Final Results

RNS Number : 4418W

ITM Power PLC

29 July 2009

 



Embargoed until 29 July 2009 7:00am

ITM Power plc

('ITM' or 'the Company')

Full year Results 

for the year ended 30 April 2009 ('FY 2009')

ITM Power plc (AIM:ITM) is a clean energy company focused on developing technology to alleviate the present dependence on hydrocarbon fuels. Today it announces its Final Results for the year ended 30 April 2009.

Highlights

●	A comprehensive review of the Company's activities was initiated in January, completed in April and accepted by the Board in May as a basis of future policy actions. The principal recommendations included:
	○	The relocation of the Company's Cambridge office and consolidation in Sheffield where there has also been a reduction in facilities;
	○	Redefinition of the development objectives to widen the range of potential commercial activities to include product substitution into the existing electrolyser market;
	○	Formulation of a clear public information and PR process to: Develop - Demonstrate - Publicise - and Engage with potential commercial partners; and
	○	To establish a co-ordinated administrative structure for Science-Technology-Engineering-prototype production all based at Sheffield.
●	Appointment of Dr Graham Cooley as new CEO, based at Sheffield.
●	Public Demonstration of the Zero Carbon Home system to meet the mandated requirement for all newly built homes to be zero carbon from 2016, and a Head of Agreement with a first potential demonstration building application.
●	Heads of agreement with Heliocentris Energiesysteme GmbH to test, evaluate and subsequently market ITM's small passive electrolyser as part of the Heliocentris product range
●	Completion and internal operation of the Company's 1kW fuel cell system: the stack modules have been built and tested to 1kW, the balance of plant designed and engineered to be ISO compliant, and built and tested internally.

Peter Hargreaves, Chairman of ITM commented:

'We live at a time when the hoped for revival in the world economy is widely predicted to lead to a significant increase in oil prices and this, taken together with the growing awareness of the need to cut carbon emissions, makes the technology ITM is developing both timely and relevant. The Company has been restructured and its activities refocused and the first examples of the challenges that ITM's technology is designed to meet have been showcased in the past month, combined with the recruitment of Dr. Cooley, I believe the Company is well positioned for the future'

For further information please contact:

ITM Power plc	0114 244 5111
Dr Graham Cooley, Chief Executive Officer
Panmure Gordon & Co.	020 7459 3600
Katherine Roe
Tavistock Communications	020 7920 3150
Simon Hudson

Chairman's statement

I am pleased to report the results for the year ended 30 April 2009, and update shareholders on the results of the review of the Company's activities which has been undertaken, and of which the first results are now clear.

In my half yearly statement I felt it necessary to remind shareholders that ITM is a company involved in the difficult process of bringing a new technology to market; this involves converting the laboratory science into prototype product, a process which involves significant engineering effort. Until that process has been completed, it cannot be clear how effective or commercial the Company's materials and products will be, and I therefore reminded shareholders that much remained to be done, both to determine the commercial value of the technology and to derive commercial benefit from any resulting products. However, in the same report it was noted that 'the first cost estimates of our complete prototype electrolyser units indicate that they could be manufactured to be commercially competitive with existing available systems….' a good starting point for the development of a commercial strategy based upon the substitution of ITM's products for competitive products in the existing electrolyser market.

It is against this background that Jim Heathcote our first CEO left the Company and I lead the Board in seeking a thorough review of the Company, its objectives and structure. This review was carried out by Roger G Putnam and Dr Donald J Highgate who I would like to thank in this statement and the report and recommendations were accepted by the Board in April of this year.

As a result of the review, the Company has been refocused and reorganised:

(i)    To reduce costs by relocating the Cambridge office, and making redundancies of approximately 10% of staff;

(ii)    Integrating the management of Science, Technology, Engineering and Prototype Production, to ensure that ITM's materials technology can be rapidly and effectively converted into prototype products for evaluation and demonstration;

(iii)    Redefining the Commercial Objectives to widen the basis of potential income to include sales into existing markets, funded demonstration and collaborative development programmes;

(iv)    Appointing Dr Graham Cooley as new CEO to take the Company forward; and 

(v)    Establishing a new PR framework.

The first fruits of these new policies are now becoming clear in the shape of the Zero-Carbon Home demonstration showcasing the Company's new low pressure electrolyser system, the demonstration of the equipment to provide High Pressure Hydrogen on site; and the agreement with Heliocentris to evaluate the ITM Small passive Electrolyser for integration into Heliocentris' product range. Further demonstration launch days are planned to focus public and partner attention on a broad range of additional commercial application areas open to the Company's core technology and to allow ITM to make contact with the strategic partners that are essential if the Company is to maximise the value of its technology.

It is particularly pleasing to see the level of interest in the ITM Zero Carbon Home package and demonstrates applications for its technology beyond the home refuelling unit made public last year.

