itm power plc | final results | fe investegate · 2016-08-01 · *cash burn is defined as the...

7/30/2014 ITM Power PLC | Final Results | FE InvestEgate

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ITM Power PLC

Final ResultsRNS Number : 6678NITM Power PLC30 July 2014

30 July 2014

ITM Power plc("ITM Power" or the "Company")

Results for the year ended 30 April 2014

ITM Power (AIM: ITM), the energy storage and clean fuel company, announcesits audited results for the year ended 30 April 2014. The Company currently has£6.550m of projects under contract. Summary Commercial Progress in year

· £5.140m of projects under contract at year end · Won £2.800m contract to supply three refuelling stations in London· A total of £2.000m refueller build contracts won with Californian Energy

Commission· Thüga Group's Power-to-Gas plant officially commissioned and

operational on schedule· Successful injection of hydrogen into the German gas grid· Participation in the UK, US, Swiss and French Hydrogen Infrastructure

Programmes· Optimisation of standard product platforms and reduction in standard

product cost· Partnership with NRM, Germany for Power-to-Gas projects· Gas network optimisation contract with AMEC and National Grid

Commercial Progress since year end· A further £1.330m of products under contract secured since year end· £3.010m of contracts in final stages of negotiation· Repeat sales of Electrolyser plant to a UK government agency

Key Financial Results For the year ended 30 April 2014

· Total revenue and Grant Funding of £3.077m (2013: £1.44m) up 114%,comprising:

o Revenue £1.127m (2013: £0.087m) up £1.040m



o Grant income £1.370m (2013: £1.358m)o Grants receivable for capital projects £0.580m (2013: £nil)

· Increase in fixed assets to £1.755m from £1.463m, up 20%· Loss from operations £7.978m (2013: £6.518m)· Cash burn*, £7.568m (2013: £6.063m)· Cash balance £9.763m (2013: £5.943m)· Two placings creating proceeds of £12.0m before expenses*Cash burn is a non-statutory measure and is defined underneath the CashFlow Statement

Corporate Development

· Incorporation of ITM Power ApS in Denmark· ITM Power Inc. joins Californian Hydrogen Business Council Hydrogen

Energy Storage (HES) Program· ITM Power GmbH Joins German Energy Agency's Power-to-Gas

Strategy Platform

Corporate Development post year end· Sir Roger Bone joins the board as a Non-Executive Director

Graham Cooley, CEO, commented: "This has been a very productive periodfor us with solid progress in technology, sales, partnerships and project income.We built, CE marked, commissioned and consented the world's largest PEMelectrolyser and have proved the Company's technology and projectmanagement ability. We now have a major reference plant with the ThügaGroup, the largest utility grouping in the world. This solid progress directlyreflects the achievements of our highly talented team." Roger Putnam, Chairman, added: "Our staff, through their hard work anddedication, have developed ITM Power's technology platforms into a broadproduct offering. ITM Power is today firmly established as a world leader inPEM electrolysis." For further information please visit www.itm-power.com or contact: ITM Power plc

Graham Cooley, CEO

+44 (0)114 244 5111

Zeus Capital

Tim Metcalfe (Nominated Adviser)John Goold (Institutional sales)

+44 (0)20 7533 7727

Tavistock Communications

Simon Hudson / James Collins+44 (0)20 7920 3150

About ITM Power

The principal activity of ITM Power is the design, manufacture and sale ofhydrogen energy systems for energy storage and clean fuel production. ITM Power plc was admitted to the AIM market of the London Stock Exchangein 2004 and raised its initial funding of £10m gross in its IPO. Further fundingrounds of £28.5m in 2006, £5.4m in 2012, £2m in 2013 and £10m in 2014 havebeen completed. The Company has now made the transition from a researchand development company to a product manufacturer and technology provider. The Company has both a strong base of intellectual property and engineeringexpertise for providing complete hydrogen solutions. STRATEGIC REPORT

Business Model

SummaryITM Power designs and manufactures hydrogen energy systems for energystorage and clean fuel production. At the heart of all these systems is a proton



exchange membrane/polymer electrolyte membrane ('PEM') electrolyser built

from ITM Power's own electrolyser stacks. These stacks, at pressure, take

excess energy from the electricity grid or directly from a renewable energy

source and convert it into hydrogen which can then be stored for deployment in

a range of applications.

The ITM Power business model is about developing innovative products, which

utilise this technology to meet the growing demand for clean fuel. The two main

applications for ITM Power's electrolyser hydrogen systems are Power-to-Gas

and Clean Fuel production for National Mobility Programmes.

