REG - ITM Power PLC - ITM Power PLC: Final Results
17/08/2023 07:00
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RNS Number : 6229J ITM Power PLC 17 August 2023
17 August 2023
ITM Power PLC
("ITM Power" or the "Company")
Preliminary results
Gaining traction - Our journey to volume manufacturing and rapid deployment
ITM Power (AIM:ITM) announces its final results for the year ended 30 April
2023
HIGHLIGHTS
Final results summary
· Revenue of £5.2m (FY22: £5.6m) significantly ahead of guidance of
£2m
· Adjusted EBITDA loss of £94.2m (FY22: £39.8m)* in line with the
£85m to £95m guidance
· Net cash at the year end of £283m (FY22: £366m) ahead of guidance
of £245m to £270m
* Adjusted EBITDA is a non-statutory measure. The calculation methodology is
set out in Note 4
The financial performance for the year is in line with, or ahead of, the
expectations set at the year end trading update on 1 June 2023. Our 12-month
plan, including stringent cash control in the second half of the year, led to
higher revenue and a stronger balance sheet position compared to the revised
guidance.
Strategic update: Good progress made against our 12-month priorities plan
· Product portfolio significantly simplified, concentrating on our core
product suite, with mature engineering processes and robust product
validation, preparing for manufacturing at scale
· A rigorous approach to capital allocation and cost management,
including a significant reduction in headcount enabling us to reinvest
faster to professionalise important areas such as engineering and
manufacturing
· Debottlenecking fabrication and testing by incremental automation,
expansion of our factory in Sheffield, and investment into ITM Power Germany
Financial guidance for FY24
· Revenue expected to increase to between £10m and £18m from
commercial projects in execution
· Adjusted EBITDA loss improving with growing output/sales and expected
to be in the range of £45m to £55m
· Net cash at year end expected to be in the range of £175m to £200m
after significant capital investment in capacity expansion, including power
supply upgrades
Commenting on the results, CEO Dennis Schulz said:
"I have been at ITM for just over half a year, joining the company at a time
of challenging operational and financial performance, and it is encouraging to
see the amount of progress we have been making against our 12-month plan laid
out in January 2023. The implementation, which is moving at pace, will
strengthen our operational and commercial capabilities, and steer a successful
path to becoming a highly efficient and reliable volume manufacturing company.
Whilst some revenues related to product deployments have yet to be recognised
at customer site acceptance testing, I am very proud that more products have
left the ITM factory over the past six months than in the previous 22 years of
its history. This is a testament to tangible progress on our transformation
journey.
Our technology is state of the art and globally leading. We are deploying our
electrolysers for some of the largest and most prominent green hydrogen
projects under execution worldwide today. These projects will serve as
important reference plants and play a crucial role in building confidence
with customers for even larger deployments in the future.
The big demand for green hydrogen lies yet ahead, and ITM will be ready!"
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
James Collins, Head of Corporate Affairs +44 (0)114 551 1205
Investec Bank plc (Nominated Adviser and Broker) +44 (0)20 7597 5970
James Rudd / Chris Sim / Ben Griffiths
There will be a presentation for investors at 0900h BST on the Investor Meet
Company platform. Investors can sign up to Investor Meet Company for free
and add to meet ITM POWER PLC via:
https://www.investormeetcompany.com/itm-power-plc/register-investor
(https://www.investormeetcompany.com/itm-power-plc/register-investor) .
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.
STATEMENT FROM THE CHAIR OF THE BOARD
The past year has been one of significant change for the Company. Our new CEO,
Dennis Schulz, joined us in December 2022, and he has brought a fresh
perspective and a renewed focus, putting into place a 12-month plan which is
laying strong foundations for our future growth aspirations.
Against a backdrop of an unacceptable operational and financial performance
for the year as a whole, our results are above or in line with the guidance
provided in January 2023 with a net cash position at the year end of £283m
and our balance sheet in a healthy position.
Previously, 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 had set unrealistic targets for project completion.
As a Board, we acted swiftly by appointing Dennis Schulz as our new CEO
and he promptly developed a 12-month plan to address the underlying
challenges of the Group. This included a three-step strategy to simplify
our product portfolio, reduce our expenditure and debottleneck our
manufacturing facilities. As part of this we completed a restructuring of
our organisation including reducing our headcount. The re-sizing of our
business was difficult, but necessary from an operational and financial
perspective and the changes will support the long-term success of our
business. Those colleagues who remain in the business today are extremely
passionate about what they do. By having a clarity of purpose I know that
together we will achieve great things in the future and the Board thanks
our employees for their continued commitment and support.
The macro picture
The world is in a race to net zero emissions by 2050. This means that
we need to reduce our greenhouse gas emissions to zero, or close to zero,
in order to avoid the worst effects of climate change. Whilst the current
global energy crisis poses a threat to near-term economic prospects, it
has strengthened the economic case for accelerating the shift away from
fossil fuels by driving investments in renewables, energy efficiency and
other clean energy technologies.
One of the key technologies that will help us achieve net zero is green
hydrogen which can replace traditional grey hydrogen in existing industrial
applications in the near term as well as being a substitute for a variety of
fuels and feedstocks in the long run.
Governments around the world are setting ambitious targets for
decarbonisation, and hydrogen is seen as a key part of the solution.
To address this, it is imperative that all of the components of the value
chain are synchronised with the build-up of hydrogen supply and demand. It is
clear that we are entering a period of significant growth for the hydrogen
industry and the emergence of a global hydrogen marketplace is now inevitable.
We are well-positioned to capitalise on this growth opportunity. We have a
strong team, a leading technology, and a clear vision for the future. We are
confident that we can grow our business and make a significant contribution to
the global effort to decarbonise the economy.
Environmental, social and governance (ESG) objectives
We are dedicated to delivering robust ESG performance out of a desire to
uphold ethical standards. The fact that we kept our MSCI "AA" rating for a
third consecutive year shows that the Company's ESG practices are well
aligned with shareholder interests, and we are proud of this achievement.
It also indicates that we are a business that is setting the standard for how
our sector manages the biggest ESG risks and opportunities.
Board changes
Denise Cockrem was appointed as a Non-Executive Director from July 2022.
