INVINITY ENERGY SYSTEMS PLC
Third Floor, IFC5
Castle Street
St. Helier
Jersey
JE2 3BY
T +44 (0)204 551 0361
W www.invinity.com
@InvinityEnergy
linkedin.com/invinity-energy-systems
Jersey registered 92432
Invinity Offices:
London, United Kingdom
Bathgate, United Kingdom
Vancouver, Canada
San Francisco, USA
Melbourne, Australia
St Helier, Jersey
www.invinity.com
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2023 Annual Report
& Financial Statements
for the year ended 31 December 2023
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Contents
INTRODUCTION
About Invinity
Highlights of 2023
Introduction – Foundations for Scale
STRATEGIC REPORT
Chairman’s Report
Chief Executive Officer’s Report
Chief Financial Officer’s Report
Risk Management Report
Sustainability Report
GOVERNANCE
The Board of Directors
Governance Report
Report of the Chairman of the Audit & Risk Committee
Report of the Chairman of the ESG Committee
Report of the Chairman of the Nomination Committee
Report of the Chair of the Remuneration Committee
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities in Respect
of the Financial Statements
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FINANCIAL STATEMENTS
Independent Auditors’ Report to the Members
of Invinity Energy Systems plc
Consolidated Statement of Profit and Loss
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
OTHER INFORMATION
Officers and Advisers
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Invinity staff and Board members at the Pender St manufacturing facility in Vancouver – September 2023
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INTRODUCTION
Invinity, proven grid-scale
energy storage
We are surrounded by energy storage. There are batteries in our phones,
computers, watches, cars, and, now, on the electric grid. The problem is
that the battery technology that works so well in our pockets doesn’t work
as well at grid scale; it wears out, limits use, and even catches fire. An
alternative is required, and Invinity provides that alternative.
Invinity’s batteries are the size of shipping containers. They’re big, heavy
and cost a bit more, but they don’t wear out, they can’t catch fire, and
they can be operated continuously from full charge to full discharge for
25 years. Built as a standardised product in a factory, our vanadium flow
batteries transform a technology proven for decades from an engineering
exercise into a vital part of the energy transition.
Invinity has 75,000 kilowatt-hours of its modular battery systems deployed
or contracted for delivery to 82 projects across 18 countries – more than
any other company in our space. We’ve deployed the largest flow battery
systems in the U.S., Canada, Australia and the UK, our shareholders include
the UK Infrastructure Bank alongside some of the world’s leading institutional
investors and our customers include the U.S. Department of Energy, the UK
Government and some of the world’s largest multinational energy companies.
Invinity is a global business with operations in the UK, Canada, the U.S.,
Australia and China. The Company is quoted in the UK on AIM and AQSE
and trades in the U.S. on OTCQX.
www.invinity.com
1
UK / U.S. / CANADA / AUSTRALIAAnnual Report and Financial Statements 2023 Highlights of 2023
Year at a Glance
Financial Highlights
Total income (£22.0m) including sales revenue and project related grant income
increased 511% YoY (2022: £3.6m).
Loss from operations (£22.8m) increased 20% (2022: £19.0m).
— The majority of the 2023 gross loss relates to projects signed before 2022. Margin improvement
is a key strategic objective and more recent projects are forecast to achieve broadly flat or small
positive gross margins at the project level (before allocation of facility costs).
Administrative costs (£19.1m) were broadly unchanged YoY (2022: £19.0).
Cash outflows (£19.7m) reduced 10% YoY (2022: £21.9m).
Debt-free with £53.2m of cash at 31 May 2024 (2023: £15.4m).
Post Period: £57.4m fundraise cornerstoned by £25.0m investment from UK Infrastructure Bank
completed in May 2024.
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Annual Report and Financial Statements 2023
Invinity Energy Systems plc
Jamie Houssian from Elemental Energy and Heather Bishop from
Cold Lake First Nations cut the ribbon to launch the 8.4 MWh Invinity
VFB system, attended by guests including Invinity’s Board Members –
September 2023
Invinity Energy Systems plc Annual Report and Financial Statements 2023Foundations for scale
INTRODUCTION
Commercial and Operational Highlights
32.5 MWh
Shipped to customers
across 8 countries in 2023
+800% YoY
136.7 MWh
Signed or awarded funding
for delivery in 2024 or 2025
+245% YoY*
6.6 GWh
Global pipeline
of commercial interest
+170% YoY†
*Compared to deals signed or awarded funding in 2022 for delivery in 2023 or 2024.
† Comparing 17 June 2024 (disclosed in 2023 Annual Report) with 24 May 2023 (disclosed in 2022 Annual Report).
Customer Pipeline Progression & Current Status
Date
24 May 2023 (2022 Annual Report)
22 September 2023 (HY23 results)
30 November 2023 (YE Business Update)
17 June 2024 (2023 Annual Report)
% change (May 2023 to June 2024)
N.B. Definitions of pipeline category terms can be found in the Company’s announcements.
Base
MWh
42.8
43.1
49.8
45.8
+7%
Qualified
Qualified
Advanced
Near-Team
Further-Term
MWh
73.4
MWh
MWh
957.1
1,397.4
137.3
1,415.0
3,057.8
92.0
1,898.5
3,790.7
446.5
2,009.4
4,122.2
+508%
+110%
+195%
UK / U.S. / CANADA / AUSTRALIA
Annual Report and Financial Statements 2023
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UK / U.S. / CANADA / AUSTRALIASTRATEGIC REPORTAnnual Report and Financial Statements 2023
Introduction
Foundations for Scale
An unprecedented level of attention and capital is flowing
towards building a net zero grid by the customers, regulators
and grid operators who make up global electricity markets.
Matt Harper
Chief Commercial Officer
Wind and solar power are the least-cost form of generation
almost everywhere. Markets that can take that low-carbon
electricity and deliver it to users reliably and at low cost are
the focus of policymakers worldwide. This is the opportunity
on which Invinity is focused.
Over the past two years, the Invinity team has delivered ever-
larger projects – proving how our vanadium flow batteries can
deliver the capabilities our customers want: durable, safe, long
duration energy storage (“LDES”). With the launch of our next-
generation vanadium flow battery, code-named “Mistral”, expected
later this year we will have the product that can deliver those
capabilities to electric grids around the world at any scale.
This combination of opportunity and capability in markets around
the world are Invinity’s “foundations for scale”. As we look
forward, we see tremendous opportunity from those foundations.
Invinity will go from strength to strength by proving at increasing
scale the benefits of durable long duration storage. If we do that
job right, we believe our products will fundamentally inform the
structure of, and be widely deployed across, the global energy
system for decades to come.
Market Headwinds and Tailwinds
Tremendous commercial opportunities are emerging on the path
to net zero. First and foremost, renewables are the world’s lowest
cost source of new electric generating capacity. This is reflected in
the massive solar farms being built from northern Canada to Dubai
and the wind farms now serving Micronesia to northern Scotland.
However, headwinds are beginning to appear. In jurisdictions like
California and Australia that have a large proportion of photovoltaic
generating assets, negative electricity market prices are becoming
common at peak solar generation times, challenging the
economics of expanding such generation. More solar also means
that fuel-powered generators are operating fewer hours per day,
lowering asset utilisation and thus pushing up costs for peaking
capacity. Even conventional low carbon sources are struggling:
from Canada to Australia, hydro projects are taking longer and
costing more, as are recent nuclear plants in the UK and U.S.
4
Fortunately, energy storage assets are increasingly proving their
ability to “firm up” the output from intermittent renewables. Batteries
are now meeting a significant portion of demand in some high
renewables markets. LDES solutions promise to further extend the
benefits of renewables when the sun isn’t shining and the wind isn’t
blowing. Even in jurisdictions like California, the largest batteries in
the world are only starting to fill in where solar power cuts off.
HOW CALIFORNIA POWERED ITSELF IN
APRIL 2021… AND AGAIN IN APRIL 2024.
AVERAGE DAILY GENERATION BY FUEL TYPE
PEAK
DEMAND
APRIL 2021
IMPORTS
APRIL 2024
PEAK
DEMAND
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If batteries are going to facilitate an even higher proportion of
our energy needs being served by renewables, critical questions
remain: what kind of batteries will serve not just peak hours but
power our businesses and homes 24 hours per day? How much
capacity is required? Where should it be installed? And who will
pay for it?
Fortunately, Invinity is already helping to answer these questions.
Our batteries are ideally suited for a 24-hour non-stop cycle
shifting solar overnight, doing so for the life of the generating asset
and with a chemistry safe enough to be installed alongside homes
and critical infrastructure. Additionally, our team are actively
engaging with policymakers and regulators worldwide to ensure
their plans contemplate these advantages, seeding markets for the
revenue and profits that will see our business grow and thrive.
Invinity Energy Systems plc Annual Report and Financial Statements 2023
The UK: Less Sun, More Wind but Similar Challenges
to California
The UK’s transition towards a net zero grid saw a massive
inflection point this winter, with wind outstripping fossil fuel
generation in consecutive quarters for the first time ever.
However, the UK battery market has struggled. Revenues for
UK-based battery assets dropped significantly over the course
of 2023, presenting challenging economics for asset operators
and developers alike.
We’ve also seen significant delays in permitting and grid
interconnection, which have been particularly challenging in the
context of our LODES project, which was awarded funds by the
UK Department of Energy Security and Net Zero (“DESNZ”).
Fortunately, as regulations adapt to the benefits that batteries
can deliver to the grid, and as local planning councils awaken to
the safety benefits of our flow batteries over lithium alternatives,
we are seeing individual projects accelerate.
The broad economic picture is improving as well. Revenues from
installed assets on a £-per-MW basis have trended up over the
first quarter of 2024, with LSE-listed Gresham House Energy
Storage Fund reporting portfolio revenue of £77,900 per MW per
year in April 2024 as compared with £43,800 per MW per year
as recently as January 2024. While monthly variation can be
expected, as more variable resources come online, we expect
the overcapacity in the UK battery market to be absorbed and
asset values return to an investable level.
Finally, on the regulatory front, 2024 so far has seen two
exciting developments. In January, DESNZ released the
first working paper on a proposed “Cap and Floor” scheme
to accelerate the deployment of non-lithium, long duration
storage on the UK grid. This scheme, on whose development
the Department did and continues to seek Invinity’s input, is
designed to ensure investable returns for operators of large-
scale LDES projects and inform the development of future
markets for LDES services.
Then in March, the House of Lords’ Science and Technology
Committee released a paper titled “Long-duration energy
storage: get on with it”, presenting a compelling vision for how
batteries like Invinity’s can both advance the path to net zero
while decreasing consumers’ electricity costs. We expect
strongly positive policies and regulation will flow from this work.
INTRODUCTION
With DESNZ projecting that deploying up to 20 GW of LDES
can save UK electricity ratepayers up to £24bn, there is ample
reason to expect success. An election year always injects some
uncertainty, but with both the current government’s “Powering
up Britain” and the Labour party’s “Great British Energy”
platforms firmly supporting long duration storage, we feel
confident of our prospects.
The U.S.: Focused on Deployment
Where the UK has focused on market innovation to
accelerate storage, the U.S. focus has been on individual
technologies and the companies that build them. In March
2023 the U.S. Department of Energy (“DOE”) published its
“Pathways to Liftoff” paper presenting how various forms
of energy storage can enhance integration of renewables.
That paper was strongly supportive of storage that delivers
inter-day shifting of renewable energy, the segment where
Invinity focuses. In June 2023, the Invinity team presented
a whitepaper based on the U.S. DOE’s analysis at the
International Flow Battery Forum which identified the inter-
day LDES segment as the one that would deliver the largest
amount of energy to the grid by 2040.
U.S. STORAGE DELIVERED ENERGY TWH, 2040
7%
28%
65%
INTER-DAY LDES
WEEKLY LDES
SHORT DURATION
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Based on that work, the DOE has set out to allocate up to
$3.5 billion worth of funds to LDES projects. Results of the
highly competitive first round of solicitations were announced
in September 2023 with only 12 projects being funded, and
Invinity being the only company to have been awarded funds
twice. Upon delivery, our 12 MWh project at the DOE’s Pacific
Northwest National Labs’ Grid Storage Launchpad, and our 72
MWh of VFBs installed at five sites with the National Renewables
Cooperative Organization, will be a massive leap forward in
proving not just the deployability of our batteries at scale, but the
impact they can have for the grid at large.
5
UK / U.S. / CANADA / AUSTRALIAAnnual Report and Financial Statements 2023
From Our Shores to Their Shores
The one undeniable trend all over the world has been towards
the regional manufacturing of infrastructure equipment in
general, components for a net zero grid in particular, and battery,
solar and wind components specifically.
We initially observed this trend in Asia where grid operators are
increasingly nervous about security risks posed by products
made in China. The trend accelerated with the introduction of
the U.S. Inflation Reduction Act, which provides incentives for
domestic battery manufacturing. While not every jurisdiction
has the market power to shift an entire industry, in every country
where we operate we consistently hear the fastest path to
adoption is one that aligns with good, well-paying jobs and a
strong domestic industry.
Fortunately, Invinity has a tremendous advantage in this
respect. Our supply chain already has global reach and does
not rely on “gigafactory” scale production or highly specialised
manufacturing. As we are proving with our new facility in
Motherwell in Scotland that, upon completion, will take our UK
capacity to over 500 MWh per year for customers in the UK
and EU, we can expand manufacturing based on customer
demand at a very low capital cost. As we expand our partnership
strategy to deliver our products globally through capable regional
partners, we will be able to further scale our business faster than
either lithium incumbents or new entrants to our industry.
Delivering on Capability
Invinity’s plan to deliver the capabilities that will serve these
massive and growing opportunities can be summed up in one
word: Mistral. Mistral is, at its most fundamental, our platform for
scale. The north star for our business is to build a battery that
can deliver low-cost, low carbon renewable power on demand
at a lower total cost of energy than any other source. With
commercial rollout imminent, both we and our regional partners
are getting ever more inbound sales inquiries, significantly
enhancing our commercial pipeline.
INVINITY COMMERCIAL PIPELINE
MAY 2023-JUNE 2024
h
W
M
5000
4000
3000
2000
1000
0
+195% YoY
4,122.2
+110% YoY
2,009.4
1,397.4
+508% YoY
957.1
+7% YoY
446.5
42.8
45.8
73.4
May ‘23
June ‘24
May ‘23
June ‘24
May ‘23 June ‘24
May ‘23
June ‘24
BASE
Negotiated and
close to signing
ADVANCED
Company selected
as the supplier
QUALIFIED
Company has qualified
need, timelines,
funding and
suitability
LONG-TERM
QUALIFIED
Qualified for
delivery beyond
24 months
from present
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Jonathan Wilkinson, Canada’s Minister of Energy and Natural
Resources, launches Canada’s National Clean Energy Strategy from
Invinity’s Vancouver facility – August 2023
Our business is highly regional. Mistral is designed for a global
supply chain both inbound to Invinity and outbound to our
regional partners, who will deliver the market-specific operating
knowledge, regional installation capabilities and domestic
sources of supply that are critical to success. However, we must
also achieve ultra-low cost, protect our intellectual property and
ensure consistently high product quality all while accelerating
speed to market.
In support of those plans, we have been encouraged by our
current and prospective partners’ response to the “license and
royalty” model with which we intend to grow our international
business. In this model, Invinity will deliver core technology
components to our regional manufacturing partners, who will
assemble and deliver products to their own regional client base.
This will allow us to rapidly scale while remaining a capital-light
business. Our first partner to adopt this model, Everdura in
Taiwan, has begun work on their final assembly plant, and is
painting a path for steadily evolving relationships in Australia,
Eastern Europe and the Middle East.
Conclusion
The coming years for Invinity are all about scale. We need our
products to be at a scale so they can solve grid operators’ and
project developers’ most pressing challenges. We need our book
of business to scale to where we can set the direction of a rapidly
evolving global market and regulatory landscape. And we need
our organisation to scale so we can deliver the revenue and
profits that will see us continually enhance shareholder value.
The foundations for scale – both the opportunity we seek to
serve and the capabilities we’ll deliver to do so – are clear.
The need for durable, safe, long duration storage as a critical
component of a high renewables net zero grid is no longer in
question and plans to deliver on that need are being developed
by the world’s most influential agencies, governments and
regulators. With Mistral, Invinity will have the tool to deliver our
vanadium flow batteries’ capabilities to the global market. This
foundation is an incredible starting point, and I’m looking forward
to delivering its potential alongside the Invinity team.
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Chairman’s Report
Delivering progress
I’m pleased to report that Invinity continues to make further
progress on its Pathway to Profitability Strategy that was
set out on pages 12-13 of our 2022 Annual Report. Our
achievements in 2023 were focused on our key themes of
delivery and scaling our business.
I am especially pleased to note that Invinity has secured
significant orders for its vanadium flow batteries and grown its
pipeline of confirmed commercial interest. Growing commercial
traction underpins our current ramp-up and investment phase
aimed at delivering a profitable, self-sustaining business. Our
achievements in 2023 were delivered against a backdrop
of rapidly growing global renewable energy production and
storage. Long duration energy storage is a key enabler in
delivering these plans and governments are being increasingly
urged to “get on with it” as a means to unlock lower cost, lower
carbon energy on demand. The launch of our next-generation
product later this year will further open up this potentially huge
addressable global market.
ENGIE Belgium, Equans BeLux, Jan De Nul and the Belgian Energy
Minister launch their Invinity VFB system – March 2024
Last year I stated that delivery is an important target for the
Company and I am pleased to report that in 2023 Invinity
delivered and commissioned more vanadium flow batteries
in 12 months than ever before. This proven ability to deliver
cements Invinity’s position as a world leading manufacturer
of vanadium flow batteries that is meeting the needs of its
customers. I have been to two site openings in the last 12
months. One a large Canadian classic solar/storage site and
secondly a European “behind-the-meter” project delivered by
ENGIE Belgium, Equans BeLux and Jan De Nul with support
from the Belgium Energy Ministry. These projects highlight the
flexibility of our technology and its ability to generate value for
our customers in a broad range of applications.
Neil O’Brien
Non-Executive Chairman
During 2023 we brought in our customer Everdura as a new
strategic partner, enabling Invinity to gain operational and
commercial access into a new market. Strategic partnerships
are going to be of great importance to Invinity’s long term growth
and I am pleased to note that our partnership with Everdura took
a step further early in 2024 when they signed up to become an
exclusive manufacturer of our next-generation product for the
Taiwanese market. The partnership route will enable Invinity’s
leading energy storage products to be deployed in more markets,
quicker and more economically.
I am also pleased to note more recently the strategic investment
secured from the UK Infrastructure Bank (“UKIB”) and Korea
Investment Partners, who participated in an oversubscribed
fundraise alongside existing and new investors in May 2024.
Their backing not only gives a valuable endorsement of Invinity
and its technology but provides important growth capital which
will further accelerate our progress towards profitability.
These successes are a testament to the foundations Invinity
has laid over the last 18 months and I would like to take this
opportunity to thank the entire team for their hard work and
perseverance that made this possible. I would also like to thank
all my Board colleagues for their support and assistance over
the year, particularly Jonathan Marren who has taken on the
role of Chief Financial Officer in addition to his role as Chief
Development Officer. The years of experience, responsibility
and focus that our Board collectively brings to bear will ensure
that the Company continues to make the right decisions for its
long-term future.
Invinity is making progress, having delivered more batteries than
ever before and secured funding and contracts for almost 100
MWh of our next generation product. I wish to express the thanks
of the entire Board for the support we received for our recent
oversubscribed fundraise. Invinity is now adequately capitalised
to address the opportunity at hand. We can attract and retain
quality staff, expand manufacturing capacity and deliver our next-
generation product to our clients. I look forward to this new phase
in our development.
I have confidence in our team’s ability to deliver on our publicly
stated strategy. The opportunity is huge and there is much to
be done.
Neil O’Brien
Non-Executive Chairman
26 June 2024
7
UK / U.S. / CANADA / AUSTRALIASTRATEGIC REPORTAnnual Report and Financial Statements 2023 Chief Executive Officer’s Report
Getting on with it
Larry Zulch
Chief Executive Officer
I’ve taken inspiration for my report title from Baroness
Brown who simply titled her recent report to the House
of Lords “Long-duration energy storage: get on with it”;
I feel it succinctly captures our challenge. The need is
acute and progress is required.
Every step toward renewable energy from wind, solar, or
the tides is simultaneously a call for more energy storage to
reduce instability. While the most widespread use of energy
storage—stabilising the grid over seconds or minutes—
remains important, grid stability over the course of a day,
the “long-duration” referred to in the title, is increasingly
vital. Invinity’s products can do both.
Scaling up manufacturing and improving our supply chain was a
major focus in 2023. A new manufacturing facility in Vancouver
added 200,000 kilowatt-hours of yearly capacity. I am pleased that
we have recently expanded our capacity in the UK and plan to
do the same in the U.S. as well in due course. Our supply chain
improvements reduced costs while keeping environmental, social
and governance obligations front of mind.
Invinity is progressing well. In 2023, we:
Delivered more product than ever before;
Recognised five times more revenue than in 2022;
Closed significant new deals across each of our core
markets;
Secured funding for major projects using Mistral,
our next-generation product; and
Progressed our strategic aim to deliver projects at positive
gross margin, an important step towards net cash generation.
I am incredibly proud of our team for these accomplishments.
We are receiving recognition for them: Bloomberg New Energy
Finance included Invinity on its list of Global Tier 1 battery
manufacturers for the first time, the only flow battery company and
the only UK company they recognised.
But our 2023 accomplishments only serve to heighten our
determination to rapidly and efficiently advance our products,
their commercial recognition, and our ability to deliver ever-larger
orders. Before looking forward, however, we should review our
commitments from 2022.
Our 2023 Achievements
In my 2022 report, I outlined a four-part strategy that would
enable Invinity to make demonstrable progress year-on-year.
I am pleased to report significant progress in each area:
1) Deliver on Backlog
Invinity delivered more than 32,000 kilowatt-hours of our vanadium
flow batteries (“VFBs”) to customers across four continents.
8
2) Close New Deals
2023 saw Invinity sign deals with eight new customers and
enter into a number of commercial partnerships. We targeted
and subsequently won a number of funding opportunities that
will support progressing large high-profile projects toward
financial close.
Our sales pipeline, with continued application of strict criteria,
has grown 170% year-on-year to over 6,000 megawatt-hours
of qualified commercial demand, giving us confidence that the
market opportunity remains very real and very large.
Johnson Chiang, Executive Chairman Asia, Invinity, Bong-Suck Kim, Princi-
pal Researcher, KEPCO New Energy Technology Research Institute, Larry
Zulch, CEO, Invinity, Dr. Seung-Joo Lee, ESS Technology Advisor, KEPCO,
and Dr. Dae-Hee Choi, Director, ESS Business, Hyosung Heavy Industries at
the 1.5 MWh Invinity VFB in Korea – December 2023
Invinity Energy Systems plc Annual Report and Financial Statements 2023
3) Deliver Mistral
Mistral, the code name for our next-generation product currently
being co-developed with Gamesa Electric and Siemens Gamesa
Renewable Energy, promises to be more capable, more scalable,
and more economical than other energy storage. That means
it must operate continuously for decades without degradation,
function at gigawatt-hour scale, and do so with a low lifetime
cost per unit of energy stored and no risk of an expensive fire.
Our current VS3 product has proven these goals are eminently
achievable, and Mistral will deliver them.
Developing an ambitious new product is not easy, but I am
pleased to report that the team made significant progress in 2023,
achieving a fully operational prototype that validated Mistral’s
fundamental performance targets and operating parameters. This
major step gave us confidence to initiate pilot manufacturing in
readiness for Mistral’s official launch later this year.
Performance verification enabled us to begin commercial activity
for Mistral in 2023 and I am pleased that we met our target of
securing a Mistral pilot project in the first half of 2023 and a
commercial order for Mistral later in the year. Additional validation
came from the U.S. Department of Energy (“DOE”) which
awarded funding for 84,000 kilowatt-hours of Mistral projects
after an extensive process evaluating Mistral and Invinity’s
capability to deliver it.
4) Operational Excellence
Outward progress must be matched by internal capabilities, and
in 2023 we focused on efficient delivery of more product than
ever before and the processes that enable us to continue to grow.
The delivery and commissioning of more than 28,000 kilowatt-
hours of our VS3 product demonstrates success.
We focus on making Invinity a great place to work; the best
workforce allows us to produce the best VFBs.
Looking Forward
In our recent fundraise, we highlighted our strategy of utilising
partnerships. In the U.S. and UK, our partners help us pursue
capex-light manufacturing and direct sales. Outside these core
markets, we are working with existing and pursuing new partners
capable of commercial engagement, product and project
support, and after-sales activities. Our relationship with rest-of-
world partners typically starts with reselling our products but can
lead to manufacturing under a licence and royalty model.
Darren Yen, Chairman, Everdura and Larry Zulch, CEO, Invinity concluding
the agreement for Everdura to set up domestic manufacturing in Taiwan
– September 2023
1) The UK Market
Each year, the UK discards (“curtails”) enough renewable
energy to power an estimated million homes. Much of this could
be captured in LDES and used effectively. However, current
regulatory support for energy storage focuses on grid stability
and therefore shorter-duration batteries. We know LDES projects
to be economically compelling but proving that requires financial
returns from operating LDES projects. The UK Government is
helping us provide that proof:
In April 2023, Invinity secured £11 million of matched funding
under Phase 2 of the UK Government’s Longer Duration
Energy Storage (“LODES”) Competition for the largest VFB
deployed in the UK.
The House of Lords released the aforementioned report from
the Science and Technology Committee on LDES and its
critical role in UK electricity supply.
More recently, the UK Infrastructure Bank, wholly owned and
backed by HM Treasury but operating independently, made a
£25 million equity investment in Invinity to support UK LDES
projects, manufacturing and jobs.
The UK electricity market has great potential for Invinity given the
significant need for LDES and the UK Government’s support for
its deployment. Our manufacturing and electrochemical research
in Scotland supports our focus on the UK. We envision an LDES
growth phase occurring in the UK just as Mistral becomes
available to dramatically expand our capabilities.
9
UK / U.S. / CANADA / AUSTRALIASTRATEGIC REPORTAnnual Report and Financial Statements 2023
2) The North American Market
A somewhat different approach is required to address the
enormous LDES market in North America, though in both
markets, adoption of renewable energy is limited by the
deployment of energy storage. Governments are stepping in to
accelerate LDES projects with one prominent example being the
U.S. Inflation Reduction Act of 2022 which provides tax credits
that support energy storage projects. Further examples include:
In June 2023, The British Columbia Centre for Innovation
and Clean Energy provided funding to support the very first
Mistral project;
In September 2023, the U.S. DOE awarded funding
for a 12,000 kilowatt-hour Mistral project at the Pacific
Northwest National Laboratory (“PNNL”), an energy
research lab with more than 6,000 scientists, engineers,
and professional staff. This will be the largest battery
system ever provided to PNNL; and
The September 2023 U.S. DOE announcement also
announced funding for 72,000 kilowatt-hours of Mistral to
be installed at five regional energy cooperatives.
Qualifying for government support in the U.S. requires
meeting certain requirements for U.S. domestic content.
Invinity has developed relationships with various partners to
support a capex-light strategy to optimize our supply chain
and U.S. manufacturing.
We see the North American market as having very high potential
for Invinity. There is an emerging need for non-lithium LDES, and
Invinity is in a prime position to address that need with Mistral.
3) Outside Core Markets
Invinity cannot address the worldwide need for LDES with a local
presence in every area with potential. The solution is to identify
partners able to fully represent our products.
An example is our relationship with Everdura in Taiwan. Everdura,
whose parent Everbrite made an equity investment in 2023 in
Invinity, has been pursuing commercial opportunities for Invinity’s
products across the entire ASEAN region. In September 2023,
Everdura became our first commercial customer to place a
Mistral order.
