REG - ITM Power PLC - Half-year Report
27/01/2020 07:00
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RNS Number : 9307A ITM Power PLC 27 January 2020
27 January 2020
ITM Power plc
("ITM Power", "the Group" or the "Company")
Half Year Results for the Period ended 31 October 2019
ITM Power (AIM: ITM), the energy storage and clean fuel company, announces
half year results for the six month period ended 31 October 2019. Comparable
figures, where stated, refer to the corresponding period in 2018 unless
otherwise indicated.
Commercial:
· Formation of a Joint Venture with Linde Engineering, ITM Linde
Electrolysis GmbH ("ILE") focusing on delivering green hydrogen to large scale
industrial projects
· Transformative £58.8m fundraise to:
o facilitate move to Bessemer park
o fund the continuing development of 5MW electrolyser module
o initially fund the Joint Venture, ILE GmbH
o provide balance sheet strength and flexibility
Operational:
· Lease for new 1GW factory signed, with Principal Contractor appointed
for fitout on a 30 week programme
· US Business development MoU with Iwatani Corporation America
· As of today, the total backlog stands at £42.4m (2018: £33.6m) with
£16.3m (2018: £23.2m) of projects under contract and a further £26.1m
(2018: £10.4m) in the final stages of negotiation.
· The qualified tender opportunity pipeline is now over £248m (2018:
£240m), representing 37 projects with an average size of £6.7m.
Financial:
· Total income of £3.8m (£5.0m), down 24%, comprising:
o Revenue of £2.4m (£1.2m), up 100%
o Grant income plus grants receivable for capital projects of £1.4m (£3.8m),
down 79%
· Loss from operations £9.8m (£5.3m), increased by 85%
· EBITDA Loss of £8.3m, (£4.5m), increased by 84%
· Cash balance (excluding restricted balances) of £56.9m (£15.6m) at
period end
· Cash burn (excluding fundraise) of £6.2m (£4.8m), up 29%
· Net working capital of £9.0m (£9.4m), down 4%
Corporate:
· Sir Roger Bone steps up to Chairman following four years on the board
· Martin Green joins the board as non-executive director
· Juergen Nowicki appointed non-executive director, nominated by Linde
· Appointment of Andreas Rupieper as MD of ITM Linde Electrolysis GmbH
· Nicola Ham Edmonds appointed Company Secretary
· Prof. Roger Putnam and Lord Roger Freeman retire from the board
Graham Cooley, CEO, commented: "The formation of the Joint Venture with Linde
and the strategic investment that accompanied it is transformative for ITM
Power. The deal allows ITM Power to concentrate on its core competence of
developing and manufacturing electrolysis equipment. The Company is now able
to offer a full turnkey solution at industrial scale with the EPC competence
of a world leader in the hydrogen industry. The opportunity to bid up to 1GW
per annum of electrolysis equipment from Bessemer Park gives the Company a
powerful cost reduction trajectory. I am confident that ITM Power and our
partner Linde have a world class offering."
Roger Bone, added: "I am delighted to take over from Roger Putnam as chairman
of ITM Power and to oversee the integration of the Company's activities with
Linde Engineering into a successful joint venture. I thank Roger for his
contribution and commitment to the Company during his tenure and look forward
to further developing our governance to drive ITM Power forward."