Financials

The loss for the year increased from £4.0m to £5.2m, in line with the Group's budget. Capital expenditure for the year under review decreased from £1.2m to £0.9m and during the year the Group's cash and cash equivalents balance reduced from £26.9m to £21.8m. The increase in operating costs reflects the strengthening of the technical and engineering teams as well as the significant investment made in systems to demonstrate the various uses for the Hydrogen generated by the Group's products at the Prototype Production Facility in Sheffield. The increases in these teams have taken the Company's average headcount from 52 to 61 for the period under review. 

The past year has seen unparalleled concern for the health of the entire financial system. In these circumstances the Board insisted on safety as the principal investment criteria for the Company's funds. This was achieved by placing funds not needed to meet immediate running expenses into short dated UK government Gilts. Subsequently the stabilisation of the banking system and the UK government support for the major UK banks has allowed the group to place money on deposit with its bankers NatWest. As mentioned above, at the year end, the Group held cash at the bank of £21.8m ensuring the Group is still in a strong position to execute its commercial plans. In the year under review, the Group had interest received of £1.3m however the unprecedented decrease in interest rates in the UK has meant that the Group will not earn significant interest from its cash and short term deposits until rates increase. 

Following the year end, on 2 June, an announcement was made that the Group would be transferring all functions to its existing sites at Sheffield and closing an analytical laboratory facility at Sheffield. As part of this process the Group proposed making a number of redundancies amounting to approximately 10% of the workforce. These redundancies have now been completed and the annualized cost saving of these actions amounts to £550,000. 

ITM continued to maintain tight control over cash expenditures during the year under review and we shall continue to monitor budgets carefully. Operating costs in FY 2010 will increase in some areas as we see the full year impact of employees hired during FY 2009 in the technical and engineering teams mentioned above but this increase will be offset by the savings that derive from the redundancies in other areas and actions announced on 2 June. 

After the Financial Year End the Group received a payment from HM Revenue and Customs of £552,000 against a claim for R&D Tax credits relating to FY 2008. This amount has not been recognised in the accounts since the Group is currently in discussion with HMRC. These amounts, once finalised will be recognised in the FY 2010 accounts and a similar claim is being pursued for FY 2009. 

The Board is not recommending payment of a dividend in accordance with the dividend policy stated at the time of the IPO.

Commercial Considerations:

One important conclusion of the Review has been the recognition that the Company's technology is sufficiently developed to offer entry into the existing electrolyser market. This requires less exacting standards of performance and cost than would be needed to create entirely new markets. The existing market is mature and offers the potential for product substitution on a time scale much less than would be required to develop new markets: it has not featured in ITM's previous commercial plans.

In addition, the Board recognises that for ITM to make a significant market entry the Company will need to engage with strategic partners in order to be able to contribute technical and commercial assistance to the production and sales of ITM's products. The Board have agreed a coherent plan to showcase ITM's platform technology in a number of areas as part of the programme necessary to make the necessary contacts with potential users and partners. This process has commenced with the recent public demonstration day and will continue at regular intervals for the coming months.

Central to this approach is the professional dissemination of Company information and the effective projection of the Company's vision. The Board have recently reviewed the publicity and PR process and have instituted a new PR structure:

(i) the appointment of New Century Media charged with the task of ensuring that ITM and ITM's technology is well known at the highest level in industrial and political circles.

(ii) Tavistock Communications, who provided assistance and support for the Company during and after the IPO have been appointed to act for ITM in matters relating to finance and shareholder interests to ensure that the Company's public position as it has developed during the past nine months is fully understood.

ITM continues to liaise with Health and Safety Executive ('HSE') and external consultants to ensure that the installation of its electrolyser systems is in accordance with relevant regulatory requirements. A High Pressure Hydrogen generation station able to supply hydrogen at pressures up to 350 bar has been completed and successfully operated at the Sheffield Prototype Production Facility. This has been constructed to be ISO compliant and has been designed with the knowledge and assistance of the HSE and in accordance with their advice , and will allow ITM to offer a refuelling facility to suitable hydrogen fuelled vehicles and other industrial applications.

The Cooperation Research and Development Agreement concluded in December 2007 with the US Naval Undersea Warfare Centre continues, ITM has provided the necessary technical data as requested and await the decision of the USNUWC as to its future.

The agreement with Renewable Energy International has terminated. REI has been wound up without financial or other liability to ITM.

More importantly:

(i) a Heads of Agreement has been signed (July 2009) with Groundworks Northeast to design and subsequently supply ITM's Zero Carbon Home pack to a development being undertaken in South Tyneside. This represents the first application of the Company's technology derived from the new programme of public demonstrations.

(ii) a Heads of Agreement has been signed (July 2009) with Heliocentris to supply examples of the ITM Small Passive Electrolyser for evaluation, joint development and subsequent sale as part of the Heliocentris range.

