised on the acquisition and hive
up of Waste2tricity Limited. An independent fair value assessment is
commissioned by the Directors on the carrying value at each balance sheet date
as explained in note 11. Impairments are made based upon the results of those
assessments.
8. Net finance income/(cost)
Group Company
2023 2022 2023 2022
£ £ £ £
Loan interest receivable - 66,388 - 66,388
Lease Interest (10,867) - (10,867) -
Other interest receivable 6,184 251 - 251
Bank and other interest payable (1,517) (1,191) (1,065) (1,191)
(6,200) 65,448 (11,932) 65,448
9. Income tax and deferred tax
As the Group incurred a loss, no current tax is payable (2022: £nil). In
addition, as there is no certainty about future profits from which accumulated
tax losses could be utilised, accordingly no deferred tax asset has been
recognised. The Group submitted a claim for research and development tax
credits (relating to financial year 2022) during the year amounting to
£168,527 (2022: £166,318, relating to financial year 2021) which has been
recognised in the accounts. The Group has not submitted a claim for research
and development tax credits for financial year 2023. This claim will be
submitted during 2024. Accumulated tax losses in the Group amount to an
estimated £24.6 million, and Group £24.3 million (2022: £22.0 million) and
reflect tax losses submitted in tax returns and arising during the period less
any relief taken for research and development credits. The tax credit rate is
lower (2022: lower) than the standard rate of tax. Differences are explained
below.
Group
Current tax 2023 2022
£
£
Loss before taxation 1,537,464 46,353,704
Tax credit at standard UK corporation tax rate of 23.5% (2022: 19%) 361,304 8,807,204
Effects of:
Goodwill impairment not deductible for tax purposes - (7,820,400)
Expenses not deductible for tax purposes (14,411) 2,429
Capital allowances in excess of depreciation 350,121 -
Allowable deduction on exercise of share options - -
Research and development tax credits claimed (146,681) 166,318
Deferred tax asset not recognised (440,516) (1,000,526)
Income tax credit 109,817 155,025
Company
Current tax 2023 2022
£
£
Loss before taxation 2,398,469 46,353,704
Tax credit at standard UK corporation tax rate of 23.5% (2022: 19%) 563,640 8,807,204
Effects of:
Goodwill impairment not deductible for tax purposes - (7,820,400)
Expenses not deductible for tax purposes (13,845) 2,429
Additions 211,628 -
Allowable deduction on exercise of share options - -
Research and development tax credits claimed (146,681) 166,318
Deferred tax asset not recognised (446,215) (1,000,526)
Income tax credit 168,527 155,025
10. Loss per share
Group Company
2023 2022 2023 2022
Total comprehensive loss (£) (1,427,648) (46,198,679) (2,229,942) (46,198,679)
Weighted average number of shares 4,025,227,834 3,957,414,135 4,025,227,834 3,957,414,135
Loss per share in pence (0.04) (1.17) (0.06) (1.17)
Diluted loss per share in pence (0.04) (1.17) (0.06) (1.17)
For the year ended 31 December 2022, 3,581,355 of the options in issue and
381,100,979 of the warrants in issue were excluded from the diluted loss per
share calculation due to being anti-dilutive.
There were 208,000,000 new ordinary shares issued in the year to 31 December
2023. A total of 200,000,000 new ordinary shares of 0.5p were placed on 4
September 2023 at an issue price of 0.5p. Additionally, 8,000,000 new ordinary
shares were issued at the issue price to the Group's broker on 4 September
2023.
11. Intangible fixed assets
Group Goodwill Exclusivity rights Patent costs Website Total
£ £ £ £ £
Cost
At 1 January 2022 57,152,699 500,000 101,717 - 57,754,416
Additions - - 117,838 - 117,838
At 31 December 2022 57,152,699 500,000 219,555 - 57,872,254
Accumulated amortisation & impairment
At 1 January 2022 14,192,699 - 7,219 - 14,199,918
Amortisation charge for the year - - 10,263 - 10,263
Impairment charge for the year 40,660,000 500,000 - - 41,160,000
At 31 December 2022 54,852,699 500,000 17,482 - 55,370,181
Carrying amount
At 31 December 2022 2,300,000 - 202,073 - 2,502,073
Cost
At 1 January 2023 57,152,699 500,000 219,555 - 57,872,254
Additions 573,581 - 31,574 16,634 621,789
Disposals (500,000) - - (500,000)
At 31 December 2023 57,726,280 - 251,129 16,634 57,994,043
Accumulated amortisation & impairment
At 1 January 2023 54,852,699 500,000 17,482 - 55,370,181
Amortisation charge for the year - - 13,130 3,867 16,997
Disposals - (500,000) - - (500,000)
At 31 December 2023 54,852,699 - 30,612 3,867 54,887,178
Carrying amount
At 31 December 2023 2,873,581 - 220,517 12,767 3,106,865
Company Goodwill Exclusivity rights Patent costs Website Total
£ £ £ £ £
Cost
At 1 January 2022 57,152,699 500,000 101,717 - 57,754,416
Additions - - 117,838 - 117,838
At 31 December 2022 57,152,699 500,000 219,555 - 57,872,254
Accumulated amortisation & impairment
At 1 January 2022 14,192,699 - 7,219 - 14,199,918
Amortisation charge for the year - - 10,263 - 10,263
Impairment charge for the year 40,660,000 500,000 - - 41,160,000
At 31 December 2022 54,852,699 500,000 17,482 - 55,370,181
Carrying amount
At 31 December 2022 2,300,000 - 202,073 - 2,502,073
Cost
At 1 January 2023 57,152,699 500,000 219,555 - 57,872,254
Additions - - 31,574 16,634 48,208
Disposals - (500,000) - - (500,000)
At 31 December 2023 57,152,699 - 251,129 16,634 57,420,462
Accumulated amortisation & impairment
At 1 January 2023 54,852,699 500,000 17,482 - 55,370,181
Amortisation charge for the year - - 13,130 3,867 16,997
Disposals - (500,000) - - (500,000)
At 31 December 2023 54,852,699 - 30,612 3,867 54,887,178
Carrying amount
At 31 December 2023 2,300,000 - 220,517 12,767 2,533,284
Goodwill acquired by the Group in 2020 arose on the acquisition and hive up of
Waste2Tricity Limited. It was considered attributable to the Group's DMG™
technology, which is intended to be licensed on a project-by-project basis to
generate income to the Group over the lifetime of each project.
