REG - ITM Power PLC - Half-year Report <Origin Href="QuoteRef">ITM.L</Origin>

ITM PowerAnnouncement

29/01/2018 07:05

RNS Number : 1289D
ITM Power PLC
29 January 2018
29 January 2018
ITM Power plc
("ITM Power", "the Group" or the "Company")
Half Year Results for the Period ended 31 October 2017
Significant commercial progress, financial position strengthened by 29.4m working capital fundraise
ITM Power (AIM: ITM), the energy storage and clean fuel company, announces its half year results for the six month period ended 31 October 2017. Comparable figures, where stated, refer to the corresponding period in 2016 unless otherwise indicated.
Commercial Progress:
 As at today, 27.0m (17.0m) of projects under contract and a further 10.4m (Jan-2017: 1.4m) of contracts in the final stages of negotiation constituting a total backlog of 37.4m (Jan-2017: 18.3m), up 103% year on year
 Tender opportunity pipeline has grown steadily and is now over 200m, reflecting strong industrial demand 
 10MW refinery hydrogen project with Shell to build the world's largest PEM electrolyser at the Rhineland refinery, Germany
 World's first tidal-powered hydrogen generated at European Marine Energy Centre (EMEC) in Orkney
 First hydrogen bus route in the Pau region of France
 20 tonne/day (50MW) hydrogen refuelling station designs launched in Las Vegas in September
 A new total of 20 hydrogen fuel contracts 
Financial Highlights:
 Total income of 4.4m (2016: 3.0m), up 47%, comprising:
o Revenue - 1.7m (2016: 0.4m), up 325%
o Grant income plus grants receivable for capital projects - 2.7m (2016: 2.6m), up 4%
 Increase in fixed assets to 5.5m (2016: 3.8m), up 139%
 Loss from operations 2.9m (2016: 2.3m), increased by 26%
 Cash balance of 27.3m at period end (2016: 1.7m)
 Debtors balances of 12.8m (2016: 9.2m), up 39%
Operational Developments:
 New, larger factory premises identified and heads of terms agreed
 Expansion of the manufacturing and after sales support teams
 Creation of Australian subsidiary ITM Power Pty Ltd and appointment of Dr Neil Thompson as MD 
Graham Cooley, CEO, commented: "The six months under review have seen significant advances in all areas of ITM Power's business. The announcement of the deployment of the worlds' largest PEM electrolyser at Shell's Rhineland refinery is a particularly important development seeing ITM Power enter the 10MW product class with a commercial product at scale. The Company's pipeline of deals has more than doubled since last year showing strong and consistent growth in both the refuelling and power-to-gas markets."
Roger Putnam, Chairman, added: "The Board is pleased with the result of the successful equity raise, which secured the working capital the Company needs to underpin the significant progress that has been achieved in growing the order pipeline of commercial sales. Our stronger financial position will help us to continue to strengthen our relationships with a number of major blue-chip companies as we progress our international business. With the establishment of our new company in Australia I welcome Neil Thompson to the development team."
For further information please visit www.itm-power.com or contact:
ITM Power plc
Andy Allen, CFO
+44 (0)114 244 5111
Investec Bank plc (Nominated Adviser and Broker)
Corporate Finance: Jeremy Ellis / Jonathan Wynn
Corporate Broking: Chris Sim / Rob Baker
+44 (0)20 7597 5970
Tavistock (Financial PR and IR)
Simon Hudson / James Collins
+44 (0)20 7920 3150
About ITM Power plc:
ITM Power manufactures integrated hydrogen energy solutions for grid balancing, energy storage and the production of green hydrogen for transport, renewable heat and chemicals. ITM Power was admitted to the AIM market of the London Stock Exchange in 2004. In September 2017 the Company announced the completion of a 29.4m working capital fundraise. The Company signed a forecourt siting agreement with Shell for hydrogen refuelling stations in September 2015 and subsequently a deal to deploy a 10MW electrolyser at Shell's Rhineland refinery. Additional customers include National Grid, RWE, Engie, BOC Linde, Toyota, Honda, Hyundai, Anglo American among others. The Company currently has 27.0m of projects under contract and a further 10.4m of contracts in the final stages of negotiation constituting a total of 37.4m, subject to exchange rate variations.
CHAIRMAN'S STATEMENT
The half year under review and the months since the period end have seen considerable progress made by the Company towards converting interest into tenders, and more importantly, tenders into contracted backlog and commercial sales. Our opportunity pipeline is at a record level, which is more than double the level it was a year ago. The traction developed by ITM Power in global markets has continued to increase as governments and companies worldwide have begun to recognise the attractions of hydrogen, both as a fuel and as an energy storage medium. Our recently announced project with Shell is a significant step into the very large market of decarbonising industrial hydrogen.
