Half Yearly Report

RNS Number : 3055G

ITM Power PLC

29 January 2010

 



29 January 2010

ITM Power Plc

('ITM' or 'the Company')

Interim Results for the six months ended 31 October 2009

ITM Power plc (AIM:ITM) the energy storage and clean fuel company announces its Interim Results for the six months ended 31 October 2009.

Current Program updates:

*	First small electrolyser successfully delivered and undergoing field trials, providing the Company with performance and longevity data outside a controlled laboratory environment.
*	Successful demonstration of the High Pressure Refueling Unit based at ITM's Test and Production facility in Sheffield.
*	Successful week-long field trial of the bi-fuel Ford Focus and High Pressure Refueling Unit in partnership with The Sunday Times.
*	ITM will be exhibiting its first generation products at the Hannover Messe in April 2010 and at the National Hydrogen Association show in California, USA in May 2010.
*	ITM's Test and Production facility has gained ISO accreditation for Quality, Environment and Occupational Health and Safety Management Systems.
*	ITM has renewed its Memorandum of Understanding (MOU) with Revolve Technologies Limited for the development of vehicles that run on Hydrogen Internal Combustion Engines (HICE's).
*	Pre-tax loss for the period was £3.4m which reflects the reorganization that has taken place and a one-off provision for a vacated property lease.
*	Cash and Short Term investments at 31 October 2009 were £19.5m.

Roger Putnam, Non-Executive Chairman of ITM Power plc commented, "ITM Power plc is a much changed company, now highly focussed on the commercial challenges ahead. The Company has a clear view of where it needs to place itself in the market for hydrogen generation, clean fuel and energy storage. Our new CEO, Graham Cooley, has been instrumental in that change and I intend to support him in his continued efforts. I am sure this will take the Company into a period of success at the forefront of the UK hydrogen market. Clean energy and efficient renewable energy storage are clearly the way forward."

For further information please visit www.itm-power.com or contact: 

ITM Power plc Graham Cooley, CEO	0114 244 5111
Panmure Gordon & Co. Andrew Godber / Ashton Clanfield	020 7459 3600
Tavistock Communications Simon Hudson / Andrew Dunn	020 7920 3150

  Chairman's Statement

I am pleased to report the interim results for the six months ended 31 October 2009 and update shareholders on current developments and future plans.

I would like to begin by thanking Peter Hargreaves for his hard work over the past two years that have been very challenging for the Company and its staff. Peter hands on the Chairmanship to me at an exciting and challenging time.

Since the publication of the Annual Financial Report for the year to 30 April 2009 our new CEO, Graham Cooley, has completed an in depth review of the Company, its technology, facilities and product prototypes. The Company has been reorganised and is now focussed on a defined range of products and strategic partnerships with the aim of bringing finished products to market at the earliest opportunity. 

Financials:

The pre-tax loss for the six months under review increased to £3.4m against a budget of £3.1m. Non-budgeted reorganisation costs totalling £0.3m are reported. This leaves the Company with a headcount of 56. The research & development tax credits recognised of £1.3m represent tax credits received for the years ended 30 April 2008 (£552k) and 2009 (£453k) as well as provision for tax credits receivable for the six months ended 31 October 2009 (£271k).

Interest rates remain depressed; the Company holds 99.8% of its funds in interest bearing deposits with its bankers NatWest. Deposit rates are monitored regularly with funds being placed in the most beneficial interest bearing accounts. The Company cash and short term deposit balances total £19.5m (£21.8m 30 April 2009).

The Company has increased its grant revenues in the period exceeding the budget by over 50% and continues to seek further grant funding as it builds good working relationships with the major funding bodies.

The Board is not recommending payment of a dividend in accordance with the dividend policy stated at the time of the IPO. Details of the Company's significant accounting policies can be found on the Company's website (www.itm-power.com/investors.html).

Board and Staff:

On 16 December 2009 Peter Hargreaves stepped down as Company Non-Executive Chairman to be succeeded by myself. He remains a Non-Executive Director of the Company. On 29 November 2009 Dr. Donald Highgate resigned from the Board of Directors to be replaced by Dr. Simon Bourne the new Technology Director. Dr. Bourne has a PhD from the University of Manchester Institute of Science and Technology and has been employed by the Company since 2002. The Board of Directors continues to monitor its staffing levels closely to ensure that the required resources are maintained in order that the Company can achieve its planned milestones.

I would like to thank the hard working staff members who have maintained their focus throughout this period of change and uncertainty. I am pleased to report that morale in the business is excellent. 