The recoverable amount of goodwill at the balance sheet date was assessed as a
directors' valuation (2022: directors' valuation). The directors (2022:
directors) assessed impairment of £nil to goodwill (2022 assessed impairment
of £40.66m to goodwill). The directors (2022: directors) took note of the
ICAEW Corporate Finance Faculty Best Practice Guideline April 2008 and applied
a discounted cashflow approach, supported by the International Private Equity
and Venture Capital Guidelines of December 2018.
Goodwill additions in the Group in the year relates entirely to the
acquisitions of Engsolve Limited and Protos Limited as set out in Note 13 and
Note 27. The goodwill generated on the acquisition of Protos Plastics to
Hydrogen No 1 Ltd was calculated as a Gain on Bargain Purchase which has been
expensed to the Statement of Comprehensive Income in accordance with the
Group's accounting policies.
The key assumptions made by the directors in both years were:
· the expected roll out of the technology over 5 years following
the delivery of the Protos project (2022: same assumption);
· that the roll out will not be significantly impacted by competing
technologies (2022: same assumption);
· that the Group and roll out developer construct 5 projects (2022:
same assumption);
· the expected operating life of projects from which the Group will
earn licence revenues (2022: same assumption);
· the expected licence fees arising per project based upon
agreements with Peel NRE (2022: same assumption);
· the expected cost of services to support annual licence fee
income estimated by the Group based upon current draft project agreements
(2022: same assumption);
· applying a discount rate to cashflow of 35% (2022: 35%) assessed
by review of market survey reports of discount rates for projects within
similar and competing sectors which was considered to provide a reasonable
estimate of a weighted average cost of capital for a group benefiting from the
assumed roll out.
Changes to the above assumptions would impact the valuation assessment.
The Directors believe that key sensitivities in the 2023 and 2022 valuation
are as follows:
(i) The Directors have assumed a fixed number of 5 projects and 6
systems to be rolled out. Sensitivity workings with the roll out of 3 projects
and 3 systems would decrease the valuation by c£0.8m to £1.5m.
(ii) The discount rate applied to the cashflows. Sensitivity
workings with a discount rate 5% higher at 40% would decrease the valuation by
c£0.5m to £1.8m.
(iii) Inflation - an increase in the inflation assumption above that
assumed in the Directors model would result in adjustment to the licence fees
and result in an increase the Director's valuation.
The Directors have not accounted for the possibility of any onerous
obligations arising within the service contracts from which licence fees will
be earnt as there is no reason to expect that these will arise at this stage
in the business life cycle.
The Group completed an impairment review and fair value review of Engsolve
Limited as part of our year end Accounts FY 2023. As part of the exercise we
reviewed fixed and current assets, liabilities and the future forecast of the
business. The outcome of this impairment review was that we believe the
Goodwill valuation at £573k should not be impaired at the year-end Dec 23.
As explained in note 27, the Group acquired the full ownership of Protos
Plastics to Hydrogen No. 1 Ltd (also known as "Protos SPV") as an indirect
subsidiary into Powerhouse Energy UK Limited from Peel NRE Ltd for a nominal
payment of £1 on 28 April 2023. During the year to 31 December 2022, the
Group had been in discussions with Peel NRE to enter into a 50/50 Joint
Venture arrangement with Peel NRE. However, this did not materialise and Peel
NRE continued to own 100% of Protos SPV until the Group finally purchased 100%
of the share capital of Protos SPV on 28 April 2023. The purchase agreement by
the Group secures full control of Protos SPV with an option to lease on the
site at Protos.
Refer to the CEO section of the Annual Report for further details.