For further information please visit www.itm-power.com
(http://www.itm-power.com) or contact:
ITM Power plc (0)114 244 5111
Graham Cooley / Andy Allen
Investec Bank plc (Nominated Adviser and Broker) (0)20 7597 5970
Jeremy Ellis / Chris Sim / Ben Griffiths / Tejas Padalkar
Tavistock (Financial PR and IR) (0)20 7920 3150
Simon Hudson / Edward Lee / Barney Hayward
About ITM Power plc:
ITM Power plc manufactures integrated hydrogen energy solutions for grid
balancing, energy storage and the production of green hydrogen for transport,
renewable heat and chemicals. ITM Power plc was admitted to the AIM market of
the London Stock Exchange in 2004. In October 2019, the Company announced
the completion of a £58.8 million fundraise, including a subscription by
Linde of £38 million, together with the formation of a joint-venture with
Linde to focus on delivering green hydrogen to large scale industrial projects
worldwide. ITM Power signed a forecourt siting agreement with Shell for
hydrogen refuelling stations in September 2015, (which was extended in May
2019 to include buses, trucks, trains and ships) and in January 2018 a deal to
deploy a 10MW electrolyser at Shell's Rhineland refinery. ITM Power announced
the lease of the world's largest electrolyser factory in Sheffield with a
capacity of 1GW (1,000MW) per annum in July 2019. Customers and partners
include Sumitomo, Ørsted, National Grid, Cadent, Northern Gas Networks,
Gasunie, RWE, Engie, BOC Linde, Toyota, Honda, Hyundai and Anglo American
among others.
CEO's Review
The tender opportunity pipeline (TOP) continues to grow highlighting the
growth in interest of green hydrogen worldwide. ITM Power has increasing
commercial visibility of those projects which are viable, and ready, and is
becoming increasingly selective about where it focuses its sales efforts, with
an increasingly rigorous bidding criteria for projects. ITM Power is working
closely with Linde to develop a joint bidding strategy appropriate to the
opportunities arising, and appropriate for ITM Linde Electrolysis to bid.
Going forward the TOP will begin to decrease as larger industrial tenders are
bid by ITM Power as electrolyser-only sales, therefore excluding the EPC
element (which will fall to Linde via the joint venture). The pipeline will
now reflect the element of a solution that is specific to ITM Power, therefore
allowing the Company to focus on the element of a project where its technology
and expertise adds the greatest value.
Products Deployed in the Period
The opening, by HM King of the Netherlands, of the 1MW electrolyser at Gasunie
represented an important milestone for the Group. The north Netherlands has a
well-defined plan for the deployment of electrolysis and it is now becoming an
important territory for the development of green hydrogen strategies.
The Company was also delighted to open its first bus refuelling station in
Pau, France, and has worked closely with Linde to integrate the hydrogen
production and bus refuelling equipment.
The network of ITM Power owned refuelling stations continues to grow in the UK
with the opening of our Gatwick station, on a Shell forecourt. The total
amount of hydrogen dispensed in the UK from Jan-Dec 2019: 17,483 kg
(£176,151) and 16,611 kg ($299,833) in the USA over the same period.
Products in Build and Order Backlog
ITM Power continues to steadily process its order book. The Group's current
focus is the build of the Shell Refhyne project, consisting of five 2MW
standard modules that represent an important reference plant for other quotes
and deployments. In terms of the project programme, the module build is
expected to complete in April 2020 with testing ongoing into the summer, which
is in line with the planned timescale for the project.
Financial Results
Total Income for the period was £3.8m (£5.0m), down 24%. Revenue recognised
for the period under review was £2.4m (£1.2m), up 100%. This was
supplemented by grant income of £0.8m ( £2.5m) and £0.4m (£1.3m) of grants
receivable for capital projects, which impacts the balance sheet by
subsidising the build of assets that ITM Power owns and operates to generate
income. The Company expects the trajectory towards an improved mix of revenue
relative to grant income to continue as its works through the current and
future backlog.
The loss before tax for the half year was £9.8m (£5.2m). This figure
continues to be affected by certain legacy projects, including that of the
Shell Refhyne project, resulting primarily from facing first-of-a-kind
deployment challenges. These challenges have been recognised by the board: the
creation of the joint venture with a global, world leading EPC partner will
diminish the Group's exposure to future deployment risk, and allow ITM to
focus further on developing its world-leading standard products.
Overhead costs were largely in line with expectations for the year. However,
in the past the Company has been able to offset some overhead through grant
income. This has diminished in the current period (£0.8m vs £3.8m) as
remaining EU grants have started to reach a conclusion. Whilst there are new,
UK, grant schemes becoming available, the company's last major award of EU
funds was for the Refhyne project, awarded in 2016 (and contracted in 2017).
