Final Results

ITM Power PLC 01 July 2005 1 July 2005 ITM Power Plc ('ITM' or 'the Company') Preliminary Results for the year ended 30 April 2005 ITM Power Plc, which aims to provide enabling technology for the hydrogen economy, announces preliminary results for the year ended 30 April 2005. Highlights: • Placing to raise £10 million and Admission to AIM in June 2004 • Prospectus and new milestones achieved: •Mark III electrolyser independently estimated to achieve US$283/kW in mass production with doubling of power input •Range of hydrophilic alkaline solid polymer electrolyte materials successfully operated in fuel cell mode, including a micro-fuel cell, using liquid fuels and air, that could be used in small, portable electronic devices •Demonstrated ITM's first working dual liquid fuelled fuel cell • Addressable markets significantly expanded • IP portfolio strengthened and extended • Capital expenditure within planned budget and defrayed by research collaboration with the BOC Foundation and government grants • Cash balances including interest receivable of £8m after successful recruitment of 5 additional scientists and a move to larger R&D facilities in Sheffield • On course to achieve further key milestones in the current financial year Stephen Massey, Chairman, commented: 'ITM has made excellent progress on all fronts since becoming a publicly traded company. The team has delivered against the milestones set out in the prospectus. We have strengthened the Board, our scientific personnel and we have accelerated the R&D programme. As the focus on renewable energy sources continues to increase, we expect more and more attention to be directed towards the hydrogen economy. ITM intends to become a world leader in enabling hydrogen to become the fuel of the future.' For further information please contact: Jim Heathcote, Chief Executive Gemma Chandler ITM Power PLC Tavistock Communications Tel: 01780 740574 Tel: 020 7920 3150 Simon Hurst/ Richard Swindells/Katherine Roe Panmure Gordon & Co Tel: 020 7459 3600 Chairman's Statement I am pleased to report the first set of annual results for the year ended 30 April 2005 since ITM's admission to AIM in June 2004. On behalf of the Board, I thank the pre-IPO shareholders for their support and welcome the new shareholders resulting from the Placing and ITM's public listing. World Energy Overview It is increasingly becoming accepted that the current resilient price of oil is a reflection of an approaching historic peak in global oil production that is unable to meet the rapidly increasing demand for energy from China and India. The work of the Association for the Study of Peak Oil has drawn attention to the serious energy crisis that could occur unless new reliable energy sources are developed. In February the Kyoto Treaty became legally binding. Some 141 countries, accounting for 55% of greenhouse gas emissions, have ratified the treaty, which pledges to cut these emissions by 5.2% by 2012. In order to sustain economic growth the world needs to develop new energy sources that can supplement our current energy system and do not produce harmful emissions. This is driving further interest into expanding nuclear power production and renewable energy sources. The conversion of renewable low value intermittent energy into high value reliable energy is at the heart of ITM's strategy and can be achieved by the development of low cost and durable electrolysers. The electrolyser has the potential to transform the economics of renewable energy. Results When reporting the interim results for the half year we stated that we were operating well within budget, and this has continued to be the case in the second half. The Operating Loss for the year was £1.61m, and the Loss before Tax was £1.26m. Cash balances including interest receivable totals £8m, which is a strong financial position from which to continue our technical development programmes. The policy of maintaining tight control over cash expenditure will continue ensuring that resources available for ITM's technical programmes are maximised. In line with prospectus statements the Directors are not recommending payment of a dividend. Review ITM's research and development activities, which provide the platform for eventual revenues from licensees, have been expanded during the year. The technical team has been increased significantly and laboratory R&D facilities enhanced following the move in November to new premises in Sheffield. ITM's intellectual property in fuel cell and electrolyser technology, affordable materials and efficient production processes mean that the Company is well placed to benefit from the greatly increased worldwide interest in a sustainable non-polluting hydrogen economy. Significant technical developments have been achieved in the year under review: Independent costings of the Mk III electrolyser showed significant cost reduction compared with Mk II, plus a doubling of power input. The Generics Group, an independent scientific consultancy, has estimated that in mass production it would be possible to achieve a cost level below $300 per kW. This represented an important step forward in ITM's development plan. Electrolysers will play a pivotal role in maximising the potential of transient renewable power generation systems such as a wind turbine. ITM has formulated and produced a range of hydrophilic alkaline solid polymer electrolyte materials, which have now been operated in fuel cell mode. Alkaline electrochemistry opens the route to new lower cost catalysts, which promise further cost reduction potential. With the support of the Department of Trade and Industry, the Company successfully tested fuel cells that operate using liquid (specifically alcohol) fuels introduced directly into the cell. This has significance for small portable electronic devices and opens a large field of potential licensees not included in our original revenue model. In April, the BOC Foundation, an independent organisation, established in 1990 by the BOC Group plc, awarded ITM a grant to further develop low cost electrolysers. As a part of the agreement, a high-level expert research committee was formed to consider electrolyser development. This committee will be hosted by ITM and will include participants from the BOC Foundation, the BOC Group plc and Professor Marcus Newborough (Scottish Power:- Royal Academy of Engineering, Professor in Energy & Environmental Engineering at Heriot Watt University). The committee reviews areas of mutual interest arising from ITM's research into the