These agreements represent the first fruits of the policy of refocusing the Company's efforts to engage with potential collaborators able to provide technical support and routes to market in new and both existing electrolyser markets; they represent a small but significant step forward and offer real encouragement for the future.

Technical Developments:

Electrolyser Developments:

Small Passive Electrolyser: Scientific, technical and engineering developments have been combined into the small electrolyser which is the subject of the development agreement with Heliocentris. This unit is self contained and produces both hydrogen and oxygen at a pressure of 15 bar suitable for use in laboratory and industrial environments, or powered by local photo-voltaic or wind power, and can form the basis of small self contained off grid energy systems.

Zero Carbon Home Energy Pack: The UK Government has mandated the construction of Zero Carbon houses for all new builds after 2016, but no coherent engineering system exists to meet this requirement. ITM has constructed and demonstrated a 3-10kW differential pressure electrolyser system which when combined with a store and ITM re-converter, is designed to meet this requirement. This was shown publicly on 7 July 2009 and has excited significant public and technical reaction.

The electrolyser represents a significant step forward in terms of cell stack design operating as it does at 15 bar hydrogen pressure compatible with storage at typical propane gas pressure, and with low oxygen pressure which greatly simplifies the balance of plant and reduces overall system cost.

Catalyst Deposition: Because ITM uses unique membrane materials it has experienced difficulties in obtaining commercial quantities of catalyst coated materials to enable the Company to move beyond laboratory scale production. The Company has recently been successful in developing routes to deposit catalyst materials directly onto its hydrophilic membrane materials, this process (for which patents have been applied) operates at low temperature and is therefore suitable for ITM's materials where it offers considerable benefits both in procurement cost and operating efficiency. These research and development programmes continue and have been accelerated following the recent reorganisation of the Company.

Fuel Cell Developments:

In accordance with the objective, set out in the last Full Year Report, to develop a 1kW hydrogen oxygen fuel cell and balance of plant for demonstration in mid 2009, I am pleased to report that the Company has successfully designed, constructed and is currently test operating a modular 1kW cell stack and compatible balance of plant in its laboratories. The unit is divided into 200W units and has achieved its design performance at a power density of 1 Watt/cm2, at low operating temperature making it suitable for applications which require rapid start-up and shut-down of the fuel cell unit. In order to facilitate prototype production, the unit is designed to achieve this power density using commercially available catalyst systems.

The balance of plant has been designed to meet current ISO regulations, and following a public demonstration expected in the early autumn, the unit will be transferred to the Engineering department for cost reduction engineering and prototype development.

Internal research to achieve higher power densities shows considerable promise and continues under the revised organisational system.

Board and Staff:

Appointment of a new CEO:

I am very pleased to be able to include in this review the announcement of the appointment of Dr Graham Cooley as the new CEO of ITM Power. Graham brings great energy and enormous personal experience of the energy industries to the task of managing and directing ITM. 

The recent past has been difficult and painful because we have had to make a number of our staff redundant; however, I have been very encouraged by the continued enthusiasm and support of the rest of our staff and the very real progress that has been apparent in the past three months under the direction of Professor Roger Putnam and Dr Donald Highgate.

I believe that ITM has been refocused and redirected in a very positive way and that this will be an excellent basis for Dr Graham Cooley, our new CEO from which to work.

Outlook:

The immediate outlook for ITM has been defined by the recent review. Financially the Company is secure; the cost base has been stabilised and will be rigorously monitored. Technically the reorganisation has begun to show tangible results which will be evidenced in the continuing and accelerating programme of 'showcase' events, each designed to highlight a separate area of application for ITM's core technology. Most importantly these events are designed to serve as a catalyst for the new PR process and to contribute to ITM's 'outward reach' for strategic partners to assist in the commercialisation of our technology.

Among the events planned for the coming months are:

• A high pressure hydrogen production unit container mounted to bring hydrogen to site for commercial industrial and transport applications;

• The remote control of electrolysers and Zero Carbon Home power units over the internet; 

• An ITM small passive electrolyser powered from a PV panel for remote and standby applications; and 

• ITM fuel cell and application scenarios.

After a difficult period for the Company I believe that it is now set on a more productive course better able to yield the results we all wish to see delivered.

