Half Yearly Report

RNS Number : 7455W

ITM Power PLC

31 January 2013

 



31 January 2013

ITM Power plc

("ITM Power", "the Group" or the "Company")

Half-Year Results

For the six months ended 31 October 2012

ITM Power (AIM: ITM) the energy storage and clean fuel company announces half-year results for the six months ended 31 October 2012.

Summary

Operational

●	Achievement of CE marking for Infintium fuel cell powerpack for materials handling market.
●	ITM Power, Inc. established in US to bid for the California refuelling station solicitation with two local partners
●	First project with German utility market to investigate power to gas energy storage.
●	Agreement with AEG to cooperate in integrating ITM Power's electrolyser technology with AEG's power control electronics.
●	Additional international representation - North American representative appointed; French representative appointed, engagement progressing.
●	HFuel cost structure updated showing competitiveness with all other sources of hydrogen and lower than EU targets for 2015.
●	Successful participation in consortia winning grant funding from the EU and the UK Government for projects in fuel cells, refuellers, methanation and energy storage.
●	Company's fuel cell technology further developed, routes to monetisation under review.

Financials

●	Grant funding of £257,000 recognised in the period (2011: £269,000), with a further £955,000 yet to claim regarding grants in progress.
●	New grant project awards of £3,046,000 (2011: £942,000) including significant revenues attributed to product delivery.
●	Maintained order flow for modular products with order book of £358k (2011: £390k) predominantly relating to the HPac platform.
●	Pre-tax loss for the period of £3.7m (2011: £3.5m) and net cash burn (after the share issue) of £3.9m (2011 £3.2m, Full year £5.6m), reflecting increased activity levels.
●	Cash and short-term deposits at 31 October 2012 £8.0m (31 October 2011: £9.0m) following £5.4m fundraise in July 2012.

Outlook

●	Development of worldwide hydrogen markets accelerating, early adoption industries growing.
●	Governments addressing energy storage and security are moving hydrogen up the agenda.
●	Launch this year and next year of fuel cell electric vehicles will provide additional profile for hydrogen.
●	Hardware and products available now for sale, demonstration and testing.

Prof Roger Putnam, Chairman of ITM Power commented: "The next few years will, we believe, see the creation of what will become multi-billion dollar global markets and our company is positioned at the heart of these nascent markets - both as a participant and, increasingly, as a partner in the design of regulation, conformity and standards.

"We plan to be a world leading player in green hydrogen solutions for these developing global markets."

Dr Graham Cooley, Chief Executive of ITM Power, added: "It is clear that the second half of the Group's financial year is the period during which large corporations and government bodies conclude their significant procurement and the Group is in advanced talks and tender processes with several significant potential customers. The use of our products for energy storage and grid balancing is a key growth area and we are seeing an upward trend in enquiries in this sector"

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

ITM Power plc Graham Cooley	0114 244 5111
Nplus1 Singer Advisory LLP (Nominated Adviser & Broker) Shaun Dobson / Jenny Wyllie	020 7496 3000
Tavistock Communications Simon Hudson / Kelsey Traynor	020 7920 3150

CHAIRMAN'S STATEMENT

The adoption of hydrogen based solutions to provide clean fuel, energy security and energy storage is now a question of 'when' not 'if'.  The United Kingdom, the United States, Germany and France among others either have launched or are launching initiatives to begin the roll-out of hydrogen infrastructure. Major automobile manufacturers are confirming their timetables to release the first generation of fuel cell powered electric vehicles.  ITM Power is now present in all of these territories and, over the last 12 months, has significantly increased its traction in the vertical market sectors that will become the early adopters of hydrogen technology.

The next few years will, we believe, see the creation of what will become multi-billion dollar global markets and our company is positioned at the heart of these nascent markets - both as a participant and, increasingly, as a partner in the design of regulation, conformity and standards.  The new markets are being led by governments and large multi-national companies that have the resources to invest in new global energy sources.  This means that they are applying the same levels of diligence, investigation and testing that comes with the adoption of any new technology.  As a consequence they are taking the time to ensure that they back the right technology solutions.

