Interim Results

ITM Power PLC
24 January 2005



24 January 2005


                                 ITM POWER PLC
                         ('ITM Power' or 'the Company')

            Interim Results for the six months ended 31 October 2004

Highlights:

   •Admission to AIM on 11 June 2004

   •Remaining on track to achieve the milestones laid out in the prospectus

   •Operating within the planned expenditure budget: operating loss after tax
    £0.5million compared to budgeted £1.2million

   •Significant cost reduction achieved by independent testing of the Mk III
    electrolyser

   •Patent portfolio strengthened

   •Range of interests available to ITM significantly extended

       •Liquid fuel

       •Alkaline based materials

   •Appointment of Lord Walker of Worcester to the Board

   •New R&D premises opened in Sheffield

Stephen Massey, Chairman commented: 'Since beginning operations as a public
company we have made good progress in expanding research and development,
increasing the patent portfolio and developing exciting new prototype devices to
demonstrate to potential licensees. This has been accomplished while maintaining
tight control over our cash expenditure. We remain on track to achieving the
milestones laid out in the Prospectus.'

For further information please contact:

Jim Heathcote, Chief Executive                 Gemma Chandler or Simon Hudson
ITM Power PLC                                  Tavistock Communications
Tel: [phone]                              Tel: [phone]




Chairman's statement
I am delighted to welcome all new shareholders who have invested in the Company
in recent months, and I am pleased to report on the activities of the Company
during the half year to 31st October 2004.

On 11th June 2004 ITM gained admission to the AIM market of the London Stock
Exchange and became the first UK fuel cell company to successfully float on a
public capital market. The Company raised £10 million before costs, and this
additional equity capital is enabling the Company to expand research and
development, increase the patent portfolio and develop exciting new prototype
devices to demonstrate to potential licensees.


Results
Since beginning operations as a public company we have made good progress in all
these activities while maintaining tight control over our cash expenditure.
During the six months under review we have also managed to defer commitment to
certain expenditure without detriment to our technical progress, thus remaining
on track to achieving the milestones laid out in the Prospectus. As a result we
have operated well within our planned expenditure budget, demonstrated by the
after tax loss of £0.5 million compared with a budgeted £1.2 million.


Energy Overview
The recent worrying rise in oil prices has raised the level of interest in
alternative energy companies. There appears to be growing concern that the
forecast global rise in demand for energy, especially from China, may outstrip
total production capabilities. Increasing attention is focused on the
possibility that we may be close to an historic peak in oil production and that
energy prices on this basis are likely to remain high.

Simultaneously, there is growing international concern that rising carbon
dioxide levels are altering the global climate. The Kyoto Protocol has recently
been ratified by the Russian Federation. Countries that have previously ratified
the Protocol have been trying to reduce emissions of greenhouse gases on a
voluntary basis. They now all have a legally binding obligation to do so from 16
February 2005.

There is now increasing awareness that new sources of pollution free energy must
be found. ITM's focus is to produce affordable materials and efficient
production processes that will contribute to a sustainable, non-polluting energy
economy based on hydrogen.


Review
Our objectives are to build on our scientific and technological capabilities,
and to pursue early commercial revenue opportunities. I am pleased to report
that substantial progress has been made in our technical development programme
and we are on course to achieve the milestones set out in the ITM prospectus
relating to flexible fuel cells, rigid fuel cells and electrolysers. In fact we
have exceeded objectives in a number of areas.

In the last few months we have made a number of significant announcements:

   • Independent costings of our Mk III electrolyser showed significant cost
     reduction compared with Mk II, plus a doubling of power input. The Generics
     Group, an independent scientific consultancy, have estimated that in mass
     production it is possible to achieve $283 per kW. This represented an
     important step forward in our development plan; we believe that
     electrolysers can play a pivotal role in maximising the potential of
     transient renewable power generation systems.


   • We have formulated and produced a range of hydrophilic alkaline solid
     polymer electrolyte materials, which have now been operated in fuel cell
     mode. Alkaline electrochemistry opens the route to new lower cost 
     catalysts, which promise further cost reduction potential and promote 
     improved catalysis.


   • We successfully tested fuel cells that operate using liquid fuels
     introduced directly into the cell. This has significance for small portable
     electronic devices and opens a large field of potential licensees not
     included in our original revenue model. We are grateful to the Department 
     of Trade and Industry for their ongoing support for this programme.