Denise is Group Chief Financial Officer of Ecclesiastical Insurance Office
plc, a specialist insurance provider that is part of the Benefact Group - a
charity owned, international family of financial services companies that exist
to donate profits to good causes. She joined Ecclesiastical Insurance Office
plc in August 2018 from Good Energy Group plc, an AIM-listed renewable
electricity company where she was Chief Financial Officer.
Helen Baker stepped down as Company Secretary in September 2022
and we welcomed Vicky Williams into her role in November 2022.
Dr Graham Cooley stepped down from his role as CEO after 13 years in the post
in December 2022. Graham was responsible for leading the Company through a
period of significant development and he remains a sizeable and very
supportive shareholder.
Dennis Schulz joined as CEO in December 2022. He brings a wealth
of experience from Linde Engineering which includes project execution,
strategy and a period as Chief Financial Officer and Managing Director. More
importantly, Dennis knows our senior management and technology very well,
having been directly involved in our strategic relationship with Linde, and
brings deep insight into the green hydrogen market and our customer base.
Dr Rachel Smith stepped down from the Board on 30 January 2023. With her
knowledge, expertise and passion for the Company, Rachel was 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 as Special Projects Director.
Katherine Roe has announced her intention not to seek re-election to the Board
at the 2023 AGM. The Board wishes to express enormous gratitude to Katherine
for her contribution over the last three years, particularly with the
development of our ESG strategy and supporting the business during a
period of significant change. Katherine has been a valued member of the team
and the Board wishes her well in her future career. The Board will not
be replacing Katherine at this juncture, thereby reducing the number of
Non-Executive Directors from five to four. This is in line with the change
made to the number of Executive Directors which reduced from four to
three upon Dr Rachel Smith's departure from the Board in early 2023. The
Board is confident the balance of executives to non-executives therefore
remains appropriate for a company of our size.
Looking ahead
Following the significant changes which we have made to our business, we are
confident that we are well-positioned to capitalise on the significant
opportunities in the green hydrogen economy that lie ahead. We have a
clear plan in place, a renewed focus and a dedicated team that is committed
to delivering results. We will continue to invest in our core technology along
with the automation of our manufacturing processes, which will allow us to
stay ahead of the curve. The investments we are making today will ensure that
we can grow into a profitable business in the future.
In closing, I would like to thank our shareholders, employees, and customers
for their continued support and confidence in our business. We remain
committed to delivering value to our shareholders and creating a sustainable
future for our Company.
Sir Roger Bone
Chair of the Board
CHIEF EXECUTIVE OFFICER'S STATEMENT
I have been at ITM for just over half a year and it is encouraging to see the
early progress we have been making against our 12-month priorities plan laid
out in January 2023. The implementation, which is moving at pace, will
strengthen our operational and commercial capabilities. When I chose to
join as CEO, it was because I believe in ITM's core technology and in the
important role green hydrogen will play in the energy transition. I welcomed
the opportunity to help ITM steer a successful path from the development
of first-of-a-kind technology to becoming a highly efficient and reliable
technology and manufacturing company. I did not underestimate the challenge to
transform ITM into a mature delivery organisation, but the majority of changes
required are about basics such as the organisational structure,
accountability, processes, controls and tools.
Whilst there is still a lot to accomplish at ITM, six months into our 12-month
plan, we should not overlook the significant steps forward we have already
made in such a short period of time. Operational excellence, what we strive
for, is a consistent way of working that delivers on our goals, activating the
entire organisation to continuously get better every day at achieving our
purpose. It is about culture, about behaviours, mindsets, and daily practices
that are intrinsically linked to our purpose and values as a company. By
slowing down and focusing on doing things right the first time, essentially
prioritising quality over quantity, we have already gained traction and speed.
This shift in culture to become a professional and credible organisation ready
for volume manufacturing has started taking effect. The transformation is
evident in our day-to-day behaviours already, and it is imperative that we
maintain this momentum. Whilst some revenues related to product deployments
have yet to be recognised at customer site acceptance testing, I am very proud
that more products have left the ITM factory over the past six months than in
the previous 22 years of its history.
Our PEM technology is state of the art and globally leading, more on this
later. We are deploying our electrolysers for some of the largest and most
prominent green hydrogen plants under execution worldwide today such as for
Linde in Leuna (24MW), for Yara in Porsgrunn (24MW), and for RWE in Lingen (2x
100MW). These projects will act as important reference plants and play a
crucial role in building confidence with customers for even larger deployments
in the future.
Over the past six months, we deliberately took a less active approach to
bidding for new projects as we did not want to overload the Company at the
same time as fixing important fundamentals which were holding us back from
scaling. This has coincided with what we believe is a temporary slowdown of
final investment decisions (FIDs) being taken by customers, which has given us
breathing space to enact our 12-month plan without missing out on the growing
market demand for electrolysers. Given our progress, we have now started to be
more active in the market again, although we will continue to be selective
to ensure that we can deliver a robust and reliable product on time and on
budget, and that projects contribute positively to our margin.
The market for green hydrogen
Climate change, decarbonisation and energy independence imperatives continue
to fuel the projected hydrogen demand. Collectively, societies worldwide have
decided to decarbonise their industries, which, as one important pillar,
requires the synchronised build-up of a hydrogen economy. This endeavour is
underway in three dimensions and at very ambitious speed:
First, hydrogen production, preferably green based on renewable energy and
electrolysis, or blue as a bridging technology to temporarily lower the carbon
footprint of the installed capacity of fossil-based hydrogen production,
before eventually transitioning to truly clean green hydrogen.
Second, hydrogen transport and storage infrastructure, mainly via pipelines
and caverns, also to unlock the energy grid balancing potential of hydrogen.
Third, applications and use cases around combustion, reconversion to
electricity, e.g. for grid balancing or the electrification of industrial
processes, or onward processing to ammonia or methanol for example. This
build-up requires a vast amount of capital to be deployed, and governments
around the world are trying to create environments which are conducive to
accelerated investment.
The International Energy Agency (IEA) sees an increased focus on renewables,
now being 30% higher than forecasted just a year ago. This follows governments
throwing additional policy weight behind renewables over the past 12 months.
They estimate that renewables are set to account for more than 90% of global
electricity expansion over the next five years.