For ITM Power the result is that although we have continued to develop our global reputation in the Clean Fuel and Energy Storage sectors, outright sales of our key products must await the completion of the processes referred to above. However, we are closer than ever before to first commercial sales of premium products and to being able to take financial advantage of the relationships we have forged through membership (and leadership) of the grant funded consortia which are defraying our costs to remain leaders in the field of clean energy and energy storage.

Financials

The pre-tax loss for the six months under review remained stable at £3.7m from £3.5m. Total grant funding accounted for in the period was £257k (2011: £269k).

The Group's cash and short-term deposit balances totalled £8.0m at the period end (£9.0m at 31 October 2011 and £6.6m at the last financial year end on 30 April 2012), reflecting both increased levels of activity and the net fundraise of £5.4 million during the period. Interest rates remain depressed and risk remains the key priority in the choice of the financial institutions in which the Group chooses to place its funds. The Group holds over 99% of its funds on deposit with its bankers, NatWest.

The Board is not recommending the payment of a dividend for the period in accordance with our stated dividend policy.

Team

Our management and staff have made substantial progress on developing relationships in our target industries of Energy Storage and Clean Fuel and in creating the valuable, patented technology that is at the core of our innovative products. Although market conditions remain difficult, our team is performing outstandingly in meeting the challenges before them.  On behalf of the Board and shareholders I thank them for their hard work, dedication and ability to meet the tightest of deadlines with often limited resources.

Outlook

Work has continued apace in the development and commercialisation of ITM Power's core technology in the second half of the financial year. We have today announced the vital CE certification of the fuel cell system provided by our exclusive partners Infintium targeting the European materials handling markets.  This means we can now supply a complete turnkey system to distributors and retailers including the fuel cell powerpacks and our renewable hydrogen refueller that we have already demonstrated to many of the UK's leading retailers.  We have high hopes for this product in what could potentially be one of the fastest growing early adoption markets if it mirrors the experience in the US.

Further afield, we have recently appointed an experienced representative for the Company, Robert Rose,   who will support ITM's new US subsidiary from his base in Washington, DC.  We are pursuing several opportunities in the U.S.  The most immediate is a tender to supply green hydrogen refuelling stations for the near term future deployment of fuel cell powered vehicles.  This latest solicitation from the California Energy Commission in 2013 is worth some US$29 million.

Bob has been involved in the fuel cell industry for more than 20 years, and founded the U.S. fuel cell trade association. Previously Bob served in senior communications and policy positions in the U.S. government, and as an advisor to non-profit organisations, the private sector and state and regional organisations in California and elsewhere.  Bob has been a member of the U.S. Secretary of Energy's Hydrogen and Fuel Cells Technical Advisory Committee since 2007.  He has just been appointed to a committee advising the U.S. Secretary of Commerce on energy issues.  Our German operations continue to make good progress, both in terms of engaging with the key players in that market and in converting studies and tests of our equipment into commercial sales.  In France too, we are gaining traction and hope to participate in the country's hydrogen infrastructure calls, which include a high level of green hydrogen refuelling stations.

In the UK, we are progressing EcoIsland and the UKH₂Mobility projects with our partners as well as developing products for the potentially large methanation and gas inject markets, both of which could form the basis of business models that could be exported to the rest of the world.  Our fuel cell technology is being further developed and refined and in this second half we will begin the process of reviewing how best to monetise this world leading technology.

More details on all of our projects is contained in the Chief Executive's Review to follow but, in summary, I will close by re-stating our key objective:  we plan to be a leading player in green hydrogen solutions for developing global markets.    Before the end of this financial year, we hope to announce sales and contracts that will demonstrate to shareholders that the path we have taken to build a long term, sustainable business is the right one.

Prof Roger Putnam CBE

Chairman

ITM Power plc

31 January 2013

CEO's REVIEW

Hydrogen's role in renewable energy storage and transport is now internationally recognised and the Group and its products are involved in all of the key geographic and industrial sectors that are driving the hydrogen economy forward. Our product range is now complete, offering solutions in each of our target vertical markets.

Major Infrastructure Projects

The UK H₂Mobility program is progressing well with the first phase report due for publication in early February. Phase two of the program is now progressing and ITM Power will play a full part in taking the project to the next level. The Group has updated the cost structure of its HFuel product that was well received by the industry and showed that our cost structure was already within 2015 EU targets.

