REG - ITM Power PLC - Interim Results and Strategic Update
31/01/2023 07:00
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RNS Number : 3324O ITM Power PLC 31 January 2023
31 January 2023
ITM Power PLC
("ITM" or the "Company")
Interim Results for the Six Months to 31 October 2022 and Strategic Update
Interim results summary
· Revenue £2.0m (H122: £4.2m)
· Adjusted EBITDA loss £54.1m (H122: £12.9m) *
· Net cash at the end of the H123 of £317.7m (H122: £164.2m)
· Majority of Leuna project revenue deferred due to delays and changed
delivery model
* Adjusted EBITDA is a non-statutory measure. The calculation methodology is
set out in the Note 3
Two 100 MW contracts signed with Linde Engineering
· Largest PEM electrolyser under execution in the world today
· Deploying the new Linde / ITM Power 10 MW standard modules based on
state-of-the-art 3MEP 30bar stacks
· To be installed at RWE's site in Lingen, Germany
Strategic update: 12-month priorities to solidify our foundations for growth
· Concentrating our portfolio on a core product suite, with robust
product validation, and preparing for manufacturing at scale
· A rigorous approach to capital allocation and cost management,
including a headcount reduction equating to a 30% (£9m) annualised saving on
personnel cost, professionalising engineering and manufacturing, and
increasing control over spend
· Plans for future testing capacity and incremental automation,
improving cycle times, volume output and build quality
Agreement with Vitol to review strategic options for their joint venture
Motive Fuels Ltd
· Options to be considered by the shareholders range from the sale of
the business to discontinuing activities, and are subject to appropriate
consultation
· This is intended to save ITM Power c.£28m to be rerouted to our core
business
Financial guidance for FY23
· As previously announced, materially changing earlier guidance
· Full-year revenue now expected to be c.£2m with further revenue
deferred into the next financial year
· Adjusted EBITDA loss expected to be in the range of £85m to £95m
· Net cash at year-end expected to be in the range of £245m to £270m
Board change
· Dr Rachel Smith to step down from the Board of Directors from 1
February 2023 and assume a new role in the Company
Sir Roger Bone, Chairman, said: "We raised capital to pursue an expansion
strategy and in doing so underestimated the competencies and capabilities
required to scale up and to transition from an R&D company to a volume
manufacturer. As a consequence, we set unrealistic targets for project
completion. This has produced an unacceptable financial performance.
"We have acted swiftly by appointing Dennis as our new CEO. During his 2
months at ITM, Dennis has developed a 12-month plan which lays out the
underlying challenges of the business as well as the solutions which we will
put into place. I have no doubt that the immediate actions being taken will
provide strong foundations for the future which will enable ITM to move into
its next phase of development and to play a leading role in the journey to net
zero.
"On a separate note, Dr Rachel Smith will step down from the Board on 1
February. With her knowledge, expertise and passion for the Company, Rachel
has been pivotal in the delivery of several key strategic projects for a
number of years. On behalf of the Board, I would like to thank Rachel for her
continued commitment to ITM as she works with the Company in her new role."
Dennis Schulz, CEO, said: "As a former customer of ITM, I had a good
understanding of the company's situation before I took on the challenge of
leading its transformation. Prior to committing myself, I questioned:
1. Does ITM have a cutting-edge electrolyser technology with the
potential to outperform its competitors?
2. Does ITM have a strong enough balance sheet to support the necessary
strategic and operational changes required to strengthen the company's
foundations?
3. Does the market give us the time window needed to solve the growing
pains ITM is encountering?
"In answer, I am confident these crucial preconditions are met.
"Having worked in close partnership with ITM, and selectively with
competitors, I am convinced that ITM's technology can outperform the
competition. However, product focus must be narrowed significantly. Our
balance sheet is robust, but we need a much more rigorous approach to managing
cost. This requires scrutinising every aspect of the business for cost saving
potential, and it will make difficult decisions necessary. One of those is the
need to streamline our organisation via a headcount reduction programme.
"We need to transform ITM from an R&D culture company to a professional
and credible delivery organisation ready for volume manufacturing -
sustainably growing into a profitable business. Most issues today arise from
immature engineering processes, which materialise during manufacturing and
lead to project delays and cost overruns. As one key priority, we will change
the way we engineer our products and control design changes.
