Half Year Results

RNS Number : 1499V

ITM Power PLC

26 January 2017

This announcement contains inside information

ITM Power plc

("ITM Power", "the Group" or the "Company")

Half Year Results for the Period ended 31 October 2016

ITM Power (AIM: ITM), the energy storage and clean fuel company, announces its interim results for the six-month period ended 31 October 2016. The Group has recognised total revenue and grant funding of £2.97m in the period and currently has £16.98m of projects under contract with a further £1.37m of contracts in the later stages of negotiation, making a total pipeline of £18.35m. In the 2016 calendar year, orders have totalled £15.68m, representing an increase of 100% year on year.

Given the current contracted order book, the Directors remain confident of delivering full year results in line with market expectations.

Summary:

Commercial Progress

· National Physics Laboratory (NPL) & The Centre for Engineering and Manufacturing Excellence (CEME) refuelling sites now open in London as part of the HyFive project.

· Upgrade completed to M1 Hydrogen refuelling station in Rotherham.

· H2ME2 grant awarded to continue to extend the network of refuelling stations in the UK.

· Stations on Shell forecourts at Cobham and Beaconsfield already underway.

· Fuel contracts signed with Arcola Energy, Commercial Group and Arval.

Post period end

· A further £3.1m of products under contract secured making a current total of £16.98m under contract and a total pipeline of £18.35m

· Sale of 1.25MW electrolyser to major EPC.

· First UK Power-to-Gas project awarded.

· Fuel contracts signed with Anglo American, Europcar UK and Hyundai.

· Announcement of a proposed placing to raise a minimum of £5.5m to;

o generate working capital to support the expanding project order book;

o move toward achieving a positive cash flow position; and

o strengthen the Company's balance sheet, to assist in meeting tender requirements

Key Financial Results for the six months ended 31 October 2016

· Total revenue and grant funding of £2.97m (2015: £3.45m), down 14%, reflecting the early stages of build projects during which there is relatively little revenue recognition*:

o Revenue - £0.4m (2015: £0.66m), down 39%

o Grant income - £1.62m (2015: £1.37m), up 18%

o Grants receivable for Capital Projects - £0.95m (2015: £1.42m), down 33%

· Increase in fixed assets to £3.8m (2015: £3.13m), up 21%

· Loss from operations £2.27m (2015: £3.17m), improved by 28%

· Cash burn⁺ of £1.61m (2015: £3.90m), decreased by 59%

· Cash balance of £1.7m at period end (2015: £2.6m)

· Debtors balances of £9.2m (2015: £5.14m), up 79%

· Debtors balance comprises substantially of balances from the California energy commission, UK government, and the EU Joint undertaking, but also balances paid in advance to suppliers.

* Revenue is recognised based on the percentage of costs incurred on a project, which means that the majority of revenue recognition takes place towards the end of a project

⁺Cash burn is a non-statutory measure and is defined underneath the Cash Flow Statement

Corporate Development

· New Managing Director, Calum McConnell, appointed in Germany to replace Phil Doran who is relocating to Scotland.

Graham Cooley, CEO, commented: "The last six months have seen significant development of our refuelling infrastructures around London and whilst this has been a key area of progress, we have also maintained a focus on our other markets and products. Demand for quotes and interest in our products and expertise continue to grow, resulting in some sizeable contracts for the second half of the current year and beyond. We hope that we can continue to develop our technology, contacts and order book as demand for our products and know-how increases on the back of these high-profile undertakings."

Roger Putnam, Chairman, added: "While changes in world economies and the UK's relationship with Europe in particular, have provided challenges for UK businesses, ITM Power has progressed with its refuelling projects in the UK and continues to receive significant interest from overseas power-to-gas markets, further raising the profile of ITM Power as a world leader in the deployment of PEM 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

Andrew Jones / Jonathan Sharp / Hugh Kingsmill Moore

+44 (0)20 3829 5000

Tavistock

Simon Hudson / James Collins

+44 (0)20 7920 3150

About ITM Power plc:

ITM Power manufactures integrated hydrogen energy solutions which are rapid response and high pressure that meet the requirements for grid balancing and energy storage services, and for the production of clean fuel for transport, renewable heat and chemicals. ITM Power plc was admitted to the AIM market of the London Stock Exchange in 2004 and is a founder member of the Social Stock Exchange. In 2016 the Group has continued its work on the Hyfive project, opening two refuelling stations in London, and signed fuel contracts with Arcola Energy, Commercial Group and Arval. The Group currently has £16.98m of projects under contract and a further £1.37m in the later stages of negotiation (£18.35m in total). www.itm-power.com.

