REG - ITM Power PLC - Interim Results
31/01/2024 07:00
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RNS Number : 4356B ITM Power PLC 31 January 2024
31 January 2024
ITM Power PLC
Interim Results for the Six Months to 31 October 2023
Interim results summary
· Revenue £8.9m (H123: £2.0m)
· Adjusted EBITDA loss £21.0m (H123: £54.1m)*
· Cash at the end of H124 of £253.7m (H123: £317.7m)
· Robust financial performance leading to improved full-year guidance:
o Revenue confirmed;
o EBITDA positively narrowed, and;
o Cash materially improved
· 12-month plan successfully completed:
o Product portfolio narrowed for standardisation and volume manufacturing
o Greater capital discipline, cost reduction, and improved processes
achieved
o Manufacturing and testing debottlenecked, and automation increased
· Project delivery performance improved; embraced by existing and
upcoming customers
· Market reach substantially extended, opening sales opportunities in
new world regions
· Strategic priorities post 12-month plan defined, reflecting the
dynamic between expected long-term and near-term market development,
necessitating readiness and flexibility, whilst maintaining a strong balance
sheet:
o Remain at the forefront of technology, product and delivery credibility
o Scale operations whilst retaining flexibility and conserving cash
o Grow global footprint and reach whilst staying adaptable
· Full details included in the interim review below
*Adjusted EBITDA is a non-statutory measure. The calculation methodology is
set out in the Note 3
Dennis Schulz, CEO ITM, said: "I am pleased to report that we have completed
the implementation of our 12-month plan on time. The first half of the
financial year already paints the early picture of a new ITM, which starts to
be reflected in our improved financial results.
We have accomplished what we set out to do in the last 12 months. Our plan
successfully addressed the most pressing issues to right the ship. It has made
ITM a stronger, more focussed, and more capable company. We have achieved a
shift in culture, and the transformation of the company has tangibly improved
our project delivery performance. We now have a strong foundation for growth.
The long-term trajectory for green hydrogen remains an unparalleled
opportunity. As I reflect on the more near-term market ahead, we will be
operating in a complex environment. This ranges from a massive long-term
opportunity just waiting to be captured, to dynamically developing markets
emerging at different speeds, and short-term macroeconomics currently slowing
down market acceleration. With the unchanged need to decarbonise, demand is
not reduced but simply piling up, and will cause exponential growth
thereafter. The most important attributes for ITM will be readiness and
flexibility, and to maintain a strong balance sheet which necessitates
continued spending discipline. We will remain at the forefront of technology
developments and continue to establish ourselves as the most credible OEM for
commercial and especially large-scale projects."
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
Justin Scarborough, Head of 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
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 REVIEW
Strategic update: 12-month successfully completed
Our 12-month plan has made ITM a stronger, more focussed, and more capable
company. We have put the necessary foundations in place to ready ITM for the
large-scale opportunities and significant demand in the market that are yet to
come.
We are pleased to announce the successful on-time completion of our plan,
which was based on the following three pillars, with:
· Product portfolio narrowed for standardisation and volume
manufacturing:
o We have completed the rationalisation of our portfolio, ceasing the
production and support of older generation technologies, and reducing the
number of product variants by 75%.
o We have translated our technology into volume products. Our TRIDENT stack
platform is world leading and sits at the heart of our product solutions,
including our 2 MW NEPTUNE plug & play containerised unit, and our 20 MW
POSEIDON core electrolysis process module.
o We launched POSEIDON to address the market for larger plants whilst
reducing complexity for integrators seeking to work with our technology,
thereby providing a competitive edge. Customer response has been very
positive.
o The release of our Hybrid Stack in November is making available our
state-of-the-art TRIDENT technology to customers operating older generation
electrolysers. The Hybrid Stack underwent robust validation and testing at
ITM's facilities and in the field. The operational data showed an efficiency
improvement of circa 10% compared to previous generation stacks, which is a
material increase.
o We have substantially enlarged our product compliance reach, and pursued
an asset-light market entry into the US.
· Greater capital discipline, cost reduction, and improved processes
achieved:
o We have fundamentally tightened the rigour applied to managing costs and
capital spend.
o Having reduced headcount by over 30% at the end of FY23, we have
professionalised our engineering capabilities and processes to operate in
unison with other areas of the company such as procurement and manufacturing.