Whilst the company's future will increasingly be made up of revenue through
sales (and there has been a 100% year on year increase for H1), the reduction
in grant income has been steeper than anticipated. The company shall continue
to seek support via grant funding when this aligns with the product and
technology development roadmaps.
Adjusting Post Balance Sheet Event
Since the period end the Company has received price indications for
installation and commissioning on the Refhyne project which are likely to be
higher than originally anticipated. The tender process is continuing, with
hopes that additional clarifications of works will bring costs down from the
outline estimates received to date. A provision for loss which has been
reflected in the statements under cost of sales, at £1.9m, representing 16%
of the total contract value. The overrun reflects ITM's learning in being able
to accurately estimate the cost of installation of a major project in an
international refinery. Going forward, ITM Power will be conducting these
projects through ITM Linde Electrolysis GmbH and the lead contracts will
benefit from the estimating, quotation and EPC delivery skills of Linde
Engineering.
Cash and short-term deposits at the period end were £56.9m (£5.2m at 30
April 2019 and £15.6m at 31 October 2018). This reflects the receipt of
proceeds from the equity raise completed in October 2019. Debtor balances
increased to £23.2m (£19.3m) reflecting pro forma and stage payments made
with suppliers. In the second half of the year, cash burn shall increase as
the work on Bessemer Park progresses.
New Site: Bessemer Park
The new premises continue to progress, with the developers handing over the
landlord's completed build phase in November, just after this period end. The
Company is now focused on adapting the site to meet its requirements. It is
anticipated that the first area of works will be the installation of an
upgraded 5MW power connection to facilitate the on-site testing of larger
electrolysers, which will support the Group's capability to deliver large
scale projects. The Clegg Group Ltd has been appointed to complete the fit
out. The development will also include an extension to the existing offices
and manufacturing and production areas, as well as a test room for factory
acceptance testing of products. The programme of works at the factory is
planned for completion by Q3 2020, and is designed to enable the company to
reach a capacity of 1GW within three years.
Technology Progress
Technology progress in the year has focused on product standardisation with
the Company concentrating on its 2MW standard offering, and its scalability to
larger projects, as well as developing the concept for the 5MW stack module
for the next generation of ITM Power electrolysis product.
Marketing
The Hannover Messe in April continues to be the company's flagship event, and
ITM Power will attend again in 2020. ITM Power will also attend the Tokyo EXPO
in February 2020 with Sumitomo. The Company continues to issue a newsletter to
people who sign up and has launched a new website. A regularly updated list of
all the events the Company will be attending can be found at
http://www.itm-power.com/news-media/events
(http://www.itm-power.com/news-media/events)
People
The Company now employs over 190 staff across the UK, USA, France, Germany and
Australia, and is well placed with the skills mix to respond to the changing
market for larger electrolyser systems. The company has been focussed on
production, project delivery and after-sales support recruitment. Once again,
the Board would like to recognise the commitment of all staff as we continue
to be in a strong position, with strong industrial partners globally, and the
capability to increase volume and production in the new site.
Outlook
Global energy markets are increasingly recognising the need for the use of
green hydrogen as an energy storage medium and as a transport fuel, chemical
fuel and for renewable heat. A number of developed economies, including the
Netherlands, Denmark, Germany, Australia, Korea, Japan, China, and the UK have
all developed hydrogen roadmaps. In the UK, the Commission for Climate Change
(CC) Net Zero - Technical Report (published on 2 May 2019) indicates that the
UK will need between 6 and 17GW of electrolysis to achieve its target of net
zero by 2050. ITM Power, with its joint venture ITM Linde Electrolysis GmbH is
very well positioned to capitalise on this opportunity. Following the
successful fundraising in October 2019, the Company also has the balance sheet
strength required to take on the challenge of large scale industrial
electrolysis.