"The market for green hydrogen is real, driven by climate change, and
decarbonisation imperatives. Increasing carbon taxation in combination with
green funding programmes make previously unattractive business cases viable.
Recent energy independence considerations are further fuelling demand growth.
However, peak electricity prices and inflation have temporarily slowed down
customer investment decisions. This gives ITM time to have the breathing space
required to focus on getting the fundamentals of the business in order, while
delivering on our contractual customer commitments.
"Our detailed 12-month plan will make ITM a stronger, more focused and more
capable company. The large-scale opportunities in the market are yet to come,
and by putting these foundations in place ITM will be ready for the
significant market demand ahead of us."
A presentation for analysts and investors by Dennis Schulz, CEO, and Andy
Allen, CFO, will be held at 9.00am GMT.
The presentation will be via the Investor Meet Company platform. Questions can
be submitted pre-event via the Investor Meet Company dashboard at any time
during the live presentation. Analysts and investors can sign up to Investor
Meet Company for free via:
https://www.investormeetcompany.com/itm-power-plc/register-investor
(https://www.investormeetcompany.com/itm-power-plc/register-investor) . Those
who already follow the Company on the Investor Meet Company platform will
automatically be invited.
A recording will be made available on the Investor Relations section of the
ITM website after the event.
For further information please visit www.itm-power.com
(http://www.itm-power.com/) or contact:
ITM Power PLC
James Collins, Investor Relations +44 (0)114 551 1205
Justin Scarborough, Investor Relations +44 (0)114 551 1080
Investec Bank plc (Nominated Adviser and Broker) +44 (0)20 7597 5970
James Rudd / Chris Sim / Ben Griffiths
Tavistock (Financial PR and IR) +44 (0)20 7920 3150
Simon Hudson / Tim Pearson / Charlie Baister
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the company's obligations under Article 17 of MAR
About ITM Power PLC:
ITM Power was founded in 2000 and ITM Power PLC was admitted to the AIM market
of the London Stock Exchange in 2004. Headquartered in Sheffield, England, ITM
Power designs and manufactures electrolysers based on proton exchange membrane
(PEM) technology to produce green hydrogen, the only net zero energy gas,
using renewable electricity and water.
Interim results
The results for the period to 31 October 2022 reflect the impact of provisions
taken for project cost overruns and inventory losses. The causes are discussed
below.
Revenue
Revenue for the period was £2.0m (H122: £4.2m). The Leuna project consists
of 12 x 2 MW Cube modules and £1.8m was recognised in the first half
following completion of the Factory Acceptance Test (FAT) for 2 Cube modules.
In order to mitigate on site delays, our customer Linde requested split
delivery of Cubes and Stacks for the remaining 10 Cubes meaning revenue will
be recognised upon successful Site Acceptance Test (SAT). All Cubes have now
been delivered to site. The project now awaits the upgraded MEP 30 bar stacks
to be delivered to site for SAT by Linde.
Gross margin
The gross loss was £45.6m (H122: £2.6m) reflecting increased losses on
inventory and customer contracts, and a prudent assessment of warranty
commitments.
Costs recognised in the period relating to inventory were £15.7m,
constituting a £1.6m write-off and a provision of £14.1m. The losses
originate from continued iterations of product designs during manufacturing,
together with some manufactured products being considered obsolete or in need
of rework.
Contract loss provisions relate to a number of factors including changes of
scope to projects, additional on-site engineering works, increased energy and
labour costs due to extended stack testing times and future costings updated
for inflation. Net contract loss provisions increased by £18.0m, with £27.3m
created and £9.3m utilised in the period. The total contract loss provision
at the period end stood at £30.4m.
The warranty provision increased by a net £2.3m in the period with a £2.8m
increase in provision offset by the utilisation of £0.5m. The balance at
period end was £5.3m. This includes all projects contracted at period end. We
expect to continue to review product performance in the field and for future
products to reflect the benefits of the manufacturing we are making.
Adjusted EBITDA
The company posted an adjusted EBITDA loss of £54.1m (£12.9m) for the
period. Adjusted EBITDA is a non-statutory measure and is detailed in Note 3.
Capital expenditure
Capital expenditure totalled £7.2m in the period, with £3.5m invested on
capital projects, namely Bessemer Park improvements and machinery, and £3.7m
on intangible assets.
Working capital
The working capital outflow in the first half was £6.9m, with inventories and
receivables increasing by £14.8m and £7.6m respectively, partly offset by an
increase in payables of £15.5m.