The Power-to-Gas model is a commercial proposition and our first product was

delivered to site near Frankfurt in the year. This takes excess energy from the

grid and converts it into hydrogen to put back into the gas grid, thereby enabling

supply to better match demand.

The refuelling model is one that incorporates the work of national hydrogen

infrastructure initiatives to support the growth of hydrogen as a transport fuel,

both for use in cars and buses initially, and with further transport applications in

the future.

The refuelling modules for ITM Power will be showcased first in California later

in the current calendar year. In the US, the opportunities for ITM Power have

developed significantly through legislative direction stating that 33% of all

refuelled hydrogen in California is required to be from renewable sources.

A developing tertiary application for the technology is through the use of

producing fertiliser through renewable energy to decarbonise the production of

fertiliser. Collaborative work in this field has begun and an integration

programme within a system will be delivered during 2015.

Enabling FundingITM Power utilises funding from grant bodies to enable technological

advancement and realisation of technologies held within ITM Power's patent

suites. The funding received from the Technology Strategy Board and EU has

enabled an acceleration of development to drive the company's innovative

technology in to these rapidly growing markets.

Global MarketsMarkets for hydrogen electrolysis as an infrastructure solution are developing in

the UK, as showcased by the Island Hydrogen (formerly, Ecolsland) project and

through the UKH2Mobility initiative, as well as in France, Denmark, Germany,

Japan and the US. ITM has a model of locating agents in key territories to

position ITM Power as a world leading global technology developer. Initial

market opportunities usually begin with collaborative projects with blue chip

companies before leading to sales and maintenance contracts of established,

CE marked units. ITM Power has five business development personnel 'in the

field', and has also used the expertise of existing personnel to form the

backbone of a fieldwork commissioning and maintenance team.

ProfitabilityITM Power sees its route to product and maintenance sales and profitability

through the increasing deployment of its products in the key power to gas

energy storage and clean fuel sectors. The Company is well represented in

these commercial sectors and territories where market growth is now

accelerating. The Company is now undertaking a program of product scale up

and product cost reduction through both design improvements and supply chain

efficiencies.

REVIEW OF THE BUSINESS

Business environmentThe year under review has seen increasing acknowledgement of the importance

of hydrogen for future energy markets. Major national initiatives in Europe and

the US to adopt hydrogen technologies, supported at the highest political level,



are now regular events. ITM Power continues to develop strong relationships

with large multinational companies, as well as with the governments of the

pioneer countries as a result of these initiatives. Consequently, we are very well

placed to offer our expertise and products and are increasingly being consulted

as a leading expert in energy storage solutions and clean fuel.

Outside Europe, we have established strong relationships in California through

our US subsidiary, and have successfully tendered for a further project in the

Chino area, and the city of Riverside.

This year has seen clear momentum from the previous year, resulting in

increased enquiries, and pipeline. ITM Power is well positioned to address

commercial opportunities within the energy storage and clean fuel generation

from renewable power markets.

ITM Power has built on key relationships and become a member of new

initiatives around the world as the hydrogen industry's growth accelerates. We

have won consecutive tenders with the California Energy commission, and have

received repeat order from a UK government agency. As the technology on offer

matures and is proven in the field, key customer relationships are strengthened.

ITM Power is now seen as a credible supplier of hydrogen systems into our

chosen markets by major international customers

Key financialsA summary of the key financial results is set out in the table below and

discussed in this section.

2014 2013 2012 2011Total revenue

and grant

funding £3.077m £1.44m £1.46m £1.02m

Of which:

Sales

Revenue £1.127m £0.087m £0.480m £0.001m

Of Which:

Grants

recognised in

the income

statement £1.370m £1.350m £0.980m £0.610m

Of Which:

Grants

recognised on

the balance

sheet

(offsetting

asset build) £0.580m £nil £nil £0.400m

Net cash

burn* £7.568m £6.063m £5.600m £4.800m

New grant

project awards

£3.380m (and

a further

£3.010m in

negotiation) £3.660m £2.700m £0.940m

Pre-tax loss £7.950m £6.170m £6.470m £6.400m

Projects

Under

Contract or in

final stage of

negotiation £9.250m

Not

measured

Not

measured

Not

measured

*Cash burn is defined as the underlying cash outflow after adjusting for

movements on short term deposit balances and fund raising activities. It is

calculated on the cash flow page.

