Half Yearly Report

RNS Number : 7779Z

ITM Power PLC

20 January 2011

 



20 January 2011

ITM Power Plc

("ITM Power" or "the Company")

Half-year results for the six months ended 31 October 2010

ITM Power plc (AIM: ITM) the energy storage and clean fuel company announces its half-year results for the six months ended 31 October 2010.

HIGHLIGHTS
Operational
•	Product sales drive starts at 2011 Hannover Messe in April
	▪	HPac CE documentation submitted between June and December 2010
	▪	HPac CE mark imminent
	▪	HPac delivered to the University of Birmingham for trial
	▪	HFlame trial with Ametek
•	First HOST trial to commence 8 March 2011 at Stansted Airport
	▪	21 commercial partners joined the HOST trials
	▪	Achievement of Euro VI Emissions for the HICE Transit Vans
•	TSB funded collaboration project with Ford Motor Company
•	MoU with BRE for the development of a zero carbon home
•	Record high power density Fuel Cell performance announced
Financial and Corporate
•	Appointment of Lord Freeman as Non-Executive Director
•	Grant funding of £536,000 accounted for in the period (2009: £108,000)
•	Pre-tax loss for the period was £3.0m (2009: £3.4m) and net cash burn of £2.3m (2009: £2.3m)
•	Cash and Short-Term investments at 31 October 2010 of £14.7m (2009: £19.5m)

Prof. Roger Putnam, Non-Executive Chairman of ITM Power commented:

"When I last commented on the developments at ITM, we had just come through a very challenging period during which we had instituted, and implemented the conclusions of, a thorough review of the Company's technology, potential markets and commercialisation strategy.  I am pleased to be reporting now on the progress of that commercialisation and the first delivery of ITM products.

"The team have worked incredibly hard on achieving the CE marking of these early products and the HOST team have been highly successful in putting together the biggest trial of Hydrogen fuelled vehicles ever to have taken place in the UK.  I look forward to reporting further progress at the conclusion of the second half of our financial year."

For further information please visit www.itm-power.com or contact:

ITM Power plc Graham Cooley, CEO	0114 244 5111
Panmure Gordon & Co. Katherine Roe	020 7459 3600
Tavistock Communications Simon Hudson / Andrew Dunn / Sonya Williams	020 7920 3150

Chairman's Statement

I am pleased to report our interim results for the six months ended 31 October 2010 and update shareholders on the progress made to date and the outlook for our company.

Following the publication of our Annual Report for the year to 30 April 2010, we held a shareholder open day at the time of our AGM in September. The open day, held at our main facility in Sheffield, was very successful, attracting over 200 visitors from 9 different countries. The visitors represented potential customers, partners and suppliers as well as shareholders and the wider investment community.  The day resulted in the international profile of the Company being enhanced and several follow up visits have taken place.

Financials

The pre-tax loss for the six months under review was reduced by 12% to £3.0m (2009: £3.4m) and was in line with budget. Total grant funds accounted for in the period were £536k (2009: £108k) with £201k of this being allocated against the cost of constructing the HFuel unit for the Hydrogen On Site Trials.

Interest rates continue to be depressed and risk remains a key factor in the investment of Company funds. The Company holds over 99% of its funds on deposits of varying terms with its bankers Nat West. Deposit rates are monitored regularly with funds being placed in the most beneficial interest bearing accounts. The Company cash and short-term deposit balances totalled £14.7m at the period end (£19.5m at 31 October 2009 and £16.9m at the last financial year end on 30 April 2010).

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

Board and Staff

On 1 October 2010 Lord Roger Freeman PC was appointed as a Non-Executive Director of the Company. Lord Freeman brings a wealth of experience to the Board and I take this opportunity to welcome him to the Company and look forward to working with him in the coming months and years.

Our staff continue to work hard on the achievement of the deadlines and development goals that have been set and I would like to thank all of our employees for their contribution to the progress that has been made over the last six months.

Outlook

During the next six months I anticipate that the Company will be rolling out products into their relevant target markets with this process commencing at the Fuel Cell and Hydrogen Energy Association (formerly the National Hydrogen Association) in Washington in February and the Hannover Messe in April. The HOST programme will begin at London Stansted Airport on 8 March 2011 with our HFuel unit subsequently visiting 20 commercial partners throughout the year.

Professor Roger Putnam CBE

Non-Executive Chairman

20 January 2011

Chief Executive Officer's Statement

ITM Power has been engaged in its transformation from a technology development company to a product company and 2011 will be the year that this process results in the first product revenues.

Progress with Products and Technology

CE marking is a key part of this process as is our ISO quality system. We had originally hoped to have CE marking in place for our first products by the end of calendar year 2010 and documentation was filed for HPac, (the largest of the initial product platforms) between June and December.

We had selected HPac as the first product to submit as it required approval against the full range of applicable Directives and provides useful feedback to the process for our other products including HFuel.  Many of these cautious UK notification bodies have not worked with hydrogen before and so we have now established a process and network which should in the future reduce process time.  Clarification of elements of CE compliance has been somewhat extended.  However, we are confident that HPac will receive official confirmation of conformity imminently.