INVINITY PROJECTS WORLDWIDE
Chappice Lake
8.4 MWh
2
4
12
2
Viejas Casino
& Resort
10 MWh
SINGLE LOCATION 10
MULTIPLE LOCATIONS
10
2
3
2
4
2
4
2
Spencer Energy
8 MWh
Y
N
A
P
M
O
C
:
E
C
R
U
O
S
Invinity Energy Systems plc Annual Report and Financial Statements 2023
In February 2024, Everdura signed a manufacturing agreement
for Mistral that gives Invinity a royalty based on a percentage of
their Mistral revenue in exchange for direct access to our supply
chain and the ability to order our proprietary cell stacks and
software directly from Invinity.
We are pursuing other similar high-potential relationships and
look forward to announcing them in due course.
Conclusion
Mistral is a differentiated product with compelling economics.
It promises to operate continuously for decades with high
throughput, no degradation, and zero chance of a fire (our water-
based electrolyte is entirely non-flammable). Bringing Mistral to
market is our highest priority and I’m pleased to say it is going
well, though certainly there are challenges, many we’ve met and
some still to come. However, we view every challenge as an
opportunity to prove our capabilities and take us further ahead of
the competition.
Mistral in itself is not enough. We must have an appropriate
strategy, tailored by region, for commercialization and
manufacturing; embrace and enhance our relationships with
partners; operate efficiently and effectively; and reduce the potential
impact of events outside of our control. And, finally, we must rapidly
become profitable, the ultimate measure of our success.
We are doing all of this with the finest team I have ever had the
privilege of leading and the continued support of our investors
and our partners. I am endlessly grateful for both.
Larry Zulch
Chief Executive Officer
26 June 2024
CCO Matt Harper and CEO Larry Zulch along with B.C. CICE Deputy Executive Director Todd Sayers
at the opening of Invinity’s new Pender St manufacturing facility in Vancouver – June 2023
11
UK / U.S. / CANADA / AUSTRALIASTRATEGIC REPORTAnnual Report and Financial Statements 2023 Chief Financial Officer’s Report
Building a Sustainable
Business
Jonathan Marren
Chief Financial Officer and
Chief Development Officer
2023
£’000
2022
£’000
22,006
11
2,944
647
22,017
3,591
Financial Highlights
Revenue
Project related grant income shown
against cost of sales
Total revenue and grant income
other than revenue
Loss from operations
(22,778) (18,982)
Total inventory
Pre-paid inventory
2023
£’000
2022
£’000
3,288
1,073
9,827
5,102
Total Inventory and Pre-paid Inventory
4,361
14,929
Amounts due from customer contracts
included in trade receivables
Contract assets (accrued income for work
done not yet invoiced)
Contract liabilities (deferred revenue related
to advances on customer contracts)
Trade payables
Provision for contract losses
Warranty provision
Net position
2,496
1,737
1,192
500
(1,312)
(2,166)
(333)
(602)
(8,375)
(3,706)
(1,607)
(284)
3,636
3,194
Net Finance costs were £0.4 million (2022: £0.4 million income)
with the majority of the difference being the costs associated with
the repayment and termination of the convertible loan instrument
that was entered into on 14 December 2022 to provide additional
working capital for the business and was completed in the year.
Total inventory and pre-paid inventory reduced to £4.4 million
(2022: £14.9 million) as a result of the conversion into revenue
from the delivery of products during the year and in particular
the Spencer Energy, Viejas Casino & Resort and Elemental
Energy projects. Considering wider balance sheet items directly
relating to product sales (i.e. Trade receivables, Accrued income,
Deferred revenue, Trade payables, Provision for contract
losses and Warranty provision), the net balance sheet position
increased by £0.4 million to £3.6 million (2022: £3.2 million).
2023 Financial Performance
I am pleased to report that total income including sales revenue
and project related grant income increased significantly
to £22.0 million in 2023 (2022: £3.6 million). Revenue is
recognised against projects when specific performance
obligations related to those projects have been satisfied.
In the year, revenue was recognised on 15 projects across
Australia, the U.S., Canada, the UK and Europe totalling over
35 MWh of projects. This marks the first time the Company has
recorded significant revenue and represents a major milestone.
As in the prior year, grant funding specific to customer projects
has been presented alongside the relevant project revenue and
associated direct costs where that funding is project specific and
represents a direct subsidy against project costs. Unlike 2022,
such grant funding only constituted a negligible part of total
revenue and grant income other than revenue.
The Company recorded a gross loss of £3.3 million (2022:
gross profit of £0.7 million) but it is notable that the gross profit
recorded in 2022 included the writing back of £3.2 million
of provisions.
The Company has a strategic aim to move to delivering projects
at positive gross margins and this positive trend continues with
the majority of the gross loss being attributed to projects signed
before 2022 and with the more recent projects being at broadly
flat or small positive gross margins at the project level (before
allocation of facility costs).
Administrative expenses did not change significantly from the
prior year at £19.1 million (2022: £19.0 million) reflecting a
continued focus on managing costs. Administrative costs were
represented by an increased investment in people with staff costs
of £12.8 million in 2023 (2022: £10.3 million) and professional
fees decreased to £0.7 million in 2023 (2022: £3.0 million),
benefiting from the one-off items in 2022 not recurring in the
current year. Sales and marketing costs increased to £1.0 million
(2022: £0.2 million) as a result of continuing investment in this
area to support marketing the Company’s products, depreciation
of £1.1 million (2022: £1.2 million) and IT costs of £0.9 million
(2022 £1.2 million). Net research and development recoveries
were £0.1 million (2022: £1.6 million costs) reflecting recoveries
from Gamesa Electric S.A.U. (“Gamesa Electric”) under the
Joint Development and Commercialisation Agreement (“JDCA”)
whereby Gamesa Electric agreed to fund up to an aggregate
US$4.62 million of Invinity’s activities towards the development of
the Company’s next-generation product, code-named “Mistral”,
payable as development milestones are met.
12
Invinity Energy Systems plc Annual Report and Financial Statements 2023
In addition, as part of the capital raise in March 2023,
Everbrite Technology Co. Ltd. (Everbrite), a leading
Taiwanese manufacturer of industrial technology, subscribed
for £2.5 million of shares in the Company. The investment by
Everbrite followed the 1 December 2022 reseller agreement
and initial 15 MWh purchase order of vanadium flow batteries
with Everdura Technology Company, a joint venture between
Everbrite and Taiwanese clean energy company, Pronergy
Technology Co. Ltd, covering Taiwan and Southeast Asia.
These strategic investments underscore the development
progress of the Company since the 2020 merger transaction
that formed the Group as it is today and, in relation to the
agreement with Everbrite, is intended to support a closer
strategic relationship for the deployment of vanadium flow
batteries in Taiwan and further afield.
Going Concern
Following completion of the fundraising in May 2024, the
Company had cash of £53.2 million as at 31 May 2024
(2023: £15.4 million).
The Directors have prepared a cash flow forecast for the
period from the balance sheet date until 30 June 2025. This
forecast indicates that the Group would expect to remain
cash positive during this period and without the requirement
for further fundraising. The business continues to be in a
cash outflow position, using funding generated from previous
fundraises (although it is planning to move to a cash inflow
position upon the launch and delivery of material volume of
Mistral). As such, this cash flow forecast was stress-tested
for a worst-case scenario of no positive cash receipts from
sales. In this tested scenario, the business would remain
cash positive for the 12 months from the date of approval of
these financial statements. The accounts have therefore been
prepared on a going concern basis.
Jonathan Marren
Chief Financial Officer and Chief Development Officer
26 June 2024
2023 Cash Performance
Year-on-year cash outflow from operations reduced to
£19.7 million (2022: £21.9 million) principally as a result of a
net improvement in operating assets and liabilities as set out
in note 14.
As stated above, the Company has a strategic aim to move to
delivering projects at positive gross margin and this positive
trend continues with the more recent projects being at broadly
flat or small positive gross margins at the project level (before
allocation of facility costs). Delivering on this margin is a key
corporate priority and will make an important contribution to the
Company being able to fund its administrative costs from cash
from operations in the future.
To this end, the Company continues to develop Mistral. Mistral
is expected to be manufactured at significantly lower cost than
the Company’s existing product, the VS3 and, when deployed,
will occupy a comparatively smaller physical footprint that will
lead to lower costs for operations and maintenance. These
characteristics are expected to enable the Company to sell this
new product at a materially lower and more competitive price
point than currently. This is anticipated to drive additional sales
at a materially better gross margin thus leading to future cash
generation and profitability.
Funding and Net Working Capital
At 31 December 2023 the Company had cash and cash
equivalents of £5.0 million (2022: £5.1 million). The Company’s
cash balance during 2024 has been materially increased
following the successful conclusion of a capital raising of
£57.4 million which completed in May 2024.
At the prior year end, the Company had recorded a
US$2.5 million convertible loan instrument taken out with
Riverfort Global Opportunities PCC Ltd and YA II PN that
was entered into on 14 December 2022 to provide additional
working capital for the business. This convertible was entirely
repaid during the period.
Accordingly, the Company was debt free as at 31 December
2023 and remains so as at the date of this document.
Strategic Investment
As noted last year, Invinity sees strategic partnerships and
investment as an important pillar of its future corporate
growth and it was delighted to conclude a material strategic
investment from the UK Infrastructure Bank of £25.0 million
and an investment from Korea Investment Partners of
£3.0 million as part of a larger £57.4 million fundraising
completed in May 2024.
13
UK / U.S. / CANADA / AUSTRALIASTRATEGIC REPORTAnnual Report and Financial Statements 2023 Risk Management Report
The Group’s business exposes it to a broad range of risks. Invinity has implemented a robust system of internal controls
which aims to manage, rather than eliminate, risk and, whilst the Group has an Audit & Risk Committee (financial risk) and an
Environmental, Social & Governance Committee (non-financial risk), it is seen as the responsibility of the entire Board.
Commercial Risk
Detail
Lithium battery manufacturers
currently dominate the stationary
battery energy storage system
(BESS) market.
The Group’s position of delivering
a longer duration, safer and more
durable BESS could come under
threat if the incumbent providers
rapidly improve their competitive
offering.
Likelihood
High
Risk
trend
Impact
Medium
Mitigation
Focus on markets where the Group
has the largest advantages in terms
of its product (e.g. safety, ultra-high
cycle counts), domestic content
and manufacturing considerations
and general alignment with national
energy policy and regulation.
Whilst sales contracts are bilateral,
they are usually part of multi-party
projects.
Whilst Invinity contracts directly with
the project developer, that same
developer is contracting with a
number of other parties as part of
financial close, which may therefore
be delayed for reasons unrelated to
the Invinity contract.
High
High
Careful up-front screening of
project characteristics along with
a preference for developers with a
good track record.
Most near-to-medium term sales
are expected to require an element
of grant funding support from
the local, regional or national
governments.
The relative market penetration of
flow batteries against lithium means
that grants are currently available
but likely to be phased out as flow
battery technology becomes more
established in the longer term.
High
High
Continue to develop expertise
in grant applications, prioritise
contracts with a high chance
of qualifying and continue to
drive down costs through value
engineering, scale and supply chain
management.
Non-lithium storage projects are not
yet considered ‘bankable’ by project
finance.
Third party finance, particularly
debt, is slower to engage with
developments until technologies are
considered ‘established’, which can
increase the cost of capital.
High
Medium
A bankability study was completed
during 2022 which should enable
Invinity to ensure that the correct
criteria are met as early as possible.
Commercialisation of the
Company’s technology is still in
process and therefore product
may fall short of performance
expectations.
With the first VS3 contracts
delivered in 2021 and 2022 and
the next-generation Mistral product
yet to be delivered, there is limited
operational performance in the field
over a prolonged period of time.
Medium
High
Strict quality control procedures
during manufacturing and
acceptance tests prior to
shipping combined with real-time
performance reporting from the field
into a dedicated support team.
14
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Commercial Risk
continued
Detail
Joint Development and
Commercialisation programme with
Gamesa Electric does not achieve
commercial release within the
timescales expected.
Invinity may be unable to deliver
on the benchmarks for commercial
competitiveness, as assessed by
measures of performance relative
to cost, set out by Gamesa Electric.
Likelihood
Impact
Medium
High
Invinity deals with a significant
number of counterparties both
commercially and operationally in
the course of its business activities.
Failure of a counterparty to
conduct itself appropriately or fulfil
its obligations to Invinity has the
potential to materially affect the
Group’s ability to trade.
Medium
Medium
The levels of key input costs
such as steel, electrolyte, labour
and transport, can fluctuate,
particularly in the current inflationary
environment.
An uncertain macro-economic
outlook across the globe can cause
increases in the costs of transport,
steel and vanadium.
Medium/
High
High
Medium
High
Whilst Invinity has been awarded
£11m of funding from BEIS under
Phase 2 of the UK Government’s
Department for Energy Security
and Net Zero’s Longer Duration
Energy Storage Demonstration
(“LODES”) Competition, it needs
a development partner to access
the funding.
The funding provided under the
LODES Competition is provided
on a matched basis which it is
anticipated will be provided by a
development partner. Whilst Invinity
has engaged with and signed
an MoU with a suitable partner,
a binding contract to provide
the funding has not yet been
executed and therefore may be
unable to proceed to the build and
commissioning stage.
Risk
trend
Mitigation
The Group is fully engaged with
Gamesa Electric and its parent
Siemens Gamesa Renewable
Energy (SGRE) on every element
of the development programme,
with the design itself based on
well-proven smaller scale existing
products, thereby minimising
technology risk.
The Board regularly reviews and
monitors material counterparty
risk. The Company’s customers,
suppliers, partners, investors and
other counterparties as appropriate
are vetted prior to engagement by
the Company or its advisors in an
effort to reduce counterparty risk to
the greatest possible extent.
Strategic relationships such as
offtake agreements with suppliers
can reduce short-term price
volatility.
The Group is fully engaged with
Gamesa Electric and its parent
Siemens Gamesa Renewable
Energy (SGRE) on every element
of the development programme,
with the design itself based on
well-proven smaller scale existing
products, thereby minimising
technology risk.
15
UK / U.S. / CANADA / AUSTRALIASTRATEGIC REPORTAnnual Report and Financial Statements 2023
Operational Risk
Detail
The supply chain is international
and certain components are sole
sourced.
The stacks, wherein resides
the Group’s ‘know how’, are
manufactured in-house in Canada
and Scotland with the balance-of-
system manufactured in China.
Final assembly is in Canada,
Scotland or China, depending on
customer location.
Likelihood
Impact
Medium
High
Risk
trend
Mitigation
Moving away from sole sourcing
where and when possible, such
as manufacturing stacks in both
Canada and Scotland. Moving
the manufacture of the balance of
system to a supplier with higher
capacity and multiple manufacturing
locations.
The supply chain is, as yet,
unproven at the scale envisaged.
Driving costs down to the levels
envisaged will require material
production increases in each of the
coming years.
High
High
A growing order book and a strong
balance sheet will enable the Group
to build more equitable relationships
with larger suppliers.
Expanding manufacturing with
new partners increases the risk of
intellectual property (IP) issues/
infringements.
Invinity’s strategy is to use
outsourced manufacturing partners.
This approach carries a limited risk
of IP infringements.
Low
Medium
The Group carries out significant
due diligence on all potential
partners and all contractual
agreements are consulted upon
by external parties so that there is
significant protection to the Group
should there need to be a pursuit
and defence of IP.
Corporate Risk
Detail
Likelihood
Impact
Risk
trend
Mitigation
The Group is international with
Whilst the VS3 and Invinity’s next
High
Medium
Senior roles have been allocated
primary operations in the UK, U.S.,
generation product, Mistral, are
Canada & China.
single products, employees are
separated by geography and time
zone, which can potentially impact
collaboration and coordination.
on the basis of function rather
than geography to encourage a
group, rather than regional, view.
The Group encourages proactive
working practices to take advantage
of timezones to enhance the
efficiency of overall operations.
Failure to meet shareholder
Fundraises have increased
Medium
High
Regular news flow and trading
expectations.
expectations and poor performance
could deter potential investors from
buying or existing shareholders
from holding.
updates, particularly where closed
sales are concerned.
16
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Financial Risk
Detail
Likelihood
Impact
Risk
trend
Mitigation
The Group does not yet generate
The Group is in the early phase
High
High
positive cash flows.
of commercialisation and so is not
yet generating the product margins
required to support all of its costs.
Continued sales growth, product
development and standardisation
will allow the Group to drive down
gross costs and improve product
margin.
Having multi-jurisdictional
Whilst sales receipts are in a range
High
Medium
The Group holds up to six months
operations exposes the Group to
of currencies, the majority of the
foreign exchange risk, particularly
materials costs are settled in US $
against the US, Canadian and
and a material element of payroll is
Australian $.
settled in Canadian $. Post-merger
fundraisings have all been in GB £.
of expected US $ required and
converts Australian $ receipts into
Canadian $.
Having multi-jurisdictional
The Group has manufacturing
High
Low
The Group seeks specialist external
operations exposes the Group to
operations in the UK, Canada and
cross-border tax risk, particularly
China, along with sales operations
transfer pricing, and tariffs.
in the U.S. In addition to the tax
issues, the U.S. trade tariffs on
Chinese output are potentially
material.
advice on tax and tariff related
matters. In the case of the U.S.
tariffs on China, sufficient content is
manufactured in Canada.
17
UK / U.S. / CANADA / AUSTRALIASTRATEGIC REPORTAnnual Report and Financial Statements 2023
Sustainability Report
How Invinity is Supporting
a Just and Equitable Transition
The impacts of Climate Change continue to be evidenced
worldwide. Providing a solution to address this forms the
fundamental tenet of our business and Invinity remains
even more committed to our role as part of the solution to
the global climate emergency.
As chair of Invinity’s Environmental, Social and Governance
(ESG) Committee which regularly presents the Company’s
ESG progress to the Board, I am pleased to provide this report
which focuses on Invinity’s environmental and societal progress
throughout 2023. Invinity’s Board of Directors also believes that
strong corporate governance and effective risk management
are key to the delivery of shareholder value, and the Board has
adopted the Quoted Companies Alliance Corporate Governance
Code. Further details on this are covered in the Governance
section of this Annual Report.
A Just and Equitable Transition
Invinity believes that there is no contradiction between
sustainable development, a healthy economy, and a clean
and safe environment. The principal of operating sustainably
sits at the heart of the Company’s business and is important
to our future.
It is widely acknowledged that the transition of energy away
from fossil fuels will bring significant environmental benefits to
communities around the world. The rapid deployment of energy
storage alongside clean renewable generation, such as solar and
wind, provides a secure route to lowering emissions by allowing
clean energy to be dispatched 24/7.
However, this transition also has the potential to bring about
significant social change as economies must adapt. Invinity
believes it is important that no one is left behind as part of this
transition. We recognise the significance of this change and it
is why the Company is pleased to be undertaking a series of
endeavours designed to make a positive societal contribution
for the benefit of all stakeholders.
Invinity is proud that its safe, durable and reliable energy storage
solution, and the manner in which we operate, has the ability to
accelerate the Just and Equitable transition to net zero.
Environment
Credentials
Invinity takes great pride in being recognised as a leader in
clean energy. The Company was one of the first to be awarded
the London Stock Exchange’s Green Economy Mark back in
2019 and we are gratified to continue to maintain our status as
a company that derives more than 50% of its revenues from
products and services that are actively contributing to climate
change mitigation and adaptation, pollution reduction and the
circular economy.
The Company has been a signatory on the SME Climate
Commitment since 2021, recognising that we cannot expect
others to reduce their carbon footprint if we do not do so
ourselves. Invinity continues to monitor, and is working to reduce,
its carbon footprint across its operations and employs a quality
audit to ensure its supply chain is in line with the Company’s
long-term social, environmental and economic values that aim to
generate further benefits.
Invinity continues to recognise that the Just Transition provides
impetus for everyone towards meeting the United Nations
Sustainable Development Goals. The Company is pleased
with its ongoing contributions to, amongst other goals, Goal 7:
‘Affordable and Clean Energy’, Goal 11: ‘Sustainable Cities and
Communities’, and Goal 13: ‘Climate Action’.
Circular Economy
A major requirement of the Just Transition is that companies
help build a more circular economy, one that reduces waste and
creates further value for all. Invinity’s vanadium flow batteries are
well-suited to support the transition because:
they are recyclable: almost 100% of an Invinity VFB can be
fully recycled, ensuring virtually no waste is created at end-
of-life;
their lack of degradation means that nearly 100% of the
vanadium itself will also be recovered for further use in other
applications; and
our batteries do not contain any ‘conflict’ materials, such as
cobalt, ensuring we have a socially sustainable product.
Invinity is proud of its efforts to date that are helping to further
protect the environment, reduce our use of virgin raw materials
and help to improve quality of life for all.
18
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Invinity is committed to further improve the sustainability of its
products for the long term. The recognition of the sustainable
role that our vanadium flow batteries play (see case studies
below), and the knowledge that they will leave almost no
waste behind at end-of-life, provides confidence to go further
in our pursuit of an even more sustainable solution for the
energy transition.
Carbon Footprint Reporting
Invinity is a fast-growing company that remains committed to
taking action to reduce its own carbon footprint. The Company
has a range of policies in place, which are reviewed and
adopted annually at Board level, to ensure that our impact is
minimised as we grow.
I
2023 Group Carbon Intensity:
8.96g CO2e
per £1 of recognised revenue
91% reduction
in carbon intensity vs 2020
(base year chosen as year of Invinity’s formation)
INVINITY CARBON FOOTPRINT 2020-23
Invinity reports its carbon footprint in compliance with the
world’s most widely used greenhouse gas reporting framework,
The Greenhouse Gas Protocol, and with the SME Climate
Commitment. The Company reports on its direct emissions
(Scope 1) and indirect emissions (Scope 2) and uses an
operational control accounting approach which involves
accounting for all emissions from operations over which the
Company has control. Finally, as per SME Climate Commitment
guidelines, as a “fast growing SME that provides solutions which
avoid or remove emissions as their core business”, it is considered
appropriate for Invinity to report its carbon footprint on an ‘intensity’
basis, using the metric of grammes of CO2 equivalent per £ of
annual revenue.
Invinity is delighted to report that it has continued to reduce its
Carbon Intensity and minimise the greenhouse gas emissions of
its activities year on year.
Social
As part of our strategy to maintain and improve Operational
Excellence, Invinity encourages socially responsible
practices within its global operations and is embedding them
to help the Company on its pathway to profitability. Being a
socially responsible business is an important part of the Just
Transition and is of critical importance to Invinity as it will
ensure the Company’s future operations continue to bring
benefits to all stakeholders.
)
£
/
e
2
O
C
g
(
I
Y
T
S
N
E
T
N
I
N
O
B
R
A
C
100
80
60
40
20
0
2023 EMISSIONS
SCOPE BREAKDOWN
23%
77%
2020
2021
2022
2023
YEAR
gCO2e/£
TOTAL SCOPE 1
TOTAL SCOPE 2
Y
N
A
P
M
O
C
:
E
C
R
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O
S
ENVIRONMENTAL STEWARDSHIP —
‘RESPECTING THE ENVIRONMENT
ON A SUSTAINABLE BASIS’
Efficient resource use
Circular economy
Biodiversity
SOCIAL IMPACT —
‘CONTRIBUTING SOCIALLY
WHERE WE OPERATE’
Community collaboration
Diversity & inclusion
Safety, health & well-being
Social
Impact
Environmental
Stewardship
ESG
Responsible
Governance
RESPONSIBLE GOVERNANCE –
‘CREATING VALUE BY EXERCISING
PRINCIPLED LEADERSHIP’
Integrated risk management
Ethical behaviour
Transparency and trust
19
UK / U.S. / CANADA / AUSTRALIASTRATEGIC REPORTAnnual Report and Financial Statements 2023
Health and Safety statistics on Accidents and Near Misses
As a manufacturer of leading utility-scale energy storage solutions, Invinity’s commitment to Health and Safety remains non-negotiable.
We retain a zero-tolerance approach to accidents and injuries as we believe all our people should finish their working day as healthily
as they started it. This commitment is reflected throughout the workforce who are empowered to speak out on safety to ensure Invinity
maintains the highest possible standards in this regard.
UNITED KINGDOM
CANADA
OTHER LOCATIONS
2023
2022
2021
2023
2022
2021
Average Number of employees
59
61
68
73
68
65
Reportable lost time incidents
Minor incidents
Near miss (No injury)
First Aid
0
0
1
0
0
3
2
0
0
3
8
1
0
1
0
1
1
0
4
0
0
1
2
1
2023
11
1
0
1
0
2022
2021
9
0
0
0
0
12
0
0
4
0
CASE STUDIES
Two of Invinity’s signature VFB projects, our 5 MWh VFB at the Energy Superhub Oxford and
our 8.4 MWh VFB at Elemental Energy’s Chappice Lake Solar & Storage site, are helping their
respective local grids to reduce their carbon emissions by dispatching clean energy on demand:
In July 2023, Energy Superhub Oxford published data for its
In September 2023, the Chappice Lake Solar & Storage project
first year of operation, noting particularly that it saved c.732.66
tonnes of carbon (the equivalent of planting 4,300 trees) and had
provided over 1.1 GWh of power to local residents. This battery,
combined with the EV charging hub, low carbon heating network
and smart energy management technologies together will help to
eliminate 10,000 tonnes of CO2 per year, rising to 25,000 tonnes
per year by 2032.
became operational and began supplying clean energy to the local
Albertan Grid, enough to power around 3,000 homes. This project,
which is also backed by the Cold Lake First Nation, is expected
to achieve annual carbon savings of c.20,000 tonnes of CO2e.
The Company is proud of its commitment to work with indigenous
nations, particularly through its partnership with Indian Energy which
covers North America, and the Chappice Lake project shows how
government, industry and indigenous nations can work together to
ensure everyone can benefit from the just transition.
Invinity’s 10 MWh VFB at the Viejas Casino & Resort, the largest VFB in the
U.S. – May 2024
Invinity Board member Kristina Peterson with Jamie Houssian, Elemental
Energy and representatives of Cold Lake First Nations at the launch of the
Chappice Lake project – September 2023
20
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Diversity
Invinity is committed to fostering a diverse, inclusive and
equitable workplace. Workforce diversity has been proven to
boost creativity and innovation, provide greater opportunities for
professional growth and leads to better decision-making. The
Company monitors the age distribution across its employees to
ensure it is well-placed for the future and that its hiring policies
are appropriately managed. Invinity is a keen supporter of
Women in STEM roles and is proud to note that the Company
hired its largest number of female staff in 2023, including into
the engineering functions within the business. The Company
also began measuring ethnic diversity within the Group in 2023
to better identify and prevent bias as part of its Operational
Excellence strategy. Invinity continually reviews its activities across
each of these areas to ensure the Company is doing the right thing
and that all Invinity stakeholders can benefit.
Initiatives and Programmes
Social responsibility programmes are recognised important tools
that can boost employee morale, lead to greater productivity
and increase customer retention and loyalty. A happy, diverse
and motivated workforce not only leads to better outcomes for
all stakeholders but also to increased brand recognition and
awareness in the industry. Furthermore, these programmes will
also enhance Invinity’s growing reputation as a company that
takes its social responsibilities seriously as the world makes a Just
Transition to net zero.
Invinity has a number of initiatives and programmes in place to
ensure the Company is doing as much as is possible to enhance
its social responsibility. Specific programmes include:
Women in Tech Roundtable
Set up in 2022, this initiative created an open forum for the
women at Invinity to discuss a wide range of topics selected by
female employees as well as a major focus on how to increase
the number of female staff at Invinity.