Cash
Net cash at the period end was £318m (H122: £164m), benefiting from the net
£242m raised in November 2021.
Two 100 MW contracts signed with Linde Engineering
ITM Power has signed two contracts, each for the sale of 100 MW of PEM
electrolysers to Linde Engineering. Both plants will be installed at a site
operated by RWE in Lingen, Germany, and are the largest PEM electrolysers
under execution worldwide today.
The plants will be the first deployment of the Linde Engineering / ITM Power
10 MW standard module skids for large-scale installations, utilising
state-of-the-art MEP 30 bar electrolyser stacks. Whilst we do not expect the
project to contribute to our margin, delivery for these two projects will
represent a key milestone on ITM Power's journey towards high volume
manufacturing of an industrialised product.
As part of its "Growing Green" strategy, RWE announced in November 2021 that
it aimed to create electrolyser capacity of at least 2 GW to generate green
hydrogen by 2030. The two 100 MW electrolyser plants at Lingen are part of
this ambition. In December 2021, Linde Engineering and ITM Power were
preselected by RWE as technical provider for the first two 100 MW
installations of the so-called GET H2 Nukleus project in Lingen.
Products
Our core electrochemical technology works well. At this stage, we are testing
and verifying the latest iteration of our state-of-the-art MEP 30 bar stack
which we expect to deploy into existing projects.
Today our product suite is too wide. The services we provide to support older
generation technologies are disruptive to our manufacturing process and have
become too costly.
Historically, we have started to develop the second generation of an existing
product in advance of the first generation having been fully verified for
field deployment. This will no longer be the case.
Our portfolio will be rationalised and our focus in the future will be on two
core products, our MEP 30 bar stack platform and our Plug and Play containers.
The MEP stack platform will benefit from design, manufacture and assembly
improvements, thereby reducing production costs, assembly time and delivery
lead times. For large-scale installations we are looking forward to deploying
Stack & Skid Modules. With regards to Plug and Play containers, some of
our engineering processes have been immature and at times disruptive. Remedial
actions to address these issues are being put into place from design, to
piloting, and validation.
Capital discipline and cost reduction
It is common for a growing technology company developing first-of-a-kind
products which need to be manufactured at scale, to be loss making. However,
our cost discipline has not been rigorous enough. Constant design changes led
to unwelcomed inventory write-downs. In addition, delays in project deliveries
caused excessive consumption of working hours. Finally, an overly-optimistic
recruitment programme has led to organisational overcapacity. We will address
the underlying causes of these issues as three parts of a 12-month priorities
plan.
First, we are in the process of reshaping our organisational structure to be
leaner and flatter, where accountability is clear and which will create an
environment for effective engineering, manufacturing and project delivery.
Today we have announced an anticipated 25% headcount reduction in full-time
equivalents (FTEs), subject to employee consultation, leading to a £9m (30%)
cost reduction on an annualised basis. The benefits will start to be
recognised in FY24.
Second, to address the causes of the inventory losses for FY23, we will bring
in new capabilities in design to professionalise engineering, including
enhanced simulation tools as well as a strengthening of the compliance and
validation function. We will improve supplier audits on quality and will
develop inspection and test planning to reflect our supplier capability risk.
A new process for enhanced parts traceability from incoming goods to shipping
will be introduced into our warehousing and a new Enterprise Resource Planning
(ERP) system will ensure seamless tracking of warehouse stock to work orders.
Lastly, to avoid future project losses, there will be enhanced discipline
around the sale of standard products as opposed to customised solutions with a
strengthening of sales governance from the initial bid phase through to
project execution and covering areas such as costings, scheduling and risk
estimations. Our project management requires the strengthening of capabilities
and accountability. Controls will be strengthened with the introduction of a
clear phase gate process which will be strictly adhered to.
Agreement with Vitol to review strategic options for their joint venture
Motive Fuels Ltd
Today the Company also announces it has agreed with Vitol to review the
strategic options for Motive Fuels Ltd. Options to be considered by the
shareholders range from the sale of the business to discontinuing activities,
subject to appropriate consultation.
The vision of the JV partners was one of building a significant UK refuelling
business, with £30m committed by each party as seed funding to be geared to
create a refuelling network. However, the landscape has changed since the
establishment of the joint venture, with lower availability of heavy-duty
hydrogen vehicles than originally anticipated adversely affecting fuelling
asset utilisation.