In its latest World Energy Transition Outlook, the International Renewables
Energy Agency (IRENA), stated that clean hydrogen production needs to rise to
518 million tonnes (mt) per annum by 2050 from the current level of 0.7mt per
annum. To achieve this goal, IRENA estimates that the world would require
5,722GW of electrolyser capacity which compares to its latest estimated
deployed capacity of just 0.5GW.
The European Green Deal is the EU's strategy for a climate-neutral, clean
and circular economy by 2050, which recognises the need for transformative
policies. The REPowerEU plan published in May 2022 foresees significant
investment in renewables as well as clean technology manufacturing. The EU's
ambition is to produce 10mt and to import 10mt of green hydrogen by 2030. In
March 2023, the European Commission proposed the Net-Zero Industry Act to ramp
up manufacturing of clean technologies, including green hydrogen. At the same
time the Commission announced the new European Hydrogen Bank (EHB), which
amongst other things will provide financing mechanisms to help create the
domestic market for green hydrogen. In total, the EU estimates that
investments of €335bn to €471bn are required to achieve 10mt of green
hydrogen production.
In the UK, the Government's Hydrogen Strategy is aiming for 10GW of clean
hydrogen production by 2030 with at least half of it being green hydrogen. The
hydrogen net zero investment roadmap includes a number of elements, among them
a Net Zero Hydrogen Fund, worth up to £240m to support the development and
deployment of new low carbon hydrogen production, a Production Business Model
to ensure long-term revenue support and a Low Carbon Hydrogen Standard to
enable market access and certainty for end use.
In the US, the government has enacted two laws, the Infrastructure Investment
Jobs Act (IIJA) of 2021 and the Inflation Reduction Act (IRA) of 2022, to
boost infrastructure development. The IIJA has budgeted $1.2trn
for infrastructure spending, of which $550bn are dedicated to creating new
infrastructure, and the IRA has earmarked $370bn for energy-related spending.
The IRA is a game changer aimed to support the decarbonisation of the US
economy and to develop a domestic clean-technology supply chain.
But how do these huge numbers translate into real business scale-up? Looking
at electrolyser manufacturers alone, growing by a factor higher than 100x in
just a few years requires laser-sharp focus and discipline. It also requires
our suppliers to scale with us. Every step of the value chain needs
substantial investments and risk-taking to grow at this pace. Therefore, to
take uncertainty out of the equation as much as possible, we require
commercial projects to scale with as well as continued government support and
funding, all of which are critical enablers, together with stable regulatory
frameworks and quick grant decisions. Ultimately, only building real physical
plants will make the hydrogen economy and energy transition real.
There are, however, a number of obstacles which have delayed customer projects
reaching a Final Investment Decision (FID). These obstacles comprise current
peak electricity prices, with electricity cost being the key determinator for
the production cost of green hydrogen, inflation leading to rising project
and capital cost, and uncertainty regarding regulatory frameworks which are
partly still evolving, as well as delayed funding decisions by governments due
to bureaucratic hurdles. As a result, projects are piling up, as industries
continue to face increasing carbon taxation and ever tighter regulatory limits
for carbon emissions. For ITM, this slowdown of investments, which we believe
is temporary, came at the right time to give us the breathing space required
to focus on implementing our 12-month plan to solidify our foundations as a
company, while integrating closer with and advancing our supply chain, all of
which is required for true upscaling of volumes and global expansion.
In summary, the global green hydrogen market and electrolyser demand are
expected to see strong growth in the coming years, driven by the need to
decarbonise, favourable government policies, increasing investments, and use
cases in a wide range of industries. It is now certain that green hydrogen
will play a significant role in the energy mix of the future, and we expect to
see continued momentum in this market in the years to come.
Update on our 12-month priorities plan
As ITM is transitioning to a volume manufacturer, we are now six months
into our 12-month plan announced in January 2023 to solidify our foundations
and have made substantial progress in our three focus areas:
1. concentrate on a standardised core product suite for repeatable and
reliable volume manufacturing;
2. improve capital discipline by a stringent cost reduction programme in
the short-term, and by introducing professional processes for the future; and
3. debottleneck and ramp up fabrication and testing, and invest into
incremental automation.
In parallel, we are delivering against our project commitments, thereby
completing important reference plants.
Products
When I joined, ITM had a product portfolio that was too wide and the services
we provided to support older generation technologies were disruptive to our
manufacturing process and became too costly.
We have now rationalised our portfolio so that we can concentrate our efforts
on our core products, namely our state-of-the-art MEP30 stack platform and our
Plug & Play containers. We have discontinued design work for older product
iterations, and limited our activities to fulfilling remaining contractual
commitments and warranty obligations. This takes account of the fact that we
deem our MEP30 stack to be the most advanced PEM technology on the market
today.
Let me pick just three of various features which make our technology superior.
First, our stack is operating at by far the highest current density in the
market, which reduces material use, size and ultimately cost substantially.
ITM has already exceeded the EU's 2030 target of 2.5 A/cm(2) in 2019. Second,
our technology has market-leading conversion efficiency at levelised current
densities to any competitor, which reduces operational cost for the end
customer. This is because there is an inverse relationship between current
density and conversion efficiency. Third, our technology has the lowest
reported precious metal loading, which reduces cost and relieves potential
future supply chain constraints. Over the last 10 years, ITM have already been
able to reduce precious metal loading by 80%, and we are continuing to reduce
it even further. Since 2019, we have been meeting the EU's 2030 target of
0.4mg/W.
Today, once a product design is signed off, there will be no ongoing
iterations to that design and the product will be manufactured to the exact
design specifications, with standardised engineering processes and will be
delivered to our customers as per contractual agreements.
Research and development will continue to play a crucial role in ITM's future
but any new product generation will only be deployed once it has gone through
strict design, engineering, assembly, testing and validation processes.
Capital discipline and cost reduction
One of the first actions I took after assuming office in December 2022 was
to tighten control over ITM's capital spend. Decisions on the use of our
shareholders' capital have to align with our strategy and be scrutinised
for appropriateness and effectiveness.
The headcount reduction that we announced in January 2023 was successfully
completed before year end, with the outcome greater than the 25% FTE reduction
we had originally planned. This allowed us to reinvest the incremental cost
savings back into the business and to selectively rehire for qualification and
experience. We were able to continue business operations without disruption
whilst also providing adequate care and support for all employees placed at
risk during the restructure process.