CHAIRMAN'S STATEMENT

Our focus continues to be on large scale plant for Power-to-Gas and Hydrogen Refuelling. There has been a particular emphasis on the latter during this six-month period, enabling the Group to open two new refuelling stations in London and sign fuel contracts with Arcola Energy, Commercial Group and Arval. There have also been upgrade and performance-monitoring contracts at our refuelling site in California.

In Power-to-Gas applications, the Thüga Group continue to endorse the efficiency of our units and we are consistently tendering for MW-scale projects many of which have resulted in contracts being awarded towards the end of the six-month period and into the following period.

Financials

Our revenue recognition accounting policy, under which we account as a contracting business, means that our revenue line can be volatile to timing differences depending on the stage of build of our projects at the reference date. This can impact our reported numbers as in the period under review, which saw a number of our projects at relatively early stages of build. Revenue for the first six months of the period under review was £0.4m (2015: £0.66m), comprising a number of different build and consultancy projects in the UK, Europe and the US. The pre-tax loss for the period was £2.27m (2015: £3.17m). The reduction is attributable to a decrease in research & development and prototype engineering costs.

Trade and other receivables have increased to £9.2m. This largely reflects grant claims yet to be received or pro forma payments made to suppliers.

Cash burn has decreased by £2.29m as costly initial outlays on the building of new refuelling stations have been off-set by pre-financing receipts for some of the larger European grants that started in the period. Total grant income in the period was £2.57m (2015: £1.37m). Cash and short-term deposits at the period end were £1.7m (£3.3m at 30 April 2016 and £2.6m at 31 October 2015).

The board is not recommending the payment of a dividend for the period in accordance with our stated policy.

I am pleased to announce that we have entered into a proposed placing of a minimum of£5.5m, subject to shareholder approval. This funding will be used to support the known pipeline for builds and sales, as well as help demonstrate a stronger balance sheet in new commercial tenders.

Team

I am delighted to welcome Calum McConnell who joins us as the new Managing Director of ITM Power GmbH. Calum will take over from Phil Doran in December. His background in renewable energy and the German utilities market strengthens our team at a crucial time for energy storage in Germany and will hopefully build on Phil's earlier successes. Phil Doran will move to Scotland, remaining with ITM to facilitate its projects and relationships in this other important market.

In order to shape a renewable hydrogen future, ITM Power continues to carefully evaluate the staff and resources of the Company, understanding that, as we drive forward with our commercial development phase, we ask a lot of our people. The Board members would like to express their appreciation of our staff's hard work and dedication towards executing our strategies and driving the Company forwards.

Outlook

Our first reference plant in the Power-to-Gas market, in Frankfurt, for the Thüga Group, has been in operation for over three years now, with the Thüga Group continuing to report 'better than expected' results. The demonstration of a full scale installation in operation, and generating vital performance metrics, is creating a great deal of interest from potential partners and customers. The market in Germany and increasingly the UK and USA shows signs of significant growth and, with negotiations ongoing for sales in other new markets, the momentum looks set to continue.

ITM Power now has four refuelling units in operation, three in the UK and one in California. The collaboration agreement with Shell will lead to the first deployment of a refuelling station on a Shell forecourt within the next few months, further extending the infrastructure in the UK.

Shareholders should note that we continue to pursue all appropriate opportunities to reinforce our position as a leader in energy storage and clean fuel internationally and to turn that position into increased revenues for the Group as our markets mature. The Board is pleased with the progress made to date and looks forward to an even busier second half of the year.

Prof Roger Putnam CBE

Chairman

26 January 2017

CEO's REVIEW

ITM Power has had a good start to the year; despite wider economic factors creating uncertainties in the European Union and further afield which may impact grant funding and cause currency fluctuations looking forward. The Group has a rapidly developing pipeline of qualified quotes for its two principal products. These larger scale platforms continue to be our largest source of income and also make up the bulk of enquiries being received.

The Company's key financial goal remains to become cash flow positive in the shortest period possible and we have successfully kept the cost base from materially increasing.

Products in Build

As of today, the Company has eight products at its Sheffield headquarters either ready to ship, undergoing factory acceptance testing (FAT) or in manufacture, of which one is an Hpac 40, two are refuellers and five are larger scale products. Product cost reduction is being achieved through both manufacturing efficiencies and reduced materials costs.

Power-to-Gas

ITM Power GmbH has now recruited a new Managing Director with experience in renewable energy and the German utilities market in particular, in order to press our advantage in this key sector. With two large scale Power-to-Gas plants already operational and continuing to provide valuable field data, ITM Power continues to secure interest from this market for our products.