Invinity Leadership Council (ILC)
The ILC, established in 2023, has a mandate to foster better
culture, communication and collaboration across the entire
organisation. The group includes the Company’s Senior
Leadership Team as well as other senior staff members from
across all facets of the business. Their purpose is to identify
organisational challenges and discuss potential solutions
through presentations and Q&A. Within the ILC, a sub-
committee also specifically focuses on employee engagement
by gathering feedback and implementing initiatives designed
to improve employee experience. This feedback is collected
through open discussion meetings and is presented to the
Executive Committee.
Student Engagement
Invinity continues to offer internships (in the UK) and Co-
ops (in Canada) for students to provide valuable first-hand
experience in a professional setting and thereby enable
Invinity to recruit future employees who are interested in
the green economy. Over the past three years, Invinity
has employed a significant number of students in both
the UK and in Canada, many of whom have gone on to
become full-time employees, with others gaining valuable
experience that has helped them to start successful
careers in the clean energy industry. In 2023 Invinity
increased its student hires by 25% YoY and has plans to
continue this trend throughout 2024 and beyond.
Employee-led Social Initiatives
Invinity is highly supportive of its employees carrying out
activities that are designed to enhance inter-office links
and support other social benefits, recognising that good
employee cohesion is vital to the health and productivity
of the workforce. Specific employee-led examples
include charitable fundraising events held at Invinity’s
Bathgate office and a global fitness event connecting
UK, Canadian, American and Australian-based staff
across the whole Company. Employees at all levels of the
Company participated in these events and Invinity actively
encourages and supports its staff as they look to undertake
similar activities.
These initiatives are enabling Invinity not only to play an active
role in the local community by sharing our knowledge and
providing new opportunities for those in the local area, but also
fostering inclusive and open attitudes and healthy activities
amongst our staff.
Invinity’s commitment to sustainability for the environment and
society, as well as the principles of the Just Transition, is a
non-negotiable part of Invinity’s development. Furthermore, the
Company is proud of the successes it has achieved and the
enhanced initiatives it has deployed in 2023 in support of our
hard-working team to make Invinity a great place to work. We
fundamentally believe that good practices embedded now will
ensure that Invinity is well set for the future.
Rajat Kohli
Chairman, Environmental, Social and Governance Committee
26 June 2024
21
UK / U.S. / CANADA / AUSTRALIASTRATEGIC REPORTAnnual Report and Financial Statements 2023
Board of Directors
Neil O’Brien Non-Executive Chairman 61 2C
Neil was appointed Non-Executive Chairman in April 2020, having first
joined the Board as a Non-Executive Director in September 2016.
Neil’s previous role was as CEO of AIM quoted Alkane Energy,
an independent UK power generator (acquired by Infinis in 2018),
which he joined in 2008. Under his leadership, the Company
achieved rapid output increases through a combination of organic
growth and acquisition activity. Alkane expanded its UK portfolio
of baseload power generating sites and established a leading
position in the UK back-up power market covering winter peaking,
National Grid “STOR” programme and the capacity market.
Neil started his career at Coopers & Lybrand in 1985, where he
qualified as a Chartered Accountant, before joining Blue Circle in
1988, holding a number of senior financial and operational roles
in the UK and Europe. He then spent three years as a Group
Management Accountant at Aggregate Industries, before moving to
Speedy Hire as Group Finance Director.
Larry Zulch Chief Executive Officer 66 2M
Larry became the CEO in April 2020. He has over 30
years’ experience successfully commercialising advanced
technologies and scaling the companies that deliver those
technologies to market.
Prior to Invinity, Larry held a number of senior leadership
and executive management roles including CEO of Avalon
Battery Corporation, President & CEO of Dantz Development
(acquired by EMC), President & CEO of Photometics,
Chairman of PLCD, CEO of Cloud Engines, and President &
CEO of Savvius (acquired by LiveAction). He served as VP
and Officer at EMC, and as Executive Chairman of Freerange
Communications (acquired by Sprint via Handmark).
An Executive Director, Larry joined the Board of Invinity in April
2020 and conducts his global responsibilities out of Invinity’s San
Francisco office. He is a member of the Nomination Committee.
Neil read Politics, Philosophy and Economics at Oriel College,
Oxford University. Neil is Chairman of the Nomination Committee.
Additional External Directorships:
3GO Security Incorporated
Proactive Diagnostic Incorporated
Additional External Directorships:
South Staffordshire Community Energy
UK Hire Ltd
Matt Harper Chief Commercial Officer 47 4M
Matt became the CCO of Invinity in April 2020. He is an engineer
and entrepreneur with over 20 years’ experience developing and
commercialising clean energy technologies, including 14 years in
energy storage.
Matt co-founded Avalon Battery, which merged with redT
energy to form Invinity. As President of Avalon, he designed and
delivered ground-breaking vanadium flow battery-based energy
storage solutions across the world. Prior to Avalon, Matt served
as VP Products and Services at Prudent Energy spending time
in both Vancouver and Beijing. He holds a Master of Science
degree in Engineering and Management from the Massachusetts
Institute of Technology and is named as the inventor of seven
granted U.S. patents.
An Executive Director, Matt joined the Board of Invinity in April 2020
and conducts his global responsibilities out of Invinity’s Vancouver
office. He is a member of the ESG Committee.
Additional External Directorships:
None
22
Jonathan Marren Chief Financial Officer and Chief Development
Officer 49
Jonathan was appointed Chief Development Officer in July 2022
and became the full-time Chief Financial Officer in September 2023
after serving as Interim CFO from September 2022. Prior to his
appointment as an Executive Director, he was a member of Invinity’s
Board as the Senior Independent Director (appointed May 2021) and
a Non-Executive Director since March 2016. Previously, Jonathan
had been Chief Financial Officer of redT energy between July 2012
and March 2016, having been an advisor to the Company since early
2006, including on its flotation in April 2006.
He has previously held positions as Deputy Head of Corporate
Finance at Singer Capital Markets, prior to which he was at Peel Hunt
between 2000 and 2010 where he was a Director in the Corporate
Department with responsibility for their new energy and clean tech
franchise where he gained considerable experience of working with
companies in this area.
Jonathan qualified as a Chartered Accountant with Arthur Andersen in
1999 after obtaining a BSc in Mathematics from Durham University.
Additional External Directorships:
None
Invinity Energy Systems plc Annual Report and Financial Statements 2023 Committee compositions
1 Audit & Risk Committee
2 Nomination Committee
3 Remuneration Committee
4 ESG Committee
C Chairman/Chair
M Member
Rajat (Raj) Kohli Senior Independent Director 60 1M 2M 3M 4C
Raj joined the Board of Invinity in June 2020 and brings over
30 years’ experience in finance and the resources, energy and
infrastructure sectors. In his City career, Raj worked as a mining and
metals analyst at BNP Paribas, subsequently joining HSBC where he
became a Managing Director in the Resources and Energy Group.
Raj then joined ArcelorMittal as Co-Head of Mergers & Acquisitions
in 2007, returning to banking in 2011 with Standard Bank as Global
Head of Metals and Mining. Since 2015, Raj has provided strategic
consulting services to the natural resources sector as Principal of
Ptolemy Resource Capital and Co-Founder of Oval Advisory.
Raj is the Chairman of the ESG Committee and is a member of
the Audit & Risk, Remuneration and Nomination Committees.
Subsequent to Jonathan Marren’s appointment as Chief
Development Officer, Raj was also appointed Senior Independent
Director in July 2022.
Additional External Directorships:
Ptolemy Resource Capital Ltd
Minas de Revuboe Ltd
Talbot Group Holdings Pty Ltd
Jockeys Financial Ltd
Oval Advisory Ltd
Talbot Group Investments Pty Ltd
Midrev Mining Mauritius Ltd
Kristina Peterson Non-Executive Director 60 1M 3C
Kristina joined the Board of Invinity and was appointed Non-
Executive Director in November 2021.
Kristina brings 30 years of experience in energy and infrastructure,
having held senior executive management roles at Brookfield,
EDF Renewables, Suntech, and Greenwood Energy. She began
her career at Citibank and ABN AMRO Bank, where she arranged
over $8.5 billion of project and structured finance debt transactions
in the U.S., Asia, Middle East and Africa. She currently serves as
Industrial Advisor for private equity firm EQT Partners, and is the
CEO of Mayflower Partners, where she provides climate, cleantech
and software investment advisory services.
Kristina received an MBA from the University of Chicago Booth School
of Business and completed graduate coursework in management
at MIT’s Sloan School prior to Booth. She earned a BS, Business
Administration from Boston University School of Management.
She is Chair of the Remuneration Committee and is also a member
of the Audit & Risk Committee.
Additional External Directorships:
Augment Ventures Fund III, L.P.
Coalition for Green Capital
Madison Energy Infrastructure Inc
Blink Charging
Electriq Power
Michael Farrow Non-Executive Director 70 1C 2M 3M 4M
Michael founded and subsequently sold Consortia Partnership
Ltd, a mid-sized Jersey regulated trust, fund and corporate
administration company, the latter being the corporate secretary
to the Company. He was the former company secretary of Cater
Allen Jersey, a banking, trustee and investment management
group. Having retired, he currently sits on the boards of a
number of listed and substantial private companies and funds.
Michael has considerable financial and corporate experience
and holds an MSc in Corporate Governance. He is a Fellow of
the Chartered Institute of Secretaries & Administrators and was
formerly a regular British Army Officer.
Michael joined the Board of Invinity in March 2006. He is the
Chairman of the Audit & Risk Committee and also sits on the
Nomination, Remuneration and ESG Committees.
Additional External Directorships:
STANLIB Funds Limited
Circle Property PLC
Melville Douglas Funds
Reuben Brothers Limited
23
UK / U.S. / CANADA / AUSTRALIAGOVERNANCEAnnual Report and Financial Statements 2023
Governance Report
Neil O’Brien
Non-Executive Chairman
Introduction on the Governance Report
from the Chairman, Neil O’Brien
Invinity is quoted on the Alternative Investment Market (“AIM”)
of the London Stock Exchange. The Company’s shares are
also admitted to trading on the Apex segment of the Aquis Stock
Exchange Growth Market (AQSE) and the Company’s long-
term warrants trade on the Access segment of the AQSE. The
Company’s shares also trade on the OTCQX in the U.S.
Since 2021, the corporate governance framework has
been strengthened with a number of initiatives including the
appointment of a Senior Independent Director and a new Non-
Executive Director, the introduction of a Board performance
appraisal process and the streamlining of Board processes,
including risk management. The Board has also established
an ESG Committee to ensure that the Company delivers on its
objective of operating responsibly and sustainably.
The Company is required to apply a recognised corporate
governance code and the Board has adopted the Quoted
Companies Alliance Corporate Governance Code (the “QCA
Code”), which is designed for small to mid-sized companies and
which has been adopted by many AIM companies. The Board
has concluded that the QCA Code remains the most appropriate
corporate governance code for the Company.
The Board has considered how the Company applies
the ten principles of the QCA Code and the Governance
Report includes the required disclosures and explanations
where relevant. Further details of the Company’s corporate
governance practices are provided on the Company’s website
in the Investors’ section under Corporate Governance.
Corporate Governance Statement
The Board recognises that good governance helps to underpin
the foundations of a solid and successful business and delivery
of shareholder value. Invinity’s Board, led by the Chairman, is
committed to maintaining high standards of corporate governance
for which the Directors are accountable to shareholders and
other stakeholders and to ensuring that the Company’s values
are communicated and upheld across the Group. The Board
recognises that corporate governance practices will need to be
regularly reviewed as the Company grows to ensure that they
remain appropriate and effective.
Board Composition During the Year
Name
Role
Non-Executives
Neil O’Brien
Michael Farrow
Rajat Kohli
Kristina Peterson
Executives
Lawrence Zulch†
Matthew Harper†
Jonathan Marren†
Non-Executive Chairman
Non-Executive Director
Senior Independent Director
Non-Executive Director
Chief Executive Officer
Chief Commercial Officer
Chief Financial Officer and
Chief Development Officer
Corporate Culture
The Company is committed to ensuring that there is a healthy
corporate culture. A number of policies and procedures have been
put in place to ensure that ethical and transparent behaviour is
recognised and followed across the Group and these include:
Code of Conduct
Whistleblowing Policy
Equal Opportunities Policy
Share Dealing Code
Anti-Bribery and Corruption Policy
Health and Safety Policy
Modern Slavery Statement
Procurement Policy
Social Impact Policy
Environmental Impact Policy
Biodiversity Policy
The above policies are hosted on the Company’s internal HR
portal and form a core part of Invinity’s staff onboarding process
in addition to Health and Safety training. Staff are also required
to complete online training and pass an assessment to prove
compliance with both the Company’s share dealing code and
anti-bribery and corruption policy.
Length of service as at 31 May 2024
Date of appointment
7 years, 8 months
18 years, 2 months*
3 years, 11 months
2 years, 6 months
4 years, 1 month
4 years, 1 month
1 year, 11 months
9 September 2016
16 March 2006
22 June 2020
2 November 2021
2 April 2020
2 April 2020
11 July 2022
* See comment below regarding Michael Farrow’s length of tenure/independence.
† All three executives previously held board-level positions in Invinity’s predecessor companies, redT energy and Avalon Battery. Lawrence Zulch was previously CEO of Avalon
Battery from April 2019 to April 2020. Matt Harper was Co-Founder, President and Chief Product Officer of Avalon Battery between July 2014 and April 2020 and Jonathan
Marren was a Non-Executive Director from March 2016 to July 2022 and previously Chief Financial Officer of redT energy.
24
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Board Composition
The Board currently consists of a Non-Executive Chairman, three
Executive Directors, a Senior Independent Director and two other
Non-Executive Directors.
Board Meetings and Processes
The Board has around eight scheduled meetings each year with
other meetings held as required. Informal meetings also take
place between the Chairman and the Non-Executive Directors
without the Executive Directors being present.
During 2023, Jonathan Marren was confirmed as permanent
Chief Financial Officer alongside his existing role as Chief
Development Officer.
The role of the Senior Independent Director is to provide a
sounding board for the Chairman and to act as an intermediary
for Board members and as a point of contact for shareholders
who have concerns which have not been adequately addressed
by the Chairman or Chief Executive Officer.
Other than any shareholdings in the Company and the receipt
of fees for acting as Directors, the Chairman and Non-Executive
Directors have no financial interests in the Company or business
relationships that would interfere with their independent judgement.
Independence of Directors
The Board considers that the Chairman and all the Non-
Executive Directors were independent for the whole of the
2023 financial year notwithstanding circumstances which could
indicate otherwise specifically the length of tenure of Michael
Farrow and Neil O’Brien’s previous role as Executive Chairman.
While recognising that Michael Farrow has been a Director for
18 years, the practicalities of maintaining corporate residency in
Jersey means that it is advantageous to have a knowledgeable
and actively participative director located there. The Board
has determined that both these individuals demonstrate
independence of character and judgement and that there are no
circumstances which are likely, or could be perceived to be likely,
to affect their judgement. The Board also note their intention to
redomicile the Company to the UK and expect this activity to
include a restructuring of the board composition.
Role of the Board
The Board is collectively responsible for delivery of the strategy
which is designed to promote the long-term success of the
Company and to deliver shareholder value. The Board is
responsible for formulation and approval of the Company’s
long-term objectives and strategy, ensuring an appropriate
organisational structure and knowledge to cater for changing
external and internal environments. This would include approval of
budgets, oversight of operations across the Group, maintenance
of internal controls and risk management systems and approval of
Group policies. The Board may delegate specific responsibilities
but there is a schedule of matters specifically reserved for decision
by the Board to ensure that it exercises control over the key
matters which could impact on delivery of the Company’s strategy.
Board Skills and Responsibilities
The Directors have a wide range of skills and industry experience
including technical, operational, commercial and financial both in the
UK and internationally. The Chairman and Non-Executive Directors
have held senior management, Board and advisory positions and
bring relevant experience from their current and previous roles.
A clearly defined organisational structure exists across the
Group, with lines of responsibility and delegation of authority
to executive management.
At each Board meeting, the Board receives an update from the
CEO on key current activities, including HSE, and considers the
Commercial and Finance Reports and any papers relating to
specific matters requiring consideration or approval.
Non-Executive Directors affirm on joining the Company that they
are able to allocate sufficient time to discharge effectively their
responsibilities and are required to keep the Board updated of any
changes in respect of their other commitments.
The letters of appointment of the Non-Executive Directors
detail the expected time commitment which is around six Board
meetings, one General Meeting and two meetings in respect
of each of the Board Committees per annum and are required
to devote to the Company’s business such additional time as
is reasonably necessary by way of preparation for, or follow-up
after, any meeting. The Non-Executive Directors may also be
asked to participate in other events such as marketing, social and
client functions with this commitment not exceeding around six
days per annum.
Board Meeting Attendance
Director
Board meetings attended
Neil O’Brien – Chairman
Lawrence Zulch
Matthew Harper
Michael Farrow
Rajat Kohli
Jonathan Marren
Kristina Peterson
Total meetings during year
8
8
8
8
8
8
8
8
In addition to the scheduled Board meetings shown above,
a number of meetings were held to deal with administrative
matters including exercises of warrants and grants and exercises
of share options and approval of documentation required for
grant funding applications.
The Board has also established a Standing Committee of the
Board to deal with ad hoc matters arising between Board meetings.
The Standing Committee is only used in exceptional circumstances
where it is not practical to convene a full Board meeting. All
Directors receive notice of any meetings and the matters to be
discussed and can attend the meeting or request that the matter
under consideration be considered at a full Board meeting.
Board Performance Evaluation
Post the successful fundraising in May 2024, there are a number
of Board changes expected to occur as Invinity redomiciles to the
UK and the UK Infrastructure Bank takes up their Board position.
The Board will evaluate performance and any gaps in knowledge
and experience that may occur with these changes later in 2024.
25
UK / U.S. / CANADA / AUSTRALIAGOVERNANCEAnnual Report and Financial Statements 2023
Board Induction, Training and Outside Advice
There is no set induction process but new Directors receive
a briefing on AIM obligations from the Company’s NOMAD,
Canaccord Genuity, as well as an appropriate induction
according to their requirements.
The Board supports Directors who wish to receive ongoing
training and education relating to their duties.
Independent legal advice is available to Directors at the
Group’s expense if external advice is considered necessary
and appropriate.
External Directorships and Interests
Executive Directors are permitted to engage in other activities
and businesses outside the Group providing that there is no
risk of conflict with their duties or commitments and subject to
full Board disclosure.
Non-Executive Directors are required to advise the Chairman as
soon as practicable of any proposed Board appointments which
could give rise to a conflict with their position as a Director of the
Company. Details are circulated to other Board members who are
invited to advise the Chairman if they have any concerns about
the proposed appointment.
Conflicts of Interest
The Board has in place a procedure for dealing with actual or
potential conflicts of interest. All Directors are obliged not to put
themselves into a situation which may give rise to a conflict of
interest, however, if such circumstances do arise then they are
required to make full disclosure to the Chairman. If requested by
the Chairman, a Director will absent themselves from any Board
discussions and decisions on matters where there is an actual
or perceived conflict of interest.
Company Secretary
The Company Secretary is Oak Secretaries (Jersey) Limited
which is 100% owned by the Oak Group (Jersey) Ltd (Oak
Group), a Jersey-based limited liability company regulated by
the Jersey Financial Services Commission. Michael Farrow
was a director of the Oak Group until his retirement from that
company in May 2019. The Company has also engaged the
services of a qualified company secretary to assist with the
administration of the share option scheme, compliance and
to provide corporate governance advice and general support
to the Board and its Committees.
Communication with Shareholders
The Company engages with shareholders in a variety of ways:
Meetings
Executive Directors meet regularly with major shareholders
and the investment community which allows exposure to new
investors, either online or in person. This process includes
presentations, one-to-one meetings and both buy and sell-
side analyst briefings. The Chief Executive Officer regularly
briefs the Board on meetings held and relays the views
expressed. Details of analyst research reports, press reports,
share trading and register analyses are shared with Directors
which ensures that they are kept up to date with the views of
the investment community.
Website
The Company’s website is updated regularly and includes
a dedicated Investor Relations section. This includes all
direct shareholder communications, external presentations,
Q&As with Directors and other relevant documentation so
that existing and potential investors have access to up-to-
date and relevant information.
Investor Relations
The Company encourages direct contact from shareholders and
potential investors by providing an email address and telephone
number for investors on the website which is monitored by
the Director of Communications & Investor Relations and the
Corporate Relations Manager. This allows investors to address
ad hoc queries to the Company.
Announcements
The Company issues announcements via the Regulatory News
Service (“RNS”) and press releases periodically to inform the
market of significant news and developments.
Webinars
The Company hosts regular interactive webinars which give
shareholders the chance to address questions to management.
Annual Report
The Company’s annual report gives a detailed overview of the
Company, its strategy, operations, financial position, risk profile
and remuneration structure and is available in hard copy and on
the website. This ensures that existing and potential investors
are provided with the information that they need to make an
assessment of the Company’s performance and prospects.
Political and Charitable Donations
The Group made no charitable or political donations during the
year (2022: £nil).
Newsletter
The Company issues regular newsletters for Investors and any
interested parties who have subscribed to receive updates on the
Company’s activities beyond what is issued through the RNS.
AGM
In addition to the formal AGM business, the executive team give
an operational and financial update and shareholders have the
opportunity to address questions to the Board.
Neil O’Brien
Non-Executive Chairman
26 June 2024
26
Invinity Energy Systems plc Annual Report and Financial Statements 2023 Report of Chairman of
Audit & Risk Committee
Michael Farrow
Chairman, Audit & Risk Committee
Introduction by the Audit & Risk Committee Chairman,
Michael Farrow
I am pleased to present the report of the Audit & Risk Committee
(the “Committee”) for the year ended 31 December 2023. The
report includes details of the Committee’s activities during the
financial year.
Committee Composition
The members of the Committee are Michael Farrow, Rajat Kohli
and Kristina Peterson. The Board is satisfied that all members of
the Committee have recent and relevant financial experience.
Meetings
The Committee met six times during the year and informal
discussions were also held both with and without management
present. The external auditors had discussions with the chairman
of the Committee during the course of the year and also met the
Committee members without management present.
Only members of the Committee have the right to attend the
meetings of the Committee but the Committee can invite the
Executive Directors, members of senior management and
representatives of the external auditors to attend its meetings.
Details of the meetings attended during the financial year were
as follows:
Director
Non-Executive Directors
Michael Farrow – Chairman
Rajat Kohli
Kristina Peterson
Directors
Neil O’Brien
Jonathan Marren
Lawrence Zulch
Matthew Harper
Total meetings during year
† Invitee
Audit & Risk Committee
Meetings Attended
6
4
5
† 3
† 6
† 3
† 3
6
Role
The core terms of reference of the Audit & Risk Committee include
reviewing and reporting to the Board on matters relating to:
the audit plans of the external auditors;
the Group’s overall framework for financial reporting and
internal controls including monitoring, overseeing and assessing
the Group’s strategy and framework of policies, procedures,
systems and controls to identify, assess, manage and report on
compliance matters;
the Group’s overall framework for financial reporting and
internal controls;
the Group’s overall framework for risk management, focusing
on financial risk;
the accounting policies and practices of the Group;
the annual and interim financial reporting carried out by the
Group; and
the independence and performance of the external auditor.
The Committee is responsible for notifying the Board of any
significant concerns that the external auditors may have
arising from their audit work, any matters which may materially
affect or impair the independence of the external auditors, any
significant deficiencies or material weaknesses in the design
or operation of the Group’s internal controls and any serious
issues of non-compliance.
No such concerns were identified during the financial period.
Key Matters Considered by the Committee
During the year, the issues considered by the Committee both
during and outside formal Committee meetings included:
Group financial disclosures and accounting matters and
policies relating to the preparation of the financial statements;
Audit plan of the external auditors for the 2023 financial year;
Reports of the external auditors concerning its audit and
review of the financial statements of the Group;
2022 Annual Report and Accounts and 2023 interim financial
statements;
External auditors’ fees; and
Change of external auditors.
Going Concern
As part of the year end reporting process, management prepares
a detailed report including detailed cashflow forecasts with a
number of potential scenarios and sensitivity assumptions. The
Committee reviews and challenges management’s assumptions
and conclusions in order that it can provide comfort to the Board
that management’s assessment has been challenged and is
supported and that it is appropriate to prepare the financial
statements on a going concern basis. Further details of the going
concern assessment process are contained in Note 2 of the
Group financial statements.
External Auditors
The Committee recommends to the Board the appointment of
the external auditors, subject to the approval of the Company’s
shareholders at a general meeting. Shareholders in a general
meeting authorise the Board to fix the remuneration of the
external auditors and the Board has delegated this responsibility
to the Committee.
27
UK / U.S. / CANADA / AUSTRALIAGOVERNANCEAnnual Report and Financial Statements 2023
The Committee actively considers the effectiveness and
quality of the external auditors on an ongoing basis and, if
considered appropriate, will retender for the position of external
auditor. During the year, the Committee undertook a tender
process for the Group audit as a result of which the Committee
recommended to the Board that BDO LLP be appointed as
external auditors in place of PricewaterhouseCoopers LLP. BDO
LLP were subsequently appointed as auditors to the Company
from 30 November 2023.
The Committee is responsible for the approval of the provision of
all audit services and permitted non-audit services undertaken
by the external auditors. Since the year end, the Committee
has adopted a policy on the independence and objectivity of the
external auditor which includes a list of permitted and prohibited
non-audit services.
The Committee is responsible for assessing the effectiveness
and quality of the external auditors.
Whistleblowing and Anti-Bribery
The Company is committed to conducting all of its business
dealings in a responsible, honest and ethical manner. All
employees, Directors and consultants are required to act with
integrity and to have regard to the Company’s Code of Conduct
in their day-to-day business behaviour. The Company also has in
place an Anti-Bribery and Corruption Policy and Procedures and
arranges training for selected employees following a risk analysis.
All employees are made aware of the Company’s whistleblowing
policy which includes contact details for the Company’s internal
whistleblowing officer and an independent whistleblowing charity,
Public Concern at Work.
All employees are required to undertake training on the
Market Abuse Regulation in relation to inside information and
unauthorised trading in the Company’s shares.
Michael Farrow
Chairman, Audit & Risk Committee
26 June 2024
Report of Chairman
of the ESG Committee
Rajat Kohli
Chairman, Environmental, Social
and Governance Committee
Introduction by the ESG Committee Chairman,
Rajat Kohli
I am pleased to present the report of the ESG Committee for the
year ended 31 December 2023. The Committee was established
by the Board during 2022.
Role
The role of the ESG Committee is to focus on ensuring that the
Company meets its legislative requirements, assesses ESG and
non-financial risk and achieves its ESG goals.
Committee Composition
The Committee is chaired by Rajat Kohli with Michael Farrow
and Matthew Harper as its members. Joe Worthington,
Director of Communications & Investor Relations, also attends
Committee meetings.
Meetings
The Committee met twice during 2023.
Details of the meetings attended during the financial year were
as follows:
Key matters Considered by the Committee
The issues considered by the Committee during the year included:
HSE incidents and remedial actions;
Approval of ESG-related policies;
Confirmation of appointment of staff representatives to
promote and execute ESG initiatives at the Company’s
manufacturing facilities;
Annual carbon footprint reporting;
Review of ESG disclosure in the Annual Report and on the
Company’s website; and
Governance matters and disclosures.
Director
Rajat Kohli – Chairman
Michael Farrow
Matthew Harper
Total meetings during year
28
ESG Committee
Meetings Attended
2
2
2
2
Rajat Kohli
Chairman, Environmental, Social and Governance Committee
26 June 2024
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Report of Chairman
of the Nomination Committee
Neil O’Brien
Chairman, Nomination Committee
Introduction by the Nomination Committee Chairman,
Neil O’Brien
I am pleased to present the report of the Nomination Committee
for the year ended 31 December 2023.