One core element of our 12-month priorities plan is a very detailed list of
process, control and tool improvements spanning the entire organisation,
to professionalise our operations and make us a highly focused delivery
company. By implementing these improvements, we will avoid inventory
and project losses as experienced during FY23. Among various improvements,
this includes the following which we have already achieved.
We have effectively professionalised our engineering capabilities and
processes. Following a structured design Failure Mode and Effects Analysis
(FMEA), the engineering is now completed and frozen. Changes are
properly controlled and only released in well-managed versions for
procurement and manufacturing, and only after robust validation. Our
strengthened compliance and validation team plays an important role in
challenging and accompanying this process.
The right selection of reliable and high-quality suppliers, and close
integration with them, are important enablers to scale our operations.
Previously, at times, procured components and parts were not of sufficient
quality. We have therefore been tightening our purchasing specifications,
have strengthened our standard terms and conditions, and are improving
supplier oversight, quality assurance and control.
We have also made good progress on the way we manufacture our products
following the design FMEA, our progress on automation, which I elaborate more
on later, and driven by an unambiguous "quality over quantity" culture. These
improvements have already led to significantly higher pass rates in factory
testing which in turn lowers retesting costs, supports the debottlenecking of
our test facilities, and causes fewer interruptions to serial manufacturing
due to avoided stack re-assembly. Also, consequentially, our production and
project delivery schedules become more predictable.
Sales and project execution governance has been strengthened around the focus
on standard products as opposed to customised solutions, which was one of the
reasons for previous cost and schedule underestimation and resulting project
overruns. We have reviewed and concluded on acceptable contract terms,
liability and warranty profiles. Furthermore, we are working on improving our
cost estimation, scheduling and risk management processes and capabilities. We
are also continuing to enhance our competencies by hiring senior industry
professionals in areas critical for project delivery.
By having signed the Heads of Terms for the sale of Motive, we aim to complete
the transaction still within this calendar year. This will free up £28m of
pre-committed capital investment to be re-purposed to our core business.
Debottlenecking
We have made good progress in this area in a short space of time. In March, we
announced the expansion of our testing capacity at Bessemer Park, initially by
50% from 5.0 to 7.5 megavolt-amperes (MVA) which is already available. This
will be followed by a further fourfold increase to 30 MVA by the end of 2024.
In April, we announced the decision to expand our facilities at Bessemer Park
in Sheffield, to make space for R&D and product validation including
science labs and first-of-a-kind product testing facilities. This will also
allow us to optimise our factory layout for stack fabrication from a layout
which evolved over time to one that is geared up for automation and serial
production. It also provides increased fabrication space for higher stack
volumes, allowing ITM to grow output in line with commercial projects. We plan
to take over our new facilities in Q4 2023 for interior fit-out.
We also announced a significant expansion in Germany. ITM Power Germany will
officially open its doors in Linden, north of Frankfurt, in October 2023. This
expansion further strengthens our position as a leading manufacturer
of large-scale electrolysers for projects in Germany and wider Europe. In its
initial fit-out, our facilities will have sizable office space, and a
warehouse with special equipment for storing our stacks in lightweight skids
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 also house facilities for repair and maintenance, as well as
for training of customers and partners. This expansion will not only support
responsive aftersales in the heart of the EU as our core market today, but
will also be home for various business functions that are enablers for ITM's
accelerated growth, including our global business development function, our
industrial Internet of Things (IoT) team, various engineering disciplines,
aftersales technicians, field engineers, procurement and other functions. As
we are scaling our operations, this is a major step in gearing up for an
increasing degree of local content creation in the EU.
Manufacturing automation plays an important role in reducing human
error, improving precision, optimising build quality and consistency,
reducing manufacturing costs, accelerating output and reducing delivery
lead times. We have made good progress against our automation roadmap and are
incrementally introducing automation in a controlled way, after new equipment
and new processes have been validated.
Over recent months we have automated or semi-automated a number of
manufacturing processes. Among them a customised press, capable of operation
at 20 tonnes of pressure, with micron-level accuracy. This enables the
thickness of critical components to be measured under compression and for
precision build. Advanced laser scanning now allows us to inspect every
electrode structure for surface conditions at micron level. We developed a
resistance welding machine in-house to assemble stack components with
the highest precision. Our new automated catalyst ink mixing produces
consistent pastes for our catalyst coated membranes, increasing both quality
and volume. Another improvement is our new use of fully integrated guided
stack assembly which supports our technicians to avoid rework and increase
productivity. This advanced sensor, laser-scanning projection and camera
system provides build oversight and documents each step so that we can quickly
identify, diagnose and remediate potential build errors. Our automation
roadmap foresees many further improvements, which will continue to drive down
build time and improve build quality and consistency. As we continue to
implement these advancements, we are entering a new era of manufacturing at
ITM.
Outlook
We are well on track to deliver our 12-month priorities plan which will lay
strong foundations for ITM's continued growth. The green hydrogen market
is still in its early stage, but evolving rapidly.
With vastly increased confidence with regards to our capability to deliver
products at volume, we are now taking a much more active approach to sales.
For this purpose, we are currently building up a new global business
development function in our new Linden facilities of ITM Power Germany right
in the heart of our core market, the EU.
As ITM is increasingly deploying stacks into the field in commercial projects
today, a rapidly growing amount of real-world performance data will enable us
to drive advancements in the areas of core technology and product
improvements, development of new business models around remote
monitoring/operations and predictive maintenance, as well as commercial
certainty around tightened system performance guarantees. These activities
will be led by our Data and Industrial IoT team which we are now building up.
Whilst we will retain our strong presence in Sheffield, ITM will expand
towards an increasingly global footprint, thereby tapping into important
growth markets and unlocking access to new talent pools.
The big demand for green hydrogen lies yet ahead, and ITM will be ready!
Dennis Schulz
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S REVIEW
The financial outcome in FY23 was not as we had originally expected. Following
the arrival of Dennis Schulz as our new CEO, a detailed review of the business
was undertaken which resulted in the announcement of our 12-month priorities
plan in January. One of the three components of the plan was the focus around
our cost and capital discipline and we announced our intention to stop the
excessive financial outflows through a stringent short-term cost reduction
programme which addressed the key costs, together with a more rigorous
approach to capital investment.