Peter Hargreaves

Chairman

29 July 2009

CONSOLIDATED INCOME STATEMENT

For the year ended 30 April 2009

			2009  £'000	2008  £'000
Revenue - consulting services			-	9
Cost of revenue - consulting services			-	(9)
Gross profit			-	-
Operating costs
- Research and development			(3,579)	(3,926)
- Prototype production and engineering			(984)	(396)
- Sales and marketing			(303)	(236)
- Administration			(1,276)	(1,146)
Grant income			-	9
Loss from operations			(6,142)	(5,695)
Interest receivable			987	1,705
Interest payable			(1)	(2)
Loss before tax			(5,156)	(3,992)
Tax			-	-
Loss for the year			(5,156)	(3,992)
Loss per share
Basic and diluted			(5.0p)	(3.9p)
Weighted average number of ordinary shares			102,098,735	102,079,609

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.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

As at 30 April 2009

	Called up share capital £'000	Share premium account £'000	Merger  reserve  £'000	Retained  loss  £'000	Total equity  £'000
1 May 2007	5,098	36,271	(1,973)	(6,861)	32,535
Issue of shares	7	1	-	-	8
Share based payments	-	-	-	25	25
Retained loss for the year	-	-	-	(3,992)	(3,992)
At 30 April 2008	5,105	36,272	(1,973)	(10,828)	28,576
1 May 2008	5,105	36,272	(1,973)	(10,828)	28,576
Share based payments	-	-	-	67	67
Retained loss for the year	-	-	-	(5,156)	(5,156)
At 30 April 2009	5,105	36,272	(1,973)	(15,917)	23,487

CONSOLIDATED BALANCE SHEET 

As at 30 April 2009

			2009  £'000	2008  £'000
NON CURRENT ASSETS
Property, plant and equipment			1,830	1,655
CURRENT ASSETS
Inventories			70	95
Trade and other receivables			242	511
Investments - short term deposits			-	20,000
Cash and cash equivalents			21,794	6,947
TOTAL CURRENT ASSETS			22,106	27,553
CURRENT LIABILITIES
Trade and other payables			(449)	(632)
NET CURRENT ASSETS			21,657	26,921
NET ASSETS			23,487	28,576
EQUITY
Called up share capital			5,105	5,105
Share premium account			36,272	36,272
Merger reserve			(1,973)	(1,973)
Retained loss			(15,917)	(10,828)
TOTAL EQUITY			23,487	28,576

CONSOLIDATED CASH FLOW STATEMENT

For the Year ended 30 April 2009

			2009  £'000	2008  £'000
Net cash used in operating activities			(5,528)	(5,195)
Investing activities
Interest received			1,251	1,441
Interest paid			(1)	(2)
Purchases of property, plant and equipment			(875)	(1,138)
Short term deposits			20,000	(20,000)
Net cash from (used in) investing activities			20,375	(19,699)
Financing activities
Issue of ordinary share capital			-	8
Net cash from financing activities			-	8
Increase (decrease) in cash and cash equivalents			14,847	(24,886)
Cash and cash equivalents at the beginning of year			6,947	31,833
Cash and cash equivalents at the end of year			21,794	6,947

	2009  £'000	2008  £'000
Cash, cash equivalents and short term deposits at the beginning of year	26,947	31,833
Decrease in the year	(5,153)	(4,886)
Cash, cash equivalents and short term deposits at the end of year	21,794	26,947

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 April 2009

1.       basis of accounting

The preliminary announcement is based on the company's financial statements which are prepared in accordance with International Financial Reporting Standards ('IFRS') 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 Company expects to publish full financial statements that comply with IFRS in August 2009.

The going concern basis has been adopted in preparing the financial statements. In reaching their conclusion regarding going concern, the Directors have considered the risks and uncertainties set out in the Directors' Report, prepared and examined the cost budgets for the coming year and reviewed the level of cash balances and concluded that the going concern basis of preparation remains appropriate.

2.       notes to the cash flow statement

			2009  £'000	2008  £'000
Operating loss			(6,142)	(5,695)
Adjustments for property, plant and equipment:
	- Depreciation		573	471
	- Loss on disposal		126	2
Share-based payments			67	25
Operating cash flows before movements in working capital			(5,376)	(5,197)
Decrease (increase) in inventories			25	(95)
Decrease (increase) in receivables			6	(58)
(Decrease) increase in payables			(183)	155
Cash used in operations			(5,528)	(5,195)
Income taxes received			-	-
Net cash used in operating activities			(5,528)	(5,195)

3.       FINANCIAL INFORMATION

The financial information set out in the announcement does not constitute statutory financial statements for the years ended 30 April 2008 or 30 April 2009, but is derived from these statutory accounts, which have been reported on by the Company's auditors. Statutory accounts for the year ended 30 April 2008 have been delivered to the Registrar of Companies and those for 2009 will be delivered following the Company's Annual General Meeting. The financial statements were approved by the Board of Directors on 29 July 2009. The auditors have reported on those accounts; their reports were unqualified; and not draw attention to any matters by way of emphasis and did not contain adverse statements under section 498(2) or (3) of the Companies Act 2006 .

The financial information is prepared on the basis of accounting policies as shown on the Company's website, www.itm-power.com. 

Copies of the announcement will be available for collection from the Company's head office at 22 Atlas Way, Sheffield, S4 7QQ.

 

END

 

 

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