Financial performance



The pre-tax loss for the year under review increased to £7.950m (2013:£6.170m) and net cash burn before fund raise increased to £7.568m (2013:£6.063m). The loss can be attributed to three major factors - the losses incurred indelivering the Thüga unit to demanding timescales, the increase in businessdevelopment activity and provisions for contracts and stock that are consideredto have lower net realisable values than their purchase price. The cash burnincrease is a result of similar factors, with the increase in components heldbeing the other driver for this. Increased business development costs have occurred as ITM Power ramps upits representation and coverage of key geographical areas and businesssegments. This increased representation has led to improved collaborativeprojects, such as the follow-on awards of a project in the California refuellingmarkets, and the opportunity to showcase the plant in Frankfurt as a world-classreference plant. The deployment of the Thüga unit which absorbed, as part of the cost of sales,a series of non-recurring engineering costs led to a gross loss. The build costfor the unit was in line with expectations. However, as a result of it being 'first oftype', site commissioning costs exceeding those estimated as the originaltechnical signoff target was met. Operationally, the deployment of the unit ontime took ITM Power through a steep learning curve that has enabled us to bidmore competitively and with a track record of delivering within much shortertimescales than can be quoted by our competitors. There will be an element of non-recurring engineering costs in every first-of-kindbuild, as the company enters new geographical markets and industries. Theelectrolyser system supplied to Thüga represented a step change in technology,being the first deployment of the Company's large product platform and its firstpower to gas installation. ITM Power chose to fully support the systemintegration as part of a commercial decision to build a comprehensiveknowledge base surrounding the product, the application and the rigorouscompliance requirements. Whilst this has meant ITM Power has recognized agross loss in the current financial year, the Company has accrued significantknowledge and expertise which will benefit all subsequent deployments. Furthermore, the Company delivered the world's first PEM power to gas systemin a strategic territory within the largest grouping of utility companies inGermany. The system is serving as an important reference plant to potentialcustomers from all over the world and generating data to underpin thefundamental benefits of ITM Power's integrated PEM electrolyser technology. Subsequent deployments of the same system would not incur the same costsand all potential sales are being bid with positive margins. Total collaborative project funding recognised in the period was £1.960m ofwhich £1.370m is recognised on the income statement (2013: £1.36m, all ofwhich was on the income statement). The strength of many of the projects ITMPower is now working on is the key invaluable partnerships created through theventures. ITM Power is proud to lead consortia to deliver innovative, cuttingedge solutions to applications whilst relying on and developing our core stacktechnology. Commentary on the year's revenueThe measure that management and the Board had previously focussed on isSales order book, and at the year end this stood at £0.80m (2013: £0.90 millionand 2012: £66,000). The drop in the Sales order book is symptomatic of thenature of the projects under contract currently, and most notably two largerefuelling construction projects totalling four refuelling stations, contributing to£9.25m of projects under contract and in negotiation. Projects under contractrepresents the value of contracted Revenue and Grant Funding yet to berecognised by ITM Power in the future, and the board find this a more accuratereflection of the increase in activity the company has experienced in the year. Projects under contract is seen as a more definitive measure of growth, as ITM



Power develops some collaborative contracts as ways to manufacture assets

whilst retaining ownership and providing an income stream through sales of

hydrogen. Examples of this are the Island Hydrogen and HyFive projects which

have a period of operation as part of the project (12 and 36 months

respectively).

Whilst projects under contract continue to accelerate ITM Power's growth and

products in the market, the board is aware of the continued potential for revenue

volatility (as experienced in 2013) as projects grow in size and complexity.

Revenue volatility will continue to decrease as the business matures and grows,

and as ITM Power realises opportunities in large markets.

This is the first financial year in which ITM Power has entered into contracts

which have been required to be accounted for as construction contracts. This is

due to the increased size and output of each project leading to a need to treat

projects individually. The only revenue project at the year end that was in build

was the California refuelling station to be delivered to Chino later in the calendar

year. The Island Hydrogen rigs were also in build as ITM develops a portfolio of

assets.

Financial position

At year end, ITM Power had £9.8m (2013: £5.9m) of funds in the bank, and

trade and other receivables of £1.2m (2013: £1.5m), which predominantly relate

to grant income debtors. Recognising the need to be lean with working capital,

ITM Power structures quotes to include upfront payment with orders so that

working capital is not impacted adversely by increased activity.