The first step was the headcount reduction which was completed before the end
of the financial year. We have also undertaken a detailed review of other
cost areas which culminated in provisions being taken for inventory and
contract losses, reflecting both actual costs to incur and uncertainty in
project execution. In addition, we undertook a detailed review of our
warranty provision policy on first-of-a-kind (FOAK) technology deployed in the
field.
Today, we are in a much better place. Our overheads have been right-sized
for the business needs of today, we have greater clarity regarding our costs,
and our balance sheet remains strong. However, there remains more to do
in the months ahead.
During the year we introduced a new Enterprise Resource Planning (ERP) system,
which includes the ongoing adoption of Microsoft Dynamics into our financial
processes replacing a number of legacy systems. Having begun to lay the
foundations for growth, we will continue to advance our competencies and
capabilities across the Company and ensure that controls across all areas of
the business continue to be reviewed and improved. This in turn will further
enhance our cost management and capital disciplines.
Key financials
A summary of the Group's key financials is set out in the table below:
Year to 30 April 2023 2022 2021
£m £m £m
Revenue 5.2 5.6 4.3
Gross loss (79.1) (23.5) (6.5)
Pre-tax loss (101.2) (46.7) (27.6)
Adjusted EBITDA(1) (94.2) (39.8) (21.4)
Property, plant and equipment plus intangible assets 31.9 24.7 16.8
Inventory (raw materials) 18.3 24.3 3.9
Inventory Work in progress (WIP) 40.5 7.9 2.5
Net cash 282.6 365.9 176.1
Net assets 295.5 395.0 197.4
1 Adjusted EBITDA in a non-statutory measure. The calculation method is
shown in Note 4.
Non-financial key performance indicators (KPIs)
We also use certain non-financial performance indicators to consider our
performance over time. During the year, MW in WIP increased to 285MW (FY22:
75MW). Revenue was recognised against 5MW of deliveries (FY22: 11MW). The
Board also regularly reviews other non-financial performance criteria
including production throughput, testing and validation performance and labour
utilisation. As the Group matures to a volume manufacturer, it is likely that
we will refresh our non-financial KPIs to reflect the evolved business.
Financial performance
The principal ways in which we generate revenue and income are
through product sales, consulting contracts (FEED and feasibility studies),
maintenance contracts and grant funding.
Revenue
Revenue for the period was £5.2m (FY22: £5.6m). This consists of a partially
delivered cube project, a Plug & Play project which was accelerated ahead
of guidance, as well as maintenance and consultancy revenue.
Gross margin
The gross loss was £79.1m (FY22: £23.5m) reflecting increased losses
on inventory and customer contracts, and an assessment of warranty
commitments.
Costs recognised in the period relating to inventory were £22.6m,
constituting a £7.5m write-off, and a provision movement of £15.1m. The
losses originate from continued iterations of product designs during
manufacturing, together with some manufactured products being considered
obsolete.
Contract loss provisions relate to a number of factors including acceleration
measures for delayed projects, additional on-site engineering works, increased
energy and labour costs due to under-estimated stack testing times and future
costings updated for inflation. Net contract loss provisions increased by
£30.1m, with £44.8m created and £14.7m utilised in the period. The total
contract loss provision at the period end stood at £42.6m.
The warranty provision increased by a net £0.9m in the period with £3.2m
created during the year, offset by the utilisation of £2.3m. The balance at
period end was £3.9m. This includes all projects delivered at period end but
excludes those not yet delivered. The warranty costs of projects not yet
delivered are presented as contract loss provision.
Operating costs
Operating costs rose by 20% to £26.2m (FY22: £21.8m). Within this, staff
and employment costs rose from £4.3m to £11.4m, reflecting an increase
in use of contractor resources and a reduction in recovery of labour costs
from inventory. The headcount reduction which was announced in January 2023
was completed by the end of the period, and the benefit of this will be
reflected in the FY24 accounts.
Consultancy and consumable costs fell by 54% to £5.1m (FY22: £11.2m), whilst
depreciation and amortisation was relatively stable at £4.0m (FY22: £3.2m).
The impairment charge of £4.5m (FY22: £nil) relates to the write off of
discontinued product development (£3.1m) and tangible assets in relation to
discontinued site expansion plans (£1.4m) where activities ceased as part of
the 12-month priorities plan.
Government grants which constitute claims against individual projects
or research and development (R&D) claims totalled £1.6m (FY22: £0.6m),
with £1.4m receivable in relation to R&D tax reclaims (FY22: £0.3m).
Adjusted EBITDA(1)
The Company posted an adjusted EBITDA loss of £94.2m (FY22: £39.8m) for the
period. Adjusted EBITDA is a non-statutory measure and is detailed in Note 4.
The loss before tax was £101.2m (FY22: £46.7m) and the basic and diluted
loss per share was 16.5p (FY22: 8.1p).
1.Adjusted EBITDA is a primary measure used across the business to provide a
consistent measure of trading performance. The adjustment to EBITDA removes
certain non-cash items, such as share-based payments, to provide a key metric
to the users of the financial statements as it represents a useful milestone
that is reflective of the performance of the business resulting
from movements in revenue, gross margin and the cash costs of the business.
We have set out below how we calculate adjusted EBITDA (see also Note 4 for
more information).
2023 2022
£000 £000
Loss from operations (103,713) (44,736)
Add back:
Depreciation 3,006 2,340
Impairment 4,469 -
Amortisation 942 849
Loss on disposal 64 -
Fair value loss on loan notes - 344
Share-based payment charge (420) 1,429
Exceptional costs of restructure 1,436 -
Adjusted EBITDA (94,216) (39,774)
Capital expenditure
Capital expenditure totalled £15.1m in the period (FY22: £11.3m), with
£8.6m invested in capital projects (FY22: £4.2m), namely Bessemer Park
improvements and machinery, and £6.5m (FY22: £6.9m) in intangible assets
primarily in respect of continued product development.
Working capital
The working capital outflow during the year was £8.9m (FY22: £6.9m outflow),
with inventories increasing by £26.6m, offset by both a reduction in
receivables of £5.9m and an increase in payables of £11.8m.