We have also put in place a more robust quality and process management system,
and strengthened compliance and validation.
o Our quality over quantity policy has driven down failure rates in
production.
o We have visibly improved our project performance and delivery credibility,
which is being positively embraced by our customers.
o The sale of our 50% share in the joint venture Motive Fuels Ltd. was
completed in October, freeing up £28m of ringfenced capital, which we
directed back to our core business.
· Manufacturing and testing debottlenecked, and automation increased:
o We have achieved the planned progress in the automation of manufacturing
and assembly. This has enabled enhanced build quality and consistency, along
with shortened build times and reduced manufacturing costs. We will continue
to introduce automation in a controlled way after new equipment and new
processes have been validated.
o We have increased our testing capacity and expanded our facilities in
Sheffield, enabling our current site to operate at an appropriate scale whilst
avoiding disruption of concurrent fit-out works.
o The development of the new site will also allow us to optimise our factory
layout for further stack manufacturing automation and serial production,
providing increased fabrication space for higher stack volumes, allowing ITM
to grow output in line with commercial projects.
o This scale up also requires the active management of our supply chain,
meaning the choice of and close collaboration with the right suppliers and
partners. Throughout the year, we have announced strategic collaborations with
market-leading suppliers, including Gore, Mott and Friem, for essential
materials and components of our products, adding to our delivery credibility,
especially as stack volumes grow.
o In October, we officially opened the all-new ITM Power Germany in Linden,
north of Frankfurt. The facility will ensure our state-of-the-art stacks are
ready for quick deployment as aftersales spares. This allows us to minimise
response time to customers, in turn maximising value from the use of our
products. It will be home to functions such as business development and
industrial IoT, and will house facilities for repair and maintenance, as well
as for training of customers and partners. As we scale our operations, we are
gearing up for an increasing degree of local content creation in the EU.
Improved financial performance
A tangible outcome of the 12-month plan is an improved project delivery
performance, which is reflected in the financial performance for the half
year.
Income statement
Revenue for the period was £8.9m (H123: £2.0m), driven predominantly by
product and service revenue from cube deliveries to Germany together, with a
number of NEPTUNE units. Further income was recognised from consulting
contracts. This constitutes an increase compared to the Trading Update value
of £7.5m as we concluded a commercial discussion with a customer which was
still ongoing in December.
The gross loss was £8.2m (H123: £45.6m), a significant reduction as a result
of improved management of projects in execution. Provisions made in the period
were primarily related to collaborative efforts with customers to use existing
projects to trial new stacks in the field, being the fastest route to
validation. Gross losses were driven by closing out legacy projects,
macroeconomic conditions (inflation), and cost of quality; marking a
significant improvement year-on-year as a result of our 12-month plan.
The Company posted an adjusted EBITDA loss of £21.0m (H123: £54.1m) for the
period. Adjusted EBITDA is a non-statutory measure and is detailed in Note 3.
The administrative expenses presented in the income statement are net of cost
booked to inventory or development costs), and have increased in
period-on-period due to a lower level of cost capitalised and absorbed on
project spend (tighter controlled) and product development (narrowing the
focus on core products).
Balance sheet
Capital expenditure totalled £7.0m in the period (H123: £7.2m), with £5.7m
(H123: £3.5m) invested in capital projects, namely factory upgrades and
machinery. This represents a saving compared with expectations whilst
achieving the planned capacity increase in the period.
In contrast to previous periods, we have spent less money, at £1.3m (H123:
£3.7m), on new product development (intangible assets). As set out in the
12-month plan a year ago, we focussed our time on consolidating a more
narrowed and targeted product portfolio.
The working capital outflow in the first half was £8.1m, with inventories and
receivables increasing by £18.0m and £7.5m respectively, partly offset by an
increase in payables of £17.3m.
Inventories held increased to £76.8m from £47.0m in the prior year and
£58.8m at April 2023. The inventory has largely been processed into finished
subsystems and products, with the raw materials balance reducing from £36.0m
(H123) to £9.4m (H124). This balance remains an opportunity for ITM to
improve working capital through project execution.
Cash at the period end was £254m (H123: £318m), representing an outflow
since the year-end of £29m. Finance income in the period was £6.3m (H123:
£1.3m), representing an annual average interest rate of 4.7%.