ITM Power has seen an increase in fixed assets to £1.76m from £1.46m in the

prior year as the company engages in projects that create assets for the future.

This is a policy that will continue, especially with the completion of the Island

Hydrogen and HyFive projects.

STRATEGY AND OBJECTIVES

Strategies

ITM Power is now firmly focused on large scale solutions. The current strategy

is to use the existing, operational Thüga project as a reference plant for Power-

to-Gas sales.

Using the same initial platform, the company will also be able to show

demonstrable success in the near future of hydrogen refuelling, using the Island

Hydrogen and HyFive stations, which will be used as reference plant for

refuelling stations

In the medium term, the national mobility programmes, in which ITM Power has

positioned itself as a key partner for refuelling through electrolysis, will drive

initial refuelling station sales.

Objectives

ITM Power has immediate objectives in terms of product development and in

particular scale up of our proven electrolysis equipment. This will allow

penetration of larger markets, and is a direct response to market demand from

sales enquiries and trade fairs and events.

Cash flow remains a key measure for the Board, with the other key objective for

ITM Power being the achievement of a positive cash flow in the shortest

possible time.

Strategies for achieving our objectives

Product development, and in particular upscaling of product offering, will be

achieved through securing and utilising project funding. This serves the dual

purpose of reducing cash outflow and creating strong key partnerships within

industry.

Short term cash flow is aided by ITM Power quoting for sales with upfront



payments which reduces reliance on working capital. Cash outflow is minimised

through working with support from partners on the development of technology

whilst we are continuing to build a contract pipeline. Historically, it has taken

two years for potential customers to move through a learning curve and to reach

the point of purchasing equipment, and it is with this in mind that we are

creating a larger pipeline.

NON-FINANCIAL KEY PERFORMANCE INDICATORS

2014 2013 ChangeStack Efficiency* 80% 77% Up 6%

Test hourscompleted 750,000 500,000 Up 50%

*The efficiency of our electrolyser stack is a measure of the electrical energy

input against the chemical energy content of the hydrogen produced.

2015 2014 2013 2012

Hydrogen

production

capacity under

contract 1,613 472 65 50

The Company has achieved an overall efficiency improvement to its rapid

response stack platform, to greater than 80% (2013: 77%). This was recorded

from plant in the field and represents a real-world reference which can be

showcased and repeated. This will provide further significant benefit to end

users and will produce a positive impact on the economics of both hydrogen

refuelling and power to gas applications.

The level of knowledge gained within stack development has increased with

longevity testing and cyclic testing all contributing to a total of 750,000 hours

assembled knowledge. This testing has enabled rapid scale up to date as

demonstrated by the largest stack capacity compared with that of prior years.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEYear ended 30 April 2014

2014£'000

2013£'000

Revenue 1,127 87

Cost of sales (2,026) (138)

Gross loss (899) (51)

Operating costs- Research and development (3,979) (4,453)

- Prototype production and engineering (2,171) (1,057)

- Sales and marketing (695) (646)

- Administration (1,604) (1,508)

Other operating income - grant income 1,370 1,358

Loss from operations (7,978) (6,357)

Investment revenues 25 189

Loss before tax (7,953) (6,168)

Tax 164 265

Loss for the year, being total comprehensiveexpense for the year (7,789) (5,903)

Loss per shareBasic and diluted (5.9p) (4.9p)

All results presented above are derived from continuing operations and are

attributable to owners of the Company.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY



Year ended 30 April 2014

Calledup

sharecapital£'000

Sharepremiumaccount

£'000

Mergerreserve£'000

Retainedloss£'000

Totalequity£'000

At 1 May 2012 5,549 36,413 (1,973) (32,284) 7,705Issue of shares 586 4,860 - - 5,446Credit to equity forshare based payments - - - 131 131Loss, being totalcomprehensiveexpense for the year - - - (5,903) (5,903)At 30 April 2013 6,135 41,273 (1,973) (38,056) 7,379

At 1 May 2013 6,135 41,273 (1,973) (38,056) 7,379Issue of shares 1,958 9,430 - - 11,388Credit to equity forshare based payments - - - 22 22Loss, being totalcomprehensiveexpense for the year - - - (7,789) (7,789)At 30 April 2014 8,093 50,703 (1,973) (45,823) 11,000

CONSOLIDATED BALANCE SHEET30 April 2014

2014£'000

2013£'000

NON CURRENT ASSETSProperty, plant and equipment 1,755 1,463

CURRENT ASSETSInventories 762 193Trade and other receivables 1,206 1,528Cash and cash equivalents 9,763 1,943Short term deposits - 4,000TOTAL CURRENT ASSETS 11,731 7,664