Committee Composition
The Committee is chaired by Neil O’Brien with Michael Farrow,
Rajat Kohli and Lawrence Zulch as its members. The Board
considers all members of the Committee, with the exception of
Lawrence Zulch (CEO), to be independent.
Meetings
The Committee did not meet during 2023. The confirmation of
Jonathan Marren’s appointment as permanent Chief Financial
Officer alongside his existing role as Chief Development Officer
was approved by the Board.
Role
The role of the Committee is to consider Board member
succession, review the structure and composition of the Board
and its Committees and identify and make recommendations
for any changes to the Board. Any decisions relating to the
appointment of Directors are made by the entire Board based on
the merits of the candidates and the relevance of their background
and experience, measured against objective criteria, with care
taken to ensure that appointees have enough time to devote to
the job.
Succession Planning
The Company is committed to appointing, retaining and
developing an experienced team which can effectively manage
the Company’s objectives and deliver its strategy. When
considering succession planning, the Committee will evaluate
the balance of skills and experience on the Board and make
recommendations to the Board on the basis of what it considers
that the Company needs in order to support delivery of the agreed
strategic objectives.
The Committee recognises the need for progressive refreshing
of the Board and the benefits of diversity and the Committee
will have regard to these when considering succession
planning. When considering new Board appointments, the
Committee will be committed to recruiting on merit measured
against objective criteria.
The management of human resources across the Group is
a matter for the Executive Directors but the Non-Executive
Directors are advised in advance of recruitment plans in respect
of senior appointments.
Neil O’Brien
Chairman, Nomination Committee
26 June 2024
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UK / U.S. / CANADA / AUSTRALIAGOVERNANCEAnnual Report and Financial Statements 2023
Report of Chair of the
Remuneration Committee
Kristina Peterson
Chair, Remuneration Committee
Introduction by the Remuneration Committee Chair,
Kristina Peterson
I am pleased, on behalf of the Remuneration Committee, to
present the Directors’ Remuneration Report (‘Report’) for the year
ended 31 December 2023.
The Report is divided into two sections:
The Policy report which sets out the current Remuneration
Policy; and
The Annual Report on Remuneration which sets out details of
the operation of the Remuneration Committee and details of
the Directors’ remuneration packages for the year ended 31
December 2023. It also sets out details of the implementation
of the Remuneration Policy for Executive and Non-Executive
Directors for the year ending 31 December 2024.
In early 2023, the Remuneration Committee engaged Alvarez
& Marsal Tax LLP (“A&M”) to review Executive and Non-
Executive Director compensation and provide benchmarks and
recommendations compared to its AIM-traded peers. A&M’s
report was used as the basis of the salary and incentives review
undertaken during the year, details of which are in the Director’s
Remuneration Report which follows.
The Committee is satisfied that the outcomes, in respect of the
incentives and remuneration during the financial year under
review, are appropriate. The Committee will continue to ensure
that the Company’s Remuneration Policy and practices are
kept under review to ensure that they remain appropriate for
the Company at its stage of development and that they do
not encourage any unnecessary risk taking by the Executive
Directors.
We recommend our Report to shareholders although do not
seek their formal approval. I would be happy to discuss any of the
above matters with individual shareholders should they so wish.
Kristina Peterson
Chair, Remuneration Committee
26 June 2024
30
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Directors’ Remuneration Report
REMUNERATION POLICY
This part of the Report sets out the remuneration policy for the Company. The policy for the Executive Directors is determined by
the Committee and the Committee recommends to the Board any adjustments to salary and bonus awards. The Committee also
makes recommendations to the Board in respect of the remuneration packages of certain members of the senior team based on
recommendations from the Chief Executive Officer. Authority is delegated to the Executive Directors to manage the remuneration
packages of all other employees. Awards of share options to employees under the Company’s Share Option Plan are the responsibility
of the Board which considers recommendations from the Chief Executive Officer in respect of employees.
The aim of the Committee is to ensure that the remuneration packages are sufficiently competitive to attract, retain and motivate
individuals of the quality required to contribute towards the strategic objectives of the Group and thereby enhance shareholder value.
The Committee also aims to ensure that all employees receive rewards that fairly reflect their seniority, level of work and contribution to
the Company.
The Company is committed to promoting equal opportunities in employment with all employees and potential employees receiving
equal treatment.
EXECUTIVE DIRECTOR POLICY
The summary of the remuneration policy for the Executive Directors is set out below. Full details of the remuneration packages are given in the
Report on Remuneration.
Salary
Purpose and link to strategy
To provide an appropriate salary level to support retention and recruitment of Executive Directors.
Operation
Executive Directors receive the same annual salary.
Base salaries are reviewed annually on 1 January with regard to the external economic environment and
salary adjustments across the Company.
The salaries of the Chief Executive Officer (CEO) and Chief Commercial Officer (CCO) are designated
in sterling but paid in local currencies. The salaries are re-based annually to allow for differentials arising
through foreign exchange.
Opportunity
Salary increases will be awarded taking into account the outcome of the review.
Salary increases will usually be in line with increases awarded to other employees but the Committee may
make additional adjustments where there has been a change in role or responsibilities or to reflect a gap in
market positioning.
Performance metrics
Not applicable for base salaries.
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UK / U.S. / CANADA / AUSTRALIAGOVERNANCEAnnual Report and Financial Statements 2023
Pension and Benefits
Purpose and link to strategy
To provide an appropriate range of benefits and pension contributions to assist in the attraction and
retention of the calibre of Executive Directors required for delivery of corporate and strategic objectives.
Operation
The CEO, based in the U.S., does not receive any benefits or employer contributions to a pension plan.
The Chief Financial Officer and Chief Development Officer (CFO & CDO), based in the UK, has income
protection, life assurance cover and private medical insurance. Benefits are administered internally and a
review of providers and prices is conducted annually through a broker to ensure that the level of rates and
cover remain competitive. A matching employer contribution of up to 5% of annual base salary is made to
the Group personal pension plan.
The CCO, based in Canada, has private medical and dental insurance and life assurance cover. He does
not receive any employer pension contributions to a pension plan.
Opportunity
The benefits and pension packages, which are tailored to the individual Executive Directors, are set at a
level that the Committee considers is appropriate.
The value of benefits will vary each year according to the cost of provision.
Performance metrics
Not applicable for benefits and pension package.
Annual Bonus
Purpose and link to strategy
To reward the achievement of corporate targets.
Operation
Objectives are set as early as possible in the financial year.
The bonuses may be paid in cash and/or shares after the end of the financial year to which they relate.
Opportunity
The annual bonus award is determined as a percentage of base salary based on performance against
pre-agreed objectives. When deciding on the level of bonus awards, the Committee will have regard to
the extent to which achievement of the objectives has contributed to progress against the Company’s
strategic drivers.
The bonus is contractual but at the discretion of the Committee.
The maximum bonus potential for Executive Directors is 100% of salary.
Performance metrics
The targets for the Executive Directors comprise the corporate, strategic and financial objectives
agreed by the Board. There are no individual objectives.
The Committee uses its judgement, supported by measurable evidence, to decide the extent to which
the objectives have been achieved and exercises its discretion to decide on the level of bonus awards
to be paid.
The Committee considers whether operations have been completed to acceptable HSE standards and
considers whether there were any HSE incidents when considering the level of bonus payments.
32
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Share Option Plan (Option Plan)
Purpose and link to strategy
To support alignment with shareholders through the link to the creation of shareholder value.
Operation
The Option Plan was introduced in 2018 to replace historical long-term incentive arrangements.
The Committee makes awards of options at an exercise price based on the prevailing market price of the
Company’s shares as at the date of grant. The options will vest in equal tranches after one, two and three
years’ further continuous employment subject to leaver provisions. Options granted to Executive Directors
in July 2023 will cliff-vest after three years and will have a one year holding period post-vesting.
Opportunity
Option awards are usually made for a three-year term but the Committee has discretion over the
frequency and quantum of awards.
Performance metrics
None.
Further Details on the Policy
Performance measurement
Annual bonus – the annual bonus is based on a range of corporate objectives that the Board have agreed are key to progressing and
delivering the Company’s strategy. These can be operational, strategic and financial. Performance targets are designed to be stretching but
achievable having regard to the Company’s strategic priorities from time to time.
Option Plan – the Option Plan ensures alignment with shareholders being focused on share price growth over the medium to long term.
Vesting of equity awards is phased with options vesting in equal tranches in years 1, 2 and 3 after the date of grant. Options granted in
exchange for options in predecessor companies at the time of the Merger vest in accordance with the terms of the original option grant. The
Option Plan for the Executive Directors is the same as that for all other employees.
Remuneration policy for other employees and consultation
The Company’s policy for all employees is to provide remuneration packages that reward them fairly for their contribution and role within the Company.
All employees are entitled to receive the full range of Company benefits but with different qualifying periods and levels of cover depending on
seniority. The most senior employees below Board level are eligible to receive an annual bonus based on performance against corporate targets.
All permanent employees have been granted options under the Option Plan on the same terms as the Executive Directors but proportionate
to their employment contracts and their ability to contribute towards the Company’s strategic objectives. This ensures that an element of
remuneration is deliverable through a scheme that aligns participants with shareholders.
The Company does not consult with employees on the effectiveness and appropriateness of the policy but, in considering individual salary
increases, the Committee does have regard to salary increases across the Company.
Recruitment
In the case of recruiting a new Executive Director, the Committee can use all the existing components of remuneration as set out in the policy table.
The salary of a new appointee will be determined by reference to the experience and skills of the individual, market data, internal comparatives
and the candidate’s current remuneration. New appointees may be entitled to receive the full range of Company benefits on joining and, if the
Committee considers it appropriate, a matching employer contribution of up to 5% of annual base salary to the Group personal pension plan.
In relation to any elements of variable pay, the Committee will take the following approach:
Component
Annual Bonus
Option Plan
Approach
The annual bonus would operate as
outlined in the Policy for existing Executive
Directors. The relevant maximum will be pro-rated
to reflect the period of employment over the year.
Consideration will be given to the appropriate
performance targets at the time of joining.
The Option Plan would operate as outlined
in the policy for existing Directors. An award of
options may be granted on joining subject to the
Company being in an open dealing period.
Maximum annual opportunity
100% of base salary in respect of the
current financial year.
Committee discretion.
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UK / U.S. / CANADA / AUSTRALIAGOVERNANCEAnnual Report and Financial Statements 2023
Service contracts, exit payments and change of control provisions
The Executive Directors have rolling term service agreements with the Company. Details of the Directors’ service contracts and appointment
dates are as follows:
Executive Directors
Appointment date
Contract date
Employing company
Lawrence Zulch
Chief Executive Officer
Matthew Harper
Chief Commercial Officer
Jonathan Marren
Chief Financial Officer & Chief Development Officer
2 April 2020
2 April 2020
Invinity Energy Systems (U.S.) Corporation
2 April 2020
2 April 2020
Invinity Energy Systems (Canada) Corporation
11 July 2022
11 July 2022
Invinity Energy (UK) Limited
The Directors’ service contracts are available to view at the Company’s registered office and prior to each Annual General Meeting at
the venue for the meeting.
The notice period for the Executive Directors is six months’ notice in writing by either party. The Company has the right to make
a payment in lieu of notice of six months’ salary and, in the case of the CEO, a reimbursement of certain benefits if relevant. The
Committee will consider termination payments on a case-by-case basis. It will consider the terms of the Director’s contract and the
circumstances of the termination and might consider making an ex-gratia payment where the circumstances and/or a Director’s
contribution to the Company justifies this. If an ex-gratia payment is to be made, the Committee will ensure that it is satisfied that it is in
the best interests of the Company to make such a payment and that there is no “reward for failure”.
The Committee also has discretion to settle any other amounts which it considers are reasonably due to the Director such as where the
parties agree to enter into a settlement agreement and the individual is required to seek independent legal advice. The Committee can
approve new contractual arrangements with a departing Director covering matters such as confidentiality or restrictive covenants and/or
consultancy arrangements where it believes this is in the best interests of the Company.
Treatment of incentives for leavers and following a corporate event
a) Annual bonus
In relation to annual bonuses, a bonus payment will not usually be made if the Director is under notice at the bonus payment date or has
already left.
b) Option Plan
In relation to awards granted under the Option Plan, the following provisions will apply in Good leaver and Intermediate leaver
circumstances (as defined in the Option Plan rules):
Good leaver where options have vested: options can be exercised for a six-month period from the leaving date (or longer at the
Committee’s discretion);
Good leaver where options have not vested: options will vest on a time pro-rated basis (or according to such other criteria as the
Committee determines) and can be exercised for a six-month period (or longer at the Committee’s discretion) from (a) the normal
vesting date or (b) the leaving date (if the Committee exercises its discretion);
Death while employed where options have vested: options can be exercised for a 12-month period (or longer at the Committee’s
discretion) from the date of death;
Death while employed where options have not vested: options will vest on a time pro-rated basis (or according to such other criteria
as the Committee determines) and can be exercised for a 12-month period (or longer at the Committee’s discretion) from (a) the
date of death or (b) the normal vesting date (if the Committee exercises its discretion);
Death after leaving where options are still held: options can be exercised for a 12 month period (or longer at the Committee’s
discretion) from the date of death (or longer at the Committee’s discretion);
Intermediate leaver where options have vested: options can be exercised for a six-month period from the leaving date (or longer at
the Committee’s discretion);
Intermediate leaver where options have not vested: options can only be exercised if the Committee exercises its discretion.
In the event of change of control of the Company, all vested options will remain exercisable for a period of six months after the change
of control. Subject to the agreement of any acquiring company, option holders may be offered the opportunity to exchange their options
for equivalent options over shares in the acquiring company for a period of up to six months from the change of control taking effect.
Options which have been granted as Incentive Stock Options have different leaver rules designed to comply with U.S. tax legislation
relating to stock options.
34
Invinity Energy Systems plc Annual Report and Financial Statements 2023
The Option Plan rules include malus and clawback provisions whereby the Committee has discretion to reduce the number of
shares subject to an existing Option award in the event that an Option has been granted or has vested on the basis of any incorrect
information relevant to the setting of any performance condition or condition of satisfaction including a material misstatement in the
published financial results or in the event of fraud or misconduct by an Option holder including where an Option holder has been
dismissed for cause. In the case of an Option which has been exercised, the Committee can require the Option holder to repay the
Company an amount equal to the benefit by way of a transfer of shares or cash.
The Board or Committee can amend the Option Plan rules at any time provided that an option holder’s existing rights cannot be
adversely affected without the Option holder’s consent.
Non-Executive Director Policy
The Company’s Articles of Association provide that the Board can determine the remuneration of the Directors. The policy for the
Chairman and Non-Executive Directors is as follows:
Fees
Purpose and link to strategy
To provide a competitive level of fee which will attract and retain high calibre directors with the range
of skills and experience required to support the Executive Directors and assist the Company in
delivering its objectives.
Operation
The fees for the Chairman and Non-Executive Directors are determined by the Board as a whole
with Directors absenting from discussions regarding their own remuneration.
The Board has regard to level of fees paid to the Non-Executive Directors of other similar sized
companies and the time commitment and responsibilities of the role.
Neither the Chairman nor the Non-Executive Directors participate in any of the Company’s share
schemes.
Opportunity
The current annual fees are:
Chairman: £72,000
Non-Executive Director basic fee:
UK: £40,000
U.S.: $50,000
Senior Independent Director fee: £5,000
Committee Chair fee:
UK: £5,000
U.S.: $10,000
Committee membership fee:
UK: £2,500
U.S.: $7,500
No additional fees are payable for membership of, or acting as Chairman of the Nomination Committee.
The fee levels will be reviewed on a periodic basis with reference to the time commitment of the role and
fee levels in comparative companies.
No benefits or other remuneration are provided.
Performance metrics
Not applicable to Non-Executive Directors.
35
UK / U.S. / CANADA / AUSTRALIAGOVERNANCEAnnual Report and Financial Statements 2023
Recruitment
The Committee will follow the Non-Executive Director remuneration policy as set out above in relation to the appointment of a new Non-
Executive Director.
Terms of appointment
The Non-Executive Directors serve under letters of appointment. Their appointments can be terminated at any time by either
party giving three months’ notice to the other. The appointments can also be terminated by the Company without notice in certain
circumstances including incapacity for three months in any 12 month period, serious or repeated breach of obligations in connection
with the appointment or unsatisfactory performance as determined by the Board.
Details of the Non-Executive Director appointments are set out below:
Director
Neil O’Brien
Appointment date
Original appointment letter
Revised appointment letter
9 September 2016
8 September 2016
14 March 2019 – in respect
of appointment as Executive
Chairman
13 March 2020 – in respect of
appointment as Non-Executive
Chairman effective 2 April 2020
Michael Farrow
Rajat Kohli
16 March 2006
22 June 2020
16 March 2006
20 June 2020
Kristina Peterson
2 November 2021
30 October 2021
—
—
—
The Non-Executive Directors’ letters of appointment are available to view at the Company’s registered office and prior to each Annual General
Meeting at the venue for the meeting.
Report on Remuneration
Remuneration Committee Membership and Meetings
As at 31 December 2023, the Committee comprised Kristina Peterson as the Committee Chair, Michael Farrow and Rajat Kohli.
The Committee met four times formally during the financial period and had informal discussions during the year. Details of the formal
meetings attended during the financial year were as follows:
Director
Kristina Peterson – Chair
Michael Farrow
Rajat Kohli
Total meetings during year
Remuneration Committee meetings attended
4
4
3
4
During the financial year, the Committee’s main areas of activity included:
Approving bonus awards in respect of the year ended 31 December 2022 for the Executive Directors;
Setting the parameters for bonus awards for the members of the senior team immediately below Board level and delegating
authority to the CEO to award bonuses within these parameters;
Approving the 2023 KPIs and weightings for the executive bonus plan;
Considering the outcome of the external remuneration benchmarking exercise and approving salary increases for the Executive
Directors; and
Amendments to the Option Plan.
No individual is involved in determining his or her own remuneration.
External Advice
During the financial year, the Committee appointed Alvarez & Marsal Tax LLP (A&M) as remuneration consultants to undertake a
remuneration benchmarking exercise in respect of Executive and Non-Executive Director remuneration and to review the current
long-term incentive arrangements.
The Committee obtains external legal advice from Fox Williams in relation to employment matters.
The Committee considers that the advice it received during the financial period was objective and independent.
36
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Total Remuneration
The table below reports a single figure for total remuneration for each Executive Director:
Salary
£’000(i)
Benefits
£’000(ii)
Annual bonus
£’000(i)
Long-term incentives
£’000 (v)
Pension benefits
£’000
Total
£’000
Directors at
31 December 2023
Year
ended
Year
ended
31 Dec 23 31 Dec 22 31 Dec 23 31 Dec 22
Year
ended
Year
ended
Year
ended
Year
ended
31 Dec 23(iii) 31 Dec 22(iv) 31 Dec 23
Year
ended
Year
ended
31 Dec 22
Year
ended
Year
ended
31 Dec 23 31 Dec 22 31 Dec 23 31 Dec 22
Year
ended
Year
ended
Lawrence Zulch
243.1 176.9
—
—
98.8
93.7
Matt Harper
216.9 172.4
1.8
2.2
86.2
91.4
Jonathan Marren
214.7
75.9
3.0
1.2
47.7
41.5
—
—
—
—
—
—
— — 341.9 270.6
— — 304.9 266.0
8.6
3.0 274.0
121.6
Former Executive Director
Peter Dixon-Clarke
(resigned 29 September 2022)
n/a 145.0
n/a
—
n/a
—
n/a
—
n/a
7.3
n/a 152.3
(i)
(ii)
Salaries and bonuses of L Zulch and M Harper are designated in sterling but paid in local currencies and are calculated using an average exchange rate for the year.
Represents employer contribution to private medical and dental insurance cover in the case of M Harper (calculated using an average exchange rate for the year) and private medical insurance in the
case of J Marren
(iii) Represents amounts paid in 2024 in respect of bonus awards for the year ended 31 December 2023.
(iv) Represents amounts paid in 2023 in respect of bonus awards for the year ended 31 December 2022.
(v)
A number of options vested during the year ended 31 December 2023. The value of the vested options, calculated with reference to the mid-market price on the vesting dates less the cost of exercise,
was £0 for M Harper (2022: £0) and £12,500 for J Marren (2022: £0). The options had not been exercised as at the date of this report in the case of M Harper and J Marren and date of leaving in the case of
P Dixon-Clarke.
The table below reports a single figure for total remuneration for each Non-Executive Director:
Directors at 31 December 2023
Neil O’Brien
Michael Farrow
Rajat Kohli*
Kristina Peterson†
Basic Fees £’000
Additional Fees £’000
Total Fees £’000
Year ended
31 Dec 2023
Year ended
31 Dec 2022
Year ended
31 Dec 2023
Year ended
31 Dec 2022
Year ended
Year ended
31 Dec 2023 31 Dec 2022
72.0
40.0
40.0
39.9(i)
60.0
30.0
30.0
40.6
—
10.0
20.0
16.6(i)
—
5.0
5.2
5.0
8.3
72.0
50.0
60.0
56.5(i)
60.0
35.0
35.2
45.6
n/a
21.2
Former Non-Executive Directors
Jonathan Marren‡ (appointed as Executive Director on 11 July 2022)
n/a
15.8
n/a
(i) Fees paid to Kristina Peterson are designated in sterling but paid in local currencies and are calculated using an average exchange rate for the year.
* Appointed as ESG Committee Chairman on 9 June 2022 and Senior Independent Director on 11 July 2022.
† Appointed as Remuneration Committee Chair on 11 July 2022 and as Audit & Risk Committee member on 27 October 2022
‡ Senior Independent Director from 1 May 2021 to 11 July 2022.
No benefits, pension contributions or other remuneration are provided to the Chairman and Non-Executive Directors.
Additional Information in Respect of Single Figure Table of Remuneration for the Year Ended 31 December 2023
Base salaries
During the year, the Committee considered the results of the A&M Executive Director compensation and benchmarking review. A&M
benchmarked the remuneration packages of each of the Executive Directors against a peer group comprising AIM quoted companies
with a similar market capitalisation to Invinity’s and concluded that the Executive Directors’ salaries and pension contribution levels
were below market in each case. The Committee agreed that it was appropriate to increase the Executive Directors’ base salaries and
agreed the following adjustments with effect from 1 January 2023:
Lawrence Zulch: £250,000 p.a.
Matthew Harper: £220,000 p.a.
Jonathan Marren: £220,000 p.a.
Chairman and Non-Executive Director fees
The fees for the Chairman and Non-Executive Directors had not been reviewed since the merger between redT energy PLC and
Avalon Battery Corporation in April 2020 or the date of appointment in the case of Rajat Kohli and Kristina Peterson. The Board of
Directors considered the outcome of the benchmarking exercise undertaken by A&M and agreed the following adjustments to fees
with effect from 1 January 2023:
Chairman fee: £72,000
Non-Executive Director basic fee: £40,000
Committee membership fee (except Nomination Committee): £2,500
37
UK / U.S. / CANADA / AUSTRALIAGOVERNANCEAnnual Report and Financial Statements 2023
Annual bonus
In respect of the financial period, the Committee agreed that the Executive Director annual bonus opportunity would be up to 100%
of base salary. The Committee had agreed objectives with a range of weightings relating to gross revenue, closing cash, share price
target and next-generation product rollout.
The Committee concluded that the final bonus calculation for 2023 was 50%.
Awards of share options during the financial year
The Board considered the outcome of the A&M benchmarking review in respect of long-term incentives which concluded that the
Executive Directors’ long-term incentives opportunity was significantly below market and noted that the CEO had not received any share
options since joining the Company. The Board agreed that it was appropriate to make a one-off grant of share options to cover the next
three performance years with three-year cliff vesting at the end of the performance period and a one year holding period post vesting
subject to continued employment. The table below summarises the options granted to Executive Directors during the financial year.
Director
Date of grant
Number of options
Exercise price
Vesting date
Larry Zulch
20 July 2023
1,500,000
£0.512
Matthew Harper
20 July 2023
1,250,000
£0.512
Jonathan Marren
20 July 2023
1,250,000
£0.512
Options vest in full at the end of year 3 following date of
grant and are subject to a further holding period of one
year post vesting
Options vest in full at the end of year 3 following date of
grant and are subject to a further holding period of one
year post vesting
Options vest in full at the end of year 3 following date of
grant and are subject to a further holding period of one
year post vesting
Implementation of Executive Director Remuneration Policy for 2024
Base salaries
The Committee agreed that a company-wide 4% salary increase effect from 1 June 2024 would also apply to the Executive Directors’ salaries.
This increase was implemented to assist staff with the rising cost of living due to inflationary pressure in the UK, the U.S. and Canada.
Annual bonus
For 2024, the Executive Directors’ annual bonus will be determined as a percentage of base salary based on performance against pre-agreed
corporate objectives. The maximum bonus potential is 100% of base salary with on target bonuses being 50%.
For the financial year ending 31 December 2024, the Committee has agreed objectives with a range of weightings relating to gross
revenue, fundraising, next-generation product rollout and delivery, product development partnerships and UK project development.
Option Plan
The Committee does not plan to make any awards of share options to Executive Directors under the Option Plan during the 2024 financial year.
Benefits and pension contributions
The Executive Directors will receive the benefits and pension contributions in line with the policy.
Implementation of Non-Executive Director Remuneration Policy for 2024
No adjustments to Non-Executive Director fees are planned for the 2024 financial year.
The current fees are set out in the table below:
Role
Chairman
Type of fee
Total fee
Other Non-Executive Directors
Basic fee
Chair of Committees with exception of Nomination Committee
Senior Independent Director
Committee membership (with exception of Nomination Committee)
£/$
£72,000
£40,000 (UK) $50,000 (U.S.)
£5,000 (UK) $10,000 (U.S.)
£5,000
£2,500 (UK) $7,500
(U.S. Director for Audit & Risk
Committee only)
38
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Statement of Directors’ Shareholdings
The table below summarises the interests of the Directors in office as at 31 December 2023 in the Company’s shares:
Neil O’Brien
Lawrence Zulch
Matthew Harper
Jonathan Marren
Michael Farrow
Rajat Kohli
Kristina Peterson
Ordinary shares of €0.01 each
at 31 December 2023
% of issued share capital
at 31 December 2023
165,625
2,290,199
1,613,470
280,000
9,224
—
—
0.09
1.20
0.84
0.15
—
—
—
In line with other investors, the Directors who participated in the Placing announced in November 2021 acquired one short-term warrant
(which subsequently expired after 16 December 2023) and one long-term warrant for every two Ordinary Shares purchased. The table
below summarises the interests of the Directors in office at 31 December 2023 in long-term warrants to subscribe for shares:
Lawrence Zulch
6,000
0.04
Long-term warrants over Ordinary Shares of €0.01 each with an
exercise price of £1.00 exercisable until 16 December 2024
% of total number
of long-term warrants issued
Outstanding Awards under the Option Plan
Director
Date of grant
Exercise
price
Options held at
31 December 2022
Lapsed/Relinquished/
exercised during year
Vested
during year
Options held
31 December 2023
Earliest
vesting date
Lawrence Zulch
20 July 2023
£0.512
—
Matthew Harper
1 April 2020*
£0.0434
263,034
(revised)
Matthew Harper
1 April 2020*
£0.0434
73,065
(revised)
—
—
—
—
—
—
263,034
73,065
1,500,000
20 July 2026
Matthew Harper
26 August 2020
(revised)
£1.13
300,000
—
100,000
300,000
Options fully vested
as at 15 July 2019
Options fully vested
as at 1 July 2021
Options fully vested
as at 26 August 2023
Matthew Harper
20 July 2023
£0.512
—
—
—
1,250,000
20 July 2026
Jonathan Marren
11 July 2022
£0.455
500,000
—
166,667
500,000
11 July 2023
(options vest in equal
instalments at the end of years
1, 2 and 3 following date of grant)
Jonathan Marren
20 July 2023
£0.512
—
—
—
1,250,000
20 July 2026
* Following the merger between redT Energy PLC and Avalon Battery Corporation, the Company granted new options in substitution and cancellation of options held under the Avalon Battery Corporation
2013 Equity Incentive Plan which had original dates of grant of 21 November 2014 and 7 July 2016. The options have retained the original vesting dates.