Market update
The pathway to Net Zero is a challenge that is unparalleled in scale and
complexity - but also an unparalleled opportunity. Today, there is broad
consensus that green hydrogen is a key enabler for the energy transition, by
means of grid balancing and particularly for the decarbonisation of
hard-to-abate sectors which account for circa 30% of global emission, such as
steel, chemicals, heavy-duty transport, shipping and aviation.
By 2050, it is estimated that hydrogen and hydrogen-based fuels will meet a
sizeable share of the energy demand, with expectations that this could equate
to a 15-20% share of the energy mix, equating to 613Mt of annual clean
hydrogen production, with two thirds of this number being green hydrogen. For
this, 5TW of electrolyser capacity are required by 2050, meaning an average of
around 160GW of electrolysers installed per year, with a few GW in the
short-term followed by a significant acceleration in deployment. The expected
613Mt of clean hydrogen production annually compare to approximately 95Mt of
grey hydrogen and 0.7Mt of clean hydrogen that is currently produced each
year.
As such, the outlook for green hydrogen as the enabler of a transition to Net
Zero is excellent. This is also demonstrated by early and significant
investments into infrastructure around transport and storage by governments
all around the world, and by targeted funding programmes and alliances between
nations which aim to stimulate and kick-start a cross-border hydrogen economy.
In the short term, the electrolyser market is still immature, with significant
'noise' but only few OEMs and technologies credible commercially. Market
consolidation has now started. As a consequence, customers continue to require
assurance and certainty around product readiness, technology and delivery
performance, all of which are areas in which ITM Power is regarded an industry
leader today.
We have been seeing the number and size of project enquiries increasing
significantly. Many final investment decisions will be unlocked through the
normalisation of today's inflation, peak energy prices and cost of capital.
Whilst government incentives can stimulate market growth, delays in approvals
can also slow projects down.
In contrast, the UK market, which had previously lagged behind developments in
the EU, has started to accelerate. The government's Hydrogen Allocation Round
(HAR) mechanism aims to kick-start the UK green hydrogen economy, with an
ambition of 1GW electrolyser capacity in operation or construction by 2025,
and 5GW by 2030. The HAR1 funding concluded at the end of 2023, supporting 125
MW (output) across 11 projects, providing £90m of CAPEX funding under the Net
Zero Hydrogen Fund, and £2bn of revenue support under the Hydrogen Production
Business Model. Six more allocation rounds are planned to follow, with HAR2
applications now open and earmarking up to 875 MW for allocation. Furthermore,
the Green Industries Growth Accelerator (GIGA) scheme, announced by Jeremy
Hunt, Chancellor of the Exchequer, at our premises in November 2023, foresees
£960m funding for manufacturing clean energy technologies, including
electrolysers. These schemes combined provide ITM in particular with near-term
commercial and scale-up opportunities, being the only commercial electrolyser
manufacturer in the UK.
In summary, the underlying long-term trajectory for green hydrogen to become a
multibillion market remains unchanged. In the short term, industrial scale-up
will be incremental. Momentum will accelerate exponentially over time, and
will depend on the dynamic of specific markets, with the UK, the US and Japan
emerging more recently, and on the successful operation of reference plants.
Strategic priorities: Onto the next phase of our journey
The outlined market development implies a need for readiness and flexibility,
whilst managing cash commitments carefully. Our strategic priorities need to
align to our vision of delivering the world's best electrolysers, of scaling
our operations profitably to meet the rising demand, and of growing our global
footprint and reach over time.
· To remain at the forefront of technology, product, and delivery
credibility, we will:
o Evolve our products, including continuous improvement of the TRIDENT stack
platform and NEPTUNE plug and play unit
o Strategically extend our portfolio, currently under development, with a
higher capacity plug & play containerised unit to even better address
mid-size projects, and launch a larger capacity, game-changing stack platform,
to further widen the gap to competition
o Be prepared for rapid scaling of stack volumes
o Continue to evolve our processes and capabilities in manufacturing,
engineering, procurement, and field services
· To scale our operations whilst retaining flexibility and conserving
cash, we will:
o Continue to deepen the level of automation, particularly at our extended
manufacturing facility in Sheffield
o Grow capacity in line with commercial projects
o Focus on credible sales opportunities, and capture a significant market
share through offering the best products and delivery credibility to customers
· To grow our global footprint and reach, whilst staying adaptable, we
will:
o Ensure an appropriate setup in all attractive offtake regions, to be best
positioned and ready for rapid demand uptick, as we are in the EU by means of
our new entity ITM Power Germany
o Take a product and service-first approach, and further expand regional
product compliance
ITM is an ambitious company. The market for green hydrogen will be a sizeable
one, and we will become the market leader for PEM electrolysers. Our 12-month
plan has transformed ITM into a credible delivery organisation, which is being
acknowledged by our customers and partners. The recently announced 100 MW
capacity reservation from Shell Deutschland GmbH as a repeat customer is yet
another testament to this. We will remain agile and adaptable; a crucial
strength given the timeframes for developing large-scale projects.