CURRENT LIABILITIESTrade and other payables (2,184) (1,711)Provisions (302) (37)TOTAL CURRENT LIABILITIES (2,486) (1,748)

NET CURRENT ASSETS 9,245 5,916

NET ASSETS 11,000 7,379

EQUITYCalled up share capital 8,093 6,135Share premium account 50,703 41,273Merger reserve (1,973) (1,973)Retained loss (45,823) (38,056)TOTAL EQUITY 11,000 7,379

CONSOLIDATED CASH FLOW STATEMENTYear ended 30 April 2014

2014£'000

2013£'000



Net cash used in operating activities (6,701) (5,380)

Investing activitiesInterest received 62 152

Purchases of property, plant and equipment (929) (835)

Cash received from interest earning deposit 4,000 1,000

Net cash from investing activities 3,133 317

Financing activitiesIssue of ordinary share capital 11,388 5,446

Net cash from financing activities 11,388 5,446

Increase in cash and cash equivalents 7,820 383

Cash and cash equivalents at the beginning ofyear

1,943 1,560

Cash and cash equivalents at the end of year 9,763 1,943

Non-statutory measures Cash burnCash burn is a measure used by key management personnel to monitor the

performance of the business.

2014£'000

2013£'000

Increase in cash and cash equivalents per the

cash flow statement 7,820 383

Less movements in short term deposits (4,000) (1,000)

Less share issue proceeds (11,388) (5,446)

Cash burn (7,568) (6,063)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYear ended 30 April 2014

1. BASIS OF ACCOUNTINGThe preliminary announcement is based on the financial statements which have

been prepared in accordance with International Financial Reporting Standards

(IFRSs) as adopted by the European Union.

While the financial information included in this preliminary announcement has

been prepared in accordance with the recognition and measurement criteria of

IFRS, this announcement does not itself contain sufficient information to

comply with IFRS. The Group expects to publish full financial statements that

comply with IFRS in July 2014.

Going concernThe directors have prepared a cash flow forecast for the period ending 31

December 2015. This forecast indicates that the company and group will be able

to sustain current levels of activity without the requirement for further funding,

for a period of at least 12 months from the date of approval of these financial

statements. The forecast includes certain assumptions about the amount and

timing of cash inflows and outflows, which are inherently uncertain;;

notwithstanding these uncertainties, the directors have a reasonable expectation

that the company and group will be able to meet their obligations as they fall

due, for the foreseeable future.

However, the directors also acknowledge that additional funding will be required

beyond the next 12 months in order to enable them to execute their business

plans.

Accordingly, the financial statements have been prepared on a going concern

basis.

The financial information is prepared on the basis of the accounting policies as



shown on the Company's website, www.itm-power.com

Copies of the financial statements/annual report will be available on the

Company's web site and for collection from the Company's registered office at

22 Atlas Way, Sheffield, S4 7QQ.

2. NOTES TO THE CASH FLOW STATEMENT2014£'000

2013£'000

Loss from operations (7,978) (6,357)

Adjustments for property, plant and equipment:

- Depreciation 641 601

- Loss on disposal - 3

Share-based payments charge 22 131

Operating cash flows before movements in working

capital

(7,315) (5,622)

Increase in inventories (567) (181)

Decrease / (increase) in receivables 443 (574)

Increase in payables 473 721

Increase in provisions 265 37

Cash used in operations (6,701) (5,619)

Income taxes received - 239

Net cash used in operating activities (6,701) (5,380)

3. FINANCIAL INFORMATIONThe financial information set out in this announcement does not constitute

statutory financial statements for the years ended 30 April 2013 or 30 April

2014, but is derived from these statutory accounts, which have been reported

on by the Group's auditor. Statutory accounts for the year ended 30 April 2013

have been delivered to the Registrar of Companies and those for 2014 will be

delivered following the Group's Annual General Meeting. The financial

statements were approved by the Board of Directors on 30 July 2014. The

auditor has reported on those accounts;; their reports were unqualified and did

not draw attention to any matters by way of emphasis and did not contain

statements under section 498(2) or (3) of the Companies Act 2006.

- ends -

This information is provided by RNSThe company news service from the London Stock Exchange

END FR BLGDRDUDBGSC

itm power plc | final results | fe investegate · 2016-08-01 · *cash burn is defined as the...

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