Share Price Movements During Year Ended 31 December 2023
The mid-market closing price of the Company’s shares at 29 December 2023 was 35 pence. The range of the trading price of the
Company’s shares during 2023 was between 59 pence and 26 pence per share.
Kristina Peterson
Chair of the Remuneration Committee
26 June 2024
39
UK / U.S. / CANADA / AUSTRALIAGOVERNANCEAnnual Report and Financial Statements 2023
Directors’ Report
Principal Activity
The principal activity of the Group is the production and selling of
vanadium flow batteries for the energy storage market.
Results and Dividends
The trading results for the year, and the Group’s financial position
at the end of the period, are shown in the attached financial
statements. The Directors have not recommended a dividend for
the year (year ended 31 December 2022: £nil).
Financial Instruments
Information relating to the financial instruments relating to the
Group is set out in the Notes to the Consolidated Financial
Statements in Note 2 (Accounting Policies) and in Note 28
(Financial Assets and Liabilities).
Political and Charitable Contributions
The Group made no charitable donations (year ended
31 December 2022: £nil) and no political donations (2022: £nil)
during the year
Major Shareholders
At 5 June 2024, the Company had been notified of the following
interests of three percent or more of the Company’s voting rights.
Shareholder/Fund Manager
Number
of shares
% of issued
share capital
UK Infrastructure Bank
108,695,652
24.67%
Schroders plc
Premier Miton
81,691,634
18.54%
20,434,783
4.64%
Herald Investment Management
16,446,850
3.73%
Directors
The present members of the Board are as listed in the Board
composition section of the Governance Report. The interests of
the Directors in office at the year-end in the share capital of the
Company are shown in the Directors’ Remuneration Report along
with details of their service contracts and terms of appointment.
Post Balance Sheet Events
Post balance sheet events are disclosed in note 33.
Going Concern
Going concern is disclosed in the Chief Financial Officer’s report
along with note 2.
Principal Risks and Uncertainties
Information relating to the principal risks and uncertainties facing
the Group is set out in the Risk Management Report of the
Strategic Report.
Related Party Transactions
Related party transactions are disclosed in note 30.
Creditor Payment Policy
The Group does not follow any specific code or standard on
payment practice. However, it is the policy of the Group to ensure
that all of its suppliers of goods and services are paid promptly
and in accordance with contractual and legal obligations.
Average creditor days for the year were 19 days (year ended
31 December 2022: 49 days), on the basis of accounts payable
as a percentage of amounts invoiced during the year.
Directors’ and Officers’ Insurance
The Group maintained directors’ and officers’ liability insurance
cover throughout the period. The Directors are also able to
obtain independent legal advice at the expense of the Group,
as necessary, in their capacity as Directors.
Employees
The Group had an average of 140 employees across the year,
three of whom are Executive Directors. The Group seeks to
employ people on the basis of merit and ability to perform
the required roles. The Group does not discriminate on any
grounds including race, gender, religion, age, nationality or
sexual orientation.
Relations with Shareholders
The Company provides shareholders and stakeholders
with relevant information in a timely and balanced manner.
We understand and respect the rights of shareholders, will
convene Annual General Meetings in full consideration of these
rights and encourage full participation of both institutional and
private investors.
Auditor
A resolution for the re-appointment of BDO LLP as auditor
of the Company will be proposed at the forthcoming Annual
General Meeting.
Jonathan Marren
Chief Financial Officer and Chief Development Officer
26 June 2024
40
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Statement of Directors’ responsibilities
in respect of the Financial Statements
Legal and Regulatory Framework
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable law
and regulations. As a Company incorporated in Jersey and
with its ordinary shares admitted to trading on the Alternative
Investment Market (AIM) of the London Stock Exchange and on
the APEX segment of the AQSE Growth Market of AQSE, the
Company is subject to the FCA’s Listing Rules and Disclosure
and Transparency Rules, as well as to all applicable laws and
regulations in Jersey.
The Directors are also responsible for the maintenance and
integrity of the corporate and financial information included on
the Company’s website. Legislation in the Jersey governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Responsibility Statement
Each of the Directors, whose names and functions are listed in
the Corporate Governance section – Board of Directors on pages
22-23, confirm that to the best of their knowledge that:
the Financial Statements, which have been prepared in
accordance with IFRS, give a true and fair view of the assets,
liabilities, financial position and loss of the Company taken as
a whole;
the Strategic Report includes a fair review of the development
and performance of the business and the position of the
Company taken as a whole, together with a description of the
principal risks and uncertainties that it faces; and
the Annual Report and Financial Statements, taken as a
whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy.
In the case of each director in office at the date the Directors’
report is approved:
so far as the Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware;
and
they have taken all the steps that they ought to have taken as
a Director in order to make themselves aware of any relevant
audit information and to establish that the Company’s auditors
are aware of that information.
This responsibility statement was approved by the Board of
Directors and is signed on its behalf by:
Jonathan Marren
Chief Financial Officer and Chief Development Officer
26 June 2024
The Companies (Jersey) Law 1991 requires the Directors to
prepare financial statements for each financial year. Under that
law, the Directors have prepared these Financial Statements
under International Accounting Standards (“IAS UK”) as adopted
in the United Kingdom.
Under Jersey company law, the Directors must not approve the
financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Company and of the
profit or loss of the Company for that period.
In preparing these Financial Statements, the Directors should:
select suitable accounting policies and then apply them
consistently;
state whether applicable IFRS have been followed, subject
to any material departures disclosed and explained in the
Financial Statements;
make judgements and accounting estimates that are
reasonable and prudent; and
prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Group
will continue as a going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any
time the financial position of the Company and enable them
to ensure that the Financial Statements comply with the
Companies (Jersey) Law 1991. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for preparing the Annual Report
and financial statements, which includes a Strategic Report,
Directors’ Report, Directors’ Remuneration Report and
Corporate Governance Statement that comply with applicable
laws and regulations.
41
UK / U.S. / CANADA / AUSTRALIAGOVERNANCEAnnual Report and Financial Statements 2023
Financial Statements Contents
Financial Statements
Independent Auditors’ Report to the Members
of Invinity Energy Systems plc
Consolidated Statement of Profit and Loss
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
43
49
49
50
51
52
Notes to the Consolidated Financial Statements
1 General Information
2 Accounting Policies
3 Critical accounting judgments and key sources
of estimation uncertainty
4 Revenue from contracts with customers and income
from government grants
5 Cost of sales
6 Administrative expenses
7 Auditors’ remuneration
8 Staff costs and headcount
9 Share based payments
10 Other items of operating income and expense
11 Net finance income and costs
12 Income tax expense
13 Loss per share
14 Cash flows from operating activities
15 Goodwill and other intangible assets
16 Property, plant and equipment
17 Right-of-use assets
18 Deferred tax balances
19 Inventory
20 Other current assets
21 Contract related balances
22 Trade receivables
23 Cash and cash equivalents
24 Trade and other payables
25 Derivative financial instruments
26 Lease liabilities
27 Issued share capital and reserves
28 Financial assets and liabilities
29 Financial risk management
30 Related parties
31 Group entities
32 Contingent liability
33 Events occurring after the report period
Other Information
Officers and Advisers
53
53
62
64
65
66
66
66
67
69
69
70
70
71
72
73
74
75
76
76
76
78
78
78
78
79
80
81
82
85
86
87
87
88
42
42
Annual Report and Financial Statements 2023
Invinity Energy Systems plc
Invinity Energy Systems plc Annual Report and Financial Statements 2023 Independent Auditors’ Report
to the Members of Invinity Energy Systems plc
Opinion on the Financial Statements
In our opinion:
the financial statements give a true and fair view of the state of the Group’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; and
have been prepared in accordance with the requirements of Companies (Jersey) Law 1991.
We have audited the financial statements of Invinity Energy Systems Plc (the ‘Group’) for the year ended 31 December 2023 which
comprise the consolidated statement of profit and loss, the consolidated statement of financial position, the consolidated statement of
changes in equity, the consolidated statement of cash flows and notes to the financial statements, including a summary of material
accounting policy information. The financial reporting framework that has been applied in their preparation is applicable law and UK
adopted international accounting standards.
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 Auditor’s responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remain independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
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 ability to continue to adopt the
going concern basis of accounting included:
We evaluated the Directors papers assessing going concern for the forecast period, including the Director’s assessment of risks
and uncertainties, together with the supporting cash flow forecasts prepared by the Directors. In doing so, we formed our own
assessment of risks and uncertainties based on our understanding of the business and current economic conditions;
We examined the cash flow forecasts and challenged the significant assumptions made by the Directors in preparing the
projections including comparing revenue from contracts to business plans and budget;
Where available, we obtained signed contracts on supply of batteries underlying expected future cash flows, enquired with Chief
Commercial Officer on the project pipeline, future capital program and ability to meet the rollout targets as per product road map,
compared forecast costs of sale to budgets, compared projected contract margins with actual margins. In addition, we evaluated
the forecast of general and administrative costs to recent actuals;
We reviewed the forecast data to actual results post year-end and latest available cash position as of 31 May 2024;
We examined evidence related to received gross proceeds in the amount of £57.4 million from a share offering subsequent to
year-end. We inspected the terms relevant to this offering to conclude on whether any restrictions may be placed on the Directors’
ability to use the related funds to support their operation;
We considered the Director’s sensitivity analysis and performed our own sensitivity analysis on the forecasts in respect of
discretionary spending in adverse scenarios of lower sales compared to base case scenario and ran stress tests to estimate cash
balances through the going concern period in the scenario of reduced sales; and
We reviewed the adequacy of the disclosures in the financial statements in respect of going concern based on the results of our
evaluation.
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 ability to continue as a going concern for a period of at least twelve months from
when the financial statements are authorised for issue.
43
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of
this report.
Overview
Coverage
Key audit matters
100% of Group loss before tax
100% of Group revenue
98% of Group total assets
Revenue
Recognition
2023
Materiality
Group financial statements as a whole
£0.33 million based on 1.5% of revenue.
An Overview of the Scope of Our Audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal
control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk
of material misstatement.
We identified five significant components, being Invinity Energy Systems Plc (Parent Company), Invinity Energy (UK) Ltd., Invinity
Energy Systems (Ireland) Ltd., Invinity Energy Systems (Canada) Ltd. and Invinity Energy Systems (U.S.) Ltd. The Group Audit team
performed full scope of audit of the Parent Company, Invinity Energy (UK) Ltd. and Invinity Energy Systems (Ireland) Ltd. The Canadian
and U.S. subsidiaries (Invinity Energy Systems (U.S.) Ltd. and Invinity Energy Systems (Canada) Ltd.) were subject to a full scope audit
by a BDO member firm. The remaining non-significant components were subject to analytical review.
Our involvement with component auditors
For the work performed by component auditors, we determined the level of involvement needed in order to be able to conclude whether
sufficient appropriate audit evidence has been obtained as a basis for our opinion on the Group financial statements as a whole. Our
involvement with component auditors included the following:
Detailed Group reporting instructions were sent to the component auditor, which included the significant areas to be covered by the
audit (including Revenue Recognition that was considered to be a key audit matter as detailed below) and set out the information
required to be reported to the Group audit team.
We performed both remote and on-site reviews of the component audit file in Canada using our online audit software platform and
held regular calls and video-conferences with the component audit team. In addition, we visited Canada to meet with the component
auditor and component management to consider relevant audit findings and conclusions.
The Group audit team was actively involved in the direction of the audits performed by the component auditor for Group reporting
purposes, along with the consideration of findings and determination of conclusions drawn. We performed our own additional
procedures in respect of the significant risk areas that represented Key Audit Matters in addition to the procedures performed by the
component auditor.
44
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that 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 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
Revenue Recognition
(Notes 2 and 4)
Key audit matters
Revenue generated for the year ended
31 December 2023 amounted to £22.0 million
(2022: £3.6 million).
The Directors are required to assess
whether performance obligations under
contractual arrangements were met for
each individual contract scenario. There are
certain complexities inherent to contractual
arrangements and, in particular, delivery
terms and bill-and-hold arrangements. This,
as a result, increases the risk that the cut-off
of revenue is inappropriately applied. Based
on the above, this is deemed to be a Key
Audit Matter.
How the Scope of Our Audit Addressed the Key Audit Matter
We obtained the listing of revenue
transactions and selected 100% of the
reported transactions for testing. We obtained
signed revenue agreements related to
each transaction and reviewed their terms,
including delivery terms, volume and pricing;
We obtained evidence regarding transfer
of control, including shipping documents,
correspondence with customers evidencing
acceptance of the product by the customer
and other relevant documents, evidencing
meeting performance obligations under
related agreement terms and, in particular,
terms of delivery.
Performed a cut-off test of revenue
transactions, including revenue recognised
in respect of goods in transit by inspecting
related documentation and correspondence
for evidence of customers’ acceptance.
We examined supporting contracts of sale
to confirm the point at which control over
the underlying inventory transferred to
the customer including review of related
terms of delivery based on Incoterms.
Where applicable, we also corroborated the
evidence by reviewing associated freight,
insurance and other applicable arrangements
related to the delivery of the product.
We traced the movement of inventory to
the cost of sales ledger to confirm that
related cost of sales has been appropriately
recognised pre and post year end;
For bill and hold arrangements for which
revenue was recognised during the year, we
obtained Directors’ assessment supporting
the recognition of revenue, inspected related
documentation and correspondence for
evidence of customers’ acceptance of the
product. Where applicable, we corroborated
the evidence by reviewing associated
storage and insurance arrangements. Based
on the above we concluded on whether the
revenue recognised, where bill and hold
arrangements were present, meets the
requirements per IFRS 15; and
We examined financial statements
disclosures and accounting policies for
compliance with IFRS 15.
Key observations:
Based on the audit procedures performed we
considered that revenue recognised in the year
is appropriate.
45
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023 Our Application of Materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable
users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily
be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality
as follows:
Key Audit Matter
Materiality
Group Financial Statements
2023
£m
0.33
Basis for determining materiality
1.5% of Revenue
Rationale for the benchmark
applied
The Group is in a loss making position and focused on expanding revenue.
Revenue is considered to be an appropriate materiality benchmark and
constitutes a key performance measure.
Performance materiality
0.2
Basis for determining
performance materiality
60% of overall materiality
Rationale for the percentage applied
for performance materiality
Given the nature of business activity, a lower level of performance
materiality was considered appropriate.
For the purposes of our Group audit opinion, we set materiality for each significant component of the Group based on a percentage
of between 30% and 90% of Group materiality dependent on the size and our assessment of the risk of material misstatement of that
component. Component materiality ranged from £100k to £300k. In the audit of each component, we further applied performance
materiality levels of 60% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality
was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £6,600. We also agreed
to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other Information
The Directors are responsible for the other information. The other information comprises the information included in the Annual Report
and Financial Statements other than the financial statements and our auditor’s report thereon. 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.
46
Invinity Energy Systems plc Annual Report and Financial Statements 2023 Other Companies (Jersey) Law 1991 Reporting
We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in
our opinion:
proper accounting records have not been kept, or proper returns adequate for our audit have not been received from branches not
visited by us; or
the financial statements are not in agreement with the accounting records and returns; 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, 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 Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either
intend to liquidate the Company 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.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below:
Non-compliance with laws and regulations
We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group. We determined that the most
significant which are directly relevant to specific assertions in the financial statements are those related to the reporting framework (UK
adopted international accounting standards, the Companies (Jersey) Law 1991, the AIM rules and the QCA Corporate Governance
Code) and local taxation legislation in the countries where the Group operates, and the terms and requirements included in the Group’s
operating and exploration licences.
Our audit procedures included the following:
Reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with the relevant
laws and regulations noted above.
Enquiries of Management, the Audit Committee of any known or suspected instances of non-compliance with laws and
regulations;
Reading minutes of meetings of those charged with governance, and reviewing correspondence with local tax and regulatory
authorities to identify potential litigation and claims and non-compliance with laws and regulations;
Performing a review of local and international tax compliance with the involvement of our tax specialists;
Reviewing of legal expenditure accounts to understand the nature of expenditure incurred and obtaining external legal
confirmations, where applicable.
Fraud
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures
included:
Enquiring of Management and the Audit Committee of known or suspected instances of fraud, potential litigation and claims.
We read minutes of meetings of those charged with governance, and reviewed correspondence with local tax and regulatory
authorities;
Holding discussions within the audit engagement team as to how and where fraud might occur in the financial statements and
where any potential indicators of fraud may arise in the Group in order to consider how our audit strategy should reflect our
considerations;
Testing the appropriateness of journal entries made throughout the year, to supporting documentation, by applying specific criteria
to detect possible irregularities or fraud;
47
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Assessing and challenging key areas of judgement and estimation made by Management and the Directors, including the
accounting policy over revenue recognition and its application (see Key Audit Matter above), the Directors’ assessment of the
going concern position of the Group and key accounting estimates;
Performing substantive testing on revenue to ensure that cut-off was appropriately applied (see Key Audit Matter above);
Undertaking unpredictability testing through substantive work on a number of selected general ledger balances;
Obtaining an understanding of, and evaluating the design and implementation of, relevant controls surrounding the financial
reporting close process such as controls over the posting of journals and the consolidation process and obtaining an
understanding of the segregation of duties in these processes;
With regards to compliance with laws and regulations at the component level, we instructed the component auditor to report to us on any
instances of non-compliance with local laws and regulations that could result in a risk of material misstatement in the Group financial
statements. We reviewed the component auditor’s working papers over laws and regulations compliance.
We also communicated relevant identified laws and regulations and identified fraud risks to all engagement team members (including
component engagement teams) and remained alert to any indications of fraud or non-compliance with laws and regulations throughout
the audit. For component engagement teams, we also reviewed the result of their work performed in this regard.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of
not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected
in the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
https://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 Article 113A of the Companies (Jersey) Law 1991.
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.
Jack Draycott (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
26 June 2024
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
48
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Consolidated Statement of Profit and Loss
for the year ended 31 December 2023
Note
£000
£000
£000
£000
2023
2022
Revenue
Direct costs
Grant income against direct costs
Cost of sales
Gross (loss)/profit
Operating costs
Administrative expenses
Other items of operating income and expense
Loss from operations
Finance income
Finance costs
Gain on foreign currency transactions
Net finance (costs)/income
Loss before income tax
Income tax expense
Loss for the year
Loss per ordinary share in pence
Basic
Diluted
4
4
5
6
10
11
12
13
13
22,006
2,944
(25,361)
11
(2,927)
647
(25,350)
(3,344)
(19,085)
(349)
(22,778)
719
(1,233)
113
(401)
(23,179)
—
(23,179)
(13.1)
(13.1)
(2,280)
664
(19,042)
(604)
(18,982)
62
(65)
448
445
(18,537)
—
(18,537)
(16.0)
(16.0)
The above consolidated statement of profit and loss should be read in conjunction with the accompanying notes.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
Loss for the year
Other comprehensive expense
Items that may be reclassified subsequently to profit or loss:
Exchange differences on the translation of foreign operations
Total comprehensive loss for the year
2023
£000
2022
£000
(23,179)
(18,537)
(60)
(137)
(23,239)
(18,674)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
49
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Consolidated Statement of Financial Position
as at 31 December 2023
Non-current assets
Goodwill and other intangible assets
Property, plant and equipment
Right-of-use assets
Contract assets
Total non-current assets
Current assets
Inventory
Other current assets
Contract assets
Trade receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Derivative financial instruments
Contract liabilities
Lease liabilities
Provisions
Total current liabilities
Net current assets
Non-current liabilities
Lease liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Called up share capital
Share premium
Share-based payment reserve
Accumulated losses
Currency translation reserve
Other reserves
Total equity
Note
15
16
17
21
19
20
21
22
23
24
25
21
26
21
26
21
27
27
27
27
27
27
2023
£000
2022
£000
24,002
1,699
1,558
304
27,563
3,288
2,721
888
2,496
5,014
14,407
41,970
24,050
1,208
1,845
—
27,103
9,827
8,781
500
1,737
5,137
25,982
53,085
(3,948)
(406)
(1,312)
(723)
(812)
(4,935)
(769)
(8,375)
(740)
(2,907)
(7,201)
(17,726)
7,206
8,256
(833)
(123)
(956)
(969)
—
(969)
(8,157)
(18,695)
33,813
34,390
51,348
162,883
6,683
(185,273)
(1,867)
39
50,716
141,579
5,957
(162,094)
(1,807)
39
33,813
34,390
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
The financial statements on pages 49 to 87 were authorised by the Board of Directors and authorised for issue on 26 June 2024 and
were signed on its behalf by:
Jonathan Marren
Director
50
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Consolidated Statement of Changes in Equity
as at 31 December 2023
Called-up
share
capital
£000
Share
premium
£000
Share-based
payment
reserve
£000
Accumulated
losses
£000
Currency
translation
reserve
£000
Other
reserves
£000
Total
£000
At 1 January 2023
50,716 141,579
5,957
(162,094)
(1,807)
39 34,390
Loss for the year
Other comprehensive income
Foreign currency translation differences
Total comprehensive loss for the year
Transactions with owners in their capacity as owners
Investment funding arrangement, net of transaction costs
Exercise of share options
Share-based payments
Total contributions by owners
—
—
—
—
—
—
631
1
—
21,295
9
—
632
21,304
—
(23,179)
—
—
(23,179)
—
—
—
—
726
726
—
(23,179)
(60)
(60)
—
(60)
—
(23,239)
—
—
—
—
—
—
—
—
—
—
—
21,926
10
726
— 22,662
At 31 December 2023
51,348 162,883
6,683
(185,273)
(1,867)
39 33,813
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Called-up
share
capital
£’000
Share
premium
£’000
Share-based
payment
reserve
£’000
Accumulated
losses
£’000
Currency
translation
reserve
£’000
Other
reserves
£’000
Total
£’000
At 1 January 2022
50,690 140,445
5,293
(143,557)
(1,670)
39 51,240
Loss for the year
Other comprehensive income
Foreign currency translation differences
Total comprehensive loss for the year
Transactions with owners in their capacity as owners
Investment funding arrangement, net of transaction costs
Exercise of share options
Share-based payments
Equity settled interest on investment funding arrangement
Total contributions by owners
—
—
—
25
1
—
—
26
—
—
—
1,129
5
—
—
1,134
—
(18,537)
—
—
(18,537)
—
—
(23)
—
681
6
664
—
(137)
—
(137)
(18,537)
(137)
—
(18,674)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,131
6
681
6
1,824
At 31 December 2022
50,716 141,579
5,957
(162,094)
(1,807)
39 34,390
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
51
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Consolidated Statement of Cash Flows
for the year ended 31 December 2023
Cash flows from operating activities
Cash used in operations
Interest received
Interest paid
Net cash outflow from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Deposits on right-of-use assets
Net cash outflows from investing activities
Cash flows from financing activities
Payment of lease liabilities
Interest paid on lease liabilities
Proceeds from the issue of share capital
Proceeds from the investment funding arrangement, net of transaction costs
Proceeds from sale of conversion shares
Financing charges on repayment of derivative financial instruments
Repayment of investment funding arrangement
Proceeds from the exercise of share options and warrants
Payment of transaction costs for the issue of share capital
Net cash inflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
Note
14
16
16
26
26
25
2023
£000
2022
£000
(19,657)
299
(1)
(21,934)
62
(1)
(19,359)
(21,872)
(1,013)
57
(28)
(984)
(629)
(44)
23,044
—
742
(992)
(881)
10
(1,117)
20,133
(210)
5,137
87
5,014
(708)
—
—
(708)
(591)
(59)
1,161
769
—
—
—
6
—
1,286
(21,294)
26,355
76
5,137
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
52
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Notes to the Consolidated Financial Statements
for the year ended 31 December 2023
1 General Information
Invinity Energy Systems plc (the ‘Company’) is a public company limited by shares incorporated and domiciled in Jersey. The registered
office address is Third Floor, IFC5, Castle Street, St. Helier, JE2 3BY, Jersey.
The Company is quoted on the AIM Market of the London Stock Exchange with the ticker symbol IES.L, on the AQSE Growth Market in the
United Kingdom with the ticker symbol IES and on the OTCQX Best Market in the United States of America with the ticker symbol IESVF.
The principal activities of the Company and its subsidiaries (together the ‘Group’) relate to the manufacture and sale of vanadium flow
battery systems and associated installation, warranty and other services.
2 Accounting policies
Basis of preparation
These consolidated financial statements have been prepared in accordance with International UK-adopted International Accounting
Standards, the associated interpretations issued by the IFRS Interpretations Committee (together ‘IFRS’) and in accordance with the
Companies (Jersey) Law 1991.
Separate presentation of the parent company financial statements is not required by the Companies (Jersey) Law 1991 and, accordingly,
such statements have not been included in this report.
The significant accounting policies applied in preparing these consolidated financial statements are set out below. These policies have
been consistently applied throughout the period and to each subsidiary within the Group.
The financial statements have been prepared under the historical cost convention except where stated.
Going concern
The Directors are satisfied that the Group has adequate resources to continue to operate as a going concern for the foreseeable future
and that no material uncertainties exist which could cause significant doubt with respect to this assessment. In making this assessment,
the Directors have considered the Group’s balance sheet position and forecast earnings and cash flows for the period from the date of
approval of these financial statements to 30 June 2025.
The Group has relied on fundraising in previous years and following the completion of successful fundraising in May 2024, the Group had
cash of £53.2 million as at 31 May 2024 (2022: £15.4 million).
As part of the going concern assessment the Directors have prepared a cash flow forecast which indicates that the Group would expect
to remain cash positive during this period and without the requirement for further fundraising. The business continues in a cash outflow
position, using funding generated from previous fundraises. However, it plans to move to a cash inflow position upon the launch and
delivery of material volume of the next generation product.
This cash flow forecast was stress-tested for a worst-case scenario of no positive cash receipts from sales. In these tested scenarios, the
business would remain cash positive for the 12 months from the date of approval of these financial statements.
Therefore, the Directors believe it is appropriate to prepare the accounts on a going concern basis.
New standards, amendments and interpretations effective and adopted by the Group in 2023
Amendments to existing standards previously issued by the IASB with effective dates during the year ended 31 December 2023 are
summarised below. There was no effect on the Group’s consolidated financial statements for the year ended 31 December 2023 as a
result of the adoption of these amendments.
IFRS 17 Insurance Contracts
The Group has adopted IFRS 17 and the related amendments for the first time in the current year. IFRS 17 establishes the principles for
the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4 Insurance Contracts.
IFRS 17 outlines a general model, which is modified for insurance contracts with direct participation features, described as the variable fee
approach. The general model is simplified if certain criteria are met by measuring the liability for remaining coverage using the premium
allocation approach. The general model uses current assumptions to estimate the amount, timing and uncertainty of future cash flows and it
explicitly measures the cost of that uncertainty. It considers market interest rates, and the impact of policyholders’ options and guarantees. The
Group does not have any contracts that meet the definition of an insurance contract under IFRS 17.