Improved financial guidance for FY24
The financial performance of ITM in the first half of the year was pleasing,
bringing us one step closer to becoming a profitable company in the future.
· Full-year revenue guidance of £10m to £18m remains unchanged.
Further deployments of NEPTUNE plug & play containers are expected in the
second half of the year.
· Adjusted EBITDA loss guidance range has narrowed, and is now expected
to be between £45m and £50m, an improvement on the £45m to £55m previously
guided.
· Net cash at year end expected to be in the range of £200m to £220m,
a material improvement compared to our original guidance of £175m to £200m,
and in line with our priorities. Capital discipline and rigour will remain at
the heart of every spending decision that we take. Whilst realising savings on
original estimates, we expect to fulfil our capacity increase as planned. Our
residual CAPEX plans are unaffected. As such, we now expect CAPEX for the full
year to be in the range of £15m to £25m, lower than our original £35m to
£45m expectations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Results for the six months ended 31 October 2023
Note Six months to 31 October 2023 (unaudited) Six months to 31 October 2022 (unaudited) Year ended 30 April 2023 (audited)
£'000 £'000 £'000
Revenue 2 8,883 2,031 5,229
Cost of sales (17,029) (47,590) (84,294)
Gross loss (8,146) (45,559) (79,065)
Administrative expenses (15,651) (10,777) (26,222)
Other income - government grants 225 175 1,574
Loss from operations (23,572) (56,161) (103,713)
Share of loss of associate companies (260) (1,384) (1,567)
Finance income 6,269 1,282 4,652
Finance costs (295) (270) (541)
Loss on disposal of joint venture 8 (331) - -
Loss before tax (18,189) (56,533) (101,169)
Tax (26) (15) (32)
Loss after tax (18,215) (56,548) (101,201)
Other comprehensive income:
Foreign currency translation differences on foreign operations (152) (260) 160
Total comprehensive loss for the period (18,367) (56,808) (101,041)
Basic and diluted loss per share (3.0p) (9.2p) (16.5p)
Weighted average number of shares 616,604,544 613,658,155 614,683,780
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 2023 were 3,858,217 (31 October 2022: 7,991,625;
30 April 2023: 5,999,019).
CONSOLIDATED BALANCE SHEET
As at 31 October 2023
Note As at 31 October 2023 As at 31 October 2022 As at 30
(unaudited) (unaudited) April 2023 (audited)
£'000 £'000 £'000
Non-current assets
Investment in associate and joint venture 109 720 379
Loan notes - 1,577 -
Intangible assets 12,130 11,916 11,475
Right of use assets 6,495 6,095 6,934
Property, plant and equipment 24,932 17,400 20,489
Financial asset at amortised cost 180 168 174
Total non-current assets 43,846 37,876 39,451
Current assets
Inventories 4 76,825 47,003 58,840
Trade and other receivables 28,634 33,073 19,657
Cash and cash equivalents 253,749 317,738 282,557
359,208 397,814 361,054
Assets held for Sale 8 - - 1,814
Total current assets 359,208 397,814 362,868
Current liabilities
Trade and other payables (63,373) (49,785) (46,081)
Provisions 5 (16,739) (19,702) (17,893)
Lease liability (646) (755) (943)
Total current liabilities (80,758) (70,242) (64,917)
Net current assets 278,450 327,572 297,951
Non-current liabilities
Lease liability (6,617) (6,271) (6,866)
Provisions 5 (38,253) (20,034) (35,028)
Total non-current liabilities (44,870) (26,305) (41,894)
Net assets 277,426 339,143 295,508
Equity
Share capital 30,844 30,808 30,823
Share premium 542,698 542,461 542,593
Merger reserve (1,973) (1,973) (1,973)
Foreign exchange reserve 20 (248) 172
Retained loss (294,163) (231,905) (276,107)
Total Equity 277,426 339,143 295,508
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Results for the six months ended 31 October 2023
Share capital Share premium Merger reserve Foreign Exchange reserve Retained loss Total
£'000 £'000 £'000 £'000 £'000 Equity
