Half Yearly Report

RNS Number : 5398D

ITM Power PLC

29 January 2015

 



29 January 2015

ITM Power plc

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

Half Year Results for the Period ended 31 October 2014

ITM Power (AIM: ITM), the energy storage and clean fuel company, announces its interim results for the six month period ended31 October 2014. The Company currently has £8.76m of projects under contract and a further £2.61m of contracts in final stages of negotiation.

Summary:

Commercial Progress

·     £5.59m of projects under contract at the period end

·     Second US refuelling station award from the California Energy Commission for US$2.125m (£1.417m)

Post period end 

Whilst noting that the Company is still at a developmental stage, trading has been slower than anticipated, meaning results for the full year will be substantially lower than market expectations, however:

·     A further £3.17m of products under contract secured making a current total of £8.76m under contract 

·     A further £2.61m of contracts in final stages of negotiation

·     £0.90m approved project funding for the HELES project

·     Sales order received for a Power-to-Gas system to RWE in Germany

·     Second gas network optimisation contract with AMEC and National Grid

Key Financial Results for the six months ended 31 October 2014

·     Total revenue and grant funding of £1.34m (2013: £1.61m), comprising:

o  Revenue £0.52m (2013: £0.71m)

o  Grant income £0.82m (2013: £0.90m)

·     Increase in fixed assets to £1.51m from £1.42m

·     Loss from operations £3.69 (2013: £3.29m)

·     Reduced cash burn* of £3.09m (2013: £4.15m) due to the receipt of upfront payments on contracts

·     Cash balance of £6.67m at period end (2013: £3.70m)

*Cash burn is a non-statutory measure and is defined underneath the Cash Flow Statement

Corporate Development

·     Advanced discussions with a potential strategic industry investor

·     Sir Roger Bone joins the board as a Non-Executive Director

·     Stephen Jones MD of ITM Power Inc. relocates to open California office

·     Andy Allen appointed as CFO and Company Secretary

Graham Cooley, CEO, commented: "Whilst trading has been more difficult than anticipated this has still been a very productive period for us. ITM Power has now identified and optimised its key products, deployed reference plant in its key markets and is now selling large scale plant to major international companies."

Roger Putnam, Chairman, added:"Our staff, through their hard work and dedication have transformed ITM Power into an internationally respected company with a growing order book in two massive, rapidly emerging global markets. We look forward to continuing the Company's progress in the coming year."

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

ITM Power plc Graham Cooley	0114 244 5111
Zeus Capital John Treacy / Dan Bate / John Goold / Alex Davies	020 7533 7727
Tavistock Communications Simon Hudson / James Collins	020 7920 3150

About ITM Power plc

ITM Power plc was admitted to the AIM market of the London Stock Exchange in 2004 and raised its initial funding of £10m gross in its IPO.  Further funding rounds of £28.5m in 2006, £5.4m in 2012, £2m in 2013 and £10m in 2014 have been completed. The Company has now made the transition from a research and development company to a plant manufacturer and installer.  The Company has both a strong base of intellectual property and engineering expertise for providing complete hydrogen solutions. The Company currently has £8.737m of projects under contract and a further £2.496m of contracts in final stages of negotiation.

CHAIRMAN'S STATEMENT

The efficient use of renewables is a global issue and this is reflected in the Company's activities and significant commercial progress during the period under review.  Our focus continues to be on large scale plant for Power-to-Gas (P2G) and Hydrogen Refuelling and I am pleased to report that ITM Power's traction in world markets continues to accelerate.  We have become a global leader in the rapidly emerging energy storage and clean fuel markets.  A detailed review of our activities in these two markets is set out in the CEO's Review.

Financials

Revenues for the period under review were £0.52m (2012: £0.71m), primarily reflecting the continuing construction of the unit scheduled to be deployed in Chino, California. The pre-tax loss for the period was £3.69m (2013: £3.29m), which reflects the fact that a lot of the work done in the period was on the standardisation of our products and the development of the manufacturing facility to further satisfy demand for electrolytic hydrogen in our two primary markets.

More importantly, at this stage of our development, cash burn reduced by 20.5% as a result of receiving money upfront for current projects.  Total grant funding accounted for in the period was £0.82m (2013: £0.90m). Cash and short-term deposits at the period end were £6.67m (£9.76m at 30 April 2014 and £3.70m at 31 October 2013) reflecting investment in the business and the roll-out of key projects.  The board is not recommending the payment of a dividend for the period in accordance with our stated policy.