12. Tangible fixed assets
Group
Right of use asset Property, plant and equipment Fixtures and Assets under construction Total
Land and buildings fittings
£ £ £ £ £
Cost
At 1 January 2022 49,250 20,413 1,203 - 70,866
Additions - - 673 - 673
At 31 December 2022 49,250 20,413 1,876 - 71,539
Accumulated depreciation
At 1 January 2022 26,677 10,705 392 - 37,774
Charge for the year 22,573 4,865 532 - 27,970
At 31 December 2022 49,250 15,570 924 - 65,744
Carrying amount
At 31 December 2022 - 4,843 952 - 5,795
Cost
At 1 January 2023 49,250 20,413 1,876 - 71,539
Additions 180,919 32,349 10,726 958,340 1,182,334
Additions on acquisition - 16,959 15,839 - 32,798
Disposals (49,250) - - - (49,250)
At 31 December 2023 180,919 69,721 28,441 958,340 1,237,421
Accumulated depreciation
At 1 January 2023 49,250 15,570 924 - 65,744
Charge for the year 30,153 9,614 2,118 - 41,885
Charges on aquisition 13,464 5,942 19,406
Disposals (49,250) - (49,250)
At 31 December 2023 30,153 38,648 8,984 - 77,785
Carrying amount
At 31 December 2023 150,766 31,073 19,457 958,340 1,159,636
Company
Right of use asset Property, plant and equipment Fixtures and Assets under construction Total
Land and buildings fittings
£ £ £ £ £
Cost
At 1 January 2022 49,250 20,413 1,203 - 70,866
Additions - - 673 - 673
At 31 December 2022 49,250 20,413 1,876 - 71,539
Accumulated depreciation
At 1 January 2022 26,677 10,705 392 - 37,774
Charge for the year 22,573 4,865 532 - 27,970
At 31 December 2022 49,250 15,570 924 - 65,744
Carrying amount
At 31 December 2022 - 4,843 952 - 5,795
Cost
At 1 January 2023 49,250 20,413 1,876 - 71,539
Additions 180,919 32,349 10,726 *628,340 852,334
Disposals (49,250) - - - (49,250)
At 31 December 2023 180,919 52,762 12,602 628,340 874,623
Accumulated depreciation
At 1 January 2023 49,250 15,570 924 - 65,744
Charge for the year 30,153 9,614 2,118 - 41,885
Disposals (49,250) - - - (49,250)
At 31 December 2023 30,153 25,184 3,042 - 58,379
Carrying amount
At 31 December 2023 150,766 27,578 9,560 628,340 816,244
*Included with fixed assets is the amount of £628,340 relating to assets
under construction. As per the accounting policy, no depreciation will be
charged until such a time as the asset is in use.
13. Investments
2023 2023 2023 2022 2022 2022
£ £ £ £ £ £
Subsidiaries Associates Other Subsidiaries Associates Other
Cost or carrying value at 1 January 48,947,155 187,638 - 48,947,155 140,540 -
Additions 846,145 - - - - -
Goodwill recognised - - - - - -
Dividends - - - - (1,935) -
Share of associate's net result - 76,203 - - 49,033 -
Transfers 263,841 (263,841) - - - -
Disposals - - - - - -
Cost or carrying value 31 December 50,057,141 - - 48,947,155 187,638 -
Provision at 1 January (48,947,154) - - (48,947,154) - -
Additions - - - - - -
Disposals - - - - - -
Accumulated impairment (48,947,154) - (48,947,154) -
Carrying value 1,109,987 - - 1 187,638 -
(i) Subsidiaries
Investments relate to costs of investments in subsidiary undertakings, namely
in Powerhouse Energy, Inc, Pyromex AG and Powerhouse Energy UK Limited.
Powerhouse Energy, Inc is incorporated in California in the United States of
America and the Group holds 100 per cent of the common stock and voting rights
of the subsidiary. Pyromex AG is based in Zug, Switzerland and the Group holds
100 per cent of the shares and voting rights of the subsidiary. Powerhouse
Energy UK Limited is a wholly owned UK based dormant company.
The subsidiaries included in the consolidated accounts are Engsolve Ltd and
Protos Plastics to Hydrogen No.1 Limited.
The registered address of Powerhouse Energy Inc is 145 N Sierra Madre Blvd,
Pasadena, CA 91107, USA.
The registered address of Pyromex AG is Chollerstrasse 3, CH-6300, Zug,
Switzerland.
The registered address of Powerhouse Energy UK Limited, Powerhouse Energy
International Limited, Engsolve Limited and Protos to Plastics Hydrogen No. 1
Limited is Unit 3/3A Garth Road, Brackla Industrial Estate, Bridgend CF31 2AQ.
(ii) Acquisition of interest in Engsolve Limited
On 21 June 2023, the Group acquired the remaining 51.61% of the share capital
of Engsolve Limited for cash consideration of £572,896. Engsolve Limited is
incorporated and operates in the UK. Summary financial information of Engsolve
Limited at acquisition and balance sheet dates is provided below:
31 Dec 2023 21 June 2023 31 Dec 2022
£ £ £
Summarised balance sheet
Fixed assets 13,391 11,694 6,221
Cash and cash equivalents 570,693 466,793 400,073
Other current assets 141,788 150,492 86,632
Current liabilities (135,564) (106,419) (109,457)
Net assets 590,308 522,560 383,469
Group share 100% 100% 48.39%
Share of net assets 590,308 522,560 185,550
Summarised Income statement - post acquisition
Revenue 1,120,144 596,860 976,182
Profit from continuing operations 206,840 152,936 101,334
Profit from discontinued operations - -
Other comprehensive income - -
Total comprehensive income 206,840 152,936 101,334
Group Share of pre-tax profit/(loss) 206,840 83,066 60,326
Group share of tax (44,534) (6,860) (11,293)
Dividends received - - 1,935
The Group incurred advisory costs associated with the acquisition which were
expensed in 2023.
(iii) Acquisition of interest in Protos Plastics Limited
On 21 June 2023, the Group acquired 100% of the share capital of Protos
Plastics to Hydrogen No.1 Limited as an indirect subsidiary though Powerhouse
Energy UK Limited for cash consideration of £1. Protos Plastics to Hydrogen
No.1 Limited is incorporated and operates in the UK. Summary financial
information of Protos Plastics to Hydrogen No.1 Limited at acquisition and
balance sheet date is provided below:
31 Dec 2023
£
Summarised balance sheet
Cash and cash equivalents 5
Other current assets 945,715
Current liabilities (197,324)
Net assets 748,391
Group share 100%
Share of net assets 748,391
Summarised Income statement - post acquisition
Revenue -
Profit/Loss from continuing operations 35,639
Profit from discontinued operations -
Other comprehensive income -
Total comprehensive income 35,639
The Group incurred advisory costs associated with the acquisition which were
expensed in 2023.