In Germany, perhaps the leader in hydrogen energy adoption, the Group has signed an agreement with a utility to investigate the deployment of our electrolyser technology for grid balancing and injecting hydrogen gas into the gas grid. To support this initiative, the Group signed a further agreement with AEG Power Solutions to integrate its power control electronics with the Group's electrolysers.

Product Sales

The Group has maintained its order flow for the modular products with our current order book standing at £358k (2011: £390k). These orders are predominantly from the HPac platform, the larger HFuel sales have not yet fallen into the order book. It is clear that the second half of the Group's financial year is the period during which large corporations and government bodies conclude their significant procurement and the Group is in advanced talks and tender processes with several significant potential customers. The use of our products for energy storage and grid balancing is a key growth area and we are seeing an upward trend in enquiries in this sector while the European automotive programs continue to progress. Our customer base is international. 

To add to our increasingly successful activities in Germany, the Group has appointed representatives in France and North America to ensure that ITM Power is ready to bid for the developing hydrogen infrastructure roll out in those territories.

Following the development of our product sales we anticipate building revenue streams in consultancy services, maintenance, spares sales and hydrogen gas sales.

Fuel Cell Development

We issued an update on our fuel cell membrane performance in December 2012. In the laboratory, the membrane is outperforming all industry standard tests including longevity tests that are a key indicator for durability.  Together with other measures such as low hydrogen crossover and power density, this gives a significant positive indication of the commercial prospects for the commercialisation of our technology. We continue to monitor the routes to monetisation for the membrane.

Grant Funding and Partnerships

The Group has made great strides in further developing its blue chip partnerships through grant funded projects including fuel cell development, high specification refuellers, methanation and energy storage. New grant project awards of £3.05m is a significant achievement and does contain significant revenues attributed to product delivery.

The Future

Hydrogen markets across the world are starting to accelerate with the early adoption sectors showing significant signs of growth. Governments are now addressing the problems of energy storage and energy security (as forecast by the Boston Consulting Group) as renewable energy generation becomes an increasing proportion of the energy mix. Hydrogen as an energy storage medium is now moving up government agenda.

Hydrogen infrastructure roll out is also starting to accelerate and we have ensured that our representation is in the right place at the right time. California will be the next market to accelerate and we have established ITM Power, Inc. to be the vehicle for our participation in the tendering process for the supply of our electrolysers into the Californian hydrogen refuelling solicitation process.

The remainder of our current financial year to 30 April 2013, and the next, look set to be an exciting period for the commercialisation of ITM Power's products and technology.

Dr Graham Cooley

Chief Executive Officer

ITM Power plc

31 January 2013

CONSOLIDATED INCOME STATEMENT (UNAUDITED) Results for the six months ended 31 October 2012
			Six months ended 31 October 2012 (unaudited) £'000		Six months ended 31 October 2011 (unaudited) £'000		Year ended 30 April 2012 (audited) £'000
Revenue			30		40		480
Cost of sales			(62)		(14)		(297)
Gross (loss) profit			(32)		26		183
Operating costs
- Research and development			(2,404)		(2,355)		(4,745)
- Prototype production and engineering			(476)		(533)		(992)
- Sales and marketing			(324)		(200)		(477)
- Administration			(835)		(741)		(1,472)
Other operating income - grant income			257		269		985
Loss from operations			(3,814)		(3,534)		(6,518)
Investment revenues			148		39		45
Loss before tax			(3,666)		(3,495)		(6,473)
Tax			100		270		230
Loss for the period			(3,566)		(3,225)		(6,243)
Loss per share
Basic and diluted			(3.1p)		(2.9p)		(5.6p)
Weighted average number of shares			116,578,675		110,639,539		110,772,642

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.