£'000
At 1 May 2023 30,823 542,593 (1,973) 172 (276,107) 295,508
Transactions with Owners
Issue of shares 21 105 - - - 126
Credit to equity for share based payment - - - - 159 159
Total Transactions with Owners 21 105 - - 159 285
Loss for the period - - - - (18,215) (18,215)
Other comprehensive income - - - (152) - (152)
Total comprehensive income - - - (152) (18,215) (18,367)
At 31 October 2023 (unaudited) 30,844 542,698 (1,973) 20 (294,163) 277,426
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 2022 30,658 542,323 (1,973) 12 (176,067) 394,953
Transactions with Owners
Issue of shares 165 270 - - - 435
Credit to equity for share based payment - - - - 1,161 1,161
Total Transactions with Owners 165 270 - - 1,161 1,596
Loss for the year - - - - (101,201) (101,201)
Other comprehensive income - - - 160 - 160
Total comprehensive income - - - 160 (101,201) (101,041)
At 30 April 2023 (audited) 30,823 542,593 (1,973) 172 (276,107) 295,508
CONSOLIDATED CASH FLOW STATEMENT
Results for the six months ended 31 October 2023
Note Six months to 31 October 2023 (unaudited) Six months to 31 October 2022 (unaudited) Year ended 30 April 2023 (audited)
£'000 £'000 £'000
Net cash used in operating activities 6 (27,533) (41,818) (72,554)
Investing activities
Investment in associate and joint venture - (428) (472)
Purchases of property, plant and equipment (5,726) (3,549) (8,553)
Capital grants received against purchases of non-current assets - 4 124
Proceeds on disposal of non-current assets 30 - -
Payments for intangible assets (1,279) (3,667) (6,562)
Interest received 6,263 1,247 4,562
Net cash used in investing activities (712) (6,393) (10,901)
Financing activities
Issue of ordinary share capital 126 900 1,048
Costs associated with fund raise - (612) (612)
Payment of lease liabilities (645) (165) (531)
Net cash (used in) / generated from financing activities (519) 123 (95)
Decrease in cash and cash equivalents (28,764) (48,088) (83,550)
Cash and cash equivalents at the beginning of period 282,557 365,882 365,882
Effect of foreign exchange rate changes (44) (56) 225
Cash and cash equivalents at the end of period 253,749 317,738 282,557
The interim summary accounts were approved by the board of Directors on 30
January 2024.
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, 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.
As permitted, this interim report has been prepared in accordance with the AIM
rules and not in accordance with IAS 34 "Interim financial reporting".
The information relating to the year ended 30 April 2023 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 2023.
Going Concern
The Directors have prepared a cash flow forecast for the period ending 28
February 2025. This forecast indicates that the Group and parent 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.
By the end of the period analysed, the Group expect to hold funds sufficient
to trade for a minimum of a further year if the business continued to operate
in a similar way beyond the forecast period.
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 2023 (unaudited) Six months to 31 October 2022 (unaudited) Year ended
£'000 £'000 30 April 2023 (audited)
£'000
Revenue from product sales recognised at point in time 4,892 1,751 4,099
Consulting contracts recognised at point in time 1,883 - 636
Maintenance contracts recognised at point in time 480 169 250
Fuel sales 117 111 244
Other 1,511 - -
Revenue in the Consolidated Income Statement 8,883 2,031 5,229
Grant income (claims made for projects) - 52 155
Other government grants (R&D claims) 225 123 1,419
Grant income in the Consolidated Income Statement 225 175 1,574
9,108 2,206 6,803
The "Other" category includes contractual revenues recognised at point in time
but not classified elsewhere as not involving the transfer of goods or the
completion of maintenance or consultancy services.