(iv) Other investments
During 2021, the Group's investment in Waste2Tricity International (Thailand)
Limited was transferred into a new Thailand based entity, Altec Energy Limited
("Altec"). The Group has not taken part in fund raises investment made by
Altec subsequent to its formation. In the previous year's accounts the
interest was identified as being reduced to 33.8% as at 31 December 2021 and
to 30.4% since December 2021. We have been recently informed that the audit of
Altec accounts picked up an error in these calculations. The share holding was
in fact 33.5% as at December 2021 and 30.1% since December 2021 (a 0.3% error
in the calculation). Due to the passive nature of the Group's involvement, the
interest is held in other investments.
14. Loans receivable
2023 2022
£ £
Loans advanced - 2,077,600
Accrued interest - 81,674
Loan provision - (2,159,274)
- -
On 12 May 2021, the Group agreed to provide a loan facility for up to £3.8m
to Protos Plastics to Hydrogen No 1 Limited, the Peel NRE special purpose
vehicle and owner of the development of the Protos plant. The loan was to
provide support to the plant construction and to secure long lead time items
and project design services. The loan facility was made available for an
initial 6-month period, accruing interest daily at the Bank of England base
rate plus 2%. The availability period for the facility was subsequently
extended until 28 April 2023 at which point Powerhouse Energy Group Plc
acquired 100% of the share capital of Protos Plastics to Hydrogen No1 Limited
for £1. From October 2022 to the year end, the directors were seeking a 50/50
JV with Peel NRE and there had been other indicators of a change in the risk
profile. The directors in note 11 have assumed a discount rate of 35% for the
project with Peel NRE, due to the change in the risk profile. Accordingly, the
Directors impaired the loan in full as at December 31 2023. The Directors also
applied the same approach to the trade debtor balance of £986,392 which
existed between Powerhouse Energy Group Plc and Protos Plastics to Hydrogen No
1 Limited and subsequently impaired the trade debtor balance also to £Nil
value at the year end 31 December 2022.
15. Trade and other receivables
Group Company
2023 2022 2023 2022
£ £ £ £
Trade receivables 79,078 - - -
Other receivables 157,094 342,021 375,864 342,021
Prepayments and accrued income 89,662 61,226 78,223 61,226
325,834 403,247 454,087 403,247
16. Corporation tax
Group Company
2023 2022 2023 2022
£ £ £ £
Corporation tax recoverable 168,527 166,318 168,527 166,318
168,527 166,318 168,527 166,318
17. Cash and cash equivalents
Group Company
2023 2022 2023 2022
£ £ £ £
Cash balances 4,348,887 5,882,897 3,775,250 5,882,897
4,348,887 5,882,897 3,775,250 5,882,897
18. Trade and other payables: amounts falling due within one year
Group Company
2023 2022 2023 2022
£ £ £ £
Trade payables 110,673 116,560 79,308 116,560
Lease liability 32,921 - 32,921 -
Other creditors and accruals 341,202 148,563 922,582 148,563
Other taxes 19,774 10,677 19,684 10,677
Pensions payable 1,688 3,506 1,688 3,506
506,258 279,306 1,056,183 279,306
19. Trade and other payables: amounts falling due more than one year
Group Company
2023 2022 2023 2022
£ £ £ £
Lease liability 122,475 - 122,475 -
122,475 - 122,475 -
20. Financial assets and financial liabilities
Financial assets Group Company
2023 2022 2023 2022
£ £ £ £
Financial assets at amortised cost:
- Trade receivables 79,078 - 79,078 -
- Other Debtors 157,094 342,021 375,864 342,021
- Cash and cash equivalents 4,348,887 5,882,897 3,775,250 5,882,897
4,585,059 5,882,897 4,230,192 5,882,897
Financial liabilities Group Company
2023 2022 2023 2022
£ £ £ £
Liabilities at amortised cost:
- Trade payables 110,673 116,560 79,308 116,560
-Other creditors 341,172 148,563 922,582 148,563
-Taxes - VAT & payroll 19,744 10,677 19,684 10,677
- Pensions payable 1,688 3,506 1,688 3,506
-Lease liabilities 32,981 - 32,921 -
506,258 279,306 1,056,183 279,306
21. Leases
The Group
has leased offices at the location of its research facility for a duration
less than one year. The lease is reflected in the accounts as an expense on
the income statement.
21.1 Amounts recognised in the balance sheet
Right of use assets relate to leased properties that do not meet the
definition of investment property and are presented within tangible fixed
assets per Note 12.