ITM expects to save £28m of the original committed sum, which will support
the core business of electrolyser manufacturing.
De-bottlenecking
One of the challenges over the past year has been managing our testing
capacity alongside our expected manufacturing output. It is our intention to
locate increased testing capacity as near to manufacturing as possible with a
phased approach in order to satisfy project delivery needs.
Looking ahead, automation will play an important role in optimising build
quality, reducing manufacturing costs, accelerating output and reducing
delivery lead times. We will incrementally introduce automation into Bessemer
Park in a controlled way and only after new equipment and new processes have
been validated.
Financial Guidance for FY23
The main factors which will impact the outcome for the financial year are
expected losses on customer contracts, legacy commitments for earlier product
generations causing on-site support costs, warranty provisions, and inventory
write-downs and provisions originating from iterations of product designs
during manufacturing. Another important factor affecting guidance is the
revenue recognition timing for contracted projects.
The guidance for FY23 is:
· Full year product revenue of c.£2.0m
· Adjusted EBITDA loss of £85m to £95m
· Net cash of £245m to £270m
Revenue
Design, manufacturing and testing bottlenecks have affected our original plan
to fully recognise the revenues associated with notable projects such as Leuna
and Yara. For Leuna, whilst we anticipate delivering all elements of the
project to site before year end, we do not expect that customer-led SAT will
be completed for ITM to recognise revenue in the current financial year. SAT
and therefore revenue recognition for the Yara project will also occur after
year end in April.
Based on the products revenue recognised in the first half, we therefore
expect revenue for the full year to be c.£2.0m.
As set out in the strategic update, decisive actions have been identified to
limit the recurrence of these predominantly process-based factors on our
future product delivery capabilities.
EBITDA
EBITDA guidance includes the contract loss provisions taken in the first half
which are expected to unwind with project progress. Further details are in
Note 5. All contracted warranty obligations including those relating to the
Lingen project announced today are reflected in the full year guidance. The
warranty provisions will be included within contract loss provisions prior to
deployment.
We expect inventory write-downs for the full-year of £18-23m. The majority of
write-down, consisting of £15.7m, was recognised in H1, with the balance
projected against production volumes in H2.
Net cash
Our balance sheet remains strong, with net cash at the year-end expected to be
in the range of £245m to £270m. Capital discipline and rigour will be at the
heart of every spending decision that we take.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Results for the six months ended 31 October 2022
Note Six months to 31 October 2022 (unaudited) Six months to 31 October 2021 (unaudited) Year ended 30 April 2022 (audited)
£'000 £'000 £'000
Revenue 2 2,031 4,156 5,627
Cost of sales (47,590) (6,766) (29,104)
Gross loss (45,559) (2,610) (23,477)
Operating costs
Staff and employment costs (4,284) (7,662) (4,316)
Consultancy and consumables (3,699) (1,902) (11,225)
Building overheads (871) (1,276) (2,564)
Depreciation and amortisation (877) (1,538) (3,189)
Impairment of obsolete assets (1,193) - -
Other 158 (241) (609)
Expected credit risk (11) 18 84
Other income - government grants 175 172 560
Loss from operations (56,161) (15,039) (44,736)
Share of loss of associate companies and joint ventures (1,384) (82) (10)
Finance income 1,282 38 325
Finance costs (270) (259) (532)
Loss on deemed disposal of subsidiary - - (1,710)
Loss before tax (56,533) (15,342) (46,663)
Tax (15) (21) (31)
Loss for the period (56,548) (15,363) (46,694)
Other total comprehensive income:
Foreign currency translation differences on foreign operations (260) (141) (71)
Total comprehensive loss for the period (56,808) (15,504) (46,765)
Basic and diluted loss per share (9.2p) (2.8p) (8.1p)
Weighted average number of shares 613,658,155 550,658,155 576,699,822
All results presented above are derived from continuing operations. 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. The number of potentially
dilutive shares not included in the calculation above due to being
anti-dilutive at 31 October 2022 were 7,991,625 (31 October 2021: 7,460,734;