The successful equity fund raise of 29.4m to finance a move to enlarged facilities and boost working capital has underpinned the significant progress in the order pipeline. On behalf of the Board, I would like to thank our shareholders for their support.
Financial Results
Revenue recognised for the period under review was 1.7m (2016: 0.4m). This was supplemented by grant income of 1.9m (2016: 1.6m) and 0.8m (2016: 1.0m) of grants receivable for capital projects, which impacts directly on the balance sheet. Due to recognising revenue on a long term contracts basis, , our revenue line depends on the stage of build of projects at the reference date. Effectively, the busier we are on project build, the more weighted we become to the most recent period. After increased staff costs associated with the higher volumes of manufacturing in the period, the loss before tax for the half year was 2.9m (2016: 2.3m).
As a result of the fundraise, cash and short-term deposits at the period end were 27.3m (3.0m at 30 April 2017 and 1.7m at 31 October 2016). Debtor balances increased to 12.8m (2016: 9.2m) reflecting grants for capital projects yet to be received and the balances yet to be paid on projects underway at period end.
The Board is not recommending the payment of a dividend for the period in accordance with our stated policy. 
Team
In October, Peter Hargreaves, a Non-executive director since 2003, notified the Company of his intention to step down from the Board with effect from the half year end. On behalf of his Board colleagues, the staff of ITM Power and all of our shareholders, I would like to thank Peter for his help and support during his 16 year involvement with the Company. We would not be where we are today without him.
I am delighted to welcome Dr Neil Thompson who joins us as the new Managing Director of ITM Power Pty Ltd in Australia. Neil's background includes engineering and commercial roles in the clean technology, aerospace and automotive industries across the Americas, Europe and the APAC region.
Once again, the Board would like to record its appreciation of the hard work and fantastic commitment of the Company's staff, without which we would not be in the strong position globally that we are today.
Outlook
The second half of the financial year to end April 2018 looks set to be busier than ever when we will be beginning the process relocating to new manufacturing premises in the South Yorkshire region which will give us the additional capacity necessary to manufacture large scale electrolysers of 10MW and beyond. In addition the ability to operate under one roof is expected to provide important operational and cost synergies.
Our relationship with key blue-chip partners such as Shell, Toyota, National Grid, BOC Linde, RWE and Engie continue to strengthen, leading to an increasing number of significant opportunities. Our business is now global and we have new projects in France and Germany and the establishment of our new company in Australia should provide a strong footprint to generate further opportunities in the APAC region.
Hydrogen technology is now receiving the attention it deserves in industrial processes, energy storage and refuelling. The second half is set to be very exciting, with ITM Power's products positioned as undoubted leaders in the world's PEM electrolyser markets for green hydrogen. I look forward to reporting to shareholders on the full year outcome in the summer.
Prof Roger Putnam CBE
Chairman
26 January 2018
CEO's Review
The strong growth in the opportunity pipeline reported in these results reflect the hydrogen and energy storage markets' rapid growth worldwide and ITM Power's focus on developing commercial sales. Scale is now key and ITM Power is in a great market position with our larger footprint of compliant reference plant deployed all over the world. ITM Power is at the forefront of a market which is revolutionising air quality, energy storage and the decarbonisation of heavy industry.
Products in Build and Order Backlog
ITM Power continues to steadily process its order book. Today, the Company has work in progress which will constitute over 5MW of installed capacity that is either in build, undergoing factory acceptance testing, is ready for shipment or being commissioned in the field. The order backlog and opportunity pipeline clearly demonstrate a trend towards larger scale. The backlog is also reflective of the Company's focus on commercial sales. In order to accommodate the increased numbers and size of units in production, and the capacity for Factory Acceptance Testing the company is planning to relocation to a larger facility accommodating all functions under one roof.
Technology Progress
ITM Power's technology development team continues its efforts towards lowering product costs, maximising durability and increasing efficiency. At the system level, the Company has used its modular system design effectively to supply customers with equipment optimised for its duty. Using this principle, systems up to 100MW in size have been developed utilising ITM Power's well proven technology. This strategy has enabled the Company to rapidly engage with large scale opportunities and while minimising technical risk. After detailed and lengthy verification processes, ITM Power is now routinely offering electrolyser systems incorporating high current density PEM stacks. This has enabled ITM Power to reduce the number of stacks in any given system without compromising in efficiency or durability.
Industry Developments:
On 13 November the Hydrogen Council published a first-of-a kind study detailing hydrogen's potential to be a key pillar of the energy transition. The study concluded that when deployed at scale, hydrogen could account for almost one-fifth of total final energy consumed by 2050. This would reduce annual CO2 emissions by roughly six gigatons compared to today's levels, and contribute roughly 20% of the abatement required to limit global warming to two degrees Celsius.