2023 2022
£ £
Right of use assets
Balance at 1 January - 22,573
Additions to right of use assets 180,919 -
Depreciation charge for the year (30,153) (22,573)
Balance at 31 December 150,766 -
2023 2022
Future minimum rentals payable are as follows: £ £
Amounts payable:
Within one year 46,000 -
Later than one year and not later than five years 135,570 -
Total gross payments 181,570 -
Impact of finance expenses (26,174) -
Carrying value of liability 155,396 -
21.2 Amounts recognised in income statement
2023 2022
£ £
Depreciation charge 30,153 22,573
Interest on lease liabilities 10,867 855
Expenses relating to short term leases 3,844 120
44,864 23,548
21.3 Amounts recognised in statement of cashflows
2023 2022
£ £
Interest on lease liabilities 10,867 855
Repayment of lease principal 30,153 23,455
Total cash outflow for leases 41,020 24,310
22. Share capital
Group and Company
(i) Number of shares
0.5 p Ordinary 0.5 p Deferred shares 4.5 p Deferred 4.0 p Deferred
shares shares shares
Shares at 1 January 2022 3,957,414,135 388,496,747 17,373,523 9,737,353
Issue of shares - - - -
Shares at 31 December 2022 3,957,414,135 388,496,747 17,373,523 9,737,353
Issue of shares 208,000,000 - - -
Shares at 31 December 2023 4,165,414,135 388,496,747 17,373,523 9,737,353
(ii) Value in £
0.5 p Ordinary shares 0.5 p Deferred shares 4.5 p Deferred shares 4.0 p Deferred shares Share Capital
£ £ £ £ £
At 1 January 2022 19,787,071 1,942,483 781,808 389,494 22,900,856
Issue of shares - - - - -
At 31 December 2022 19,787,071 1,942,483 781,808 389,494 22,900,856
Issue of shares 1,040,000 - - - 1,040,000
At 31 December 2023 20,827,071 1,942,483 781,808 389,494 23,940,856
All ordinary shares of the Company rank pari-passu in all respects.
The deferred shares do not carry any voting rights or any entitlement to
attend general meetings of the Company. They carry only a right to participate
in any return of capital once an amount of £100 has been paid in respect of
each ordinary share.
On 22 August 2023, the Company issued 200,000,000 new ordinary shares of 0.5p
each ("Ordinary shares") in the Company at a price of 0.5p each amounting to
£1,000,000 before issue costs. The Company also paid its Broker, Turner Pope
Investments Limited, 8,000,000 new ordinary shares ("Broker Fee Shares") at
the issue price 0.5p each amounting to £40,000 instead of cash in respect of
certain professional fees.
23. Other reserves
Group
Merger relief Share premium account
reserve £
£
As at 1 January 2022 36,117,711 61,291,710
Reserve transfer - goodwill impairment (36,117,711) -
At 31 December 2022 - 61,291,710
Share based payments - (70,901)
Share issue costs - -
Reserve transfer - goodwill impairment - -
At 31 December 2023 - 61,220,809
Company
Merger relief Share premium account
reserve £
£
As at 1 January 2022 36,117,711 61,291,710
Reserve transfer - goodwill impairment (36,117,711) -
At 31 December 2022 - 61,291,710
Share based payments - (70,901)
Share issue costs - -
Reserve transfer - goodwill impairment - -
At 31 December 2023 - 61,220,809
24. Accumulated deficit
Group
2023 2022
£ £
As at 1 January (75,323,903) (65,224,306)
Loss for the year (1,427,647) (46,198,679)
Share based payments 70,901 (18,629)
Reserve transfer - goodwill impairment - 36,117,711
At 31 December (76,680,649) (75,323,903)
Company
2023 2022
£ £
As at 1 January (75,323,903) (65,224,306)
Loss for the year (2,229,942) (46,198,679)
Share based payments 70,901 (18,629)
Reserve transfer - goodwill impairment - 36,117,711
At 31 December (77,482,944) (75,323,903)
25. Share based payments
The expense recognized for share-based payments during the year is shown in
the following table:
2023 2022
£ £
Share based payment charge recognised in Income Statement
Expense arising from equity-settled share-based payment transactions:
- Share options for Directors and employees - -
- Shares issued for third party services 40,000 -
Total share-based payment charge in Income Statement 40,000 -
Share based payment charge recognised in Share Premium Account
Warrants for third party services in Sep 23 78,735 -
Warrants lapsed in Sep 23 (7,834)
Total share-based payment charge in Share Premium Account 70,901 -
Total share-based payment charges recognised - -
Other share-based payment movement
Exercise of share options by Directors and employees - -
Exercise of warrants for third party services - -
Shares option lapsed in Jan 22 - (18,629)
Total share-based payment - (18,629)
There were no liabilities recognised in relation to share based payment
transactions.
25.1 Share options for Directors and employees
The Group has put in place various options schemes for Directors and employees
as follows:
On 8 December 2014, the Group granted 11,000,000 options over ordinary shares
to the Board. The options may be exercised between the grant date and the
tenth anniversary of the grant date and will lapse if not exercised during
that period.
On 6 March 2018, the Group granted 32,100,000 options over ordinary shares to
employees, including a Board member, under the Powerhouse Energy Group PLC
2018 EMI Option Scheme. The options vest to the employees over a period of 24
months and are exercisable between the relevant vesting dates and the tenth
anniversary of the grant date and will lapse if not exercised during that
period. These options had all been exercised or forfeited by 31 December 2019.
On 6 March 2018, the Group granted 60,000,000 options over ordinary shares to
Board members under the Powerhouse Energy Group PLC 2018 non-employee Share
Option Plan. The options vest to the Board members over a period of 24 months
and are exercisable between the relevant vesting dates and the tenth
anniversary of the grant date and will lapse if not exercised during that
period.
On 23 April 2021, the Group granted 1,773,239 share options in ordinary shares
of 0.5p each in the Group to two Directors of the Group in lieu of part or all
of their fees to which they are entitled. The options have an exercise price
of 6.3p each and lapse 3 years from the date of grant.
The movement of share options in the year are as follows:
2023 2023 2022 2022
Number WAEP (pence) Number WAEP (pence)
Outstanding at 1 January 15,581,355 1.13 16,062,692 1.33
Granted during the year - - - -
Forfeited during the year (481,337) 6.3
Exercised during the year - - - -
Outstanding at 31 December 15,581,355 1.13 15,581,355 1.13
Exercisable at 31 December 15,581,355 1.13 15,581,355 1.13
The weighted average remaining contractual life for the share options
outstanding as at 31 December 2023 was 0.9 years (2022: 1.9 years).