Trading and Outlook

Whilst the Board believes that the overall long term outlook for the Company remains positive, trading has been slower than anticipated and we therefore expect our results for the full year to be substantially lower than current market expectations. This is due in part to slow decision making by large international companies with which ITM Power are engaged.   

As a consequence of the above and increased internal investment the cash position of the Company has been adversely affected and in seeking to address this, the directors are in advanced discussions with a potential strategic industry investor in relation to a significant investment for a material equity stake in the business. The Company hopes to conclude this investment in the near term at which time it will update the market accordingly. As with any negotiations there is no certainty that this investment will conclude. On the basis of this, the Directors have a reasonable expectation that the Company and Group are a going concern and have therefore prepared these interim statements on a going concern basis. Further details are provided in note 1 to these interim statements.

In terms of our trading activities, we are pleased to report that there has been good progress for the Company in the period and a strong developing pipeline. Our first reference plant in the Power-to-Gas market, in Frankfurt for the Thüga Group, has been in operation for over a year now.  The demonstration of a full scale installation in operation, and generating vital performance metrics, is creating a great deal of interest from potential partners and customers.  The market in Germany shows signs of significant growth and, with the order for a P2G unit from RWE, the momentum has led to an increased ITM Power presence in Germany which we will look to build on further in 2015.

In refuelling, projects in which ITM Power is participating, notably the Island Hydrogen and HyFive projects, are ramping up.  The second Island Hydrogen unit will be deployed in Q1 2015 and the HyFive units have received approval for two of the sites in London where they will be located. We will be delivering our first contract in California and will use this success to broaden our involvement in the North American market as a whole. 

Team

I am delighted to welcome Sir Roger Bone to the board as a Non-Executive Director. Roger recently stepped down as President of Boeing UK and brings a wealth of experience. I would also like to congratulate Andy Allen on his appointment as CFO and Company Secretary, having performed the role on an interim basis since March 2014. Finally I would like to wish Stephen Jones every success as he moves with his family to California to take up the post of Managing Director of ITM Power Inc and to open our office in Irvine, California.

In order to deliver on our ambition to shape a renewable hydrogen future ITM Power continues to develop an international presence with top quality scientists, engineers, managers and support staff. However, in this commercial development phase, we continue to monitor carefully the resources of the Company and this means that we ask a lot of our people. Once again, I would like to record the Board's appreciation of their effort and hard work to execute our strategy to grow the Company.

Shareholders should note that we continue to aggressively pursue opportunities to reinforce our position as a leader in energy storage and clean fuel internationally and to turn that position into increased revenues for the Company as our markets mature and become mainstream. 

Prof Roger Putnam CBE

Chairman

29 January 2015

CEO's REVIEW

The global hydrogen industry continues to develop and ITM Power, as an entrenched participant, has continued to access key opportunities.  Of particular note over the last twelve months is the rapidly accelerating interest in using our electrolyser technology to convert surplus or redundant renewable energy into hydrogen and then injecting it into national and regional gas grids.  This Power-to-Gas product gives utilities an additional method of balancing the grid for fluctuations in electricity demand and provides additional renewable energy into gas grids as renewable hydrogen gas.

POWER TO GAS

Power-to-Gas Large Stack Platform

As the Company engages with demand for ever larger systems, ITM Power has been developing a higher capacity PEM electrolyser cell and stack module capable of absorbing 0.35MW of electrical power. The stack is a significant strand in ITM Power's development activity and will extend the Company's reach to higher capacity energy storage applications. The main advantages to the stack module are the ability to fit more electrolysis into a smaller footprint (an important consideration when addressing multi MW installations) and enabling plant simplification through the use of fewer stacks in products. Electrolyser systems incorporating the 0.35MW rapid response, self-pressurising stack will be on sale for the first time at the Hannover Messe in April 2015 where a 1MW module will be on display. 