Revenues from major products and services
The Group's revenues from its major products and services were as follows:
Six months to 31 October 2023 (unaudited) Six months to 31 October 2022 (unaudited) Year ended
£'000 £'000 30 April 2023 (audited)
£'000
Power-to gas 19 107 126
Refuelling 2,545 173 2,717
Industrial 4,241 1,751 1,750
Other 2,078 - 636
8,883 2,031 5,229
The "Other" category contains consultancy values that cannot be allocated to a
single product group.
GEOGRAPHIC ANALYSIS OF REVENUE
A geographical analysis of the Group's revenue is set out below:
Six months to 31 October 2023 (unaudited) £'000 Six months to 31 October 2022 (unaudited) £'000 Year ended
30 April 2023
(audited)
£'000
United Kingdom 1,912 45 699
Germany 2,582 1,751 1,750
Austria 1,660 - -
France 908 62 124
Netherlands - 62 64
United States 117 111 244
Australia 1,704 - 2,348
8,883 2,031 5,229
The following accounted for more than 10% of total revenue:
Six months to 31 October 2023 (unaudited) Six months to 31 October 2022 (unaudited) Year ended
£'000 £'000 30 April 2023 (audited)
£'000
Customer A N/A 1,751 1,750
Customer B 1,698 N/A 636
Customer C 1,266 N/A N/A
Customer D <10% N/A 2,348
Customer E 1,316 N/A <10%
Customer F 1,660 N/A N/A
Customer G 903 <10% <10%
Customer H 1,064 N/A N/A
3. Calculation of Adjusted EBITDA
In reporting EBITDA, management use the metric of adjusted EBITDA, removing
the effect of the non-repeating costs that are not directly linked to the
trading performance of the business in the period under review:
Six months to 31 October 2023 (unaudited) Six months to 31 October 2022 (unaudited) Year ended
£'000 £'000 30 April 2023 (audited)
£'000
Loss from operations (23,572) (56,160) (103,713)
Add back:
Depreciation 1,766 1,318 3,006
Impairment - 1,193 4,469
Amortisation 624 482 942
Loss on disposal of property, plant and equipment 39 35 64
Share based payment (credit) / charge 159 (952) (420)
Exceptional costs of restructure - - 1,436
(20,984) (54,084) (94,216)
4. Inventories
October 2023 October 2022 April 2023
£'000
£'000 £'000
Raw Materials 9,367 36,013 18,308
Work in progress 67,458 10,990 40,532
76,825 47,003 58,840
Inventories are stated after a provision for impairment of £21.0 million
(October 2022: £18.1 million; April 2023: £17.8 million). Included in work
in progress is inventory that has yet to be assigned to a specific contract.
At the point that the work in progress is assigned to a contract, and it is
loss-making, the work in progress will be reduced to recoverable value, which
will be offset by an equal and opposite reduction in the contract loss
provision. Inventory has increased as we have continued to scale up production
towards contract fulfilment.
5. Provisions
Half year to October 2023 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 2023 (896) (3,854) (42,630) (5,326) (215) (52,921)
Provision created in the period (23) (249) (11,645) (2,049) - (13,966)
Use of the provision - 452 11,396 - 21 11,869
Transfer between provisions - (161) 161 - - -
Release in the period - - - - 26 26
Balance at 31 October 2023 (919) (3,812) (42,718) (7,375) (168) (54,992)
In the balance sheet:
Expected within 12 months - (2,979) (7,211) (6,549) - (16,739)
(current)
Expected after 12 months (919) (833) (35,507) (826) (168) (38,253)
(non-current)
Full year to April 2023 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 year (42) (3,219) (44,810) (4,059) - (52,130)
Use of the provision - 2,303 14,673 1,615 18,591
Release in the year - - - 63 2,323 2, 386
Balance at 30 April 2023 (896) (3,854) (42,630) (5,326) (215) (52,921)
In the balance sheet:
Expected within 12 months - (676) (12,437) (4,565) (215) (17,893)
(current)
Expected after 12 months (896) (3,178) (30,193) (761) - (35,028)
(non-current)
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)
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 current best estimate of the potential
costs involved in diagnosing and correcting faults and the likelihood of such
faults occurring during the warranty period. These assumptions are built upon
our ongoing assessment of the performance of our products and their components
both in the field and in our testing facilities. They are reviewed and revised
as more information becomes available. If it becomes known that additional
work is required, then the provision is extended. Risks around this judgement
are high given the limited data ITM Power has available, and the potentially
large values involved in making warranty repairs, particularly if stack
components require replacement. The assumptions made for the warranty
provision were based on field data from older generation stacks, adjusted to
take account of product improvements planned or implemented since they were
built. Management believes that these improvements are realistic and
deliverable within the timescales projected.