Cash
Net cash at the year end was £283m (FY22: £366m) benefitting later in the
year from the rigorous approach to costs and capital disciplines which was
announced at the time of our interim results in January.
Financial position: positioned for the future
Current assets decreased to £362.9m (FY22: £423.6m) principally reflecting
a reduction in year-end net cash of £83.3m with year-end cash of £282.6m
(FY22: £365.9m), partly offset by an increase in inventories to £58.8m
(FY22: £32.2m) as the Group stocked up on raw materials to deliver its order
pipeline and saw work-in-progress increase ahead of the delivery of the Leuna,
Yara and other projects.
Trade and other receivables were £19.7m (FY22: £25.5m) reflecting a £4.1m
decrease in prepayments, primarily in relation to prepayments for inventory on
the balance sheet. Trade and other payables increased to £46.1m
(FY22: £34.3m), driven by an increase of £14.1m in deferred sales income
principally in relation to the timings of payments from customers on projects
to be delivered.
Fixed assets increased to £39.5m (FY22: £34.5m) reflecting a £4.9m rise in
property, plant and equipment and £2.4m of additional intangible assets.
Investments in associates and joint ventures reduced to £0.4m (FY22: £1.7m),
reflecting the booking of losses in these associates and joint ventures
against their holding value.
Events after the balance sheet date
At the time of our interim results update, we stated that we were exploring
options for the future of our joint venture Motive Fuels Ltd. We have now
signed Heads of Terms for the sale of the company. The 50/50 JV between ITM
and Vitol was established in March 2022 to develop and roll out hydrogen
refuelling stations in the UK. The vision of the JV partners was one of
building a significant UK refuelling business, with £30m committed by each
party as seed funding. However, one of the three priorities of our 12-month
plan is increased cost and capital discipline.
The planned transaction will allow ITM to redirect £28m of pre-committed cash
to our core business, and to focus on becoming a volume manufacturer of
state-of-the-art electrolysers. Motive Fuels Ltd, via ITM, was the recipient
of grant funding to support the rollout of refuelling stations in the UK. As
part of the transaction, a contingent liability may materialise for ITM in the
future against the performance obligations in the grants.
Outlook and financial guidance for FY24
We start the new financial year in a strong financial position and, whilst
our near-term focus is on the completion of our 12-month plan, we expect good
sales momentum, with investment in our people, our processes and
our assets. The guidance for FY24 is:
Revenue in the range of £10m to £18m
Revenue will be largely impacted by sales of Plug & Play containers which
have a shortened sales and deployment timeline compared to larger plant
projects. Under our revenue recognition policy, there is a dependency on site
readiness for our larger projects as these are recognised on site acceptance
testing (SAT).
Adjusted EBITDA loss of £45m to £55m
We expect to realise the benefits of improved testing times and improved first
time pass through rates during factory acceptance testing. Close and prudent
management of our in-flight projects and control of inventory will be required
to ensure that the unacceptable project and inventory losses experienced
during FY23 are not repeated. Our route to reducing losses further will be
built on profitable sales and volume growth.
Net cash at year end between £175m and £200m
Continued investment in the capability of the organisation will be needed
as we transition into a volume manufacturer. Investments of £24-30m will be
made to expand our facilities in Sheffield as well as the previously
announced upgrade to our power supply to support increased testing capacity.
We will also invest into the development of our technology, supporting
our automation roadmap which will drive efficiencies into our
manufacturing processes.
Andy Allen
Chief Financial Officer
CONSOLIDATED INCOME STATEMENT AND OTHER COMPREHENSIVE INCOME
Note 2023 2022
£000 £000 Restated£000 Restated
£000
Revenue 3 5,229 5,627
Cost of sales (84,294) (29,104)
Gross loss (79,065) (23,477)
Administrative expenses (26,222) (21,819)
Other income - government grants 3 1,574 560
Loss from operations (103,713) (44,736)
Share of loss of associate companies and joint ventures (1,567)
(10)
Finance income 4,652 325
Finance costs (541) (532)
Loss on deemed disposal of subsidiary - (1,710)
Loss before tax (101,169) (46,663)
Tax (32) (31)
Loss for the year (101,201) (46,694)
OTHER TOTAL COMPREHENSIVE INCOME:
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences on foreign operations 160 (71)
Net other total comprehensive income 160 (71)
Total comprehensive loss for the year (101,041) (46,765)
Basic and diluted loss per share 5 (16.5p) (8.1p)
All results presented above are derived from continuing operations and are
attributable to owners of the Company.
In the prior year, Operating costs previously presented as Research and
development, Production and engineering, Sales and marketing, Administration
expenses and Expected credit loss have been aggregated into Administrative
expenses to present costs by function.