Power-to-Gas in Germany

Following on from the successful Thüga Power-to-Gas project in Frankfurt, the first PEM electrolyser to inject hydrogen into the German gas distribution network, engagement with power and gas utilities in Germany has been very significant. The electrolyser system has undergone an extensive testing programme and is performing well. The Visitors' Centre built on the Frankfurt site by the Thüga group has been very busy. Since the official inauguration of the plant (attended by the State of Hessen's Economics Minister, Tarek Al-Wazir and his counterpart from the neighbouring state of Rhineland Palatinate, Eveline Lemke) on 7 May 2014, the plant has welcomed a diverse set of visitors. Alongside a large number of interested domestic visitors, a significant number of foreign visitors have also been to inspect the plant.

Power-to-Gas in North America

In December 2010, the California Public Utilities Commission (CPUC) set policy for California utilities and load-serving entities to consider the procurement of viable and cost-effective energy storage systems. In October 2013, the CPUC, to support this policy, adopted an energy storage procurement framework and established an energy storage target of 1.3 GW for PG&E, Edison, and SDG&E (the three principal utilities in California) by 2020, with installations required no later than the end of 2024. P2G is one of the energy storage technologies that have been formally registered with the CPUC by ITM Power through its association, the California Hydrogen Business Council.

ITM Power has become a leader for the introduction of P2G technology in the USA and Canada, where the technology was largely unknown a year ago. ITM Power, through a dedicated programme of education and outreach, is now actively pursuing numerous opportunities. Initially targeting California's mandated deployment of 1.3GW of energy storage and the Province of Ontario's procurement directive, the Company is in discussions with a number of potential partners to bring to bear its European experience and to deploy products in the USA and Canada.

HYDROGEN REFUELLING

Island Hydrogen; UK

The project formerly known as EcoIsland will see the deployment of two hydrogen refuelling stations incorporating on-site electrolysis systems. The first will be used to refuel road vehicles including the Hyundai ix35, Microcab and Ford Transit vans, while the second will be used to refuel a hydrogen powered boat. The collaborative project is supported by Innovate UK, the UK's innovation agency. The ITM Power led project brings together IBM, Vodafone, SSE, Cheetah Marine, Toshiba, Arcola Energy, NPL, University of Nottingham and University of South Wales.

The vehicle refueller will now be located on the Advanced Manufacturing Park in Rotherham. This decision was taken in agreement with the project consortium to ensure maximum utilisation for the station.  The site is off the M1 motorway, close to the junction with the M18, and will make an important contribution to the UK hydrogen infrastructure roll out. Planning permission for the site has been granted and we look forward to completion of the commissioning process which is now underway. ITM Power already has a presence on the site and is commissioning a wind hydrogen fuel project partially funded by Rotherham Metropolitan Borough Council which will see a Hyundai ix35 fuel cell vehicle deployed in the South Yorkshire region.

The electrolyser build programme has gone to schedule and the system has achieved a CE mark and successfully completed Factory Acceptance Testing.  The measured system efficiency of the electrolyser system is <55kWhr/kg (>71%) which surpasses the target set by the Fuel Cell and Hydrogen Joint Undertaking (FCH JU) for 2017. This project represents the first deployment of the Company's standardised HGas180 platform, capable of generating 80kg of hydrogen per day, the template for further refuelling station deployments in both the UK and the rest of Europe.

HyFive; UK

Hydrogen For Innovative Vehicles (HyFIVE) is an ambitious European project funded by the FCH JU under the EU Framework 7 programme, and comprises 15 Partners who will deploy 110 Fuel Cell Electric Vehicles (FCEVs) manufactured by five global automotive companies across three European cluster locations. ITM Power is providing three new hydrogen refuelling stations to London for deployment in Spring 2015. Each will include both on-site electrolyser systems and 700 bar refuelling capacity. Siting activities are in progress both for HyFIVE refuelling equipment and potential additional roll out programmes. We now have planning permission for two sites in London, with further applications having been submitted for the third site. 

The electrolyser build programme is underway with functional and compliance testing of the first electrolyser system due for commissioning by March 2015.

Hydrogen Mobility Programmes

The UK H2Mobility and Mobilité Hydrogène France consortia have defined deployment scenarios for fuel cell electric vehicles (FCEVs) and hydrogen refuelling stations (HRS), which identified costs, emissions reductions and benefits to society. The total number of HRS required by just these two countries between 2015 and 2030 amounts to over 1,700. The UK Government is expected to make a statement shortly, outlining how initial funds will be made available to assist deployment of hydrogen infrastructure to support the launch of FCEVs over the coming months.