   • We filed three further patent applications covering - photo-electric
     devices; further novel materials for use in fuel cells and electrolysers;
     key technological elements important to the application of our proprietary
     manufacturing process for membrane electrode assembly (MEA) and cell 
     stacks.


Board and Staff
We have strengthened the Board with the appointment of Lord Walker of Worcester,
a former Secretary of State for Energy, who has joined as a non-executive
director. He brings a wealth of business experience together with an extensive
network of worldwide contacts.

We have also completed a successful recruitment process and a further six
scientists have joined our technical team. The new people have integrated well
and in November we moved into larger premises in Sheffield to provide the extra
space needed for the expansion of our activities.

ITM is in a pre-commercial revenue phase and our current corporate goals are
focused on the attainment of technical milestones and the maintenance of tight
financial controls. I am very satisfied with the progress that is being made,
and I would like to take this opportunity to thank all our employees for their
hard work and commitment and our investors for their support.

Stephen Massey
Chairman
24 January 2005




PROFORMA CONSOLIDATED PROFIT AND LOSS ACCOUNT
Results for the six months ended 31 October 2004

                                  Six months       Six months
                                    ended 31         ended 31    Year ended 30
                                October 2004     October 2003       April 2004
                                  (unaudited)      (unaudited)        (audited)
                                           £                £                £

Administrative expenses
- Research and development          (355,368)        (291,753)        (579,893)
- Other                             (374,781)        (140,969)        (281,543)
                                    -------------------------------------------

                                    (730,149)        (432,722)        (861,436)
Other operating income                30,000           72,757          210,049 
                                    -------------------------------------------

Operating loss                      (700,149)        (359,965)        (651,387)

Interest receivable and
  similar income                     161,441            7,576           12,366 
                                    -------------------------------------------

Loss on ordinary activities
before taxation                     (538,708)        (352,389)        (639,021)

Tax on loss on ordinary
  activities                          24,000           26,000           43,579 
                                    -------------------------------------------

Loss on ordinary activities
  after taxation,being retained
  loss for the financial period     (514,708)        (326,389)        (595,442)
                                    ===========================================

Loss per share
Basic and diluted                      (0.6p)           (0.5p)           (0.8p)
                                    ===========================================

There are no recognised gains or losses for the current financial period and
preceding financial periods other than as stated in the profit and loss account.




PROFORMA CONSOLIDATED BALANCE SHEET
Results for the six months ended 31 October 2004

                                    As at 31         As at 31         As at 30
                                October 2004     October 2003       April 2004
                                  (unaudited)     (unaudited)         (audited)
                                           £               £                 £
FIXED ASSETS
Tangible assets                      128,223          90,761             75,540
                                   --------------------------------------------

CURRENT ASSETS
Debtors                              371,452         131,618            189,984
Investments -short term
  deposits                         8,601,308         390,211            275,476
Cash at bank and in hand              40,177          23,508                526
                                   --------------------------------------------
                                   9,012,937         545,337            465,986
                                   --------------------------------------------

CREDITORS:amounts falling 
  due within one year               (182,630)       (100,369)          (194,850)
                                   --------------------------------------------

NET CURRENT ASSETS                 8,830,307         444,968            271,136
                                   --------------------------------------------

TOTAL ASSETS LESS CURRENT
  LIABILITIES, BEING NET ASSETS    8,958,530         535,729            346,676
                                   ============================================

CAPITAL AND RESERVES
Called up share capital            4,593,712       3,500,000          3,570,000
Share premium account              8,102,850               -                  -
Merger reserve                    (1,972,820)     (1,982,820)        (1,972,820)
Profit and loss account           (1,765,212)       (981,451)        (1,250,504)
                                  ----------------------------------------------

EQUITY SHAREHOLDERS' FUNDS         8,958,530         535,729            346,676
                                   ============================================




PROFORMA CONSOLIDATED CASH FLOW STATEMENT
Results for six months ended 31 October 2004

                                  Six months      Six months
                                    ended 31        ended 31      Year ended 30
                                October 2004    October 2003         April 2004
                                  (unaudited)     (unaudited)          (audited)
                                           £               £                  £

Net cash outflow from
  operations                        (692,904)       (274,090)          (653,876)
                                   ---------------------------------------------