The Group plans to showcase a series of large scale electrolyser configurations up to 100MW at Hannover Messe 2017. This is in response to utility and oil and gas industry demand for larger scale industrial installations.

Hydrogen Refuelling Station (HRS) Deployment

The nature of HRS projects is that costs, and in particular non-recurring engineering costs, are subsidised through project income that ultimately results in ITM Power retaining ownership and operation of completed units. This means that the assets will be of value to ITM Power not only as a revenue stream but also as a source of information for continually improving the performance of plant.

ITM Power has a total contracted HRS portfolio today of ten, comprising five operational stations with a further five stations under development.

ITM Power's Nottingham HRS has been operating now for over four years (deployment announced 20 September 2012) and comprises a small 350bar refueller on the Nottingham University site. ITM Power's first commercial scale (80kg/day) refueller, sited less than two miles from Junction 33 on the M1 at The Advanced Manufacturing Park in Rotherham was recently upgraded to 700bar refuelling under the OLEV HRS upgrade scheme.

HyFive, an EU funded project (with OEM partners BMW, Daimler, Honda, Hyundai and Toyota), is to deploy three 700 bar stations in London. Sites at the National Physical Laboratory (NPL) in Teddington and Centre for Engineering and Manufacturing Excellence (CEME) in Rainham, have both opened to the public. The third HyFive site at Shell Services, Cobham is due to open in February 2017.

H2ME, another EU project launched in June 2015, will deploy a further two HRS in London at Beaconsfield off the M40 and at Gatwick Airport.

Technology Progress

ITM Power's Development team continues to focus on lowering product costs, maximising durability and increasing efficiency. Significant cost savings have been made through lowering the use of precious metals, increasing power density (three-fold), minimising part count, optimising protective coating and developing in-house processing and/or component manufacture. The Group tested production-scale stacks to 300% power density just two years ago with unprecedented performance, and degradation below the level of detection. This technology is currently being implemented into customer products for deployment in early 2017.

A greater understanding of mechanisms of degradations has led to the development of world first electrolyser accelerated stress tests that have allowed ITM Power to get innovations to market faster. The Group's research centre was completely renovated during the period with little or no interruption to tests and engineering development.

The scaling-up of technology is also gathering momentum with both multi-megawatt modules and multi-megawatt plant design in the final stages of testing. Additional cost reduction is achieved through the adoption of a less wasteful rectangular active area. The megawatt scale module conserves advantages from previous generations through a reduced number of parts and through patented stack decoupling, enabling agile logistics in manufacture, commissioning and servicing. It has been adopted commercially in the newly launched 100MW plant design.

ITM Power's electrolyser stack materials have surpassed a 35,000 operational hours landmark, with an average degradation rate below two millionths of a volt per hour per cell. This gives a predicted lifetime of over 100,000 hours of high efficiency operation, which equates to a 20 year lifetime at 60% usage or 12 years of continuous operation before materials need to be changed. In addition, internal stack tests have performed over 30,000 rapid response operations (from zero to 100% in less than one second) without any additional degradation. This allows the Group's water electrolysers to respond to fluctuations in renewable energy generation with a sub-second response time. Tests at 300% of normal operating power have surpassed a 20,000 hours operational mark with a degradation rate below two millionths of a volt per hour.

This data further validates the Group's core technology and is testament to the heavy emphasis placed on extensive laboratory testing. Coupled with the rapidly growing quantity of data acquired from equipment in the field, ITM Power is in a very strong position.

Marketing

The Group's marketing efforts remain focused on engagement with multi-national companies that operate within the energy, transport and chemical sectors. In addition, ITM Power was invited to deliver keynote presentations at All-Energy in Scotland and attend the World Hydrogen Energy Conference, Spain where it showcased its 1MW stack assembly.

In May, ITM Power launched the first London HyFive Hydrogen Station at the National Physical Laboratory (NPL) in Teddington. The station was opened to the public by Andrew Jones MP, Transport Minister at the Department for Transport, and was supported by the automotive OEMs Hyundai, Toyota, Honda and Renault partner Symbio FCell, who also presented and participated in a Q&A session.

ITM Power also ran a series of UK hydrogen fleet user workshops and Ride & Drive events. This was in response to the Office of Low Emission Vehicles (OLEV) £2m FCEV Fleet Support Scheme which was launched on 10 May. The tour was organised in collaboration with Toyota, Hyundai, Arcola Energy, Symbio FC and GreenTomatoCars.

In October, ITM Power officially launched its third public access hydrogen refuelling station and the second HyFive hydrogen refuelling station in London at the Centre of Engineering Manufacturing Excellence (CEME) in Rainham. The station was opened to the public by Bill Williams, CEO of CEME and Prof Roger Putnam CBE, Chairman of ITM Power. The opening was supported by the automotive OEMs, who also presented and participated in a Q&A session.