No share options were granted during the year (2022: nil). The range of
exercise prices for options outstanding at the year-end was 0.6p to 6.3p
(2022: 0.6p to 6.3p). The number of options outstanding at 31 December 2023
and the movements in the year are as follows:
Date of Granted Share price on grant Exercised Forfeited At 31 Dec Exercise price Exercise period
grant 2023
8 Dec 6,000,000 1.875p - (3,000,000) 3,000,000 2.5p 9 Dec 2014 until 8 Dec 2024
2014
6 Mar 60,000,000 0.57p (48,000,000) - 12,000,000 0.6p 7 Mar 2018 until
2018 8 Dec 24*
22 Apr 1,773,239 5.58p - (1,191,884) 581,355 6.3p 23 Apr 2021 until
2021 22 Apr 2024
Total 67,773,239 (48,000,000) (4,191,884) 15,581,355
*The expiry date of the option granted on 6 March 2018 was adjusted by the
board due to a director leaving the Group in June 2022. On 29 September 2022
the board agreed to align the termination/expiry dates for both sets of
options for James Greenstreet to 8 December 2024.
The estimated fair value of the options issued was calculated by applying the
Black-Scholes option pricing model. The assumptions used in the calculation
were as follows:
8 December 2014 6 March 2018 22 April 2021
Options in issue 31 December 2023 3,000,000 12,000,000 581,355
Exercise price 2.5p 0.6p 6.3p
Expected volatility 127.56% 70.00%** 214.8%**
Contractual life 10 years 10 years 3 years
Risk free rate 2% 1.49% 0.15%
Estimated fair value of each option 1.79p 0.32p* 3.87p*
* the calculation applies a 25% discount for small companies
** expected volatility based on historic volatility at the point of grant.
25.2 Warrants for third party services
The Group has issued warrants in respect of services provided by consultants
as part of their service arrangements. It has also issued warrants to
participating shareholders in respect of certain fund raises. No share-based
payment charge is recognised for warrants issued to participating shareholders
as they are outside of the scope of IFRS 2.
Details of warrants which have been issued are as follows:
On 15 September 2020, the Group granted 5,395,260 warrants to the Group's
broker as part of its service arrangement in relation to the fund raise
arising on that date. The options may be exercised between the grant date and
the third anniversary of the grant date and will lapse of not exercised during
that period. At the date of grant the share price was 3.3p and the warrants
have an exercise price of 2.5p per share.
On 21 January 2021, the Group granted 9,090,910 warrants to the Group's broker
as part of its service arrangement in relation to the fund raise arising on
that date. The options may be exercised between the grant date and the third
anniversary of the grant date and will lapse of not exercised during that
period. At the date of grant the share price was 8.6p and the warrants have an
exercise price of 5.5p per share.
On 1 September 2023, the Group granted 16,000,000 warrants to the Group's
broker as part of its service arrangement in relation to the fund raise
arising on that date. The options may be exercised between the grant date and
the third anniversary of the grant date and will lapse of not exercised during
that period. At the date of grant the share price was 0.55p and the warrants
have an exercise price of 0.5p per share.
Please see note 32 Events after the reporting period in relation to issuing
warrants to Strand Hanson Limited.
Warrants in respect of services provided:
The movement of warrants issued for share-based payments in the year are as
follows:
2023 2023 2022 2022
Number WAEP (pence) Number WAEP (pence)
Outstanding at 1 January 9,590,910 5.3 9,590,910 5.3
Granted during the year 16,000,000 0.5 -
Forfeited during the year (500,000) 2.5 - -
Exercised during the year - - -
Outstanding at 31 December 25,090,910 2.3 9,590,910 5.3
Exercisable at 31 December 25,090,910 2.3 9,590,910 5.3
The weighted average remaining contractual life for the share warrants
outstanding as at 31 December 2023 was 1.7 years (2022: 1.0 years)
The range of exercise prices for warrants outstanding at the year-end was 0.5p
to 5.5p (2022: 2.5p to 5.5p).
The number of warrants, which have been included for share-based payment
purposes, outstanding at 31 December 2023 and the movements in the year are as
follows:
Date of grant Granted Share price Exercised Forfeited At 31 Dec Exercise Exercise
on grant 2023 Price period
15 Sep 2020 5,395,260 3.3p (5,395,260) - 2.5p 16 Sep 2020 until 15 Sep 2023
21 Jan 2021 9,090,910 8.6p - - 9,090,910 5.5p 22 Jan 2021 until
21 Jan 2024
01 Sep 2023 16,000,000 0.6p - - 16,000,000 0.5p 02 Sep 2023 until 01 Sep 2026
Total 30,486,170 - - (5,395,260) 25,090,910
The Group is required to assess the fair value of instruments issued in
respect of services received, with such value charged to the Income Statement.
The estimated fair value of the warrants issued during the year was calculated
by applying the Black-Scholes option pricing model. The assumptions used in
the calculation were as follows:
Warrants issued for services 21 Jan 2021 01 Sep 2023
In issue 31 December 2023 9,090,910 16,000,000
Exercise price 5.5p 0.5p
Expected volatility* 161.6% 275.58%
Contractual life 3 years 3 years
Risk free rate (0.07%) 4.82%
Estimated fair value of each option 4.6p 0.49p
* expected volatility based on historic volatility at the point of grant.