53
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023 Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
Amendments to ‘IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 – Making Materiality Judgements – Disclosure
of Accounting Policies’
The Group has adopted the amendments to IAS 1 for the first time in the current year. The amendments change the requirements in
IAS 1 with regard to disclosure of accounting policies. The amendments replace all instances of the term ‘significant accounting policies’
with ‘material accounting policy information’. Accounting policy information is material if, when considered together with other information
included in an entity’s financial statements, it can reasonably be expected to influence decisions that the primary users of general-purpose
financial statements make on the basis of those financial statements.
The supporting paragraphs in IAS 1 are also amended to clarify that accounting policy information that relates to immaterial transactions,
other events or conditions is immaterial and need not be disclosed. Accounting policy information may be material because of the nature
of the related transactions, other events or conditions, even if the amounts are immaterial. However, not all accounting policy information
relating to material transactions, other events or conditions is itself material.
The IASB has also developed guidance and examples to explain and demonstrate the application of the ‘four-step materiality process’
described in IFRS Practice Statement 2.
Amendments to ‘IAS 12 Income Taxes – Deferred Tax related to Assets and Liabilities arising from a Single Transaction’
The Group has adopted the amendments to IAS 12 for the first time in the current year. The amendments introduce a further exception
from the initial recognition exemption. Under the amendments, an entity does not apply the initial recognition exemption for transactions
that give rise to equal taxable and deductible temporary differences. Depending on the applicable tax law, equal taxable and deductible
temporary differences may arise on initial recognition of an asset and liability in a transaction that is not a business combination and affects
neither accounting profit nor taxable profit. Following the amendments to IAS 12, an entity is required to recognise the related deferred tax
asset and liability, with the recognition of any deferred tax asset being subject to the recoverability criteria in IAS 12.
Amendments to ‘IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Accounting Estimates’
The Group has adopted the amendments to IAS 8 for the first time in the current year. The amendments replace the definition of a change
in accounting estimates with a definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in
financial statements that are subject to measurement uncertainty”. The definition of a change in accounting estimates was deleted.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2023 reporting
periods and have not been early adopted by the Company. These standards are not expected to have a material impact on the entity in
the current or future reporting periods or on foreseeable future transactions and are summarised below:
IAS 1 Classification of Liabilities as Current or Non-Current (effective for periods beginning on or after 1 January 2024);
IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (the effective date of the
amendments has yet to be set by the IASB);
IAS 1 Non-current Liabilities with Covenants (effective for periods beginning on or after 1 January 2024);
IAS 7 and IFRS 7 Supplier Finance Arrangements (effective for periods beginning on or after 1 January 2024); and
IFRS 16 Lease Liability in a Sale and Leaseback (effective for periods beginning on or after 1 January 2024)
Foreign currency
Presentation currency
The consolidated financial statements are presented in Great British Pounds (GBP) rounded to the nearest thousand (£000), except
where otherwise indicated.
Functional currency
Items included in the financial information of the individual companies that comprise the Group are measured using the currency of the
primary economic environment in which each subsidiary operates (its functional currency).
Whilst Jersey uses the Jersey Pound as its currency, Jersey is in a currency union with the United Kingdom and so the functional currency
of the parent company of the Group has been determined to be GBP.
54
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Foreign currency transactions
Transactions in currencies other than an entity’s functional currency (foreign currencies) are translated using the exchange rate on
the date of the transaction. Foreign exchange gains and losses resulting from the settlement of transactions denominated in a foreign
currency are translated into functional currency using the relevant exchange rate at the date of the transaction.
Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at the
balance sheet date of monetary assets and liabilities denominated in foreign currencies, are recognised in the consolidated statement of
comprehensive loss within gains/(losses) on foreign currency transactions.
Foreign currency gains/(losses) realised on the retranslation of subsidiaries as part of the year-end consolidation are recorded in the
translation reserve that forms a part of shareholders’ funds in the consolidated financial statements of the Group.
Consolidation of subsidiaries
Subsidiaries are all entities over which the Company has control. The Company controls an entity when it is exposed to, or has rights
over, variable returns from its involvement with the entity and can affect those returns through its ability to exercise control over the entity.
Subsidiaries are consolidated in the Group financial statements from the date at which control is transferred to the Company.
Subsidiaries are deconsolidated from the date that control ceases. The ability to control an entity may cease because of the sale of a
subsidiary or other change in the Company’s shareholding in that subsidiary, voting rights or board representation.
Foreign currency operations
Subsidiaries of the Company may have functional currencies that are different from that of the Company. Since the Group financial
statements are presented in GBP, the assets and liabilities of foreign currency subsidiaries consolidated into these financial statements
are translated into the Group’s presentational currency using exchange rates prevailing at the end of the reporting period. Income and
expense items are similarly translated using the average rate for each month during the year. The exchange rates on the actual dates
of transactions are used where exchange rates fluctuate significantly within a month. Exchange differences arising on consolidation are
recognised in other comprehensive income and are accumulated as part of shareholder’s equity.
Transaction between entities within the Group
Transactions and balances between companies forming part of the Group together with any unrealised income and expenses arising from
intra-group transactions are eliminated in the preparation of the consolidated financial statements of the Group.
Operating segments
The Group is organised internally to report to the Executive Directors as a whole. The Executive Directors comprise the Chief Executive
Officer, the Chief Commercial Officer, and the Chief Financial Officer and Chief Development Officer. The Executive Directors, as a
group, have been determined, collectively, to prosecute the role of chief operating decision maker of the Group. The chief operating
decision maker is ultimately responsible for entity-wide resource allocation decisions, the evaluation of the financial, operating and ESG
performance of the Group.
The Group’s activities have been determined to represent a single operating segment being the provision of vanadium flow batteries and
ancillary services, principally comprising installation and integration services, and the provision of extended warranties for battery units sold.
Revenue
The Group generates revenue from the sale of battery storage systems integration hardware, installation, extended warranty and other
services. These multiple elements are separate performance obligations that are derived from contractual arrangements with customers.
The sales contracts do not include a general right of return.
For contracts that contain multiple elements or promises, the Group accounts for individual goods and services separately if they are
distinct. A product or service is distinct if it is separately identifiable from other items in the agreement and where a customer can benefit
from the good or service on its own or together with other resources that are readily available.
The consideration paid for each performance obligation is typically fixed. A significant portion of the aggregate payment due under a
contract for sale is normally due before delivery or completion of the service. The total consideration under the contract is allocated
between the distinct performance obligations contained in the contract based on their stand-alone selling prices. The stand-alone selling
price is estimated using an adjusted market assessment approach that looks to industry benchmarks or pricing surveys for certain
standalone products or services.
55
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023 Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
The Group measures revenue based on the consideration specified in the contracts for sale with customers. Revenue is recognised
when a performance obligation is satisfied by transferring control over a good or service to a customer. With respect to the battery system,
associated control systems and integration hardware, control is transferred at a point in time and is usually based on the contractual
shipping terms. In certain instances, the battery system and integration hardware may be ready for delivery although the customer is not
ready to receive the product. The Group will recognise revenue in accordance with IFRS 15 as a Bill-and-Hold arrangement if all of the
following conditions are satisfied:
The reason for the bill and hold arrangement is substantive;
The battery systems and hardware are identified separately as belonging to the customer;
The battery systems and hardware are currently ready for physical transfer to the customer; and
The Company does not have the ability to use the product or to direct it to another customer.
With respect to the services that includes installation and commissioning, the performance obligation is usually satisfied at a point in time
when a when a commissioning certificate or site performance report has been issued to the customer. Revenue excludes any taxes such
as sales taxes, value added tax or other levies that are invoiced and collected on behalf of third parties, such as government tax authorities.
In addition, under the terms of its contracts for sale, the Group may be responsible for other services such as storing and delivering battery
systems to its customers. When this is the case, the Group will invoice the relevant customer for, and will recognise as revenue, any charges
incurred together with any associated handling costs. Revenue is recognised for the storage services over time as the services are delivered
and for shipping services at a point in time when the goods are delivered to the agreed upon location. The related costs incurred by the Group
for storage, shipping and handling services are recognised as cost of sales concurrent with the recognition of the associated revenue.
Grant income
Government and other grants received are recognised in the consolidated statement of profit and loss in the period that the related
expenditure is incurred. Grant income received in respect of costs incurred is presented net within the associated cost category. Capital
grants are similarly netted against the relevant asset acquired or constructed.
Grant income received in advance of the associated expenditure is presented as deferred income within contract liabilities and released to
profit and loss as the associated expenditure is incurred. Grant income receivable is presented as accrued income within contract assets
until such time as it can be claimed or is received.
Finance income and costs
Finance income comprises interest on cash deposits, foreign currency gains and the unwind of discount on any assets that are carried at
amortised cost. Interest income is recognised as it accrues using the effective interest rate method.
Finance costs include foreign currency losses and the unwind of the discount on any liabilities held at amortised cost, such as lease
liabilities arising from lease contracts.
Employee benefits
Short-term benefits
Benefits provided to employees that are short-term in nature are recognised as expenses in the statement of profit and loss as the related
service is provided. The principal short-term benefits given to employees are salaries, associated holiday pay and other periodic benefits
such as healthcare and pension contributions made by the Group for the benefit of the employee. A liability is recognised for the amount
expected to be paid under short-term cash bonus plans if there is either a present legal or constructive obligation to pay the amount and
the amount can be reliably estimated.
Share-based payments
The Group operates equity-settled share-based compensation plans, under which it compensates employees for services rendered
through the issue of equity instruments, deferred share awards or options to subscribe for ordinary shares of the Group. The fair value of
the employee services received in exchange for the grant of the equity instruments, shares or options is recognised as an expense. The
total amount to be expensed is determined by reference to the fair value of the options granted:
including any market conditions (for example, the Group’s share price);
excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales, growth targets,
and the requirement to remain as an employee of the Group over a specified period); and
including the impact of any non-vesting conditions.
56
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Non-market performance and service conditions are included in the assumptions regarding the number of options that are expected to
vest. The total expense is recognised over the vesting period, which is the period over which all the specified vesting conditions are to
be satisfied.
In some circumstances, employees may provide services in advance of the grant date and therefore the grant date fair value is estimated
for the purposes of recognising the expense during the period between service commencement and the grant date.
At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-
market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the consolidated statement of profit and
loss, with a corresponding adjustment to equity.
Any social security contributions payable in connection with the grant of the share options is considered an integral part of the grant itself,
and the charge will be treated as a cash-settled transaction.
Taxes
The total tax charge or credit recognised in the statement of profit and loss comprises both current and deferred taxes. Taxation is
recognised in the consolidated statement of profit and loss except to the extent that it relates to a business combination or items recognised
directly in equity or other comprehensive income.
Current tax
The current tax charge is based on the taxable profit for the year. Taxable profit or loss is different from the profit or loss reported in
the statement of profit and loss as it excludes items of income and/or expense that are taxable or deductible in other years (temporary
differences) and it further excludes items that are never taxable nor deductible (permanent differences).
Deferred tax
Deferred tax is the tax that is expected to be payable or recoverable on differences between the carrying value of assets and liabilities in
the financial statements and the corresponding value of those assets and liabilities used to calculate taxable profit or loss.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax
losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.
Deferred tax assets and liabilities are recognised using the liability method for all taxable temporary differences, except in respect of
taxable temporary differences associated with investments in subsidiaries and associates. Where the timing of the reversal of temporary
difference arising from such investment related assets and liabilities can be controlled and it is probable that the temporary difference will
not reverse in the foreseeable future then the Group does not recognise deferred tax liabilities on these items.
A deferred tax asset or liability is not recognised if a temporary difference arises on initial recognition of an asset or liability and, at the time
of the transaction, affects neither the accounting profit nor taxable profit or loss.
Current and deferred tax is calculated using tax rates and laws that have been enacted or substantively enacted at the balance sheet date.
Deferred tax balances are presented on a gross basis. Refer to note 18, deferred tax balances.
Earnings per share
The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the
profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during
the year.
Diluted EPS is determined by adjusting the weighted average number of ordinary shares outstanding used in the EPS calculation to
include all potentially dilutive ordinary shares, which, in the case of the Company, represents additional shares that could be issued in
relation to ‘in-the-money’ convertible notes, warrants or share options.
The effects of anti-dilutive potential ordinary shares are ignored in calculating diluted EPS. Anti-dilution is when an increase in earnings per
share or a reduction in loss per share would result from the exercise of such options, warrants or convertible instruments.
57
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023 Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
Intangible assets
Goodwill
The Group allocates the fair value of the purchase consideration on the acquisition of a subsidiary to the assets acquired and liabilities
assumed based on an assessment of fair value at the acquisition date. Any excess of purchase consideration is recognised as goodwill.
Where goodwill is recognised, it is allocated to the cash generating units (CGUs) in a systematic manner reflective of how the Group
expects to recover the value of the goodwill. Because the Group has been determined to consist of a single business unit, the carrying
value of goodwill is tested for impairment based on the recoverable value of the Group as a whole.
Goodwill is tested for impairment on an annual basis, and the Group will also test for impairment at other times if there is an indication
that an impairment may exist. Determining whether goodwill is impaired requires an estimation of the value-in-use of the CGU. The key
estimates are therefore the selection of the suitable discount rates and the estimation of future growth rates which may depend on specific
risks and the anticipated economic and market conditions related to the CGU.
As part of determining the value in use of the CGU, sensitivities have been considered on the underlying inputs included within the value-
in-use calculations used for impairment reviews and no impact exists on the carrying value of goodwill, given the headroom identified as a
result of the impairment test. Goodwill is impaired where circumstances indicate that the recoverable amount of the underlying CGU may
no longer support the carrying value of the CGU. An impairment charge is recognised in the statement of profit and loss for the period in
which it is determined the goodwill is no longer recoverable. Impairment losses related to goodwill cannot be reversed in future periods.
Internally generated intangible assets – research and development costs
Research
Expenditure on research activities is recognised as an expense in the period in which it is incurred. Research activities are aimed at
creating new knowledge or the use of existing knowledge in new or creative ways to generate new concepts. Research activity does not
typically have a defined commercial objective at the outset.
Development
Where projects evolve toward commerciality or are related to a specific commercial objective they are assessed to determine whether the
activity constitutes development that is associated with a commercial objective or practical application.
The associated costs represent development costs and can be capitalised if, and only if, the following conditions can be demonstrated:
the technical feasibility of completing the intangible asset so that it can be made available for use or sale;
the intention to complete the intangible asset for use or sale;
the availability of adequate technical, financial and other resources to complete the development and to use or sell it;
an asset is created that can be separately identified for use or sale;
it is probable that the asset created will generate future economic benefits; and
the development cost of the asset can be measured reliably.
Development work undertaken by the Group typically relates to the refinement of design, materials selection, construction techniques,
firmware and control systems to enhance battery system performance over successive generations. Where development costs are
capitalised, they are amortised over the expected period to the introduction of the next generation of battery system.
Amortisation is recorded over that period on a straight-line basis with the corresponding amortisation charge recognised in the statement
of profit and loss as a component of administrative expenses.
Four years has historically been the typical cycle time between successive generations of battery system design.
Other intangible assets
Intangible assets other than goodwill that are acquired by the Group are stated at their historical cost of acquisition less accumulated
amortisation and any impairment losses.
Software and purchased domain names
Third-party software is initially capitalised at its cost of purchase. Amortisation is charged to administrative expenses over the expected
useful life of the software which has been assessed as three years from the date of acquisition.
Acquired domain names are initially capitalised at cost of purchase. Amortisation is charged to administrative expenses over the expected
useful life of the domain name which has been assessed as ten years from the date of acquisition.
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Invinity Energy Systems plc Annual Report and Financial Statements 2023
Patents and certifications
Patent rights and certifications are initially capitalised at the cost of applying for relevant patent rights and other protections, and
certifications. Amortisation is charged to administrative expenses over the expected useful life of the patents and certifications which has
been assessed as five years from the date of acquisition.
Property, plant and equipment
Items of property, plant and equipment are stated at historical cost less accumulated depreciation and any impairment losses. Historical
cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent expenditure is only included in the asset’s
carrying amount or recognised as a separate asset, as appropriate, when it is probable that future economic benefits associated with that
item will flow to the Group.
Costs that do not enhance the value of an asset such as repair and maintenance costs are charged to the statement of profit and loss
in the period in which they are incurred.
Depreciation is charged to write off the cost of assets over their estimated useful lives on a straight-line basis. Depreciation commences
on the date the assets are available for use. Work-in-progress assets are not depreciated until they are available for use and transferred
to the appropriate category of property, plant and equipment.
Estimated useful lives for property, plant and equipment and other intangible assets are:
Category
Computer and office equipment
Period (years)
3 - 5
Recognition in
statement of profit and loss
Administrative expenses
Leasehold improvements
Shorter of lease term or useful life
Administrative expenses/Cost of sales
Vehicles
Manufacturing equipment and tooling
R&D Equipment
Software and purchased domain names
Patents and certifications
3
3 - 20
5 - 10
3
10
Administrative expenses
Cost of sales
Administrative expenses
Administrative expenses
Administrative expenses
Depreciation methods, useful lives and residual values of assets are reviewed, and adjusted prospectively as appropriate, at each
reporting date.
Where an asset is disposed of, the corresponding gain or loss on disposal is determined by comparing the sales proceeds received with
the carrying amount of that asset at the date of disposal. Gains or losses on disposal of fixed assets are included within other items of
operating income and expense in the statement of profit and loss.
Impairment of tangible and intangible assets
The Group reviews the carrying values of its tangible and intangible assets, other than goodwill, at each balance sheet date to determine
if any indicators exist that could mean those assets are impaired. Where an indicator of impairment exists the recoverable amount of the
relevant asset (or CGU) is estimated to determine the amount of any potential impairment loss.
Recoverable amounts are determined using a discounted cash flow model related to each asset or CGU being assessed. The discount
rate applied to the cash flows in the model is a pre-tax discount rate that reflects market assessment of the time value of money and risks
specific to the groups of assets being considered.
If the recoverable value estimated in the cash flow model for a specific asset (or CGU) is lower than the carrying value, then the carrying
value of the asset is reduced to its estimated recoverable value with a corresponding charge immediately recognised in the statement of
profit and loss.
Where the condition that gave rise to an impairment loss reverses in a subsequent period, the impairment loss is similarly reversed and
the carrying value of the asset increased to the revised estimate of its recoverable value. The carrying value of an asset immediately
following the reversal of an impairment cannot exceed the carrying value that the asset would have had if the original impairment had not
been made and the asset was depreciated as normal. A reversal of an impairment loss is recognised immediately in profit or loss.
59
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023 Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
The value of any impairment (or reversal of impairment) of an asset is recorded in the same financial statement line item where depreciation
or amortisation of the asset would normally be shown.
Where it is impractical to meaningfully assess recoverable amount using a discounted cash flow model, for instance where near term
cash flows are low or negative, an assessment of the fair value adjusted for the costs that would be incurred in the disposal of an asset or
operation is used. This is typically the case for development stage assets, operations or associated intangible assets (including goodwill)
where the underlying products or technologies have not yet been commercialised.
Provisions
Provisions are established when the Group has a present legal or constructive obligation because of past events, it is probable that an
outflow of resources will be required to settle the obligation and the amount of that outflow can be reliably estimated.
Provisions are measured at the Group’s best estimate of the expenditure required to settle the obligation at the financial position date,
considering the risks and uncertainties of the obligation, and are discounted to present value of the expenditures that are expected to be
incurred in settling the obligation using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks
related to the obligation. The initial recognition of a provision results in a corresponding charge to profit or loss. Where discounting is used, the
carrying amount of a provision increases in each period to reflect the passage of time, this increase is recognised as borrowing cost.
Leases
Group entities only participate in lease contracts as the lessee. Lease contracts typically relate to facilities.
On inception of a contract, the Group assesses whether it contains a lease. A contract is a lease or contains a lease if it conveys the
right to control the use of an identified asset for a period of time in exchange for consideration. The right to control the use of an identified
asset is determined based on whether the Group has the right to obtain substantially all the economic benefits from the use of the asset
throughout the period of use, and if the Group has the right to direct the use of the asset.
Obligations under a lease are recognised as a liability with a corresponding right-of-use asset, these are recognised at the commencement
date of the lease.
The lease liability is initially measured at the present value of the lease payments that have not yet been paid at the inception of the lease,
discounted using the interest rate implicit in the lease contract. Where the interest rate implicit in the lease contract cannot be readily
determined, the Group’s incremental borrowing rate is used.
Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease liability. The lease
liability is measured at amortised cost using the effective interest rate method.
The lease liability is subsequently measured at amortised cost using the effective interest method. It is remeasured when:
there is a change in future lease payments arising from a change in an index or rate;
there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee; or
the Group changes its assessment of whether it will exercise a purchase, extension or termination option.
When a lease liability is remeasured under one of these scenarios, a corresponding adjustment is made to the carrying value of the right-
of-use asset or in profit and loss when the carrying amount of the asset has already been reduced to zero.
The corresponding right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability plus any lease
payments made at or before the commencement date, any initial direct costs incurred and an estimate of the costs required to remove or
restore the underlying asset, less any lease incentives received. The right-of-use asset is amortised over the shorter of the asset’s useful
life and the lease term on a straight-line basis.
The Group has elected not to recognise right-of-use assets and corresponding lease liabilities for short-term leases, those existing leases
with a lease term of less than 12 months and leases related to low value assets with an annual lease cost of £5,000 or less. The payments
for the exempt leases are recognised as an expense on a straight-line basis over the lease term.
The Group has elected not to separate non-lease components from lease components, by class of underlying asset. Each lease
component and any associated non-lease components are accounted for as a single lease component.
60
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Inventory
Inventory is stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs
and those overheads that have been incurred in bringing the inventories to their current location and condition. Cost is calculated using
the first-in, first-out method.
Net realisable value is calculated as the estimated selling price for an item of inventory less estimated costs of completion.
Prepaid inventory
Prepaid inventory is recognised on inventory payments where physical delivery of that inventory has not yet been taken by the Group and
is stated at the lower of cost and net realisable value.
Financial instruments
Financial assets and liabilities are recognised by the Group and recorded in the statement of financial position when the Group is
contractually bound to the terms of the financial instrument. Financial assets and liabilities are derecognised when the Group is no longer
bound by the terms of the financial instrument through settlement or expiry.
Financial assets
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive
income (OCI), and fair value through profit or loss.
The classification of financial assets to which the Group is a party is determined by the nature of the underlying financial instrument and
the characteristics of the contractual cash flows expected to be received under the terms of instrument.
Financial assets are not reclassified after their initial recognition unless there is a contractual change in the nature of the cash flows under
the instrument or the business purpose of the instrument has changed.
For a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are
‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and
is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through
profit or loss, irrespective of the business model.
Financial assets that the Group is party to are classified and measured as follows:
Financial asset
Trade receivables
Cash and cash equivalents
Measurement basis
Amortised cost
Amortised cost
Amortised cost
On initial recognition, the Group measures amortised cost for financial assets based on the fair value of each financial asset together with
any transaction costs that are directly attributable to the financial asset.
After initial recognition, amortised cost is measured for each financial asset held using the effective interest rate method less any
impairment loss identified. Interest income is recognised for all financial assets, other than those that are classified as short-term, by
applying the effective interest rate for the instrument. Interest income on short-term financial assets is not considered to be material. Short-
term financial instruments are determined as those that have contractual terms of 12-months or less at inception.
Interest income, foreign exchange gains and losses, impairment, and any gain or loss on derecognition are recognised in profit or loss.
Impairment of financial assets
A loss allowance for financial assets is determined based on the lifetime expected credit losses for financial assets. Lifetime expected
credit losses are estimated based on factors including the Group’s experience of collection, the number and value of delayed payments
past the average credit periods across the Group’s financial assets. The Group will also consider factors such as changes in national or
local economic conditions that correlate with default on receivables and financial difficulties being experienced by the counterparty.
Financial assets are impaired in full and a corresponding charge is recognised in profit or loss where there is no reasonable expectation
of recovery.
61
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
Financial liabilities
The classification of financial liabilities is determined at initial recognition. Financial liabilities are classified and measured as follows:
Financial liability
Trade and other payables
Derivative Financial Instrument
Lease liabilities
Measurement basis
Amortised cost
Fair value through Profit and Loss
Amortised cost
Amortised cost
At initial recognition, the Group measures financial liabilities at amortised cost using the fair value of the underlying instrument less
transaction costs directly attributable to the acquisition of the financial liability.
Derecognition of financial liabilities
The Group derecognises financial liabilities when the Group’s obligations under the relevant instrument are discharged, expired or
cancelled.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into, and they are subsequently remeasured
to their fair value at the end of each reporting period. Changes in the fair value of any derivative instrument are recognised immediately in
profit or loss and are included in other gains/(losses).
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and on demand deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.
Equity instruments
Instruments are classified as equity instruments if the substance of the relative contract arrangements evidences a residual interest in the
assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded as proceeds received, net
of direct issue costs not charged to income.
Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there
is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets
and settle the liabilities simultaneously.
3 Critical accounting judgments and key sources of estimation uncertainty
The preparation of the financial statements in conformity with generally accepted accounting practice (GAAP) requires management to
make estimates and judgments. Those estimates and judgments can affect the reported values for assets and liabilities as well as the
disclosure of contingent assets and liabilities at the balance sheet date.
Management is also required to make estimates and judgments related to the reported amounts of revenues and expenses and related
to the timing of the recognition of those revenues and expenses.
Judgments made and estimates applied are based on historical experience and other factors including management’s expectations
of future events that are considered relevant. Actual results may differ from these estimates. The estimates, judgments and underlying
assumptions made are reviewed on an ongoing basis and specifically in the preparation of the interim and annual published financial
information.
Revisions to accounting estimates are recognised in the period in which the estimate is revised and applied consistently in future periods
subject to the ongoing reassessment of estimates.
62
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Critical judgments for the year under review
Going concern
The Directors are required to assess whether it is appropriate to prepare the financial statements on a going concern basis. In making this
assessment the Directors need to be satisfied that the Group can meet its obligations as they fall due and will remain cash-positive for a
period of at least 12 months from the date of approval of the financial statements. Potential additional funding that is not yet committed at
the date of approval of the financial statements cannot be anticipated in making the assessment of going concern.
The Directors make their assessment based on a cash flow model prepared by management and based on its expectation of cash flows
for the 18-month period from the date of approval of the financial statements. The extended period in the model provides additional
comfort that the 12-month solvency requirement can be met when making the assessment of going concern.
In preparing the cash flow model, assumptions have been made regarding the timing of cash collection from customers based on the
expected cash receipt under contracts that require milestone payments to be made by customers. The timing of the receipt of milestone
payments may not always align with or precede the costs incurred by the Company in performing its obligations under a contract.
Downside sensitivities have been applied to the cash flows primarily related to no sales being made. Refer to ‘Basis of preparation’ for
details of the going concern analysis performed and the Directors’ conclusions regarding going concern.
The Directors expect that the business will continue to be viable throughout the model period and, accordingly, the financial statements
have been prepared on a going concern basis.
Revenue recognition
Sales contracts are assessed in accordance with the Group accounting policy for revenue recognition. The policy requires the identification
of the performance obligations, or promises, under the contract and a determination of the conditions and implications of each performance
obligation. Revenue is recognised only when a distinct and appropriate performance obligation under a contract is satisfied.
Some performance obligations are satisfied separately such as the delivery of the battery systems and integration hardware. Other
obligations may be satisfied in conjunction with other contract promises or where a contract calls for equipment sold under the contract to
be integrated into a larger project before formal acceptance is notified by the customer.
Where the ability of a customer to benefit from a product or service is dependent on the satisfaction of other performance obligations,
more than one promise may need to be bundled together as a combined performance obligation that must be satisfied before the revenue
related to each element can be recognised.