CONSOLIDATED BALANCE SHEET
Note 2023 2022
£000 £000
NON-CURRENT ASSETS
Investments in associate and joint venture 379 1,662
Loan notes - 1,548
Intangible assets 11,475 9,081
Right of use assets 6,934 6,454
Property, plant and equipment 20,489 15,637
Financial asset at amortised cost 174 161
TOTAL NON-CURRENT ASSETS 39,451 34,543
CURRENT ASSETS
Inventories 58,840 32,198
Trade and other receivables 19,657 25,542
Cash and cash equivalents 282,557 365,882
361,054 423,622
Assets held for Sale 1,814 -
TOTAL CURRENT ASSETS 362,868 423,622
CURRENT LIABILITIES
Trade and other payables (46,081) (34,296)
Provisions 6 (17,893) (15,207)
Lease liability (943) (626)
TOTAL CURRENT LIABILITIES (64,917) (50,129)
NET CURRENT ASSETS 297,951 373,493
NON-CURRENT LIABILITIES
Lease liability (6,866) (6,522)
Provisions 6 (35,028) (6,561)
TOTAL NON-CURRENT LIABILITIES (41,894) (13,083)
NET ASSETS 295,508 394,953
EQUITY
Called up share capital 7 30,823 30,658
Share premium account 7 542,593 542,323
Merger reserve 7 (1,973) (1,973)
Foreign exchange reserve 7 172 12
Retained loss 7 (276,107) (176,067)
TOTAL EQUITY 295,508 394,953
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Note Called up share capital Share premium account Foreign exchange reserve
£000 £000 Merger reserve £000 Retained loss Total equity
£000 £000 £000
At 1 May 2021 27,533 302,248 (1,973) 83 (130,444) 197,447
Transactions with owners 7
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 loss - - - (71) - (71)
Total comprehensive loss - - - (71) (46,694) (46,765)
At 1 May 2022 30,658 542,323 (1,973) 12 (176,067) 394,953
Transactions with owners
Issue of shares 7 165 270 - - - 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 loss - - - 160 (101,201) (101,041)
At 30 April 2023 30,823 542,593 (1,973) 172 (276,107) 295,508
CONSOLIDATED CASH FLOW STATEMENT
2023 2022
Note £000 £000
Net cash used in operating activities 8 (72,554) (38,155)
Investing activities
Investment in joint venture / associate (472) (1,838)
Cash flows arising from loss of control of subsidiary - (993)
Loan notes (loan to joint venture) - (1,899)
Purchases of property, plant and equipment (8,553) (4,119)
Capital grants received against purchases of non-current assets 124 150
Proceeds on disposal of property, plant and equipment - 352
Payments for intangible assets (6,562) (7,036)
Interest received 4,562 304
Net cash used in investing activities (10,901) (15,079)
Financing activities
Issue of ordinary share capital 1,048 250,000
Costs associated with previous equity raise (612) (6,800)
Payment of lease liabilities (531) (69)
Net cash (used in)/from financing activities (95) 243,131
(Decrease)/Increase in cash and cash equivalents (83,550) 189,897
Cash and cash equivalents at the beginning of year 365,882 176,078
Effect of foreign exchange rate changes 225 (93)
Cash and cash equivalents at the end of year 282,557 365,882
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
ITM Power PLC is a public company incorporated in England and Wales under
the Companies Act 2006. The registered office is at 2 Bessemer
Park, Sheffield, South Yorkshire S9 1DZ.
The summary accounts set out above do not constitute statutory accounts as
defined by Section 434 of the UK Companies Act 2006. The summarised
consolidated balance sheet at 30 April 2023, the summarised consolidated
income statement and other comprehensive income, the summarised consolidated
statement of changes in equity and the summarised consolidated cash flow
statement for the year then ended have been extracted from the Group's 2023
statutory financial statements upon which the auditor's opinion is unqualified
and did not contain a statement under either sections 498(2) or 498(3) of the
Companies Act 2006. The audit report for the year ended 30 April 2022 did not
contain statements under sections 498(2) or 498(3) of the Companies Act 2006.
The statutory financial statements for the year ended 30 April 2022 have been
delivered to the Registrar of Companies. The 30 April 2023 accounts were
approved by the directors on 16 August 2023 but have not yet been delivered to
the Registrar of Companies.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of accounting
The summary accounts are based on the consolidated financial statements that
have been prepared in accordance with UK-adopted international accounting
standards and with the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards.
They have been prepared on the historical cost basis except for the
remeasurement of certain financial instruments to fair value. The principal
accounting policies adopted are the same as those set out in Note 3 to the
consolidated financial statements except as noted below.
Going Concern
The Directors have prepared a cash flow forecast for the period from the
balance sheet date until 31 August 2024. This forecast indicates that the
Group would expect to remain cash positive without the requirement for further
fundraising based on delivering the existing pipeline.
By the end of the period analysed, the Group is forecast to hold significant
cash reserves. This should give the business sufficient funds to trade for the
going concern period if the business continues according to its medium-term
business plan.
The business continues in a cash outflow position, using funding generated
from previous fundraises. As such, this cash flow forecast was stress-tested,
both for a worst-case scenario of no receipts and inflationary pressures on
utilities and purchases. In all the scenarios tested, the business would
remain cash positive for the 12 months from the date of approval of these
financial statements.
The accounts have therefore been prepared on a going concern basis.
3. Revenue, OPERATING SEGMENTS AND INCOME FROM GOVERNMENT GRANTS
All revenues are derived from continuing operations. An analysis of the
Group's revenue is as follows:
2023 2022
£000 £000
Revenue from product sales recognised over time - 808
Revenue from product sales recognised at a point in time 4,099 1,231
Consulting contracts recognised over time 636 2,948
Maintenance contracts recognised at a point in time 250 43
Fuel sales 244 229
Other (e.g. scrap sales) - 368
Revenue in the Consolidated Income Statement 5,229 5,627
Grant income (claims made for projects) 155 271
Other government grants (R&D claims) 1,419 289
Other income - government grants 1,574 560
6,803 6,187
At 30 April 2023, the aggregate amount of the transaction price allocated to
remaining performance obligations of continuing build contracts was £87.7m
(2022: £42.0m). The Group expects to recognise 32% of this within one year,
with the remaining 68% expected the following year.
Segment information
ITM Power PLC is organised internally to report to the Group's Chief Operating
Decision Maker, the Chief Executive Officer, on the financial and operational
performance of the Group as a whole. The Group's Chief Operating Decision
Maker is ultimately responsible for Group-wide resource allocation decisions,
evaluating performance on a Group-wide basis and any elements within it on a
combination of information from the executives in charge of the Group and
Group financial information.
Management has previously identified three target markets for our products
(Power, Transport, and Industry). Revenue reporting has begun to look at these
three sectors to assess the commerciality of those sales. However, decisions
for resourcing cannot be made by reference to these segments. The Group
operates a single factory in the UK that builds units for use across all
sectors. It would be hard to assign overhead costs to particular product
segments as builds all occur in that one facility and can run concurrently.
Similarly, fixed assets and suppliers' balances cannot be assigned to the
production of one specific segment. For overhead costs and net asset
resources, therefore, decisions are taken on a Group basis.
An analysis of the Group's revenue, by major product (or customer group), is
as follows:
2023 2022
£000 £000
Power 126 207
Transport 2,717 1,704
Industry 1,750 507
Other 636 3,209
Revenue in the Consolidated Income Statement 5,229 5,627
The Other category contained a large consultancy project in the prior year,
involving design and FEED studies for larger scale product manufacture. This
consultancy embarked on a new phase in the current year.