The other products are also well along the certification process with documentation required for mandatory Notified Body approval already submitted. In addition to preparation for CE Marking, we have redesigned a number of components and production systems for the products resulting in lower overall costs of manufacture. We also had our first ISO renewal audit which was successful against 19001, 14001 and 18001.

Product, stack and membrane testing particularly for efficiency and longevity have been a key focus for the technology team. Our three test laboratories are producing consistent and impressive results.  Over 250,000 cumulative hours of testing has been acquired since June 2009. Extensive reliability and warranty testing has also been undertaken and is on-going.

In November the Company reported record fuel cell performance achieved using its membrane material in the laboratory.  Power densities up to 5.5W/cm2 at 10A/cm2 have been recorded when using hydrogen and oxygen gases; a performance which is a step-change from the current state of the art offering significant cost reduction potential.  This and other data was used to win a grant from the Carbon Trust to demonstrate performance with hydrogen and air, targeting deployment in the automotive sector.  ITM are engaging candidate commercial users to establish an appropriate onward development path towards this growing application.

Market Entry

The product sales process is the next challenge for the Company. We begin the sales push at Hannover with a high profile display of the two largest of our product range, HFuel and HPac. Both these products will be sold using a direct sales model and we hope to take our first orders at the show. 

Key to achieving a marketable product has been the continuous improvement applied to the products for cost and manufacturability. Reliable supply chains and sub-assembly manufacturing partnerships have been established to increase our capability to respond to large order volumes.

Grant funding has been a new and important funding stream and partnering exercise for the Company over the last six months. The Carbon Trust grant for the partnering and development of ITM Power's high power density fuel cell was particularly noteworthy and has the potential to attract a significant global partner.

We have been very successful at gaining funding from UK grant bodies and are now looking to larger funding and partnerships in the EU/USA.  Our existing grant programmes are progressing very well and have contributed usefully to our technical development while establishing vital links with top university departments and collaborating companies.

HFuel was launched at ITM Power in September, an event attended by numerous visitors.  This extremely successful event was instrumental in attracting the 21 partners who have now signed up to the HOST trials which will commence in March this year.

The World is Changing

I am delighted to report that clean fuel and energy storage are finally receiving the attention they deserve from politicians and the media in the UK.

In the last quarter, the Minister for Energy, Charles Hendry, has specifically referred supportively to green energy storage and hydrogen on two occasions in the House of Commons.  The Minister for Science, David Willetts, has also made the case in official speeches.   We continue to meet with leading politicians and policymakers.

Just before Christmas, the Government's Electricity Market Reform Consultation acknowledged in ten separate references the need for renewable energy storage and demand side management and ITM Power will provide a full consultation response.  This followed the publication, in November,  of the policy paper, 'Rescuing Renewables', by the leading Conservative think tank, The Bow Group, which made the case for green energy storage and carried a foreword by Deputy London Mayor, Kit Malthouse.

We continue to enjoy strong and high profile media coverage with numerous articles in the national and regional media in 2010, the most recent of which was in The Sunday Times' 'Green Pioneers' column on Boxing Day, which was devoted to ITM.

The Future

Following the clear commitments to hydrogen fuel made in both Germany and USA, hydrogen vehicles are coming, and in meaningful numbers.  The need for hydrogen infrastructure has never been greater and ITM will be using the HOST trials to demonstrate its capability to supply and operate plant able to seed early stage installation with capacity for further expansion.  The ability to generate green hydrogen via electrolysis also offers opportunities to 'green-up' pre-installed hydrogen infrastructure with renewable-tied plant.

We anticipate bidding into the subsequent stage of the Next Energy project towards the build of an alpha prototype home hydrogen refueller.  The present phase has been very successful and benefited from input from eight OEM's during the design process.

With CE marks, first product revenues, a broad range of field trials, shows in Germany and the USA,

2011 will be a transformational year for ITM Power. I am confident that the uptake of Hydrogen will continue to gain momentum and that, with our range of energy storage and clean fuel products, the Company is extremely well positioned.

Dr Graham Cooley

Chief Executive Officer

20 January 2011

CONSOLIDATED INCOME STATEMENT (UNAUDITED) Results for the six months ended 31 October 2010
			Six months  ended   31 October  2010  (unaudited) £'000		Six months  ended  31 October  2009  (unaudited) £'000		Year ended  30 April 2010  (audited) £'000
Operating costs
- Research and development			(1,866)		(1,771)		(3,531)
- Prototype production and engineering			(413)		(722)		(1,316)
- Sales and marketing			(233)		(162)		(389)
- Administration			(915)		(980)		(1,665)
Other operating income - grant income			335		108		139
Loss from operations			(3,092)		(3,527)		(6,762)
Investment revenues			80		124		203
Finance costs			-		-		(1)
Loss before tax			(3,012)		(3,403)		(6,560)
Tax			336		1,276		1,509
Loss for the period			(2,676)		(2,127)		(5,051)
Loss per share
Basic and diluted			(2.6p)		(2.1p)		(5.0p)
Weighted average number of shares			104,467,735		102,141,226		102,409,137