Dr Graham Cooley
Chief Executive Officer
27 January 2019
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Results for the six months ended 31 October 2019
Six months ended 31 October 2019 (unaudited) Six months ended 31 October 2018 (unaudited) Year ended 30 April 2019 (audited)
£'000 £'000 £'000
Revenue 2,438 1,187 4,589
Grant income against cost of sales 689 5 427
Cost of sales (5,649) (1,832) (6,182)
Gross profit (2,522) (640) (1,166)
Operating costs
Distribution expenses
- Research and development (1,087) (1,117) (2,327)
- Prototype production and engineering (4,318) (3,197) (6,202)
- Sales and marketing (771) (833) (1,713)
(6,176) (5,147) (10,242)
Administration expenses (1,938) (2,007) (4,738)
Other operating income - grant income 807 2,506 6,799
Loss from operations (9,829) (5,288) (9,347)
Investment income 15 29
Interest expense (10)
Loss before tax (9,839) (5,273) (9,318)
Tax 25 79 (133)
Loss for the period (9,814) (5,194) (9,451)
OTHER TOTAL COMPREHENSIVE INCOME:
Foreign currency translation differences on foreign operations 30 65 40
Total comprehensive loss for the period (9,874) (5,129) (9,411)
Loss per share
Basic and diluted (3.0p) (1.8p) (2.9p)
Weighted average number of shares 331,124,871 287,311,287 324,009,397
The loss per ordinary share and diluted loss per share are equal because share
options are only included in the calculation of diluted earnings per share if
their issue would decrease the net profit per share or increase the net loss
per share.
All results presented above are derived from continuing operations.
The loss for the period is equal to the total comprehensive expense for the
period.
Prior periods have not been restated in this transition to IFRS 16 Lease
Accounting. Therefore comparison with the current period may be affected for
Distribution and Administration expenses and Investment income. This is
explained further in the accompanying notes, which form part of these
financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Results for the six months ended 31 October 2019
Called up share capital Share premium account Merger reserve Foreign Exchange reserve Retained loss Total
£'000 £'000 £'000 £'000 £'000 Equity
£'000
At 1 May 2019 16,200 86,631 (1,973) 111 (74,760) 26,209
Loss for the period
- - - - (9,814) (9,814)
Other comprehensive income for the period
- - - 30 - 30
Total Comprehensive income for the period
- - - 30 (9,814) (9,784)
Issue of share capital 7,353 50,443 - - - 57,796
Credit to equity for equity settled share based payments
- - - - 182 182
At 31 October 2019 (unaudited)
23,553 137,074 (1,973) 141 (84,392) 74,403
At 1 May 2018 16,200 86,631 (1,973) 71 (65,338) 35,591
Adjustment for IFRS15 (161) (161)
Adjusted balance at 1 May 2018 16,200 86,631 (1,973) 71 (65,499) 35,430
Loss for the period
- - - - (5,194) (5,194)
Other comprehensive income for the period
- - - 65 - 65
Total Comprehensive income for the period
- - - 65 (5,194) (5,129)
At 31 October 2018 (unaudited) 136
16,200 86,631 (1,973) (70,693) 30,301
The accompanying notes form part of these financial statements.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
31 October 2019
As at 31 October 2019 As at 31 October 2018 As at 30 April 2019 (audited)
(unaudited) (unaudited) £'000
£'000 £'000
NON CURRENT ASSETS
Software & Development Costs 1,056 486 669
Property, plant and equipment 8,302 4,217 5,742
9,358 4,703 6,411
CURRENT ASSETS
Inventories 3,519 1,652 1,906
Trade and other receivables 23,239 19,260 31,903
Cash and cash equivalents 56,878 15,603 5,173
TOTAL CURRENT ASSETS 83,636 36,515 38,982
CURRENT LIABILITIES
Trade and other payables (14,362) (9,905) (17,579)
Lease liability (310) - -
Provisions (3,435) (1,011) (1,605)
TOTAL CURRENT LIABILITIES (18,107) (10,916) (19,184)
NET CURRENT ASSETS 65,529 25,599 19,798
Long-term lease liability (484) - -
NET ASSETS 74,403 30,302 26,209
EQUITY
Called up share capital 23,553 16,200 16,200
Share premium account 137,074 86,631 86,631
Merger reserve (1,973) (1,973) (1,973)
Foreign Exchange Reserve 141 136 111
Retained loss (84,392) (70,692) (74,760)
TOTAL EQUITY 74,403 30,302 26,209
The accompanying notes form part of these financial statements.