30 April 2022: 45,064,658).
CONSOLIDATED BALANCE SHEET
As at 31 October 2022
Note As at 31 October 2022 As at 31 October 2021 As at 30
(unaudited) (unaudited) April 2022 (audited)
£'000 £'000 £'000
Non-current assets
Investment in associate 720 155 1,662
Loan notes 1,577 - 1,548
Intangible assets 11,916 3,856 9,081
Right of use assets 6,095 6,203 6,454
Property, plant and equipment 17,400 13,732 15,637
Financial asset at amortised cost 168 155 161
Total non-current assets 37,876 24,101 34,543
Current assets
Inventories 4 47,003 11,742 32,198
Trade and other receivables 33,073 21,481 25,542
Cash and cash equivalents 317,738 164,235 365,882
Total current assets 397,814 197,458 423,622
Current liabilities
Trade and other payables (49,785) (22,487) (34,296)
Provisions 5 (19,702) (10,237) (15,207)
Lease liability (755) (512) (626)
Total current liabilities (70,242) (33,236) (50,129)
Net current assets 327,572 164,222 373,493
Non-current liabilities
Lease liability (6,271) (6,033) (6,522)
Provisions 5 (20,034) - (6,561)
Total non-current liabilities (26,305) (6,033) (13,083)
Net assets 339,143 182,290 394,953
Equity
Called up share capital 30,808 27,533 30,658
Share premium account 542,461 302,248 542,323
Merger reserve (1,973) (1,973) (1,973)
Foreign exchange reserve (248) (58) 12
Retained loss (231,905) (145,460) (176,067)
Total Equity 339,143 182,290 394,953
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Results for the six months ended 31 October 2022
Share capital Share premium Merger reserve Foreign Exchange reserve Retained loss Total
£'000 £'000 £'000 £'000 £'000 Equity
£'000
At 1 May 2022 30,658 542,323 (1,973) 12 (176,067) 394,953
Transactions with Owners
Issue of shares 150 138 - - - 288
Credit to equity for share based payment - - - - 710 710
Total Transactions with Owners 150 138 - - 710 998
Loss for the period - - - - (56,548) (56,548)
Other comprehensive income - - - (260) - (260)
Total comprehensive income - - - (260) (56,548) (56,808)
At 31 October 2022 (unaudited) 30,808 542,461 (1,973) (248) (231,905) (339,143)
At 1 May 2021 27,533 302,248 (1,973) 83 (130,444) 197,447
Transactions with Owners
Issue of shares - - - - - -
Credit to equity for share based payment - - - - 347 347
Total Transactions with Owners - - - - 347 347
Loss for the period - - - - (15,363) (15,363)
Other comprehensive income - - - (141) - (141)
Total comprehensive income - - - (141) (15,363) (15,504)
At 31 October 2021 (unaudited) 27,533 302,248 (1,973) (58) (145,807) 182,285
At 1 May 2021 27,533 302,248 (1,973) 83 (130,444) 197,447
Transactions with Owners
Issue of shares 3,125 240,075 - - - 243,200
Credit to equity for share based payment - - - - 1,071 1,071
Total Transactions with Owners 3,125 240,075 - - 1,071 244,271
Loss for the year - - - - (46,694) (46,694)
Other comprehensive income - - - (71) (71)
Total comprehensive income - - - (71) (46,694) (46,765)
At 30 April 2022 (audited) 30,658 542,323 (1,973) 12 (176,067) 394,953
CONSOLIDATED CASH FLOW STATEMENT
Results for the six months ended 31 October 2022
Note Six months to 31 October 2022 (unaudited) Six months to 31 October 2021 (unaudited) Year ended 30 April 2022 (audited)
£'000 £'000 £'000
Net cash used in operating activities 6 (41,818) (9,800) (38,155)
Investing activities
Investment in associate (428) - (1,838)
Cashflows arising from loss of control of subsidiary - - (993)
Loan notes (loan to joint venture) - - (1,899)
Purchases of property, plant and equipment (3,549) (1,064) (4,119)
Capital Grants received against purchases of non-current assets 4 97 150
Proceeds on disposal of plant & equipment - - 352
Payments for intangible assets (3,667) (1,059) (7,036)
Interest received 1,247 32 304
Net cash used in investing activities (6,393) (1,994) (15,079)
Financing activities
Issue of ordinary share capital 900 - 250,000
Costs associated with fund raise (612) - (6,800)
Payment of lease liabilities (165) (65) (69)
Net cash from financing activities 123 (65) 243,131
(Decrease)/ increase in cash and cash equivalents (48,088) (11,859) 189,897
Cash and cash equivalents at the beginning of period 365,882 176,078 176,078
Effect of foreign exchange rate changes (56) 15 (93)
Cash and cash equivalents at the end of period 317,738 164,234 365,882
The interim summary accounts were approved by the board of Directors on 30
January 2023.