Marketing
The Group's marketing efforts remain focused on engagement with multi-national companies that operate within the energy, transport and chemical sectors. Salesforce has become a key tool for the sales and marcomms teams with the industry contacts data base now at over 28,000 contacts. ITM Power attends and presents at many industry specific trade fairs and conferences in the UK, mainland Europe and the United States. A regularly updated list of all the events the company will be attending can be found at http://www.itm-power.com/news-media/events
Outlook
Quotations, sales and the order pipeline are stronger than they have ever been. The traction with customers and partners that ITM Power achieves through its market leading PEM electrolyser technology combined with the additional balance sheet strength following the recent equity fund raising puts the group in a very strong position to deliver its future growth ambitions. The global growth in demand for hydrogen solutions in utility, petrochemical and refuelling markets is also very encouraging. I look forward to reporting on what will be a very active second half to the year, as well as reporting on the development of the opportunity pipeline at the announcement of the full year results.
Dr Graham Cooley
Chief Executive Officer
26 January 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Results for the six months ended 31 October 2017
Six months ended 31 October 2017 (unaudited)
'000
Six months ended 31 October 2016 (unaudited)
'000
Year ended 30 April 2017 (audited)
'000
Revenue
1,739 
405
2,415
Cost of sales
(1,580)
(313)
(1,757)
Gross profit
159
92
658
Operating costs
- Research and development
(957)
(790)
(2,023)
- Prototype production and engineering
(1,586)
(1,614)
(2,615)
- Sales and marketing
(673)
(744)
(1,528)
- Administration
(1,739)
(833)
(2,202)
Other operating income - grant income
1,920
1,616
4,160
Loss from operations
(2,877)
(2,274)
(3,550)
Investment revenues
-
2
- 
Loss before tax
(2,877)
(2,272)
(3,550)
Tax
348
69
(230)
Loss for the period
(2,529)
(2,203)
(3,780)
OTHER TOTAL COMPREHENSIVE INCOME:
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences on foreign operations
134
81
(250)
Total comprehensive loss for the period
(2,395)
(2,122)
(4,030)
Loss per share
Basic and diluted 
(1.0p)
(1.0p)
(1.7p)
Weighted average number of shares
250,613,176
216,892,973
222,513,007
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.
The accompanying notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Results for the six months ended 31 October 2017
Called up share capital
'000
Share premium account
'000
Merger reserve
'000
Foreign Exchange reserve
'000
Retained loss
'000
Total
Equity
'000
At 1 May 2016
10,845
58,151
(1,973)
54
(55,442)
11,635
Loss for the period
-
-
-
-
(2,203)
(2,203)
Other comprehensive income for the period
-
-
-
81
-
81
Total Comprehensive income for the period
-
-
-
81
(2,203)
(2,122)
Issue of share capital
-
-
-
-
-
-
Credit to equity for equity settled share based payments 
-
-
-
-
-
-
At 31 October 2016 (unaudited) 
10,845
58,151
(1,973)
135
(57,645)
9,513
At 1 May 2017
12,531
61,930
(1,973)
(196)
(59,222)
13,070
Loss for the period
-
-
-
-
(2,529)
(2,529)
Other comprehensive income for the period
-
-
-
134
-
134
Total Comprehensive income for the period
-
-
-
134
(2,529)
(2,395)
Issue of share capital
3,669
24,767
-
-
-
28,436
Credit to equity for equity settled share based payments 
-
-
-
-
-
-
At 31 October 2017 (unaudited) 
16,200
86,697
(1,973)
(62)
(61,751)
39,111
The accompanying notes form part of these financial statements.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
31 October 2017
As at 31 October 2017
(unaudited)
'000
As at 31 October 2016
(unaudited)
'000
As at 30 April 2017 (audited)
'000
NON CURRENT ASSETS
Development Costs
330
352
380
Property, plant and equipment
5,137
3,447
4,519
5,467
3,799
4,899
CURRENT ASSETS
Inventories
749
445
760
Trade and other receivables
12,834
9,195
11,082
Cash and cash equivalents
26,190
1,315
1,558
Restricted cash and cash equivalents
1,117
410
1,446
TOTAL CURRENT ASSETS
40,890
11,365
14,846
CURRENT LIABILITIES
Trade and other payables
(6,479)
(5,651)
(6,666)
Provisions
(767)
-
(9)
TOTAL CURRENT LIABILITIES
(7,245)
(5,651)
(6,675)
NET CURRENT ASSETS
33,644
5,714
8,171
NET ASSETS
39,111
9,513
13,070
EQUITY
Called up share capital
16,200
10,845
12,531
Share premium account
86,697
58,151
61,930
Merger reserve
(1,973)
(1,973)
(1,973)
Foreign Exchange Reserve
(62)
131
(196)
Retained loss
(61,751)
(57,645)
(59,222)
TOTAL EQUITY
39,111
9,513
13,070
The accompanying notes form part of these financial statements.