Outlook:

ITM intends to continue its process of continuous improvement and development that will enable it to meet changing market conditions head on. It is now in the position of having several product prototypes with clear market potential that with funding and partnerships can access existing and future markets for hydrogen technology. The future remains uncertain but ITM is now well positioned to lead the UK hydrogen market.

Prof Roger Putnam CBE

Non-Executive Chairman

  CEO's Statement

It is clear that the hydrogen economy tipping point is still some years away and the continuing economic uncertainties mean that the pressures of sustained high oil prices are not yet affecting Government policies and plans. That said, it remains a generally accepted view that hydrogen will inevitably play an important role in the development of low-carbon economies. 

A Clearly Communicated Strategy:

ITM Power is focussed on Energy Storage and Clean Fuel. A loud and clear message I received when joining ITM was that the Company's proposition needed to be more clearly articulated and that more open communication with stakeholders was needed. Our website has been redesigned to that end and our external presentations reflect a new strategic focus and openness.

Company Reorganisation and Market Entry:

The Company has been reorganised with Product Managers as the focus of the organisation. We have undertaken commercial analysis of the Energy Storage and Clean Fuel markets and have focussed the Company on a number of small and medium sized electrolyser offerings to gain early revenue. The Company will be displaying its range of small and medium size electrolysers at the Hannover Messe Expo in April 2010. This is the first time that the Company has exhibited at Hannover, the premier technology and green energy showcase in Europe.

In addition, in May 2010 ITM will exhibit at the US National Hydrogen Association annual conference to engage with interested parties in North America. As such there will be no significant development of new projects or further products until the response to the initial offering is gauged.

The Company is now focussed on identifying partnerships with organisations that will enable the placement of our products in practical applications. Several opportunities have been identified and further partners are sought in the transport and off-grid sectors.

Focus on Product Delivery:

The engineering team has developed a number of small electrolyser products which will be the first ITM products to market. Once our field trials are completed, these will move into a phase of European Conformity (CE) marking and reliability testing before release onto the market. Our medium size electrolyser also continues to deliver a good performance in the development laboratory and we hope to have a marketable product within the next six months.

ITM's Production and Testing facility has gained ISO accreditation for Quality, Environment and Occupational Health and Safety Management Systems.  This achievement is an important step towards establishing ITM as a quality supplier.

We are delighted to achieve accreditation for these internationally recognised standards and believe that this achievement is an indication of the way that the Company is now managed and gives us a solid foundation for our manufacturing capability and product CE marking.

The Company has moved to a project based budgeting system to further improve cost control and focus the use of funds and grant income towards the commercialisation of products.

Technical Developments:

Significant progress has been made in the area of electrolyser efficiency.  In addition to maximizing gas generation, the benefit of greater efficiency is to enable further product cost reductions. Our development focus will remain on Membrane Electrode Assembly (MEA) longevity and efficiency. ITM continues to transfer laboratory progress into its prototype systems, a process that has intensified following the Company's reorganisation.

Continued development of the Company's proprietary membrane and MEA for fuel cells has enabled attainment of exceptionally high power densities.  ITM have identified this differentiating factor as being central to achieving a step change in costs.

Managing External Relationships:

During my first six months as CEO, the Company has been building relationships with industry bodies and grant funding organisations. This is a vital area that the Company has not fully exploited in the past.

Outlook:

I am extremely positive about ITM, its staff, technology and market prospects. We are now focussed on delivering products, market entry and building a sustainable business.

Dr Graham Cooley

Chief Executive Officer

  CONSOLIDATED INCOME STATEMENT (UNAUDITED)

Results for the six months ended 31 October 2009

	Six months ended 31 October 2009 (unaudited) £'000	Six months ended 31 October 2008 (unaudited) £'000	Year ended 30 April 2009 (audited) £'000
Operating costs
- Research and development	(1,771)	(1,801)	(3,579)
- Prototype production and engineering	(722)	(447)	(984)
- Sales and marketing	(162)	(166)	(303)
- Administration	(980)	(505)	(1,276)
Other operating income - grant income	108	-	-
Loss from operations	(3,527)	(2,919)	(6,142)
Investment revenues	124	674	987
Finance costs	-	(1)	(1)
Loss before tax	(3,403)	(2,246)	(5,156)
Tax	1,276	-	-
Loss for the period	(2,127)	(2,246)	(5,156)
Loss per share
Basic and diluted	(2.1p)	(2.2p)	(5.0p)
Weighted average number of shares	102,141,226	102,079,609	102,098,735

The loss per ordinary share and diluted loss per share are equal because share options are only included in the calculation of diluted earnings per share if their issue would decrease the net profit per share or increase the net loss per share.