Notes to the interim summary accounts
1. Basis of preparation of interim figures
These interim summary accounts have been prepared using accounting policies
consistent with UK-adopted international accounting standards, in conformity
with the requirements of the Companies Act 2006. Whilst the financial
information has been compiled in accordance with the recognition and
measurement principles of UK-adopted international accounting standards
(IFRSs), it does not 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 has been prepared on the historical cost basis. The
principal accounting policies adopted by the Group are as applied in the
Group's latest audited financial statements.
The information relating to the year ended 30 April 2022 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.
Selected explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in financial position
and performance of the Group since the last annual consolidated financial
statements as at the year ended 30 April 2022.
Going Concern
The Directors have prepared a cash flow forecast for the period ending 31
January 2024. This forecast indicates that the Company would expect to remain
cash positive without the requirement for further fund raising based on
delivering the existing pipeline, for a period of at least 12 months from the
date of approval of these summary accounts.
This cash flow forecast has also been stress tested. As a worst-case scenario,
if all payments had to continue as forecast while receipts were not received
at all, the business would remain cash positive for the full twelve months
from the date of approval of these summary accounts.
The interim summary accounts have therefore been prepared on a going concern
basis.
2. Revenue and other operating income
An analysis of the Group's revenue is as follows:
Six months to 31 October 2022 (unaudited) Six months to 31 October 2021 (unaudited) Year ended
£'000 £'000 30 April 2022 (audited)
£'000
Revenue from product sales recognised over time - 510 808
Revenue from product sales recognised at point in time 1,751 670 1,231
Consulting contracts recognised over time - 2,840 2,948
Maintenance contracts recognised at point in time 169 32 43
Fuel sales 111 104 229
Other - - 368
Revenue in the Consolidated Income Statement 2,031 4,156 5,627
Grant income (claims made for projects) 52 61 271
Other government grants (R&D claims) 123 111 289
Grant income in the Consolidated Income Statement 175 172 560
2,206 4,328 6,187
Revenues from major products and services
The Group's revenues from its major products and services were as follows:
Six months to 31 October 2022 (unaudited) Six months to 31 October 2021 (unaudited) Year ended
£'000 £'000 30 April 2022 (audited)
£'000
Power-to gas 107 16 207
Refuelling 173 859 1,704
Industrial 1,751 412 507
Other - 2,869 3,209
2,031 4,156 5,627
GEOGRAPHIC ANALYSIS OF REVENUE
A geographical analysis of the Group's revenue is set out below:
Six months to 31 October 2022 (unaudited) £'000 Six months to 31 October 2021 (unaudited) £'000 Year ended
30 April 2022
(audited)
£'000
United Kingdom 45 2,976 3,359
Germany 1,751 425 770
Rest of Europe 124 85 246
United States 111 - 22
Australia - 670 1,230
2,031 4,156 5,627
The following accounted for more than 10% of total revenue:
Six months to 31 October 2022 (unaudited) £'000 Six months to 31 October 2021 (unaudited) £'000 Year ended
30 April 2022 (audited) £'000
Customer A 1,751 N/A N/A
Customer B N/A 2,840 2,840
Customer C N/A 670 673
3. Calculation of Adjusted EBITDA
In reporting EBITDA, management use the metric of adjusted EBITDA, to better
reflect underlying performance and remove the effect of the following items:
Six months to 31 October 2022 (unaudited) £'000 Six months to 31 October 2021 (unaudited) £'000 Year ended
30 April 2022 (audited) £'000
Loss from operations (56,161) (15,039) (44,736)
Add back:
Depreciation 1,318 1,149 2,340
Impairment 1,193 - -
Amortisation 482 396 849
Loss on disposal 35 - -
Fair value loss on loan notes - - 344
Share based payment (credit) / charge (952) 552 1,429
(54,085) (12,942) (39,774)
4. Inventories
October October April
2022
2022 2021
£000
£000
£000
Raw Materials 36,013 9,486 24,311
Work in progress 10,990 2,256 7,887
47,003 11,742 32,198
Inventories are stated after a provision for impairment of £18.1 million
(October 2021: £1.5 million; April 2022: £2.7 million).