Preceding the station opening, a Hydrogen Rally took place to the finishing line at the CEME HRS from two locations, with journalists and transport industry commentators, some of whom became the first to make the 186 mile drive from a wind hydrogen station in South Yorkshire to the solar hydrogen station, demonstrating how excess renewable energy can be used and stored as hydrogen gas to refuel FCEVs in three minutes. A second rally commenced at ITM Power's hydrogen station in Teddington, West London, crossing central London to CEME and highlighting zero emission driving across the Capital's Low Emission Zone. In total 11 FCEVs took part, provided by automotive OEMs Toyota, Hyundai and Symbio FCell Renault and vehicle owners JCB, Anglo American, Johnson Matthey, Green Tomato Cars and ITM Power.

Outlook

With the traction that ITM Power has built in the design and supply of industrial scale, rapid response electrolysers, and with the new funding announced today, the Group is in a very strong position to exploit fast growing utility, petrochemical and hydrogen refuelling markets worldwide. Quotation, sales and order pipelines are stronger than they have ever been. I look forward to reporting on what will be an active second half to the year and, given the current contracted order book, the Directors remain confident of delivering full year results in line with market expectations.

Dr Graham Cooley

Chief Executive Officer

26 January 2017

	CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) Results for the six months ended 31 October 2016
		Note	Six months ended 31 October 2016 (unaudited) £'000	Six months ended 31 October 2015 (unaudited) £'000	Year ended 30 April 2016 (audited) £'000

Revenue		2	405	655	1,930
Cost of sales			(313)	(438)	(1,483)
Gross profit			92	217	447

Operating costs
- Research and development			(790)	(1,066)	(1,952)
- Prototype production and engineering			(1,614)	(2,162)	(2,954)
- Sales and marketing			(744)	(624)	(1,364)
- Administration			(833)	(905)	(1,724)
Other operating income - grant income		2	1,616	1,368	3,188
Loss from operations			(2,274)	(3,172)	(4,359)

Investment revenues		2	2	2	-
Loss before tax			(2,272)	(3,170)	(4,359)
Tax			69	394	359
Loss for the period			(2,203)	(2,776)	(4,000)

OTHER TOTAL COMPREHENSIVE INCOME:
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences on foreign operations			81	(37)	(62)
Net other total comprehensive income			(2,122)	(2,813)	(4,062)
Loss per share
Basic and diluted			(1.0p)	(1.6p)	(2.0p)
Weighted average number of shares			216,892,973	178,100,996	184,566,326

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.

The accompanying notes form part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

Results for the six months ended 31 October 2016

	Called up share capital £'000	Share premium account £'000	Merger reserve £'000	Foreign Exchange reserve £'000	Retained loss £'000	Total Equity £'000


At 1 May 2015	8,905	54,738	(1,973)	116	(51,442)	10,344
Loss for the period	-	-	-	-	(2,776)	(2,776)
Other comprehensive income for the period	-	-	-	(37)	-	(37)
Total Comprehensive income for the period	-	-	-	(37)	(2,776)	(2,813)

Issue of share capital	-	-	-	-	-	-
Credit to equity for equity settled share based payments	-	-	-	-	-	-
At 31 October 2015 (unaudited)	8,905	54,738	(1,973)	79	(54,218)	7,531


At 1 May 2016	10,845	58,151	(1,973)	54	(55,442)	11,635
Loss for the period	-	-	-	-	(2,203)	(2,203)
Other comprehensive income for the period	-	-	-	81	-	81
Total Comprehensive income for the period	-	-	-	81	(2,203)	(2,122)

Issue of share capital	-	-	-	-	-	-
Credit to equity for equity settled share based payments	-	-	-	-	-	-
At 31 October 2016 (unaudited)	10,845	58,151	(1,973)	135	(57,645)	9,513

The accompanying notes form part of these financial statements.