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. Furthermore, the Group
uses software to track the risks and opportunities of each project. This gives
a potential cost and risk rating for active risks and has been reviewed by
management at period end to determine if any additional contingency should be
recognised.
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. It also represents management's best current
estimate of monies that could be refundable to grant bodies for non-completion
of works.
Lastly, 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 2023 (unaudited) Six months to 31 October 2022 (unaudited) Year ended
£'000 £'000 30 April 2023 (audited)
£'000
Loss from operations (23,572) (56,160) (103,713)
Adjustments:
Depreciation of property, plant and equipment 1,766 1,318 3,006
Loss on disposal of property, plant and equipment 39 35 64
Impairment - 1,193 4,469
Amortisation 624 482 942
Share based payment (as seen through equity) 159 711 1,161
Foreign exchange on intercompany transactions (112) (272) (137)
Operating cash flows before movements in working capital (21,096) (52,693) (94,208)
Increase in inventories (17,985) (14,805) (26,642)
(Increase) / decrease in receivables (7,458) (7,548) 5,852
Increase in payables 17,292 15,488 11,787
Increase in provisions 2,048 17,989 31,152
Cash used in operations (27,199) (41,569) (72,059)
Interest paid (272) (249) (495)
Income taxes paid (62) - -
Net cash used in operating activities (27,533) (41,818) (72,554)
Cash Burn
Cash burn is a measure used by key management personnel to monitor the
performance of the business.
Six months to 31 October 2023 (unaudited) Six months to Year ended
£'000 31 October 30 April 2023 (audited)
2022 (unaudited) £'000
£'000
Decrease in Cash and Cash equivalents per the cash flow statement (28,764) (48,088) (83,550)
Effect of foreign exchange rates (44) (56) 225
Less share issue proceeds (net) (126) (288) (436)
Cash Burn (28,934) (48,432) (83,761)
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 arm's length.
During the period purchases from Linde/BOC Group, represented on the Board by
J Nowicki, totalled £0.3m (H1 2023: £0.3m; YE 2023: £0.8m) with £0.1m
outstanding for payment at period-end (H1 2023: £0.1m; YE 2023 £0.1m). There
were also milestone billings on sales contracts of £6.8m (H1 2023: £9.4m; YE
2023: £15.3m) with £1.9m outstanding (H1 2023: £5.3m; YE 2023: £0.9m).
There were stage payments of £nil (H1 2023: £nil; YE 2023: £0.9m), and
£0.7m remained outstanding from ITM Linde Electrolysis GmbH at period end (H1
2023: £nil; YE 2023: £0.9m). The Group also continued to pay for the hosting
of ILE's website.
Transactions with Ecclesiastical Insurance Office PLC for the services of D
Cockrem, as Non-Executive Director on our Board, amounted to £0.06m with
£nil outstanding at period end (H1 2023: £nil with £nil outstanding; YE
2023: £0.03m with £nil outstanding).
Transactions with Motive Fuels Limited amounted to £0.3m in the period (H1
2023: £0.1m with £0.3m outstanding, YE 2023: £0.4m with £0.2m
outstanding). The sale of Motive to a third party was agreed on 19 October and
the company was therefore no longer part of the Group at period end.
8. Disposal of Motive Joint Venture
The joint venture investment in Motive Fuels Limited was moved into "Held for
Sale Assets" towards the end of last financial year (£1.8m). Subsequently, as
mentioned above, the sale of Motive to a third party was agreed on 19 October
for a sum of £1.5m. The resulting loss of £0.3m is shown as a loss on
disposal of joint venture in the income statement. The monies were paid across
from the solicitors post-period end so no transaction is currently recognised
in the cash flow statement but the receivable is recognised within current
assets on the balance sheet.
9. Subsequent events
Since the balance sheet date the company has signed a 15-year lease to extend
our manufacturing footprint in Sheffield.
Independent review report to ITM Power PLC
Conclusion
We have reviewed the summary accounts in the half-yearly financial report for
the six months ended 31 October 2023 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 accounts in the half-yearly financial report for the
six months ended 31 October 2023 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 condensed 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 2024
-ends-
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