Identifying where hardware or services are readily available from other providers is a key determinant as to whether a contract promise represents
a separate performance obligation or if it should be bundled with other promises that, together, represent a single performance obligation.
Sources of estimation uncertainty for the year under review
Warranty provision
The Company provides time-limited standard warranties in its contracts for sale of battery systems. In addition, customers may elect to
purchase separate, standalone extended warranties. Extended warranties are for periods greater than the standard warranties that are
provided with the purchase of all battery systems.
Estimating the costs that may be incurred by the Company in servicing warranty agreements requires management to estimate the number
of expected claims in relation to the total number of battery systems sold. In addition, an estimate of costs that the Company could expect to
incur to remedy each warranty claim should also be made to determine the amount of the total provision that should be recorded for warranties.
Provisions made in respect of expected warranty obligations are reassessed and remeasured where actual experience indicates the
claim rate may be higher or lower than initially expected or where costs to remedy warranty claims differ from the assumptions used in
calculating the provision. The release of an over-provision of warranty costs results in other operating income being recognised in the
period whereas an additional provision for warranties results in a charge being recognised.
A 20% increase in the number of warranty claims or a 20% increase in the cost to remedy warranty issues would increase the provision
by £120,436. A 40% increase in the number of warranty claims or a 40% increase in the cost to remedy warranty issues would increase
the provision by £240,872.
Refer to note 21, contract related balances.
63
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023 Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
Provision for onerous contracts
A contract is onerous when the unavoidable costs of meeting the Company’s obligations under the contract are expected to be greater
than the revenue earned under that contract.
The assessment of unavoidable costs includes direct costs such as parts and labour and indirect costs, such as production overhead or
indirect labour, that are expected to be incurred in servicing a warranty claim.
The assessment of future costs is inherently subjective and requires the use of estimates in determining the appropriate amount of
provision that may be required.
A 20% increase in unavoidable costs would increase the provision by £66,493. A 40% increase in unavoidable costs would increase the
provision by £132,986.
Refer to note 21, contract related balances.
4 Revenue from contracts with customers and income from government grants
Segment information
The Group derives revenue from a single business segment, being the manufacture and sale of vanadium flow battery systems and
related hardware together with the provision of services directly related to battery systems sold to customers.
The Group is organised internally to report on its financial and operational performance to its chief operating decision maker, which has
been identified as the three Executive Directors as a group.
All revenues in 2023 were derived from continuing operations.
Revenue from contracts with customers
Battery systems and associated control systems
Integration hardware
Integration and commissioning
Other services
Total revenue in the consolidated statement of profit and loss
Analysed as:
Revenue recognised at a point in time
Revenue recognised over time
Total revenue in the consolidated statement of profit and loss
Grant income shown against cost of sales
Geographic analysis of revenue
The Group’s revenue from contracts with customers was derived from the following geographic regions:
Geographic analysis of revenue
Asia
Australia
Europe
North America
Total revenue in the consolidated statement of profit and loss
2023
£000
19,425
1,470
504
607
22,006
22,000
6
22,006
11
22,017
2023
£000
737
6,212
2,826
12,231
22,006
2022
£000
2,548
—
254
142
2,944
2,936
8
2,944
647
3,591
2022
£000
160
—
1,691
1,093
2,944
The Group maintains its principal production and assembly facilities in Bathgate, Scotland and Vancouver, Canada. These facilities
include office space for design, sales and administrative teams. The Group also has offices, operations and management based in
London, England and San Francisco, California.
64
Invinity Energy Systems plc Annual Report and Financial Statements 2023
The Group does not consider that the locations of its operations constitute geographic segments as they are managed centrally by the
executive management team. The location of the manufacturing plants and business development activity is a function of time-zone when
servicing customers both pre-sale and during product delivery. The geographic location of offices, facilities and management is not related
to distinct markets or customer characteristics at the present time.
Significant customers and concentration of revenue
Revenue from contracts with customers was derived from three (2021: two) customers who each accounted for more than 10% of total
revenue as follows:
Significant customers and concentration of revenue
Customer A
Customer B
Customer C
Customer D
Customer E
Customer F
2023
£000
6,238
6,038
4,299
—
—
—
2022
£000
—
—
—
1,247
466
466
Grant income other than revenue
The Group receives grant income to help fund certain projects that are eligible for support, typically in the form of innovation grants. The
total grant income that was received in the year was as follows:
Grant income received
Business support grants against employee costs – COVID-19
Grants for research and development
Grants for product deployment
Economic and social development
Total government grants
Disclosed as:
Grant income against cost of sales
Grant income against administrative expenses
5 Cost of sales
Movement in inventories of finished battery systems
Movement in provisions for warranty and warranty costs
Movement in provisions for sales contracts
Total cost of sales
2023
£000
—
160
378
1
539
11
528
2023
£000
27,023
(429)
(1,233)
25,361
2022
£000
(11)
647
—
—
636
647
(11)
2022
£000
6,168
763
(4,004)
2,927
65
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
6 Administrative expenses
Staff costs
Research and development costs
Research and development recoveries, tax credits and grants
Professional fees
Sales and marketing costs
Facilities and office costs
Depreciation and amortisation
Other administrative costs
Total administrative expenses
No development costs were capitalised in the period (2022: £nil).
7 Auditors’ remuneration
Fees payable to the Company’s auditors for the audit of the consolidated financial statements
Audit of financial statements of subsidiaries pursuant to legislation
Fees payable to the Company’s auditor for other services:
– Tax compliance services
2023
£000
12,750
1,868
(1,949)
669
1,048
232
1,056
3,411
19,085
2023
£000
282
17
—
299
2022
£000
10,322
2,184
(592)
2,983
249
385
1,150
2,361
19,042
2022
£000
271
33
19
323
The Group has a policy in place related to the commissioning of non-audit service from its auditors where all such work requires pre-
approval by the Audit & Risk Committee before the commencement of any non-audit work.
Audit fees are discussed with and approved by the Audit & Risk Committee.
8 Staff costs and headcount
Staff costs
Wages and salaries
Employer payroll taxes
Contributions to defined contribution plans
Other benefits
Share-based payments
Total staff costs
2023
£000
11,475
839
123
977
726
14,140
2022
£000
9,280
840
95
822
388
11,425
Administrative staff costs in the year were £12,749,556 (2022: £10,321,870) and staff costs included in cost of sales were £1,390,336
(2022: £1,103,027).
Average headcount
Canada
South Africa
United Kingdom
United States of America
Total
66
2023
Number
73
—
59
8
140
2022
Number
71
1
68
7
147
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Key management compensation
The key management of the Group comprises the members of the senior leadership team.
Key management compensation
Short-term employee benefits
Post-employment benefits
Equity settled share-based payment
Total key management compensation
2023
£000
2,364
14
263
2,641
2022
£000
1,812
16
225
2,053
Prior year equity settled share-based payment was included into the table above to conform to the current period presentation.
9 Share based payments
Since its incorporation, the Company has operated various share-based incentive plans. The purpose of each of the schemes has been
to incentivise Directors and employees related to improving Company performance and building shareholder value.
Set out below is a summary of the option awards in issue at 31 December 2023.
Final
Expiry date
Exercise
price
2023
2022
Standard
redT 2015 plan
redT 2018 plan
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 Consultant SOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Grant date
07 Dec 2015
18 May 2018
01 Apr 2020
01 Apr 2020
01 Apr 2020
01 Apr 2020
01 Apr 2020
26 Aug 2020
28 Jan 2021
04 Mar 2021
15 Apr 2021
03 Aug 2021
29 Oct 2021
20 Dec 2021
03 Feb 2022
02 Mar 2022
11 Apr 2022
11 Jul 2022
08 Dec 2022
27 Jan 2023
20 Apr 2023
19 Jul 2023
26 Oct 2023
07 Dec 2023
07 Jan 2020
18 May 2023
12 Mar 2030
12 Mar 2030
12 Mar 2030
07 Jul 2026
08 May 2029
26 Aug 2030
28 Jan 2031
04 Mar 2031
15 Apr 2031
03 Aug 2031
29 Oct 2031
20 Dec 2031
03 Feb 2032
02 Mar 2032
11 Apr 2032
11 Jul 2032
08 Dec 2032
27 Jan 2033
20 Apr 2033
19 Jul 2033
26 Oct 2033
07 Dec 2033
58.95 €c
352.50 p
82.50 p
82.50 p
82.50 p
4.34 p
6.84 p
113.00 p
204.00 p
152.00 p
151.00 p
134.50 p
111.50 p
91.00 p
64.50 p
93.50 p
90.00 p
45.50 p
38.00 p
42.00 p
43.50 p
51.20 p
38.00 p
29.50 p
Non-standard
Grant date
Expiry date
Price
Long-term incentive plan
Camco 2006 Executive Share Plan
redT 2018 plan
8 Dec 2009
30 Jul 2013
30 May 2018
30 Jul 2023
30 Jul 2023
30 Jul 2023
50.00 €c
50.00 €c
400.00 p
Total
—
3,888
151,428
290,000
378,000
1,052,134
628,358
1,540,000
313,000
170,000
84,000
290,000
263,000
135,000
150,000
45,000
60,000
500,000
531,000
2,655,100
97,000
4,177,000
369,000
75,000
68,803
3,888
185,143
290,000
378,000
1,052,134
658,314
2,043,334
372,000
194,000
108,000
375,000
297,000
135,000
186,000
60,000
60,000
500,000
822,000
—
—
—
—
—
13,957,908
7,788,616
2023
—
—
—
—
2022
15,000
68,127
70,000
153,127
13,957,908
7,941,743
Weighted average remaining contractual life of options outstanding at the end of the year
7.96
7.18
67
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
A total of 39,956 employee options were exercised during the year (2022: 87,678) with a weighted average exercise price of 14.64 pence
per share (2022: 4.34p).
The grant-date fair value of share options issued is calculated using a Black-Scholes methodology at the date of grant. Key inputs to
the model include the share price at the date of grant, the option exercise price, the term of the award, share price volatility, the risk-free
interest rate (by reference to government bond yields) and the expected dividend yield rate, which has historically been and continues to
be zero, reflective of the development-stage nature of the Group.
The Long-term Incentive Plan, Camco 2006 Executive Share Plan and redT 2015 Plan are closed and all options have expired in 2023.
No further option awards will be made under any of these plans.
The aggregate number of options granted, vested, exercised and forfeited during the year under the plans are summarised and analysed
between unvested and vested awards as follows:
Unvested
Unvested
Vested
Vested
At 1 January 2023
Granted
Forfeited
Vested
Exercised
At 31 December 2023
At 1 January 2022
Granted
Forfeited
Vested
Exercised
At 31 December 2022
3,538,691
8,184,600
(1,279,738)
(1,844,379)
—
8,599,174
84.86p
46.41p
52.13p
91.84p
—
51.64p
4,249,925
—
(695,614)
1,844,379
(39,956)
5,358,734
72.80p
—
114.21p
91.84p
14.64p
74.42p
Unvested
Unvested
Vested
Vested
4,369,588
1,781,000
(900,589)
(1,711,308)
—
3,538,691
113.47p
50.39p
121.89p
108.00p
—
82.73p
2,708,094
—
(81,799)
1,711,308
(87,678)
4,249,925
35.26p
—
96.31p
108.00p
4.34p
69.24p
Plans with standard performance conditions
The primary share plan that remains outstanding at 31 December 2023 is the 2018 plan. The 2018 plan was adopted by the Board on 14
May 2018 and introduced HMRC scheme rules related to certain non-taxable option grants. The plan contains a provision to issue options
as CSOP, EMI or unapproved awards.
Parallel options issued
In addition, certain legacy redT options were reissued in 2020 as they were considered by the Board to be sufficiently ‘out-of-the-money’
such that they no longer provided a performance incentive to the holders of the options. As a mechanism to adjust the terms of the
unfavourable options, new parallel options were issued on a one-for-one basis with the same terms as the original awards excepting that
they were issued with a lower exercise price.
Both the original and parallel option schemes remain in existence. However, the exercise by an employee of a single option from either
pool (original or parallel) allocated to them will cause the equivalent value in the other pool to be forfeited. Accordingly, the number of
options disclosed above has been adjusted to remove the number of options that is equivalent to the number of parallel options issued.
Other options
On 10 May 2021, the Company granted an option for 8,672,273 shares to Gamesa Electric S.A. Unipersonal (GaE), a wholly-owned
subsidiary of Siemens Gamesa Renewable Energy S.A. The options were granted to GaE in consideration of its entering into a joint
development and commercialisation agreement with Invinity Energy Nexus Limited, a wholly-owned subsidiary of the Company.
The exercise price of the options is 175 pence and upon exercise of those options then for as long as GaE holds at least 5% of the issued
share capital of the Company it shall be entitled, subject to certain conditions, to nominate one non-executive director to the Board of the
Company. The options expire on 10 May 2025.
68
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Warrants issued in the period or outstanding
The Company had 909,090 warrants outstanding at 31 December 2023 in relation to a 2020 investment agreement with Riverfort Global
Opportunities (“Riverfort”) which expired 2 April 2024.
VSA Capital was awarded 340,000 warrants with an exercise price of 82.5 pence in April 2020, at the time of the merger. These warrants
are outstanding and expire on 2 April 2025. In June 2023, the exercise price was amended to 50 pence with the expiry date remaining
unchanged.
In December 2021, the Company issued 14,464,571 ‘placing units’ comprised of one share, one short-term warrant and one long-term
warrant.
At 31 December 2023, the Company had nil (2022: 14,464,317) short-term warrants and 14,463,665 (2022: 14,646,317) long-term
warrants outstanding.
Short-term warrants expired 16 December 2023. The long-term warrants’ subscription price was amended to 100 pence per ordinary
share, giving the holder the right to subscribe to one new ordinary share at any time from Second Admission until 16 December 2024.
The warrants are trading on the Aquis Stock Exchange (AQSE) and have been deemed to have no fair value based on the price at which
they are currently quoted.
In December 2022, the Company issued 1,350,020 warrants as part of the convertible loan facility with Riverfort Global Opportunities and
YA II PN Ltd (“Noteholders”). Each warrant gives the holder the right to subscribe for one new ordinary share at a price of 32 pence per
ordinary share until 14 December 2026.
In consideration of the Noteholders undertakings, the Company has agreed to grant a further 449,980 warrants at an exercise price of 32
pence which will expire on 14 December 2026.
10 Other items of operating income and expense
The following items are included in comprehensive loss:
(Income)/expense
Provision for onerous contracts, net of amounts used
(Gain)/Loss on disposal of property, plant and equipment
Obsolete inventory
Impairment of inventory to net realisable value
Loss/(gain) on curtailment of right-of-use asset
Total other operating expenses
11 Net finance income and costs
Finance income
Interest on bank deposits and money market funds
Gain on realised foreign currency transactions
Gain on unrealised foreign currency transactions
Finance costs
Finance charges on convertible loan notes and financial instruments
Finance charges for lease liabilities
Finance charges for liabilities held at amortised cost
Net finance costs/(income)
2023
£000
—
(15)
8
151
205
349
2023
£000
(299)
(42)
(71)
768
44
1
401
2022
£000
554
33
25
—
(8)
604
2022
£000
(62)
(38)
(410)
6
58
1
(445)
69
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
12 Income tax expense
Current tax
Current tax on profits for the year
Total current tax expense
Reconciliation of income tax expense calculated using statutory tax rate
Loss before tax
Tax at the Jersey rate of nil%
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Non-taxable gains and expenses not deductible for tax
Differences in overseas tax rates
Unrelieved tax losses carried forward
Origination and reversal of timing differences not recognised
Total income tax expense
13 Loss per share
Basic loss per share
From continuing operations
Diluted loss per share
From continuing operations
Loss used in calculation of basic and diluted loss per share
From continuing operations
Weighted average number of shares used in calculation
Basic
Diluted
2023
£000
—
—
2023
£000
2022
£000
—
—
2022
£000
(23,179)
(18,537)
—
—
67
(4,761)
4,615
79
—
2023
In pence
(13.1)
2023
In pence
(13.1)
2023
£000
181
(4,707)
4,350
176
—
2022
In pence
(16.0)
2023
In pence
(16.0)
2022
£000
(23,179)
(18,537)
2023
Number
2022
Number
176,439,069
177,915,837
116,151,378
117,754,966
Additional potential shares used in the calculation of diluted earnings per share primarily relate to potential shares outstanding at 31
December 2023 that may be issued in satisfaction of ‘in-the-money’ employee share options. Potentially dilutive shares related to ‘in-the-
money’ outstanding warrants to subscribe for ordinary shares in the Company are also included in calculating diluted earnings per share.
Where additional potential shares have an anti-dilutive impact on the calculation of loss per share calculation, such potential shares are
excluded from the weighted average number of shares used in the calculation.
70
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Weighted average number of shares used in loss per share calculation – basic and diluted
In issue at 1 January
Shares issued in the year – weighted average
Weighted average shares in issue 31 December
Effect of employee share options and other warrants not exercised
Weighted average number of diluted shares in issue 31 December
2023
Number
2022
Number
119,007,846
57,431,223
176,439,069
1,476,768
116,048,761
102,617
116,151,378
1,603,588
177,915,837
117,754,966
Additional potential shares are anti-dilutive where their inclusion in the calculation of loss per share results in a lower loss per share. The
weighted average number of shares are not included in the diluted loss per share calculation because they had an anti-dilutive effect on
the calculation was 26,279,049 (2022: 29,170,511).
14 Cash flows from operating activities
Loss after income tax
Adjustments for:
Depreciation and amortisation
(Gain)/loss on disposal of property, plant and equipment
Impairment of inventory
Obsolete inventory
Share-based payments charge
Equity settled interest and transaction costs on Investment funding arrangement
Net finance costs
Gain on unrealised foreign currency transactions
Change in operating assets & liabilities
Decrease/(increase) in inventory
Increase in contract assets
Increase in trade receivables and other receivables
Decrease/(increase) in other current assets and prepaid inventory
(Decrease)/increase in trade and other payables
(Decrease)/increase in warranty provision
Decrease in onerous contract provision
(Decrease)/increase in contract liabilities
2023
£000
2022
£000
(23,179)
(18,537)
1,399
(15)
151
8
726
—
481
(71)
1,350
33
24
—
681
6
(8)
(168)
(20,500)
(16,619)
6,144
(694)
(796)
5,823
(956)
(647)
(1,217)
(6,814)
843
(3,875)
(174)
(88)
(2,354)
1,263
183
(3,252)
2,982
(5,315)
Cash used in operations
(19,657)
(21,934)
71
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
15 Goodwill and other intangible assets
Cost
At 1 January 2023
Disposals
Foreign currency exchange differences
At 31 December 2023
Accumulated amortisation
At 1 January 2023
Amortisation charge
Disposals
Foreign currency exchange differences
At 31 December 2023
Net book value
At 1 January 2023
At 31 December 2023
Cost
At 1 January 2022
Foreign currency exchange differences
At 31 December 2022
Accumulated amortisation
At 1 January 2022
Amortisation charge
Foreign currency exchange differences
At 31 December 2022
Net book value
At 1 January 2022
At 31 December 2022
Goodwill
£000
Patents and
certifications
£000
Software and
domain names
£000
23,944
—
—
23,944
—
—
—
—
—
23,944
23,944
203
—
—
203
(112)
(41)
—
—
(153)
91
50
50
(15)
(1)
34
(35)
(7)
15
1
(26)
15
8
Goodwill
£000
Patents and
certifications
£000
Software and
domain names
£000
23,944
—
23,944
—
—
—
—
23,944
23,944
203
—
203
(71)
(41)
—
(112)
132
91
47
3
50
(26)
(8)
(1)
(35)
21
15
Total
£000
24,197
(15)
(1)
24,181
(147)
(48)
15
1
(179)
24,050
24,002
Total
£000
24,194
3
24,197
(97)
(49)
(1)
(147)
24,097
24,050
For impairment testing goodwill acquired through business combinations and patents and certifications with indefinite useful lives are
allocated to the single CGU.
Goodwill
All goodwill is tested annually for impairment. At 31 December 2023, goodwill was tested for impairment using a fair value less costs of
disposal methodology by reference to the Company’s quoted market capitalisation using the price of 35.0 pence per share at that date
and the discounted cash flow forecasts used to estimate the recoverable amounts. The discount rate used in the calculation amounted
to 15%. Change of discount rate by 5% would not result in impairment of goodwill given significant headroom was maintained under all
sensitivity scenarios run. No impairment loss was identified in relation to goodwill.
On 24 May 2024, the Company announced the results of a placing, subscription and open offer. The fundraising raised total proceeds of
£57.38 million through placing of 121,739,130 new ordinary shares, subscription of 121,739,130 new ordinary shares and open offer of
6,011,983 new ordinary shares at 23.0 pence per share.
The closing share price on 30 May 2024 was 22.00 pence, giving a market capitalisation of £42.0 million which does not indicate
impairment of goodwill or net assets.
Patents and certifications
There have been no events or circumstances that would indicate that the carrying value of patents and certifications may be impaired at
31 December 2023.
72
Invinity Energy Systems plc Annual Report and Financial Statements 2023
16 Property, plant and equipment
Computer and office
equipment
£000
Leasehold
improvements
£000
Vehicles and
equipment
£000
Cost
At 1 January 2023
Additions
Disposals
Transfers
Foreign currency exchange differences
At 31 December 2023
Accumulated depreciation
At 1 January 2023
Depreciation charge
Disposals
Transfers
Foreign currency exchange differences
At 31 December 2023
Net book value
At 1 January 2023
At 31 December 2023
Cost
At 1 January 2022
Additions
Disposals
Foreign currency exchange differences
At 31 December 2022
Accumulated depreciation
At 1 January 2022
Depreciation charge
Disposals
Foreign currency exchange differences
At 31 December 2022
Net book value
At 1 January 2022
At 31 December 2022
699
76
(214)
—
(7)
554
(662)
(23)
214
—
6
(465)
37
89
1,119
212
(328)
(161)
(19)
823
(635)
(271)
328
147
7
(424)
484
399
Total
£000
3,220
1,087
(667)
30
(58)
3,612
(2,012)
(524)
625
(30)
28
1,402
799
(125)
191
(32)
2,235
(715)
(230)
83
(177)
15
(1,024)
(1,913)
687
1,211
1,208
1,699
Computer and office
equipment
£000
Leasehold
improvements
£000
Vehicles and
equipment
£000
780
45
(136)
10
699
(653)
(129)
125
(5)
(662)
127
37
681
429
(2)
11
1,119
(427)
(204)
1
(5)
(635)
254
484
1,165
234
(37)
40
1,402
(416)
(301)
16
(14)
(715)
749
687
Total
£000
2,626
708
(175)
61
3,220
(1,496)
(634)
142
(24)
(2,012)
1,130
1,208
The Group has no assets pledged as security. No amounts of interest have been capitalised within property, plant and equipment at
31 December 2023 (2022: £nil).
73
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
17 Right-of-use assets
Cost
At 1 January 2023
Additions
Adjustments1
Transfers2
Curtailments and disposals
Foreign currency exchange differences
At 31 December 2023
Accumulated depreciation
At 1 January 2023
Depreciation charge
Adjustments1
Transfers2
Curtailments and disposals
Foreign currency exchange differences
At 31 December 2023
Net book value
At 1 January 2023
At 31 December 2023
Cost
At 1 January 2022
Additions
Curtailments
Foreign currency exchange differences
At 31 December 2022
Accumulated depreciation
At 1 January 2022
Depreciation charge
Curtailments
Foreign currency exchange differences
At 31 December 2022
Net book value
At 1 January 2022
At 31 December 2022
Offices and facilities
£000
Vehicles and equipment
£000
3,330
929
(392)
—
(738)
(83)
3,046
(1,489)
(824)
200
—
582
43
(1,488)
1,841
1,558
31
—
—
(30)
—
(1)
—
(27)
(4)
—
30
—
1
—
4
—
Offices and facilities
£000
Vehicles and equipment
£000
1,845
1,512
(106)
79
3,330
(879)
(661)
106
(55)
(1,489)
966
1,841
28
—
—
3
31
(19)
(6)
—
(2)
(27)
9
4
Total
£000
3,361
929
(392)
(30)
(738)
(84)
3,046
(1,516)
(828)
200
30
582
44
(1,488)
1,845
1,558
Total
£000
1,873
1,512
(106)
82
3,361
(898)
(667)
106
(57)
(1,516)
975
1,845
1 During the year, adjustments were made to remove variable payments related to non-lease components from the lease liability and right-of use assets.
2 During the year, right-of-use assets were transferred to property, plant and equipment upon completion of lease terms.
Right-of-use assets relate to buildings, vehicles and equipment held under leases with third-party lessors. A right-of-use asset represents
the Company’s right to use a leased asset over the term of the lease. The Company’s rights to use specific buildings, items of equipment
or specific vehicles under lease arrangements represent assets to the Group.
74
Invinity Energy Systems plc Annual Report and Financial Statements 2023
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally
the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have
to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with
similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in
financing conditions since third party financing was received;
uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not
have recent third-party financing; and
makes adjustments specific to the lease, e.g. term, country, currency and security.
18 Deferred tax balances
Deferred tax relates to the following:
Accelerated capital allowances
Share options
Accrued liabilities
Reserves and other
Tax losses
Total deferred tax assets
2023
£000
5,292
292
266
901
110,568
117,319
2022
£000
1,003
595
137
3,008
91,482
96,225
Tax losses
The Company’s subsidiaries carry on business in other tax regimes where the corporation tax rate is not zero. At 31 December 2023, the
Group had the following tax losses carried forward available for use in future periods:
Canada
Ireland
United Kingdom
United States of America
Total potential tax benefit
2023
£000
35,928
6,214
51,877
16,539
110,568
2022
£000
27,707
4,467
46,416
12,892
91,482
Under current tax legislation tax losses in the United Kingdom and Ireland can be carried forward indefinitely and be offset against future
profits arising from the same activities at the tax rate prevailing at that time. There is a portion of the tax losses in the United States of
America that will begin to expire in 2035, whereas the majority can be carried forward indefinitely. The tax losses in Canada can be carried
forward 20 years and will begin to expire in 2035.
Due to the uncertainty regarding the timing and extent of future profits within these subsidiaries, no deferred tax assets have been
recognised in respect of these tax losses. Deferred tax is also not recognised on the timing differences between accounting and tax
treatment in these subsidiaries given the offsetting tax losses on which no deferred tax has been recognised.
The UK Government announced that the Corporation Tax rate increased from 19% to 25% on profits of over £250,000, effective 1 April
2023. Profits below £50,000 continue to be chargeable to Corporation Tax at 19%. In computing the UK deferred tax asset, management
has assumed that as neither the deferred tax assets nor the deferred tax liabilities will crystallise in the immediate future, calculations based
on 19% are appropriate.
75
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
19 Inventory
Raw materials and consumables
Work in progress
Finished goods
Total inventory
2023
£000
2,961
285
42
3,288
2022
£000
1,815
6,370
1,642
9,827
Inventory recognised as an expense within cost of sales during the current year amounted to £27,023,108 (2022: £3,356,045).
At 31 December 2023, inventory impairment to net realisable value totalled £150,988 (2022: nil). Net reversal of inventory write-downs
during the current year amounted to £nil (2022: £5,154).
20 Other current assets
Prepayments and deposits
Prepaid inventory
Tax credits – recoverable
Other receivables
Total other current assets
2023
£000
475
1,073
719
454
2,721
2022
£000
1,879
5,102
551
1,249
8,781
Prepaid inventory is recognised on inventory payments where physical delivery of that inventory has not yet been taken by the Group.