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, and therefore no consolidated statement of comprehensive income has been presented.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

Results for the six months ended 31 October 2010

	Called up share capital £'000	Share premium account £'000	Merger  reserve  £'000	Retained   loss  £'000	Oct  2010  Total  £'000	Oct  2009  Total  £'000	Apr  2010  Total  £'000
At 1 May 2010	5,142	36,277	(1,973)	(20,983)	18,463	23,487	23,487
Issue of share capital	350	50	-	-	400	9	42
Credit to equity for equity settled share based payments	-	-	-	205	205	(3)	(15)
Retained loss, being total comprehensive expense for the period	-	-	-	(2,676)	(2,676)	(2,127)	(5,051)
At 31 October 2010 (unaudited)	5,492	36,327	(1,973)	(23,454)	16,392	21,366	18,463

CONSOLIDATED BALANCE SHEET (UNAUDITED)

As at 31 October 2010

	Note	As at 31  October 2010  (unaudited) £'000		As at 31  October 2009  (unaudited) £'000		As at 30  April 2010  (audited) £'000
NON CURRENT ASSETS
Property, plant and equipment		1,477		1,377		1,364
CURRENT ASSETS
Inventories		21		48		12
Trade and other receivables		1,395		1,067		733
Investments - short term deposits		13,750		15,000		-
Cash and cash equivalents		904		4,461		16,932
TOTAL CURRENT ASSETS		16,070		20,576		17,677
CURRENT LIABILITIES
Trade and other payables		(1,155)		(587)		(578)
NET CURRENT ASSETS		14,915		19,989		17,099
NET ASSETS		16,392		21,366		18,463
EQUITY
Called up share capital	3	5,492		5,113		5,142
Share premium account		36,327		36,273		36,277
Merger reserve		(1,973)		(1,973)		(1,973)
Retained loss		(23,454)		(18,047)		(20,983)
TOTAL EQUITY		16,392		21,366		18,463

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

Results for the six months ended 31 October 2010

		Six months  ended  31 October  2010  (unaudited) £'000		Six months  ended  31 October   2009  (unaudited) £'000		Year ended  30 April  2010  (audited) £'000
Loss from operations		(3,092)		(3,527)		(6,762)
Adjustments:
Depreciation of property, plant & equipment		365		393		722
Loss on disposal of property, plant & equipment		-		187		223
Share-based payments		205		(3)		(15)
Operating cash flows before movements in working capital		(2,522)		(2,950)		(5,832)
(Increase) decrease in inventories		(9)		21		58
(Increase) decrease in receivables		(326)		7		(5)
Increase in payables		577		138		129
Cash used in operations		(2,280)		(2,784)		(5,650)
Income taxes received		-		552		1,023
Net cash used in operating activities		(2,280)		(2,232)		(4,627)
Investing activities
Interest received		80		17		203
Interest paid		-		-		(1)
Proceeds on disposal of property, plant and equipment		-		-		11
Purchases of property, plant and equipment		(478)		(127)		(490)
Decrease in short term deposits		(13,750)		(15,000)		-
Net cash used in investing activities		(14,148)		(15,110)		(277)
Financing activities
Proceeds from issue of shares		400		9		42
Net cash from financing activities		400		9		42
Decrease in cash and cash equivalents		(16,028)		(17,333)		(4,862)
Cash and cash equivalents at the beginning of the period		16,932		21,794		21,794
Cash and cash equivalents at the end of the period		904		4,461		16,932
Cash, cash equivalents and short term deposits at the beginning of the period		16,932		21,794		21,794
Decrease in the period		(2,278)		(2,333)		(4,862)
Cash, cash equivalents and short term deposits at the end of the period		14,654		19,461		16,932

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 2010 and 31 October 2009 has not been audited.   The information for the year ended 30 April 2010 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The auditors' report on those accounts was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The directors continue to believe that the going concern basis of preparation remains appropriate based upon the level of the Company's level of cash and short term investments relative to the foreseeable operating losses, for a period of not less than 12 months from the date of this report.

2.  Significant accounting policies

The financial statements have been prepared on the historical cost basis.

The principal accounting policies adopted by the Company are as applied in the Group's latest annual audited financial statements.

3.  Called up share capital

			As at  31 October  2010  (unaudited)  £'000	As at  31 October  2009  (unaudited) £'000	As at  30 April  2010  (audited) £'000
Called up, allotted and fully paid:
109,842,735 ordinary shares of 5p each
(Oct 2009: 102,265,985, Apr 2010: 102,842,735)			5,492	5,113	5,142

INDEPENDENT REVIEW REPORT TO ITM POWER PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 October 2010 which comprises the income statement, the balance sheet, the statement of changes in equity, the cash flow statement and related notes 1 to 3. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with the accounting policies the group intends to use in preparing its next annual financial statements.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 October 2010 is not prepared, in all material respects, in accordance with the AIM Rules of the London Stock Exchange.

Deloitte LLP

Chartered Accountants and Statutory Auditors

Cambridge, UK

20 January 2011

 

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