CONSOLIDATED BALANCE SHEET (UNAUDITED)

31 October 2016

	As at 31 October 2016 (unaudited) £'000	As at 31 October 2015 (unaudited) £'000	As at 30 April 2016 (audited) £'000
NON CURRENT ASSETS
Development Costs	352	-	252
Property, plant and equipment	3,447	3,126	3,024
	3,799	3,126	3,276

CURRENT ASSETS
Inventories	445	1,572	291
Trade and other receivables	9,195	5,137	6,487
Cash and cash equivalents	1,725	2,597	3,336
TOTAL CURRENT ASSETS	11,365	9,306	10,114

CURRENT LIABILITIES
Trade and other payables	(5,651)	(4,859)	(1,755)
Provisions	-	(42)	-
TOTAL CURRENT LIABILITIES	(5,651)	(4,901)	(1,755)

NET CURRENT ASSETS	5,714	4,405	8,359

NET ASSETS	9,513	7,531	11,635

EQUITY
Called up share capital	10,845	8,905	10,845
Share premium account	58,151	54,738	58,151
Merger reserve	(1,973)	(1,973)	(1,973)
Foreign Exchange Reserve	131	79	54
Retained loss	(57,645)	(54,218)	(55,442)
TOTAL EQUITY	9,513	7,531	11,635

The accompanying notes form part of these financial statements.

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

Results for the six months ended 31 October 2016

	Six months ended 31 October 2016 (unaudited) £'000	Six months ended 31 October 2015 (unaudited) £'000	Year ended 30 April 2016 (audited) £'000

Loss from operations	(2,274)	(3,172)	(4,359)
Adjustments:
Depreciation of property, plant and equipment	415	264	619
Loss on disposal	22	-	67
Share-based payment expense	-	-	-
Operating cash flows before movements in working capital	(1,837)	(2,908)	(3,673)
(Increase)/decrease in inventories	(154)	(1,060)	221
(Increase) in receivables	(2,803)	(629)	(1,998)
Increase/(decrease)in payables	3,838	1,564	(1,540)
Increase/(decrease) in provisions	-	(66)	(108)
Cash used in operations	(956)	(3,100)	(7,098)
Income taxes received	252	-	-
Net cash used in operating activities	(704)	(3,100)	(7,098)

Investing activities
Interest received	2	2	-
Purchases of property, plant and equipment	(839)	(844)	(1,167)
Proceeds from sale of plant & equipment	3	-	-
Payments for intangible assets	(100)	-	(252)
Net cash (used in) investing activities	(934)	(842)	(1,419)

Financing activities
Proceeds from issue of shares	-	-	5,819
Costs associated with fund raise	-	-	(466)
Net cash from financing activities	-	-	5,353

(Decrease) in cash and cash equivalents	(1,638)	(3,941)	(3,164)
Cash and cash equivalents at the beginning of the period	3,336	6,576	6,576
Effect of foreign exchange rate changes	27	38	(76)

Cash and cash equivalents at the end of the period	1,725	2,597	3,336

Cash Burn

Cash burn is a measure used by key management personnel to monitor the performance of the business.

(Decrease) in Cash and Cash equivalents per the cash flow statement	(1,638)	(3,941)	(3,164)
Effect of foreign exchange rates	27	38	(76)
Less share issue proceeds	-	-	(5,819)
Cash Burn	(1,611)	(3,903)	(9,059)

The accompanying notes form part of these financial statements.

The condensed Interim Financial Statements were approved by the board of Directors on

26 January 2017

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 ended 31 October 2015 have been subject to an interim review in accordance with ISRE2410 by the Group's auditors. The financial information for the six months ended 31 October 2016 have not been subject to an interim review. The information relating to the year ended 30 April 2016 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 IAS 34 Interim Financial Reporting as adopted by the European Union. The principle 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 principle accounting policies adopted by the Group are as applied in the Group's latest audited financial statements.

Going concern

The Directors announced today that the Company has entered into a proposed placing to raise a minimum of £5.5m, conditional on passing of resolutions at a General Meeting to be held on 16 February 2017.

The Directors have prepared a cash flow forecast (the "Forecast") for the period to 31 January 2018 (the "Forecast Period"). The Forecast includes a minimum of £5.5m proceeds from the equity fund raise less expenses relating to the fundraise, together with a number of assumptions, including the level of projected sales and grant income, the timing of which is inherently uncertain.

Whilst the Directors anticipate that the additional financing of a minimum of £5.5m will be required in order to take advantage of the various opportunities that it is actively pursuing, based on the above, 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

In 2016, no single customer contract accounted for more than 10% of total revenue (2015: Customer A - £552,000).

An analysis of the Group's revenue is a follows:	2016 £'000	2015 £'000
Continuing operations
Revenue from construction contracts	213	579
Consulting services	157	23
Maintenance services	23	27
Refuelling/ electricity sales	4	-
Other	8	26
Revenue in the Consolidated Income Statement	405	655
Grant income	1,616	1,368
Investment income	2	2
	2,023	2,025

Revenues from major products and services

The Group's revenues from its major products and services were as follows:

	2016 £'000	2015 £'000
Continuing operations
Electrolyser platform sales	236	606
Consultancy	157	23
Other	12	26
Consolidated revenue (excluding investment revenue)	405	655