Returns on investments and 
  servicing of finance Interest
  received                            55,233           7,576             12,366
                                   ---------------------------------------------

Taxation Research and
  development tax credit                   -           7,869             82,460
                                   ---------------------------------------------

Capital expenditure and financial
  investment Purchase of tangible 
  fixed assets                       (38,289)         (4,280)            (6,711)
                                   ---------------------------------------------

Net cash outflow before
  management of liquid
  resources and financing            (675,960)      (262,925)          (565,761)
                                   --------------------------------------------

Management of liquid resources
  Cash (placed)withdrawn from
  term deposits                    (8,325,832)       285,231            399,966
                                   --------------------------------------------

Financing Issue of
  ordinary share capital (net
  of expenses)                      9,126,562              -             80,000
                                   --------------------------------------------

Increase (decrease) in cash           124,770         22,306            (85,795)
                                   ============================================




1. Corporate restructuring
   During the period the Group carried out a corporate restructuring consisting
   of the introduction of a new holding company incorporated on 1 March 2004 
   under the name Quayshelfco 1070 PLC. On 4 May 2004, its name was changed to 
   ITM Power Plc. On 29 April 2004 ITM Power Plc acquired the entire share 
   capital of ITM Fuel Cells Limited in exchange for the issue of shares to 
   shareholders on a seventy for one basis. The restructuring represented a 
   change in the identity of the holding company rather than an acquisition of 
   the business. Consequently, the restructuring has been accounted for using 
   merger accounting principles. Therefore, although ITM Power Plc did not 
   become the parent company of the Group until 29 April 2004, the Group 
   financial information is presented as if the companies had always been part 
   of the same group. In accordance with Sections 131 and 133 of the Companies 
   Act 1985, ITM Power Plc has taken no account of any premium on the shares 
   issued to acquire ITM Fuel Cells Limited and has recorded the cost of the 
   investment at the nominal value of the shares issued. The resulting 
   difference on consolidation has been debited to a merger reserve.

2. Loss per share
   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. The calculation is based on information in the table 
   shown below.

                                   Six months     Six months 
                                     ended 31       ended 31         Year ended
                                      October        October            30 Apri
                                         2004           2003               2004
                                   (unaudited)    (unaudited)          (audited)
                                            £              £                  £

Loss (£)                             (514,708)      (326,389)          (595,442)

Weighted average number
  of shares                        87,253,433     70,000,000         70,176,438
  


3. Reserves and reconciliation of movement in shareholders'  funds

                                Called up        Share      Merger       Profit    Shareholders'
                                    share      premium     reserve     and loss           funds
                                  capital      account                  account
                                        £            £           £            £               £

At 1 May 2004                   3,570,000            -  (1,972,820)  (1,250,504)        346,676

Issue of shares                 1,023,712    9,003,388           -           -       10,027,100
Share issue costs                       -     (900,538)          -           -         (900,538)
Retained loss for the period            -            -           -     (514,708)       (514,708)
                                ----------------------------------------------------------------
At 31 October 2004              4,593,712    8,102,850  (1,972,820)  (1,765,212)      8,958,530 
                                ================================================================
  


4. Basis of interim figures
   These interim financials do not constitute statutory financial statements 
   within the meaning of section 240 of the Companies Act 1985. The results for
   the six months ended 31 October 2004 and 31 October 2003 have been extracted
   from the management accounts of ITM Power Plc and ITM Fuels Cells Limited. 
   The accounting policies that have been applied to these interim figures are 
   consistent with those applied in the preceding annual accounts of ITM Fuel 
   Cells Limited. The information relating to the year ended 30 April 2004 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 s237(2) of the Companies Act 1985. A copy of those financial 
   statements has been filed with the Registrar of Companies.



INDEPENDENT REVIEW REPORT TO ITM Power Plc

Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 October 2004 which comprises the profit and loss
account, the balance sheet, the cash flow statement and related notes 1 to 4. 
We have read the other information contained in the interim report and 
considered whether it contains any apparent misstatements or material 
inconsistencies with the financial information.

This report is made solely to the company, in accordance with Bulletin 1999/4
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 interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are also responsible for ensuring that the accounting policies and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.


Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.


Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 October 2004.


Deloitte & Touche LLP
Chartered Accountants
Cambridge
24 January 2005



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