Geographical analysis
The United Kingdom is the Group's country of domicile but the Group also has
subsidiary companies in the United States, Germany and Australia. All
non-current tangible assets were domiciled in the United Kingdom (NBV:
£20.5m) or Germany (NBV: £0.02m). All intangible assets were domiciled in
the United Kingdom. Revenues have been generated as follows:
2023 2022
£000 £000
United Kingdom 699 3,359
Germany 1,750 770
Rest of Europe 188 246
United States 244 22
Australia 2,348 1,230
5,229 5,627
Included in revenue are the following amounts, which each accounted for more
than 10% of total revenue:
2023 2022
£000 £000
Customer A Industrial 1,750 n/a
Customer B Other 636 2,840
Customer C Refuelling n/a 673
Customer D Refuelling 2,348 n/a
Except where extended warranties have been purchased and treated as separate
performance obligations for the purpose of IFRS 15 Revenue from Contracts with
Customers, warranty commitments are disclosed in Note 6.
4. CALCULATION OF ADJUSTED EBITDA
In reporting EBITDA, Management uses the metric of adjusted EBITDA, removing
the effect of non-repeating costs that are not directly linked to the trading
performance of the business in the year under review:
2023 2022
£000 £000
Loss from operations (103,713) (44,736)
Add back:
Depreciation 3,006 2,340
Amortisation 942 849
Fair value loss on loan notes - 344
Loss on disposal of non-current assets 64 -
Impairment 4,469 -
Non-underlying share-based payment (credit)/charge (Note 26) (420) 1,429
Exceptional costs of restructure 1,436 -
(94,216) (39,774)
The exceptional costs of restructure refer to redundancy costs that largely sit within the staff costs in administrative expenses. Management removed these in the adjusted EBITDA calculation due to their one-off nature that would otherwise distort the true operational figures.
5. LOSS PER SHARE
The calculation of the basic and diluted earnings per share is based on the
following data:
2023 2022
£000
£000
Loss for the purposes of basic and diluted loss per share being net loss (101,201) (46,694)
attributable to owners of the Company
Number of shares
Weighted average number of ordinary shares for the purposes of basic and 614,683,780 576,699,822
diluted earnings per share
Loss per share 16.5p 8.1p
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 in the years presented was 5,999,019 (2022: 45,064,658).
6. provisions
Leasehold property provision Warranty Provision Other provisions Employer's NIC 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 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 14,674 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)
The leasehold property provision represents management's best estimate for the
dilapidations work that may be required to return our leased buildings to the
landlords at the end of the lease term. In a prior year we recognised a
dilapidations provision for the present value of the cost of works quoted by
our Employer's Agent for stripping Bessemer Park back to the original
condition at handover from the landlords. The discounting will continue to
amortise over the remaining 12 years of the lease.
The warranty provision represents management's best estimate of the Group's
liability under warranties granted on products, based on knowledge of the
products and their components gained both through internal testing and
monitoring of equipment in the field. 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. Warranties are usually
granted for a period of one year, although two-year warranties are the
standard within some jurisdictions.
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. They also maintain risk
registers that highlight the impact of delays and circumstances on the
potential cost of a project. The provision is therefore based on best
estimates and information known at the time to ensure the expected losses are
recognised immediately through profit and loss. The effects of discounting on
non-current balances were not deemed to be material. The increase on the
provision in the current year is due 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 updating costs for
the effects of inflation since the original quote to the customer. The
increase in the year is allocated against 13 projects. This provision will be
used to offset the costs of the project as it reaches completion in future
periods. Contract loss provisions are recognised as greater than one year
based on the expected completion of the contract. Work in progress is only
assigned to a contract at the point of delivery as products are generally
fungible until that point.
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 includes amounts payable to contracted
parties for potential non-performance on contracts.
There is a provision for Employer's NIC due on share options as they exercise.
7. CALLED UP SHARE CAPITAL AND RESERVES
Called up, allotted and fully paid (ordinary shares of 5p each) Number of shares
£000
At 1 May 2022 613,158,155 30,658
Share options exercised 3,307,500 165
At 30 April 2023 616,465,655 30,823
Holders of ordinary shares have voting rights at General Meetings in
proportion with their shareholding.
The share premium account represents the amount paid in excess of the nominal
value when shares are issued.
The merger reserve arose on the acquisition of ITM Power (Research) Limited in
2004.
The foreign exchange reserve arises upon consolidation of the foreign
subsidiaries in the Group, and accounts for the difference created by
translation of the income statement at average rate compared with the year-end
rate used on the balance sheet as well as the effect of the change in exchange
rates on opening and closing balances.
The Group's other reserve is retained earnings which represents cumulative
profits or losses, net of any dividends paid and other adjustments.
8. notes to the cash flow statement
2023 2022
£000 £000
Loss from operations (103,713) (44,736)
Adjustments:
Depreciation 3,006 2,340
Share-based payment (through equity) 1,161 1,071
Foreign exchange on intercompany transactions (137) (43)
Fair value adjustment and expected credit loss on loan notes - 359
Loss on disposal 64 -
Impairment 4,469 -
Amortisation 942 849
Operating cash flows before movements in working capital (94,208) (40,160)
Increase in inventories (26,642) (25,780)
Decrease/(Increase) in receivables 5,852 (2,550)
Increase in payables 11,787 21,437
Increase in provisions 31,152 9,492
Cash used in operations (72,059) (37,561)
Interest paid (495) (532)
Income taxes (paid) - (62)
Net cash used in operating activities (72,554) (38,155)
9 . POST BALANCE SHEET EVENTS
At the time of our interim results update, we stated that we were exploring
options for the future of our joint venture Motive Fuels Ltd. We have now
signed Heads of Terms for the sale of the company. The 50/50 JV between ITM
and Vitol was established in March 2022 to develop and roll out hydrogen
refuelling stations in the UK. The vision of the JV partners was one of
building a significant UK refuelling business, with £30m committed by each
party as seed funding. However, one of the three priorities of our 12-month
plan is increased cost and capital discipline. The planned transaction will
allow ITM to redirect £28m of pre-committed cash to our core business, and to
focus on becoming a volume manufacturer of state-of-the-art electrolysers.
Motive Fuels Ltd, via ITM, was the recipient of grant funding to support the
rollout of refuelling stations in the UK. As part of the transaction, a
contingent liability may materialise for ITM in the future against the
performance obligations in the grants.
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