Warrants issued to participating shareholders
Warrants issued to participating shareholders are outside the scope of IFRS 2
and no share-based payment charges have been recognised on them. On initial
recognition the warrants' cost was deducted from equity as it represents the
cost of shares issued to investors. As the agreements had a fixed-for-fixed
requirement, they are also recognised as equity at the same time. As such,
there is £nil net impact on equity and has not been included in the statement
of changes in equity.
The number of warrants issued to participating shareholders, which have not
been included for share-based payment purposes, outstanding at 31 December
2023 and the movements in the year are as follows:
Date of grant Granted Share price on grant Exercised Forfeited At 31 Dec 2023 Exercise price Exercise period
15 Sep 2020 371,510,069 3.3p - (371,510,069) - 2.75p 16 Sep 2020 until 30 April 2023
Total 371,510,069 - (371,510,069) -
The estimated fair value of the warrants issued was calculated by applying the
Black-Scholes option pricing model. The assumptions used in the calculation
were as follows:
All warrants
The number of all warrants outstanding at 31 December 2023 and the movements
in the year are as follows:
Date of Granted Share price on grant As at 1 Jan 2023 Exercised Forfeited At 31 Dec 2023 Exercise price Exercise period
grant
15 Sep 2020 5,395,260 3.3p 500,000 - (500,000) - 2.5p 16 Sep 2020 until
15 Sep 2023
15 Sep 2020 371,510,069 3.3p 371,510,069 - (371,510,069) - 2.75p 16 Sep 2020 until29 Apr 2023
21 Jan 2021 9,090,910 8.6p 9,090,910 - - 9,090,910 5.5p 22 Jan 2021 until
21 Jan 2024
01 Sep 2023 16,000,000 0.6p - - - 16,000,000 0.5p 01 Sep 2023 until
01 Sep 2026
Total 401,996,239 381,100,979 - (372,010,069) 25,090,910
*Please see the Post Balance Sheet Event note on Strand Hanson Limited
warrants and Turner Pope warrants.
26. Material risks
The Group is subject to various risks relating to political, economic, legal,
social, industry, business and financial conditions. Risk assessment and
evaluation is an essential part of the Group's planning and an important
aspect of the Group's internal control system. The Group's approach to these
risks is detailed in the Strategic Report.
27. Business Combinations
In April 2023 the Group acquired Protos Plastics to Hydrogen No.1 Limited for
£1 and on 20 June 2023 the Group acquired Engsolve Limited for a total
consideration of £572,896 as set out in the notes below:
Acquisition of Protos Plastics to Hydrogen No.1 Limited
Recognised amounts of identifiable assets acquired and liabilities assumed:
Book Value Adjustment Fair Value
£ £ £
Fixed Assets
Tangible 2,362,649 (2,362,649) -
Asset under Construction 330,000 330,000
Current Assets
Debtors 615,709 (209,015) 406,694
Cash at bank and in hand 5,787 - 5,787
Total Assets 3,314,145 (2,571,664) 742,481
Creditors
Due within one year (3,361,853) 3,332,124 (29,729)
Total dentifiable net assets (47,708) 760,460 712,752
Goodwill (712,751)
Total Purchase Consideration 1
Cash (Outflow)/Inflow on Acquisition 5,786
As part of the Fair Value adjustments it was identified that Fixed Assets held
were impaired and had no sales value. In addition to this the Group took the
decision that the loan between Powerhouse Energy Group PLC and Protos Plastics
to Hydrogen No 1 Limited is not expected to be recovered and due to there
being control the loan owed in the books of Protos Plastics to Hydrogen No 1
Limited was impaired to £nil.
The goodwill arising on acquisition is attributable to the acquisition of
Protos Plastics to Hydrogen No.1 Limited. The goodwill generated from the
Acquisition of Protos Plastice to Hydrogen No.1 Limited is included in the
Group profit and loss account.The results of Protos Plastics to Hydrogen No.1
Limited since acquisition are as follows.
Current Period since acquisition
£
Turnover -
Profit for the period since acquisition 35,639
Acquisition of Engsolve Limited
Recognised amounts of identifiable assets acquired and liabilities assumed:
Book Value Fair Value
£ £
Fixed Assets
Tangible 11,694 11,694
Current Assets
Debtors 150,492 150,492
Cash at bank and in hand 466,793 466,793
Total Assets 628,979 628,979
Creditors
Due within one year (106,419) (106,419)
Total identifiable net assets 522,560 522,560
Goodwill (See note 11) (573,581)
Total Purchase Consideration 1,109,986
Cash (Outflow)/Inflow on Acquisition (108,967)
The goodwill arising on acquisition is attributable to the acquisition of
Engsolve Limited. The results of Engsolve Limited since acquisition are as
follows:
Current Period since acquisition
£
Turnover 180,559
Profit for the period since acquisition 53,904
Cash Acquired on Aquisition Cash acquired Cash Paid Cash (Outflow)/Inflow on Acquisition £
£
£
Protos Plastics to Hydrogen No.1 Limited 5,787 (1) 5,786
Engsolve Limited 466,793 (575,760) (108,967)
Total 472,580 (575,761) (103,181)
28. Pension Costs
*Group Company
£ £
Pension Creditor Year end 2022 - -
Pension liability in the year 71,655 23,207
Pension paid out in the year 67,496 21,520
Pension Creditor Year end 2023 4,159 1,687
*Please note the Group pension scheme figures includes Engsolve pension scheme
after full acquisition on 21 June 2023
29. Directors' remuneration and share interests
The Directors who held office at 31 December 2023 had the following interests,
including any interests of a connected party in the ordinary shares of the
Group:
Number of ordinary shares Percentage of
of 0.5p each voting rights
Paul Emmitt 3,574,901 0.09
Ben Brier 6,533,007 0.15
The remuneration of the Directors of the Group paid or payable for the year or
since date of appointment, if later, to 31 December 2023 is:
2023 2023 2023 2023 2023 2022
£ £ £ £ £ £
Salary/Fee Pension Share based payments Other Total Total
Antony Royston Gardner-Hillman 82,500 - - - 82,500
Anthony Clive Gale 30,000 - - - 30,000 -
Paul Emmitt 106,250 4,000 - - 110,250 66,906
James John Pryn Greenstreet - - - 15,000
Hugh McAlister 30,000 - - - 30,000 27,232
Paul Drennan-Durose - - 259,740
Gillian Weeks - - - 24,296
Russell Ward - - - 18,899
Myles Howard Kitcher - - - 25,667
Allan Vlah - - - 7,500
David John Hitchcock 32,500 - - - 32,500 -
Karol Kacprzak 26,518 - - - 26,518 -
Keith Riley 157,528 - - - 157,528 92,546
Ben Brier 9,375 750 - - 10,125
Total 474,671 4,750 - 479,421 537,786
Total remuneration includes share-based payments arising from the issue of
options amounting to nil in 2023 (2022: nil). There have been no awards of
shares to Directors under long term incentive plans during the year.