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Results for the six months ended 31 October 2018
Six months ended 31 October 2019 (unaudited) Six months ended 31 October 2018 (unaudited) Year ended 30 April 2019 (audited)
£'000 £'000 £'000
Loss from operations (9,830) (5,288) (9,347)
Adjustments:
IFRS 15 adjustment - (128) (145)
Depreciation of property, plant and equipment 1,089 887 1,773
Loss on disposal 92 - -
Impairment reversal - - (24)
Amortisation 126 53 122
Share based payment 182 - 184
Operating cash flows before movements in working capital
(8,341) (4,476) (7,437)
Decrease/ (Increase) in inventories (1,614) (998) (1,251)
Decrease/ (Increase) in receivables 8,637 (755) (13,571)
(Decrease)/ Increase in payables (3,215) 1,974 9,651
Increase in provisions 2,624 163 757
Cash from/ (used in) operations (1,909) (4,092) (11,852)
Income taxes received 52 76 77
Net cash used in operating activities (1,857) (4,016) (11,774)
Investing activities
Purchases of property, plant and equipment (3,950) (640) (3,052)
Proceeds from sale of plant & equipment 224 - -
Payments for intangible assets (513) (183) (436)
Net cash (used in) investing activities (4,239) (823) (3,488)
Financing activities
Proceeds from issue of shares 58,822 - -
Costs associated with fund raise (1,026) - -
Net interest (10) 15 29
Net cash from financing activities 57,786 15 29
Increase/ (decrease) in cash and cash equivalents 51,690 (4,824) (15,233)
Cash and cash equivalents at the beginning of the period 5,173
20,403 20,403
Effect of foreign exchange rate changes 15 24 3
Cash and cash equivalents at the end of the period 56,878 15,603 5,173
Cash Burn
Cash burn is a measure used by key management personnel to monitor the
performance of the business.
Six months ended 31 October 2019 (unaudited) Six months ended 31 October 2018 (unaudited) Year ended 30 April 2018 (audited)
£'000 £'000 £'000
Increase/ (Decrease) in Cash and Cash equivalents per the cash flow statement 51,690 (4,824) (15,233)
Effect of foreign exchange rates 15 24 3
Less share issue proceeds (net) (57,796) - -
Cash Burn (52,621) (4,800) (15,230)
The accompanying notes form part of these financial statements.
The condensed Interim Financial Statements were approved by the board of
Directors on:
27 January 2019
Notes to condensed Interim Financial Statements
1. Basis of preparation of interim figures
The interim financial statements have been prepared using accounting policies
consistent with International Financial Reporting Standards (IFRSs) as adopted
for use in the EU. While the financial information included in this interim
announcement has been compiled in accordance with the recognition and
measurement principles of IFRSs, this announcement does not itself contain
sufficient information to comply with IFRSs. This interim financial
information does not constitute statutory financial statements within the
meaning of section 435 of the Companies Act 2006. The financial information
for the six months periods ended 31 October 2018 and 2019 have not been
subject to an interim review. The information relating to the year ended 30
April 2019 has been extracted from the Group's published financial statements
for that year, which contain an unqualified audit report that does not draw
attention to any matters of emphasis, and did not contain statements under
section 498(2) and 498(3) of the Companies Act 2006 and which have been filed
with the Registrar of Companies.
The Group's condensed interim financial statements have been prepared in
accordance with the principles of IAS 34 Interim Financial Reporting as
adopted by the European Union. The principal accounting policies adopted by
the group are as applied in the Group's latest annual audited financial
statements.
The financial statements have been prepared on the historical cost basis. The
principal accounting policies adopted by the Group are as applied in the
Group's latest audited financial statements, except that in the period the
company adopted IFRS 16 for the first time. The details of this adoption is
set out in note 3 of this announcement.