The loss for the period is equal to the total comprehensive expense for the period.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

Results for the six months ended 31 October 2012

	Called up share capital £'000	Share premium account £'000	Merger reserve £'000	Retained loss £'000	Oct 2012 Total £'000	Oct 2011 Total £'000	Apr 2012 Total £'000
At 1 May 2012/1 May 2011	5,549	36,413	(1,973)	(32,284)	7,705	13,764	13,764
Issue of share capital	582	4,853	-	-	5,435	17	101
Credit to equity for equity settled share based payments	-	-	-	150	150	50	83
Retained loss, being total comprehensive expense for the period	-	-	-	(3,566)	(3,566)	(3,225)	(6,243)
At 31 October 2012 (unaudited) /31 October 2011(unaudited) / 30 April 2012	6,131	41,266	(1,973)	(35,700)	9,724	10,606	7,705

CONSOLIDATED BALANCE SHEET (UNAUDITED)

As at 31 October 2012

	Note		As at 31 October 2012 (unaudited) £'000		As at 31 October 2011 (unaudited) £'000		As at 30 April 2012 (audited) £'000
NON CURRENT ASSETS
Property, plant and equipment			1,223		1,230		1,232
CURRENT ASSETS
Inventories			53		-		12
Trade and other receivables			1,215		1,274		891
Investments - short term deposits			4,000		6,250		5,000
Cash and cash equivalents			4,048		2,707		1,560
TOTAL CURRENT ASSETS			9,316		10,231		7,463
CURRENT LIABILITIES
Trade and other payables			(815)		(855)		(990)
NET CURRENT ASSETS			8,501		9,376		6,473
NET ASSETS			9,724		10,606		7,705
EQUITY
Called up share capital	3		6,131		5,532		5,549
Share premium account			41,266		36,346		36,413
Merger reserve			(1,973)		(1,973)		(1,973)
Retained loss			(35,700)		(29,299)		(32,284)
TOTAL EQUITY			9,724		10,606		7,705

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

Results for the six months ended 31 October 2012

		Six months ended 31 October 2012 (unaudited) £'000		Six months ended 31 October  2011 (unaudited) £'000		Year ended 30 April 2012 (audited) £'000
Loss from operations		(3,814)		(3,534)		(6,518)
Adjustments:
Depreciation of property, plant and equipment		282		350		669
Profit on disposal of property, plant and equipment		-		-		(6)
Share-based payment expense		150		50		83
Operating cash flows before movements in working capital		(3,382)		(3,134)		(5,772)
Increase in inventories		(41)		-		(12)
(Increase) decrease in receivables		(219)		20		(243)
(Decrease) increase in payables		(175)		(110)		14
Cash used in operations		(3,817)		(3,224)		(6,013)
Income taxes received		-		120		737
Net cash used in operating activities		(3,817)		(3,104)		(5,276)
Investing activities
Interest received		143		39		45
Proceeds on disposal of property, plant and equipment		-		-		7
Purchases of property, plant and equipment		(273)		(155)		(476)
Decrease (increase) in short term deposits		1,000		(6,250)		(5,000)
Net cash from (used in) investing activities		870		(6,366)		(5,424)
Financing activities
Proceeds from issue of shares		5,435		18		101
Net cash from financing activities		5,435		18		101
Increase (decrease) in cash and cash equivalents		2,488		(9,452)		(10,599)
Cash and cash equivalents at the beginning of the period		1,560		12,159		12,159
Cash and cash equivalents at the end of the period		4,048		2,707		1,560

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 2012 and 31 October 2011 has not been audited.  The information relating to the year ended 30 April 2012 has been extracted from the Group's published financial statements for that year, which contain an unqualified audit report, does not draw attention to any matters of emphasis, and did not contain statements under section 498(2) and 498(3) of the Companies Act 2006 and which have 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 Group's cash and short term investments relative to the foreseeable operating losses, for a period of not less than 12 months from the date of this report.

2.         Significant accounting policies

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

The principal accounting policies adopted by the Group are as applied in the Group's latest annual audited financial statements.

3.         Called up share capital

		As at 31 October 2012 (unaudited)  £'000	As at 31 October 2011 (unaudited) £'000	As at 30 April 2012 (audited) £'000
Called up, allotted and fully paid:
122,629,880 ordinary shares of 5p each
(Oct 2011: 110,646,314 Apr 2012: 110,972,299)		6,131	5,532	5,549

INDEPENDENT REVIEW REPORT TO ITM POWER PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2012 which comprises the income statement, the balance sheet, the statement of changes in equity, the cash flow statement and related notes 1-3. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review 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, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with the accounting policies the group intends to use in preparing its next annual financial statements.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 October 2012 is not prepared, in all material respects, in accordance with the AIM Rules of the London Stock Exchange.

Deloitte LLP

Chartered Accountants and Statutory Auditor

Cambridge, UK

30 January 2013

 

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