All results presented above are derived from continuing operations.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

Results for the six months ended 31 October 2009

	Called up share capital £'000	Share premium account £'000	Merger reserve £'000	Retained loss £'000	Total £'000
At 1 May 2009	5,105	36,272	(1,973)	(15,917)	23,487
Issue of new shares	8	1	-	-	9
Share based payments	-	-	-	(3)	(3)
Retained loss for the period	-	-	-	(2,127)	(2,127)
At 31 October 2009	5,113	36,273	(1,973)	(18,047)	21,366

CONSOLIDATED BALANCE SHEET (UNAUDITED)

As at 31 October 2009

	As at 31 October 2009 (unaudited) £'000	As at 31 October 2008 (unaudited) £'000	As at 30 April 2009 (audited) £'000
NON CURRENT ASSETS
Property, plant and equipment	1,377	1,496	1,830
CURRENT ASSETS
Inventories	48	246	70
Trade and other receivables	1,067	508	242
Investments - short term deposits	15,000	20,016	-
Cash and cash equivalents	4,461	4,597	21,794
TOTAL CURRENT ASSETS	20,576	25,367	22,106
CURRENT LIABILITIES
Trade and other payables	(587)	(479)	(449)
NET CURRENT ASSETS	19,989	24,888	21,657
NET ASSETS	21,366	26,384	23,487
EQUITY
Called up share capital	5,113	5,105	5,105
Share premium account	36,273	36,272	36,272
Merger reserve	(1,973)	(1,973)	(1,973)
Retained loss	(18,047)	(13,020)	(15,917)
TOTAL EQUITY	21,366	26,384	23,487

  CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

Results for the six months ended 31 October 2009

	Six months ended 31 October 2009 (unaudited) £'000	Six months ended 31 October 2008 (unaudited) £'000	Year ended 30 April 2009 (audited) £'000
Loss for the Period	(2,127)	(2,246)	(5,156)
Adjustments:
Investment Revenues	(124)	(674)	(987)
Finance Costs	-	1	1
Income Tax Credit	(1,276)	-	-
Depreciation of property, plant & equipment	393	277	573
Loss on disposal of property, plant & equipment	67	-	126
Share-based payments	(3)	54	67
Operating cash flows before movements in working capital	(2,950)	(2,588)	(5,376)
Decrease (increase) in inventories	21	(151)	25
Decrease in receivables	7	3	6
Increase / (decrease) in payables	138	(161)	(183)
Cash used in operations	(2,784)	(2,897)	(5,528)
Income taxes received	552	-	-
Net cash used in operating activities	(2,232)	(2,897)	(5,528)
Investing activities
Interest received	17	810	1,251
Interest paid	-	(1)	(1)
Purchases of property, plant and equipment	(127)	(240)	(875)
Short term deposits	(15,000)	(22)	20,000
Net cash (used in) from investing activities	(15,110)	547	20,375
Financing activities
Issue of ordinary share capital	9	-	-
Net cash from financing activities	9	-	-
(Decrease) Increase in cash and cash equivalents	(17,333)	(2,350)	14,847
Cash and cash equivalents at the beginning of the period	21,794	6,947	6,947
Cash and cash equivalents at the end of the period	4,461	4,597	21,794
Cash, cash equivalents and short term deposits at the beginning of the period	21,794	26,947	26,947
Decrease in the period	(2,333)	(2,334)	(5,153)
Cash, cash equivalents and short term deposits at the end of the period	19,461	24,613	21,794

  Notes

1. Basis of preparation of interim figures

The interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs) as adopted for use in the EU. While the financial information included in this interim announcement has been compiled in accordance with the recognition and measurement principles of IFRSs, this announcement does not itself contain sufficient information to comply with IFRSs. This interim financial information does not constitute statutory financial statements within the meaning of section 435 of the Companies Act 2006.

The financial information for the six months ended 31 October 2009 and 31 October 2008 has not been audited. The information relating to the year ended 30 April 2009 is an extract from the audited financial statements for that year on which the auditors gave an unqualified audit report and did not contain a statement under s498(2) or S498(3) of the Companies Act 2006. A copy of those financial statements has been filed with the Registrar of Companies.

The directors continue to believe that the going concern basis of preparation remains appropriate based upon the level of the Company's level of cash and short term investments relative to the foreseeable operating losses.

2. Significant accounting policies

The financial statements have been prepared on the historical cost basis.

The principal accounting policies adopted by the Company are available from the website at:

www.itm-power.com 

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