H2USA continues to make progress and gather pace. ITM Power Inc. is a member of the Hydrogen Fuelling Station working group and is contributing to the technical and commercial aspects of hydrogen stations nationwide in the US.

The California Energy Commission (CEC) continues to fund the roll out of hydrogen stations across the state. The next phase of funding will be publicly released within the next few months. The Company continues to engage with a number of potential partners, land owners, vehicle OEMs and end users to secure further stations in California and add to its station network.  The opening of an ITM Power, Inc. office in Irvine will undoubtedly assist in this process.

Chino and Riverside Refuelling Stations

The Company is working on the delivery of its high pressure electrolyser to Chino, where it will be used in conjunction with a 700 bar refueller, to be sited at Hyundai's Technical Centre in California. This is a particularly important project for ITM Power as it will be its first deployment in the target state of California while comprising elevated pressure electrolyser technology. The project, which was funded by the California Energy Commission as part of the Californian Hydrogen Infrastructure Initiative, has required ITM Power to go through a different compliance route from that required for deployment in Europe, enabling the Company to demonstrate compliance in both US and European markets. The electrolyser system is in the final stages of functional testing prior to shipping to site.

The Company has now started its second refuelling project in California, this time as the lead organisation, to supply a 100kg per day station. Sub-contracts with key partners and the land owner are in the final stages of negotiation. The station will be sited at the City of Riverside's fleet site and is due to be operational by October 2015. This refuelling station will be open to the public as well as selected industrial partners operating heavy duty fuel cell powered vehicles.

ITM Power will be pursuing ongoing maintenance contracts for the electrolyser systems in Chino and Riverside, once deployed, recognising this as an important and valuable long term revenue stream.

Dr Graham Cooley

Chief Executive Officer

29 January 2015

CONSOLIDATED INCOME STATEMENT (UNAUDITED) Results for the six months ended 31 October 2014
			Six months ended 31 October 2014 (unaudited) £'000		Six months ended 31 October 2013 (unaudited) £'000		Year ended 30 April 2014 (audited) £'000
Revenue			521		711		1,127
Cost of sales			(160)		(1,412)		(2,026)
Gross profit/(loss)			361		(701)		(899)
Operating costs
- Research and development			(3,581)		(1,806)		(3,979)
- Prototype production and engineering			(148)		(519)		(2,171)
- Sales and marketing			(242)		(332)		(695)
- Administration			(902)		(832)		(1,604)
Other operating income - grant income			823		901		1,370
Loss from operations			(3,689)		(3,289)		(7,978)
Investment revenues			11		20		25
Loss before tax			(3,678)		(3,269)		(7,953)
Tax			93		-		164
Loss for the period			(3,585)		(3,269)		(7,789)
Loss per share
Basic and diluted			(2.2p)		(2.6p)		(5.9p)
Weighted average number of shares			161,864,536		124,796,785		132,489,013

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 2014

	Called up share capital £'000	Share premium account £'000	Merger reserve £'000	Retained loss £'000	Oct 2014 Total £'000	Oct 2013 Total £'000	Apr 2014 Total £'000
At 1 May 2014/ 1 May 2013	8,093	50,703	(1,973)	(45,823)	11,000	7,379	7,379
Issue of share capital	-	-	-	-	-	1,906	11,388
Credit to equity for equity settled share based payments	-	-	-	8	8	14	22
Retained loss, being total comprehensive expense for the period	-	-	-	(3,585)	(3,585)	(3,269)	(7,789)
At 31 October 2014 (unaudited) / 31 October 2013 (unaudited) / 30 April 2014	8,093	50,703	(1,973)	(49,400)	7,423	6,030	11,000

CONSOLIDATED BALANCE SHEET (UNAUDITED)