Going concern
The Directors have prepared a cash flow forecast (the "Forecast") for the
period to 31 January 2021 (the "Forecast Period"). The Forecast includes a
number of assumptions, including the level of projected sales and grant
income, the timing of which is inherently uncertain.
The Directors have a reasonable expectation that the Company and Group can
continue to meet their liabilities as they fall due, for a period of not less
than twelve months from the date of approval of this condensed set of
financial statements.
Accordingly, the financial statements have been prepared on a going concern
basis.
2. Revenue, other operating income and investment income
The following accounted for more than 10% of total revenue:
H1 2019 H1 2018
Customer A £666,015 <10%
Customer B £815,187 <10%
Customer C £377,792 <10%
Customer D <10% £788,838
An analysis of the Group's revenue is a follows:
H1 2019 H2 2018
£'000 £'000
Continuing operations
Revenue from construction contracts 1,687 950
Consulting services 392 16
Maintenance services 30 34
Fuel sales 237 158
Other 93 29
Revenue in the Consolidated Income Statement 2,438 1,187
Grant income 1,496 2,505
Investment income 10 15
3,944 3,707
Revenues from major products and services
The Group's revenues from its major products and services were as follows:
2019 2018
£'000 £'000
Continuing operations
Power-to gas 233 959
Refuelling 908 193
Chemical Industry 822 4
Other 475 31
Consolidated revenue (excluding investment revenue) 2,438 1,187
GEOGRAPHIC ANALYSIS OF REVENUE
A geographic analysis of the Group's revenue is set out below:
2019 2018
£'000 £'000
United Kingdom 583 314
Germany 832 (10)
Rest of Europe 868 800
North America 155 82
2,438 1,187
3. Leases (Transition to IFRS 16)
The new accounting standard is effective for years commencing on or after 1
January 2019. Under the new standard, the distinction between operating and
finance leases is removed and most leases will be brought onto the statement
of financial position, as both a right-of-use asset and a corresponding lease
liability.
We have used the modified retrospective transitional approach meaning that the
lease liability and equivalent right of use asset are brought on to the
balance sheet at the discounted amount applicable at the transition date.
Prior year financial information will not be restated, resulting in no impact
on retained earnings on transition.
The right to control the use of an asset over a period of time applies when
the lessee has the right to obtain substantially all the economic benefits
from the use of the asset and the right to direct the use of the asset. If the
lessor has the substantive right to substitute the asset during this period,
then it would not meet this condition. Two potential exemptions can also be
applied -for leases of less than 12 months duration or of low value. For these
reasons, we have not included temporary equipment hire for projects nor the
rent-a-room office and storage facilities.
A key judgement associated with the adoption of this standard is the
identification of the discount rate to be used to calculate the present value
of the future lease payments on which the reported lease liability and
right-of-use asset are based. With no clearly defined interest rates for our
existing leases and no incremental borrowing rate known for the group, we have
selected discount rates of 2.5% (properties) and 5% (non-property) based on
similar companies and leases.
The impact on the current period financial statements is described below:
Liability at 1/5/19 Half-year operating costs under old standard Interest recognised in current period Depreciation recognised in current period
£000s £000s £000s £000s
Property leases 898 158 8 150
Van leases 59 18 2 16
957 176 10 166
4. Business Combinations
ITM Power have entered into a Joint Venture (JV) with Linde Engineering. The
creation of ITM Linde Electrolysis GmbH in January 2020 will require ITM
Power, as 50% owner, to make a £2m investment initially with the view that
the JV will provide a conduit for larger scale projects.
Under the JV, ITM Power will supply its technical know-how and products in
manufacturing and commissioning hydrogen electrolysers, while Linde will
supply their experience of coordinating and executing EPC projects.
The JV will operate under joint ownership of 50% ITM Power and 50% Linde
shareholdings, with no one party having control. Accounting for the JV will
take the form of an investment on the balance sheet of ITM Power PLC.
-ends-
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