5. Provisions
Half year to October 2022 Leasehold Property Provision Warranty Provision Other Provisions Employers' National Insurance Provision Total
for contract losses Provisions
£000 £000 £000 £000 £000 £000
Balance at 1 May 2022 (854) (2,938) (12,493) (1,330) (4,153) (21,768)
Provision created in the period (21) (2,842) (27,255) (1,454) - (31,572)
Use of the provision - 496 9,304 - 376 10,176
Release in the period - - - - 3,428 3,428
Balance at 31 October 2022 (875) (5,284) (30,444) (2,784) (349) (39,736)
In the balance sheet:
Expected within 12 months - (534) (16,954) (2,214) - (19,702)
(current)
Expected after 12 months (875) (4,750) (13,490) (570) (349) (20,034)
(non-current)
Full year to April 2022 Leasehold Property Provision Warranty Provision Other Provisions Employers' National Insurance Provision Total
for contract losses Provisions
£000 £000 £000 £000 £000 £000
Balance at 1 May 2021 (1,024) (797) (4,820) (677) (4,958) (12,276)
Provision created in the year (36) (2,163) (15,052) (1,330) - (18,581)
Use of the provision 206 18 7,379 509 - 8,112
Release in the year - 4 - 168 805 977
Balance at 30 April 2022 (854) (2,938) (12,493) (1,330) (4,153) (21,768)
In the balance sheet:
Expected within 12 months - (1,145) (9,453) (456) (4,153) (15,207)
(current)
Expected after 12 months (854) (1,793) (3,040) (874) - (6,561)
(non-current)
Half year to October 2021 Leasehold Property Provision Warranty Provision Other Provisions Employers' National Insurance Provision Total
for contract losses Provisions
£000 £000 £000 £000 £000 £000
Balance at 1 May 2021 (1,024) (797) (4,820) (677) (4,958) (12,276)
Provision created in the year (20) (569) (1,344) (313) (7) (2,253)
Use of the provision 142 18 4,065 67 - 4,292
Balance at 31 October 2021 (902) (1,348) (2,099) (923) (4,965) (10,237)
The leasehold property provision represents management's best estimate of the
present value of the dilapidations work that may be required to return our
leased buildings to the landlords at the end of the lease term. The discount
applied to this is amortising over the lease term.
The warranty provision is recognised in line with revenue recognition on
contracts and represents management's best estimate of the Group's liability
under warranties granted on products. It is based on historical knowledge of
the products or their components and adjusted for any new knowledge that
becomes available. As with any product warranty, there is an inherent
uncertainty around the likelihood and timing of a fault occurring that would
trigger further work or part replacement.
The provision for contract losses is created when it becomes known that a
commercial contract has become onerous. Project Managers provide rolling spend
forecasts, updating these as quotes are obtained. The provision is therefore
based on best estimates and information known at the time to ensure the
expected losses are recognised immediately through the statement of
comprehensive income. This provision will be used to offset the costs of the
project as it reaches completion in future periods.
Provision is also made at the point when project forecasts suggest that the
contractual clauses for liquidated damages might be triggered. The other
provisions category relates to potential liquidated damages for overruns on
contracts with customers.
There is a provision for Employer's NIC due on share options as they exercise.
6. Notes to the Cashflow Statement
Six months to 31 October 2022 (unaudited) Six months to 31 October 2021 (unaudited) Year ended
£'000 £'000 30 April 2022 (audited)
£'000
Loss from operations (56,161) (15,039) (44,736)
Adjustments:
Depreciation of property, plant and equipment 1,318 1,149 2,340
Loss on disposal 35 - -
Impairment 1,193 - -
Amortisation 482 396 849
Share based payment (as seen through equity) 710 347 1,071
Foreign exchange on intercompany transactions (270) - (43)
Fair value adjustment and expected credit loss on loan notes - - 359
Operating cash flows before movements in working capital (52,693) (13,147) (40,160)
Increase in inventories (14,805) (5,324) (25,780)
(Increase)/ decrease in receivables (7,548) 1,377 (2,550)
Increase in payables 15,488 9,630 21,437
Increase/ (decrease) in provisions 17,989 (2,039) 9,492
Cash used in operations (41,569) (9,503) (37,561)
Interest paid (249) (235) (532)
Income taxes received - (62) (62)
Net cash used in operating activities (41,818) (9,800) (38,155)
Cash Burn
Cash burn is a measure used by key management personnel to monitor the
performance of the business.