As at 31 October 2014

	Note		As at 31 October 2014 (unaudited) £'000		As at 31 October 2013 (unaudited) £'000		As at 30 April 2014 (audited) £'000
NON CURRENT ASSETS
Property, plant and equipment			1,511		1,421		1,755
CURRENT ASSETS
Inventories			937		543		762
Trade and other receivables			1,229		1,497		1,206
Investments - short term deposits			-		1,000		-
Cash and cash equivalents			6,674		2,699		9,763
TOTAL CURRENT ASSETS			8,840		5,739		11,731
CURRENT LIABILITIES
Trade and other payables			(2,840)		(919)		(2,184)
Provisions			(88)		(211)		(302)
NET CURRENT ASSETS			5,912		4,609		9,245
NET ASSETS			7,423		6,030		11,000
EQUITY
Called up share capital	3		8,093		6,430		8,093
Share premium account			50,703		42,884		50,703
Merger reserve			(1,973)		(1,973)		(1,973)
Retained loss			(49,400)		(41,311)		(45,823)
TOTAL EQUITY			7,423		6,030		11,000

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

Results for the six months ended 31 October 2014

	Six months ended 31 October 2014 (unaudited) £'000		Six months ended 31 October  2013 (unaudited) £'000		Year ended 30 April 2014 (audited) £'000
Loss from operations	(3,689)		(3,289)		(7,978)
Adjustments:
Depreciation of property, plant and equipment	314		305		641
Share-based payment expense	8		14		22
Operating cash flows before movements in working capital	(3,367)		(2,970)		(7,315)
Increase in inventories	(175)		(350)		(567)
(Increase)/decrease in receivables	(123)		15		443
Increase/(decrease) in payables	656		(792)		473
(Decrease)/increase in provisions	(214)		174		265
Cash used in operations	(3,223)		(3,923)		(6,701)
Income taxes received	193		-		-
Net cash used in operating activities	(3,030)		(3,923)		(6,701)
Investing activities
Interest received	11		36		62
Purchases of property, plant and equipment	(70)		(263)		(929)
Decrease in short term deposits	-		3,000		4,000
Net cash (used in)/from investing activities	(59)		2,773		3,133
Financing activities
Proceeds from issue of shares	-		1,906		11,388
Net cash from financing activities	-		1,906		11,388
(Decrease)/increase in cash and cash equivalents	(3,089)		756		7,820
Cash and cash equivalents at the beginning of the period	9,763		1,943		1,943
Cash and cash equivalents at the end of the period	6,674		2,699		9,763

Cash Burn

Cash burn is a measure used by key management personnel to monitor the performance of the business.

(Decrease)/increase in Cash and Cash equivalents per the cash flow statement	(3,089)		756		7,820
Less movements in short term deposits	-		(3,000)		(4,000)
Less share issue proceeds	-		(1,906)		(11,388)
Cash Burn	(3,089)		(4,150)		(7,568)

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 2014 and 31 October 2013 has not been audited.  The information relating to the year ended 30 April 2014 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.

Going concern

The Directors have prepared a cash flow forecast (the "Forecast") for the period ending 31 January 2016 (the "Forecast Period"), which shows that the company will need to raise additional financing within the Forecast Period.

The directors are in advanced discussions with a potential strategic industry investor in relation to a significant investment for a material equity stake in the business. The Company hopes to conclude this investment in the near term at which time it will update the market accordingly. As with any negotiations there is no certainty that this investment will conclude. If successful, this cash investment will enable the company to continue to meet its liabilities as they fall due, for a period of at least twelve months from the date of approval of these interim statements. However, the ability to complete this fund raise constitutes a material uncertainty.

Notwithstanding this material uncertainty, the Directors have a reasonable expectation that the Company and Group are a going concern and have therefore prepared these interim statements on a going concern basis.

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 2014 (unaudited)  £'000	As at 31 October 2013 (unaudited) £'000	As at 30 April 2014 (audited) £'000
Called up, allotted and fully paid:
161,864,536  ordinary shares of 5p each
(Oct 2013: 128,604,872 Apr 2014: 161,864,536)		8,093	6,430	8,093

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 2014 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 it 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 31 October 2014 is not prepared, in all material respects, in accordance with the AIM Rules of the London Stock Exchange.

Emphasis of Matter

In arriving at our review conclusion, which is not qualified, we have considered the adequacy of the disclosures made in note 1 to the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2014 concerning ITM Power plc's ability to continue as a going concern should ITM not finalise its planned additional fund raising. These conditions, along with the other matters explained in note 1 to the interim statements, indicate the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern.

Deloitte LLP

Chartered Accountants and Statutory Auditor

Leeds, UK

29 January 2015

 

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