The Directors' social security costs for the year amounted to £25,192 (2022:
£54,026) resulting in a total remuneration expense of £504,613 (2022:
£651,312).
Prior to their resignations from the Board, Tim Yeo, James John Pryn
Greenstreet, Allan Vlah, Antony Royston Gardner-Hillman and Keith Riley had
service contracts that could be terminated by the provision of three months'
notice.
There are no share options for directors who served during the year.
Highest Paid Director
Keith Riley was the highest paid Director in the year. There were no shares
received or receivable by him in respect of qualifying services under long
term incentive schemes.
30. Related parties
Engsolve Limited, an engineering solutions company, was a related party until
30 June 2021 due to a Paul Emmitt's family member being part of its key
management personnel and Paul Emmitt being a controlling shareholder, and from
12 August 2021 when the Group acquired 48.39% of its share capital. On the
21 June 2023 the Group acquired the remaining 51.61% of shares of Engsolve
Limited for a consideration of £572,896, the majority of the shares of which,
came from Paul Emmitt who was COO of Powerhouse at the time. Engsolve provided
engineering services to the Group during the year amounting to £666,739
(2022: £596,172). Amounts outstanding at year end for services provided and
included in these accounts amounted to £51,269 (2022: £31,778). All amounts
post acquisition have been eliminated in accordance with the accounting
policies in the Consolidated Financial Statements
Keith Riley was appointed as a non-executive director of the Group on 27
September 2021. Mr Riley was Interim Chairman and acting Chief Executive
Officer of the Group in 2023 and resigned on 5 September 2023. Mr Riley was
also an active director in Engsolve Limited from 8 March 2023 to 5 September
2023. Keith Riley joined Hydrogen Utopia International PLC as Technical
Director on 6 January 2022 and resigned on 26 May 2023. Keith Riley was also a
director of HU2021 International UK Ltd from 18 January 2022 until 31 May
2023.
Howard White is a shareholder in the Group and also a strategic Consultant to
the Group, having received £40,000 for his services in 2023. Howard White is
also a Board Member and shareholder of Hydrogen Utopia International.
Hugh McAlister was a Non-Executive Director of the Group during 2023 and also
owned shares in Hydrogen Utopia International.
31. Events after the reporting period
On 21 January 2024 9,090,910 warrants held by Turner Pope at an exercise price
of 5.5 pence expired.
On 31 January 2024 the Group announced the appointment of Strand Hanson
Limited as the Group's Nominated and Financial Adviser.
On 31 January 2024 the Group entered into a warrant agreement with Strand
Hanson Limited. The warrant agreement included 31,240,606 warrants over
ordinary shares of 0.5 pence at a subscription price of 0.29 pence. The
warrant agreement was signed on 31 January 2024 with a final exercise date of
31 January 2029.
On 22 February 2024 the Group announced the signing of an initial five year
framework agreement with Australian based, National Hydrogen Ltd ("NH2"). The
Agreement sets out the terms on which the Group's technology and engineering
expertise would be provided, on a project-by-project exclusivity basis, to NH2
for its intended roll out of multiple hydrogen-based projects across
Australia, Italy, Switzerland, and Hong Kong. Powerhouse will not be required
to contribute any capital for these projects. Instead, the collaboration will
be based on a license fee and royalties model.
On 11 March 2024 the Group announced the signing of the Longford Joint Venture
with Hydrogen Utopia International. The Group had previously announced on 30
October 2023 the delaying of the signing. Initial financing is being provided
by AFT and Powerhouse International by way of shareholder loans (for a maximum
of €200,000 each) under separate loan agreements. Any future financing will
be raised in accordance with the Subscription and Shareholder Agreement
through further loans or (with the consent of the shareholders only)
subscription for shares. Signing of the Subscription and Shareholder Agreement
requires Powerhouse to make an immediate payment of £100,000 to HUI. This is
in addition to the £100,000 already paid to HUI, as noted in the Group's
announcement on 21 March 2023. A further payment of £100,000 in cash will
also be made to HUI once planning permission has been granted for the Longford
Project.
On 22 April 2024 581,355 of share options granted on 22 April 2021 to a
Director lapsed.
On 21 May 2024 the Group's GB Patent Application No GB1910309.2 "Treatment of
waste producing recirculated combustible" was granted.
32. Ultimate controlling party
There is no single controlling party of the Group.
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