Six months to Six months to 31 October 2021 (unaudited) Year ended
31 October £'000 30 April 2022 (audited)
2022 (unaudited) £'000
£'000
(Decrease)/ increase in Cash and Cash equivalents per the cash flow statement (48,088) (11,859) 189,897
Effect of foreign exchange rates (56) 15 (93)
Less share issue proceeds (net) (288) - (243,200)
Cash Burn (48,432) (11,844) (53,396)
7. Related Parties
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. All related party transactions which were not intra-group have been
conducted at arms' length.
During the period purchases from Linde/BOC Group, represented on the Board by
J Nowicki, totalled £0.3m (H1 2022: £0.4m; YE 2022: £0.5m) with £0.1m
outstanding for payment at period-end (H1 2022: £0.1m; YE 2022 £0.1m).
Furthermore, an amount of £0.6m brought forward from the year-end relates to
stage payments made for goods not yet received (H1 2022 & YE 2022:
£0.6m). Sales invoices raised to Linde/BOC group in the period totalled
£9.4m (H1 2022: £nil; YE 2022: £7.0m) with £5.3m outstanding (H1 2022:
£nil; YE 2022: £1.7m).
There were also stage payments of £nil (H1 2022: £4.1m; YE 2022: £5.4m),
and £nil remained outstanding from ITM Linde Electrolysis GmbH at period end
(H1 2022: £0.2m; YE 2022: £1.0m). Purchases from ILE in the period equated
to £nil (H1 2022: £0.2m; YE 2022: £0.2m, which was paid immediately and
therefore settled by both period ends). Sales to ILE in the period were £1.8m
(H1 2022 and YE 2022: £nil). The Group also continued to pay for the hosting
of ILE's website.
Transactions with Motive Fuels Limited amounted to £0.1m in the period with
£0.3m remaining outstanding at period end (YE 2022: total transactions of
£0.2m that remained outstanding at year end).
8. Subsequent events
The Company announced the appointment of Dennis Schulz and the official
resignation of Dr Graham Cooley as Chief Executive Officer with effect
from 1 December 2022.
The Company today announced the official resignation of Dr Rachel Smith from
the Board of Directors with effect from 1 February 2023.
The Company today announced an agreement with Vitol to seek exit from their
joint venture Motive Fuels Ltd.
The Company today announced it has signed two contracts, each for the sale of
100 MW of PEM electrolysers to Linde Engineering. Both plants will be
installed at a site operated by RWE in Lingen, Germany.
Independent review report to ITM Power PLC
Conclusion
We have reviewed the summary set of financial statements in the half-yearly
financial report for the six months ended 31 October 2022 which comprises the
Consolidated Statement of Comprehensive Income, the Consolidated Balance
Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Cash
Flow Statement and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the summary set of financial statements in the half-yearly
financial report for the six months ended 31 October 2022 is not prepared, in
all material respects, in accordance with the recognition and measurement
principles of UK adopted International Accounting Standards.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (ISRE) 2410 (UK), "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" (ISRE (UK) 2410). 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 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.
As disclosed in Note 3, the annual financial statements of the group are
prepared in accordance with UK-adopted international accounting standards. The
financial information in the half-yearly financial report has been prepared in
accordance with the basis of preparation in Note 1.
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 summary set of financial
statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
In our evaluation of the directors' conclusions, we considered the inherent
risks associated with the group's business model including effects arising
from macro-economic uncertainties, we assessed and challenged the
reasonableness of estimates made by the directors and the related disclosures
and analysed how those risks might affect the group's financial resources or
ability to continue operations over the going concern period.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The AIM rules of the London Stock Exchange require
that the accounting policies and presentation applied to the financial
information in the half-yearly financial report are consistent with those
which will be adopted in the annual accounts having regard to the accounting
standards applicable for such accounts.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Our responsibility
Our responsibility is to express to the company a conclusion on the financial
information in the half-yearly financial report based on our review.
Our conclusion, including our Conclusions relating to going concern, are based
on procedures that are less extensive than audit procedures, as described in
the Basis for conclusion paragraph of this report.
Use of our report
This report is made solely to the company in accordance with guidance
contained in ISRE (UK) 2410. Our review work has been undertaken so that we
might state to the company those matters we are required to state to it in a
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 conclusion we have
formed.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Sheffield
30 January 2023
-ends-
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