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Results for the six months ended 31 October 2017
Six months ended 31 October 2017 (unaudited)
'000
Six months ended 31 October 2016 (unaudited) '000
Year ended 30 April 2017 (audited)
'000
Loss from operations
(2,877)
(2,274)
(3,550)
Adjustments:
Depreciation of property, plant and equipment
730
415
1,181
Loss on disposal
2
22
22
Fixed asset impairment 
39
-
100
Amortisation
50
-
23
Operating cash flows before movements in working capital
(2,056)
(1,837)
(2,224)
Decrease/ (Increase) in inventories
11
(154)
(469)
(Increase) in receivables
(1,493)
(2,803)
(5,363)
Increase in payables
1,984
3,838
2,747
Increase in provisions
758
-
9
Cash used in operations
(796)
(956) 
(5,300)
Income taxes received
189
252
252
Net cash used in operating activities
(607)
(704) 
(5,048)
Investing activities
Interest received
-
2
-
Purchases of property, plant and equipment
(3,574)
(839)
(647)
Proceeds from sale of plant & equipment
-
3
4
Payments for intangible assets
-
(100)
(151)
Net cash (used in) investing activities
(3,574)
(934)
(1,419)
Financing activities
Proceeds from issue of shares
29,359
-
5,732
Costs associated with fund raise
(921)
-
(267)
Net cash from financing activities
28,438
-
5,465
Increase/ (decrease) in cash and cash equivalents
24,257
(1,638)
(377)
Cash and cash equivalents at the beginning of the period
3,004
3,336
3,336
Effect of foreign exchange rate changes
46
27
45
Cash and cash equivalents at the end of the period
27,307
1,725
3,004
Cash Burn
Cash burn is a measure used by key management personnel to monitor the performance of the business.
Increase/ (Decrease) in Cash and Cash equivalents per the cash flow statement
24,257
(1,638)
(377)
Effect of foreign exchange rates
46
27
45
Less share issue proceeds
(29,359)
-
(5,732)
Cash Burn
(5,056)
(1,611)
(6,064)
The accompanying notes form part of these financial statements.
The condensed interim financial statements were approved by the board of Directors on 26 January 2018
Notes to condensed interim financial statements
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 2015 have been subject to an interim review in accordance with ISRE2410 by the Group's auditors. The financial information for the six months ended 31 October 2017 have not been subject to an interim review. The information relating to the year ended 30 April 2017 has been extracted from the Group's published financial statements for that year, which contain an unqualified audit report that 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 Group's condensed interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union. The principle accounting policies adopted by the group are as applied in the Group's latest annual audited financial statements.
The financial statements have been prepared on the historical cost basis. The principle accounting policies adopted by the Group are as applied in the Group's latest audited financial statements.
Going concern
The Directors have prepared a cash flow forecast (the "Forecast") for the period to 31 January 2018 (the "Forecast Period"). The Forecast includes proceeds from the equity fund raise completed in October 2017 less expenses relating to the fundraise, together with a number of assumptions, including the level of projected sales and grant income, the timing of which is inherently uncertain. 
The Directors have a reasonable expectation that the Company and Group can continue to meet their liabilities as they fall due, for a period of not less than twelve months from the date of approval of this condensed set of financial statements. 
Accordingly, the financial statements have been prepared on a going concern basis.
2. Revenue, other operating income and Investment Income
In 2017, the following accounted for more than 10% of total revenue (2016: no single customer contract):
Customer A
456,672
Customer B
438,572
Customer C
232,915
Customer D
278,229
An analysis of the Group's revenue is a follows:
2017
'000
2016
'000
Continuing operations 
Revenue from construction contracts
1,522
213
Consulting services
99
157
Maintenance services
32
23
Fuel sales
63
4
Other
23
8
Revenue in the Consolidated Income Statement
1,739
405
Grant income
1,920
1,616
Investment income
-
2
3,659
2,023
Revenues from major products and services
The Group's revenues from its major products and services were as follows:
2017
'000
2016
'000
Continuing operations
Power-to gas
639
148
Refuelling
398
249
Chemical Industry
679
-
Other
23
8
Consolidated revenue (excluding investment revenue)
1,739
405
GEOGRAPHIC ANALYSIS OF REVENUE
A geographic analysis of the Group's revenue is set out below:
2017
'000
2016
'000
United Kingdom
419
150
Germany
770
172
Italy
439
-
Rest of Europe
53
2
North America
58
81
1,739
405
-ends-

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