21 Contract related balances
The Group has recognised the following assets and liabilities related to revenue from contracts with customers that are in progress at the
respective year-ends:
Amounts due from customer contracts included in trade receivables
Contract assets (accrued income for work done not yet invoiced)
Non-current contract assets
Contract liabilities (deferred revenue related to advances on customer contracts)
Net position of sales contracts
2023
£000
2,496
888
304
(1,312)
2,376
2022
£000
1,737
500
—
(8,375)
(6,138)
The amount of revenue recognised in the year that was included in contract liabilities at the end of the prior year was £8,097,770 (2022:
£428,417).
The aggregate position on customer contracts included in the statement of financial position will change according to the number and
size of contracts in progress at a given year-end as well as the status of payment milestones made by customers toward servicing those
contracts. The Group structures payment milestones in its customer contracts to cover upfront expenditure for parts and materials and
other working capital requirements associated with the delivery of promises under customer contracts to better manage Group cash flow.
The timing of revenue recognition is based on the satisfaction of individual performance obligations within a contract and is not based on
the timing of advances received. Customer advances are recognised as contract liabilities in the statement of financial position and are
released to income progressively as individual performance obligations are met. The difference in timing between the receipt of contract
advances and the timing of the satisfaction of performance obligations for revenue recognition can cause values to remain in deferred
income. The amount of such deferrals is related to both the overall size of the underlying contract and the planned pace of delivery in the
related work schedule. This is expected to occur where satisfaction of performance obligations is evidenced by customer acceptance of
the good or service that is the subject of the performance obligation.
76
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Provisions related to contracts with customers
At 1 January 2023
Charges to profit or loss:
– Provided in the year
– Unused amounts reversed
Amounts used in the year
Foreign exchange
At 31 December 2023
Current
Non-current
At 1 January 2022
Charges to profit or loss:
– Provided in the year
– Unused amounts reversed
Amounts used in the year
Foreign exchange
At 31 December 2022
Current
Non-current
Warranty
provision
£000
Legacy products
provision
£000
Provision for
contract losses
£000
284
552
(38)
(195)
(1)
602
586
16
1,016
15
(968)
(13)
(50)
—
—
—
1,607
332
(235)
(1,315)
(56)
333
226
107
Warranty
provision
£000
Legacy products
provision
£000
Provision for
contract losses
£000
257
204
(28)
(153)
4
284
284
—
860
555
(94)
(406)
101
1,016
1,016
—
4,859
565
(2,059)
(1,980)
222
1,607
1,607
—
Total
£000
2,907
899
(1,241)
(1,523)
(107)
935
812
123
Total
£000
5,976
1,324
(2,181)
(2,539)
327
2,907
2,907
—
Warranty provision
The warranty provision represents management’s best estimate of the costs anticipated to be incurred related to warranty claims, both
current and future, from customers in respect of goods and services sold that remain within their warranty period. The estimate of future
warranty costs is updated periodically based on the Company’s actual experience of warranty claims from customers.
The element of the provision related to potential future claims is based on management’s experience and is judgmental in nature. As for
any product warranty, there is an inherent uncertainty around the likelihood and timing of a fault occurring that would cause further work
to be undertaken or the replacement of equipment parts.
A standard warranty of up to two years from the date of commissioning is provided to all customers on goods and services sold and is
included in the original cost of the product. Customers are also able to purchase extended warranties that extend the warranty period for
up to a total of ten years.
Provision for legacy products
Where it is considered of commercial value, management has elected to provide for the costs of ongoing maintenance for certain legacy
products. Provisions in respect of legacy products have fully unwound in 2023 and are no longer provided.
Provision for contract losses
A provision is established for contract losses when it becomes known that a customer contract has become onerous. A contract is onerous
when the unavoidable costs of fulfilling the Group’s obligations under a contract are greater than the revenue that will be earned from it.
The unavoidable costs of fulfilling contract obligations will include both direct and indirect costs.
The creation of an additional provision is recognised immediately in profit and loss. The provision is used to offset subsequent costs
incurred as the contract moves to completion.
In determining the amount to be provided, management has evaluated the likelihood of input costs continuing to rise against a backdrop of
inflation and instability due to current macro-economic factors such as, the increasing price of oil feeding through to production and shipping
costs and continuing supply chain issues.
Provisions in respect of contract losses relate to contracts which are expected to be delivered in 2024 and will therefore unwind during
that year. Provisions in respect of contract losses relating to extended warranties for up to a total of ten years will unwind over that period.
77
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
22 Trade receivables
Total trade receivables
2023
£000
2,496
2022
£000
1,737
All trade receivables relate to receivables arising from contracts with customers.
Trade receivables are amounts due from customers for sales of vanadium flow battery systems in the ordinary course of business. Trade
receivables do not bear interest and generally have 30-day payment terms and therefore are all classified as current.
The actual credit loss over 2023 was determined to be less than 1% of total sales (2022: less than 1%). An allowance for potential credit
losses of £139,639 (2022: £23,953) has been recognised.
23 Cash and cash equivalents
Total cash and cash equivalents
2023
£000
5,014
Term deposits are presented as cash equivalents if they have a maturity of three months or less from the date of acquisition.
24 Trade and other payables
Trade payables
Other payables
Accrued liabilities
Accrued employee compensation
Government remittances payable
Total trade and other payables
2023
£000
2,166
29
877
772
104
3,948
2022
£000
5,137
2022
£000
3,706
78
701
143
306
4,934
Trade payables are unsecured and are usually paid within 30 days.
The carrying amounts of trade and other payables are the same as their fair values due to the short-term nature of the underlying
obligation representing the liability to pay.
25 Derivative financial instruments
Derivative value of warrants issued
Other
Total derivative financial instruments
2023
£000
406
—
406
2022
£000
449
320
769
Investment funding arrangement
On 14 December 2022, the Company entered into an investment agreement with Riverfort Global Opportunities PCC Limited and YA
II PN Ltd. (“Noteholders”). The instrument was entered by way of an initial drawdown in the amount of US$2.5 million and related
subscription of 2,870,038 shares priced at nominal value of €0.01 and to be used to facilitate the conversion of amounts advanced under
the investment agreement.
Pursuant to the facility, the Noteholders were granted warrants exercisable at 67.35p to subscribe for 1,350,020 ordinary shares for a
period of up to four years. These warrants remain outstanding and have been repriced to 32p being the price per share achieved in the
2023 capital raise. In consideration of the Noteholders undertakings, the Company has agreed to grant a further 449,980 warrants at an
exercise price of 32p which will expire on 14 December 2026.
78
Invinity Energy Systems plc Annual Report and Financial Statements 2023
The convertible notes balance was fully repaid by 31 March 2023 using funds from the 2023 capital raise. Prepayment was at the
Company’s option and carried a redemption premium of 10% paid to the Noteholders at the date of prepayment totalling US$208,107.
Following the redemption of the investment agreement, proceeds from the sale of the conversion shares were split 97% to the company
and 3% to the Noteholders, resulting in net proceeds to the Company of £742,601.
Information about the Group’s exposure to interest rate, foreign currency and liquidity risks is included in note 29.
26 Lease liabilities
The Group’s obligations under lease contracts are presented as follows:
At 31 December
Current – due within 12 months
Non-current – due after 12 months
Total lease liabilities
Payments of lease principal and interest in the period to 31 December were:
At 31 December
Payments of lease principal
Payments of interest
Total payments under leases
The contractual undiscounted cash flows for lease obligations at each period end were:
At 31 December
Less than one year
One to five years
Total lease liabilities
2023
£000
723
833
1,556
2023
£000
629
44
673
2023
£000
784
884
1,668
2022
£000
740
969
1,709
2022
£000
591
58
649
2022
£000
804
1,009
1,813
Lease liabilities represent the present value of the minimum lease payments the Group is obliged to make to lessors under contracts for
the lease of assets that are presented as right-of-use assets.
Amounts recognised in the consolidated statement of profit and loss were:
Variable lease payments
Expenses relating to short-term leases
Expenses relating to leases of low-value assets
2023
£000
230
70
8
2022
£000
117
82
5
79
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
27 Issued share capital and reserves
Authorised at 31 December
Issued and fully paid
At 1 January
Issued in the year
At 31 December
2023
No: 000
1,000,000
119,007
72,060
191,067
2023
£000
—
50,716
632
51,348
2022
No: 000
1,000,000
116,048
2,959
119,007
2022
£000
—
50,690
26
50,716
During the year, 72,059,618 new shares were issued with a nominal value of £631,857. The total gross proceeds were £23,045,832
with the balance of £22,413,975 credited to the share premium account. Total costs of issuance were £1,117,307 and these costs were
charged directly to the share premium account.
On 22 November 2022, the Company subdivided each ordinary share of €0.50 nominal value into one ordinary share of €0.01 each and
one Deferred A Share of €0.49 each. The Deferred A Shares do not have any voting rights and are not admitted to trading on AIM or any
other market. They carry only a priority right to participate in any return of capital or in any dividend to the extent of €1 in aggregate over
the class. The Deferred A Shares are, for all practical purposes, valueless and it is the Board’s intention, at an appropriate time, to have
the Deferred A Shares cancelled in accordance with Companies Law.
Ordinary shares have a par value of €0.01. The holders of ordinary shares are entitled to receive dividends as may be declared from time
to time and are entitled to one vote per share at meetings of the Company.
Share capital and share premium
Share capital comprises issued capital in respect of issued and paid-up shares, at their par value. Share premium comprises the difference
between the proceeds received and the par value of the issued and paid-up shares.
Share-based payment reserve
The share-based payment reserve comprises the equity component of the Company’s share-based payments charges.
Currency translation reserve
The translation reserve comprises foreign currency differences arising from the translation of the financial statements of foreign operations.
Other reserve
Other reserve comprises the portion of the consideration paid for redT energy Holdings (Ireland) Limited’s minority interests over the fair
value of the shares purchased.
80
Invinity Energy Systems plc Annual Report and Financial Statements 2023
28 Financial assets and liabilities
All financial assets are held at amortised cost. There were no financial assets measured at fair value through other comprehensive
income nor through profit and loss in either period presented.
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial asset presented
above. The carrying value of the financial assets approximate their fair values due to the short-term maturities of these instruments.
The Group does not currently use derivative instruments for managing financial risk. All financial liabilities are held at amortised cost.
Recognised fair value measurements
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1:
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading securities)
is based on quoted market prices at the end of the reporting period.
The battery systems manufactured by the Company use vanadium metal as a key component in the electrolyte. Vanadium
is an actively traded commodity for which quoted market prices are available.
The Company does not currently hold inventories of vanadium. Vanadium purchased from third parties is solely for the use
in electrolyte and open purchase contracts are not accounted for as derivatives.
Level 2:
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques that maximise the use of observable market data and rely as little as possible on
entity-specific estimates. If all significant inputs required to fair value instrument are observable, the instrument is included
in Level 2.
At 31 December 2023, the Company held warrants issued to Riverfort Global Opportunities and YA II PN Ltd as part of the
December 2022 financing event. The warrants are valued using Level 2 inputs as they do not represent a fixed-for-fixed
equity instrument and are valued using observable market factors such as the share price at the date of the grant, the term
of the award, the share price volatility and the risk-free interest rate.
Level 3:
If one or more of the significant inputs is not based on observable market data the instrument is included in Level 3.
The Group did not hold any financial assets or liabilities that were required to be valued using Level 3 inputs at 31
December 2023 (2022: none).
No other financial instruments were outstanding at the period end that required to be valued using a methodology that
uses Level 1, 2 or 3 inputs.
81
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
29 Financial risk management
This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future financial performance.
Current year profit and loss information has been included where relevant to add further context.
Risk
Exposure arising from
Measurement
Management
Market risk –
foreign exchange
Future commercial
transactions
Cash flow forecasting
Sensitivity analysis
Recognised financial assets
and liabilities not denominated
in GBP
Market risk –
commodity price risk
Purchases of vanadium to be
used in the battery electrolyte
Quoted market prices
for vanadium
Credit risk
Cash and cash equivalents,
trade receivables and
contract assets
Ageing analysis
Credit ratings
Liquidity risk
Borrowings and other liabilities Rolling cash flow forecasts
Cash is held in GBP until
non-GBP requirements
for up to the next
six-months are established,
at which point the GBP
is sold in favour of the required
currency, which is then remitted
to the relevant Group entity
Strategic supply
arrangements with
multiple pre-qualified
suppliers
Monitoring accumulation
of bank balances
Credit risk assessment for
customers and pre-agreed
deposits and interim payments
within customer contracts
Access to capital markets for
equity or debt funding
Market risk – foreign exchange risk
The Group is primarily exposed to foreign exchange risk related to bank deposits, receivables or payables balances and other monetary
working capital items that are denominated in a currency other than the Company’s functional currency which has been determined to
be GBP.
The Group does not speculate on foreign exchange and aims to mitigate its overall foreign exchange risk by holding currency in line
with forecast regional operating expenses, providing an element of natural hedge against adverse foreign exchange movement.
82
Invinity Energy Systems plc Annual Report and Financial Statements 2023
The Group’s exposure to foreign exchange risk at the end of the reporting period, expressed in GBP, was as follows:
31 December 2023
Cash and cash equivalents
Trade receivables
Trade and other payables
Derivative financial instruments
Lease liabilities
Net exposure
31 December 2022
Cash and cash equivalents
Trade receivables
Trade and other payables
Derivative financial instruments
Lease liabilities
Net exposure
Sterling
£000
3,284
747
(1,799)
(406)
(254)
Euro
£000
696
1,350
(178)
—
—
Canadian
dollar
£000
346
11
(1,466)
—
(1,169)
1,572
1,868
(2,278)
US
dollar
£000
444
388
(505)
—
(133)
194
Australian
dollar
£000
244
—
—
—
—
244
Sterling
£000
1,545
350
(1,197)
(769)
(279)
(350)
Euro
£000
354
—
(557)
—
—
(203)
Canadian
dollar
£000
106
1,475
(2,867)
—
(1,347)
US
dollar
£000
South African
rand
£000
Australian
dollar
£000
2,810
(88)
(313)
—
(83)
5
—
—
—
—
5
317
—
—
—
—
317
(2,633)
2,326
Total
£000
5,014
2,496
(3,948)
(406)
(1,556)
1,600
Total
£000
5,137
1,737
(4,934)
(769)
(1,709)
(538)
Sensitivity – exchange rates
The sensitivity of profit or loss to changes in quoted exchange rates for currencies to which the Group is exposed is as follows, based on
each relevant exchange rate strengthening (or weakening) by 5%.
There is no impact on other components of equity as the Group is not party to any derivative financial instruments, such as hedging
instruments, where currency gains and losses would be recognised in other comprehensive loss.
At 31 December +/ -5%
Euro
Canadian dollar
US dollar
South African rand
Australian dollar
2023
£000
93
(114)
10
—
12
1
2022
£000
24
227
137
1
16
405
Market risk – commodity price risk
The Group’s batteries use an electrolyte incorporating vanadium. Vanadium is an elemental metal and is used primarily to strengthen
steel, particularly for the construction industry.
Whilst it is not a mature market traded commodity, such that one can buy forward or derivative contracts, market prices for vanadium
pentoxide (V2O5) at 98% purity are quoted in US dollars per pound.
Vanadium forms about two-thirds of the value of the electrolyte, which in turn forms about a quarter of the landed cost of a battery, and so
a fluctuation in the price of vanadium will impact the profitability of battery sales. An increase or decrease in the market price of vanadium
of 5% could cause the value of the electrolyte component of a battery to increase or decrease by approximately 3%.
83
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
Credit risk – cash held on deposit with banks
Credit risk arises from cash and cash equivalents and deposits with banks and other financial institutions.
Credit risk related to holdings with financial institutions is managed by only maintaining bank accounts with reputable financial institutions.
The Group aims only to place funds on deposit with institutions with a minimum credit rating of B2 Moody’s.
The Group’s cash at bank and short-term deposits are held with institutions with credit ratings as follows:
At 31 December
Aa1
Aa2
A1
Ba2
2023
£000
220
566
4,228
—
5,014
2022
£000
780
1,315
3,037
5
5,137
Credit risk – trade and other receivables
Past due but not impaired
The Group’s credit risk from receivables encompasses the default risk of its customers and other counterparties. Its exposure to credit
risk is influenced mainly by the individual characteristics of each customer or counterparty. The creditworthiness of potential and existing
customers is assessed prior to entering each new transaction. A credit analysis is performed, and appropriate payment terms implemented
that may include increased level of upfront deposits for the purchase of battery units. The Group’s standard terms of trade provide that up
to 90% of the sales price of a battery unit is paid prior to delivery.
Receivables are considered for impairment on a case-by-case basis when they are past due or where there is objective evidence that the
customer or counter party may be a default risk. The Group takes into consideration the customer or counter party payment history, its
credit worthiness together with the prevailing economic environment in which it operates to assess the potential impairment of receivables.
The assessment reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is
available at the reporting date about past events, current conditions and forecasts of future economic conditions.
On an ongoing basis, receivable balances attributable to each customer or other counterparty are monitored and appropriate action
is taken when the relevant balance becomes or is considered likely to become overdue. The maximum exposure to loss arising from
receivables is equal to invoiced value.
The ageing of trade receivable balances was:
At 31 December
Current
Past due – less than 30 days
Past due – more than 30 days
Total trade receivables
2023
£000
1,940
339
217
2,496
2022
£000
1,582
112
43
1,737
Past due amounts at 31 December 2023 related to six customers (2022: four customers) and £139,639 (2022: £23,953) was considered
to be impaired.
84
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Liquidity risk
Liquidity risk relates to the Group’s ability to meet its obligations as they fall due.
The Group generates cash from its operations that are principally related to the manufacture and installation of vanadium flow batteries.
The market for reliable and flexible grid-scale storage solutions for energy generated from renewable sources is growing and the
technology continues to develop.
The development of new and enhanced storage technologies can be capital intensive and the Group has historically funded development
and early-stage commercial activity primarily from equity investment but also using cash from operations and loan funding.
The Group forecasts cash generation using a comprehensive company financial model and monitors the timing and amount of its payment
obligations.
The following table shows the Group’s financial liabilities by relevant maturity grouping based on contractual maturities. The amounts
included in the analysis are contractual, undiscounted cashflows.
31 December 2023
Trade and other payables
Derivative financial instruments
Lease liabilities
Total financial liabilities
31 December 2022
Trade and other payables
Derivative financial instruments
Lease liabilities
Total financial liabilities
Less than
one year
£000
One to two
years
£000
Two to five
years
£000
Over
five years
£000
Total contracted
cash flows
£000
3,948
406
784
5,138
—
—
422
422
—
—
462
462
—
—
—
—
3,948
406
1,668
6,022
Less than
one year
£000
One to two
years
£000
Two to five
years
£000
Over
five years
£000
Total contracted
cash flows
£000
4,582
769
740
6,091
352
—
630
982
—
—
339
339
—
—
—
—
4,934
769
1,813
7,516
Carrying
amount
£000
3,948
406
1,556
5,910
Carrying
amount
£000
4,934
769
1,709
7,412
Capital management
At 31 December 2022, the Group had debt from an investment agreement entered with Riverfort Global Opportunities PCC Ltd and
YA II PN Ltd. At 31 March 2023, the loan has been repaid in full using proceeds from the March 2023 equity raise. Following the loan
redemption, the Company has no external debt outstanding.
The Board regularly reviews the Group’s cash requirements and future projections to monitor cash usage and assess the need for
additional funding. At 31 May 2024, the Group had £53.2 million of cash on hand.
30 Related parties
The only related parties of the Group are the key management and close members of their family. Key management has been determined
as the CEO and his direct reports.
Invinity Energy Systems plc purchased a total of 15,000 shares at the issue price of 32 pence per share in the March 2023 fundraising on
behalf of two executive directors. 31,250 shares were purchased on behalf of Larry Zulch and 15,625 shares on behalf of Matt Harper. At
31 December 2023, the £15,000 owed by executive directors had been settled.
Key management compensation is disclosed in note 8, Staff costs and headcount.
85
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023
Notes to the Consolidated Financial Statements
continued for the year ended 31 December 2023
31 Group entities
Direct subsidiary
undertakings
Country of
incorporation
Camco Holdings UK Limited
England
Invinity Energy Systems
Limited (formerly Camco
Services (UK) Limited)
England
Camco (Mauritius) Limited
Mauritius
Invinity Energy Systems
(U.S.) Corporation
United States
of America
Registered office
Principal activity
Ownership %
2022
2023
128 City Road, London,
EC1V 2NX United Kingdom
128 City Road, London,
EC1V 2NX United Kingdom
24 Dr Joseph Rivière Street
1st Floor, Felix House
Port Lewis, Mauritius
1201 Orange St. #600
Wilmington, DE
USA 19899
Holding company
100%
100%
Support services
100%
100%
Holding company
100%
100%
Energy storage
100%
100%
Invinity Energy Nexus
Limited
England
128 City Road, London,
EC1V 2NX United Kingdom
Energy storage
100%
100%
Indirect subsidiary undertakings
redT Energy Holdings (UK)
Limited
England
Re-Fuel Technology Limited
England
Invinity Energy (UK) Limited
England
128 City Road, London,
EC1V 2NX United Kingdom
128 City Road, London,
EC1V 2NX United Kingdom
Research and
consultancy
Energy storage
consultancy
Office 501 New Broad Street House Energy storage
35 New Broad Street,
London, England, EC2M 1NH
United Kingdom
consultancy
100%
100%
99%
99%
99%
99%
redT Energy Holdings
(Ireland) Limited
Invinity Energy Systems
(Ireland) Limited
Ireland
Ireland
redT energy (Australia)
(Pty) Ltd
Australia
Invinity Energy
(South Africa) (Pty) Ltd
South Africa
Invinity Energy Systems
(Canada) Corporation
Canada
22 Northumberland Road
Ballsbridge,
Dublin 4, Ireland
22 Northumberland Road
Ballsbridge,
Dublin 4, Ireland
RSK Advisory, Level 2, Suite 7
66 Victoria Crescent
Narre Warren, Victoria 3805
Australia
1st Floor, Kiepersol House
Stonemill Office Park
300 Acacia Road
Darrenwood, Randburg 2194
2900-550 Burrard Street
Vancouver, BC
Canada V6C 0A3
Energy storage
99%
99%
Energy storage
99%
99%
Energy storage
99%
99%
Business Services
100%
100%
Energy storage
100%
100%
Suzhou Avalon Battery
Company Limited
The People’s
Republic of China no.11888 East Taihu Avenue,
1809 Building 4
Business Services
100%
100%
Songling Town, Wujiang District,
Suzhou City
Associates
Vanadium Electrolyte
Rental Limited
86
England
128 City Road, London,
EC1V 2NX United Kingdom
Vanadium
procurement
50%
50%
Invinity Energy Systems plc Annual Report and Financial Statements 2023 32 Contingent liability
The Group is involved in legal proceeding with a landlord with a received claim which has a possible range from £nil to £693k. While the
outcome of this matter is uncertain and difficult to predict, management believes that, based on the information currently available, the
ultimate resolution of these matters will not have a material adverse effect on the Group’s financial position.
33 Events occurring after the report period
On 26 February 2024, the Company announced that it had entered into an agreement with its Taiwanese strategic partner, Everdura,
to undertake domestic manufacturing of its next generation vanadium flow battery (“VFB”) product, code-named “Mistral”, to serve the
Taiwanese and other markets (“the Agreement”). Under the Agreement, Everdura will manufacture Mistral VFBs to fulfil orders it intends
to secure under the terms of the existing reseller agreement which targets more than 255 MWh of product sales over a three-year period.
The Agreement states that Everdura will pay Invinity a royalty fee based on a material percentage of the sale price of any Mistral products
sold. Everdura will also utilise Invinity’s existing supply chain and purchase cell stacks directly from the Company, which will continue to
be manufactured by Invinity at its facilities in the UK and Canada.
In addition, on 24 May 2024, the Company announced it had raised gross proceeds of £57.4 million through the issue of 249,490,243 new
ordinary shares of €0.01 each at the issue price of 23 pence per new ordinary share. Of this amount, £25.0 million was raised through a
subscription by the UK Infrastructure Bank (the British state-owned policy bank), £3.0 million by Korean Investment Partners (an affiliate
of Korea Investment Holdings, a leading financial conglomerate in the Republic of Korea) acting through an investment fund, £28.0 million
through an oversubscribed placing with institutional and other investors and £1.38 million from an open offer of 3 open offer shares for
every 20 ordinary shares held to existing shareholders.
The fundraising shares were admitted to trading on the AIM market of the London Stock Exchange and the APEX segment of the AQSE
Growth Market on 24 May 2024.
87
UK / U.S. / CANADA / AUSTRALIAFINANCIAL STATEMENTSAnnual Report and Financial Statements 2023 Officers and Advisers
Officers
Neil O’Brien
Larry Zulch
Matt Harper
Jonathan Marren
Rajat Kohli
Michael Farrow
Kristina Peterson
Registered Address
Investor Relations
Joe Worthington
Ralph Anderson
Non-Executive Chairman
Chief Executive Officer
Chief Commercial Officer
Chief Financial Officer and Chief Development Officer
Senior Independent Director
Non-Executive Director
Non-Executive Director
Third Floor, IFC5
Castle Street
St. Helier
Jersey
JE2 3BY
Director of Communications & Investor Relations
Corporate Relations Manager
To contact Investor Relations
email ir@invinity.com or call +44 (0)204 551 0361
Jersey Company Number
92432
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
VSA Capital Limited
Park House
16-18 Finsbury Circus
London
EC2M 7EB
Computershare Investor Services (Jersey) Limited
Queensway House
13 Castle Street
St. Helier
Jersey
JE1 1ES
Oak Secretaries (Jersey) Limited
Third Floor, IFC5
Castle Street
St. Helier
Jersey
JE2 3BY
Advisors
Nominated Adviser and Joint Broker
AQSE Corporate Advisor, Financial Advisor and Joint Broker
Registrar
Company Secretary
88
Invinity Energy Systems plc Annual Report and Financial Statements 2023
Contents
INTRODUCTION
About Invinity
Highlights of 2023
Introduction – Foundations for Scale
STRATEGIC REPORT
Chairman’s Report
Chief Executive Officer’s Report
Chief Financial Officer’s Report
Risk Management Report
Sustainability Report
GOVERNANCE
The Board of Directors
Governance Report
Report of the Chairman of the Audit & Risk Committee
Report of the Chairman of the ESG Committee
Report of the Chairman of the Nomination Committee
Report of the Chair of the Remuneration Committee
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities in Respect
of the Financial Statements
1
2
4
7
8
12
14
18
22
24
27
28
29
30
31
40
41
FINANCIAL STATEMENTS
Independent Auditors’ Report to the Members
of Invinity Energy Systems plc
Consolidated Statement of Profit and Loss
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
OTHER INFORMATION
Officers and Advisers
43
49
49
50
51
52
53
88
Invinity staff and Board members at the Pender St manufacturing facility in Vancouver – September 2023
Designed and produced by JacksonBone Limited.
Print management by Sterling Financial Print.
This report is printed on Amadeus Silk which is made of FSC®
certified and other controlled material. It is also Carbon Balanced
with the World Land Trust, an international conservation charity,
who offset emissions through the purchase and preservation of
high conservation value land. It is manufactured in accordance
with ISO certified standards for environmental, quality and
energy management. Printed sustainably in the UK by Pureprint,
a CarbonNeutral® company with FSC® chain of custody and
an ISO 14001 certified environmental management system
recycling 100% of all dry waste.
INVINITY ENERGY SYSTEMS PLC
Third Floor, IFC5
Castle Street
St. Helier
Jersey
JE2 3BY
T +44 (0)204 551 0361
W www.invinity.com
@InvinityEnergy
linkedin.com/invinity-energy-systems
Jersey registered 92432
Invinity Offices:
London, United Kingdom
Bathgate, United Kingdom
Vancouver, Canada
San Francisco, USA
Melbourne, Australia
St Helier, Jersey
www.invinity.com
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