manufacture and use of low cost electrolysers for hydrogen production from renewable resources. ITM will own all intellectual property (IP rights) to any new discoveries made during the research carried out under the agreement. ITM announced in March 2005 that it had successfully demonstrated an alkaline solid polymer fuel cell. ITM's unique alkaline membrane technology has been demonstrated operating using two liquids: a liquid fuel and a liquid oxidant. The device was built to demonstrate the application of ITM's technology to a micro-fuel cell, a size that could be compatible with use, for example, in a hand held telecommunication or other portable electronic devices. It has the potential to be operated at high energy density at room temperature using a safe fuel / oxidant combination: sodium boro-hydride (non-flammable, as it is used as a solution in water) and hydrogen peroxide (a similar dilution to an antiseptic that can be bought at a high street chemist). Using two liquids enables the device to operate at high altitudes, such as in an aircraft; in polluted environments (including the presence of carbon monoxide in atmospheric air), as well as underwater. The demonstration device was an additional strong indication of the diversity and commercial potential of ITM's core materials and processes and further broadens the potential addressable markets for future licensing deals. Intellectual Property In August 2004, the Company filed three UK provisional patent applications covering: • Photoelectric devices • Novel materials for use in fuel cells and electrolysers • Key technological elements important to the application of ITM's proprietary 'in-situ' manufacturing process for membrane electrode assembly ('MEAs') and cell stacks. Additionally, ITM developed and filed a UK patent on a new early warning system, which indicates when the liquid fuelled fuel cell, demonstrated in March 2005, is in need of refuelling. The system consists of a colour indicator that allows the colour of the fuel (or the oxidant) to change as the material is exhausted, giving an early warning of the need to re-charge the device. Previously, a rapid drop in performance was the only means of detecting that the fuel needed re-charging. UK patent applications have been made to include: the early warning refuelling colour indicator and a sealed refuelling cassette designed specifically to enable the rapid and convenient refuelling of fuel cells operating using one (or two) liquids. It is central to ITM's approach that the technology it develops should be actually useable, and it must therefore be robust and easy to refuel using non-hazardous materials. This new system offers a route to a rapid, safe and convenient refuelling process without which such fuel cells will not become commercially successful. In total the granted or pending patent portfolio has grown and now consists of 12 separate applications a significant increase during the year. Board, Management and Staff At the end of June 2004, I was pleased to welcome The Right Hon. Lord Walker to the Board as a non-executive Director of the Company. Lord Walker was a member of all Conservative Cabinets between 1970 and 1990, holding several posts including Secretary of State for Trade and Industry (including Energy), Secretary of State for the Environment and Secretary of State for Energy. He is Chairman of Allianz Cornhill Insurance plc and a non-executive Director of The London International Financial Futures and Options Exchange. After retiring from the Cabinet, Lord Walker became Chairman of international investment bank, Kleinwort Benson Group plc and is now Vice Chairman of Dresdner Kleinwort Wasserstein. Lord Walker was not the only new arrival at ITM during the year; we further strengthened our team by recruiting five experienced scientists, top-level graduates and postgraduates. The Board announces today, John Wreford, who is currently Finance Director, has indicated that he will retire from the Board at the end of the year to pursue other interests. We will make an appropriate announcement as soon as we have found a replacement. I would like to thank John for his significant contribution to the Company since he joined in 2000, and wish him every success in the future. I would like to take this opportunity to welcome the new recruits to ITM and to thank all staff for their hard work and commitment during the year. Outlook We look to remain on track to achieve further key milestones over the next 12 months, including a 250 watt electrolyser and a 250 watt rigid fuel cell. We will also be announcing results on longevity testing on both fuel cells and electrolysers over the next year. ITM believes that the development of its low cost durable modular electrolysers will be the key contributor to realising the hydrogen economy. If the test results are successful, ITM's innovations will open the door to the replacement of fossil fuels. However, I would like to emphasize that we are currently at an important stage of development and substantial laboratory work still needs to be concluded successfully before any product can be brought to market. This will enable us to generate the additional IP necessary to protect our core technology and negotiate favourable terms for the Company. I believe that ITM is in a good position to meet its ongoing objectives and look forward to updating shareholders on progress at the Annual General Meeting in September. Stephen Massey Chairman 1 July 2005 Consolidated Profit and Loss Account Results for the year ended 30 April 2005 Note Year ended Year ended 30 April 30 April 2005 2004 (unaudited) (audited) £ £ Administrative expenses - Research and development (930,525) (579,893) - Share related charges (175,000) - - Other (745,938) (281,543) --------- --------- (1,851,463) (861,436) Other operating income 241,306 210,049 --------- --------- Operating loss (1,610,157) (651,387) Interest receivable and similar income 346,461 12,366 --------- --------- Loss on ordinary activities before taxation (1,263,696) (639,021) Tax on loss on ordinary activities 58,108 43,579 --------- --------- Loss on ordinary activities after taxation, being retained loss for the financial period (1,205,588) (595,442) =========== ========= Loss per share Basic and diluted 2 (1.3p) (0.8p) ========= ========= All activities derive from continuing operations. There are no recognised gains or losses for the current financial year and preceding financial year other than as stated in the profit and loss account. Consolidated Balance Sheet Results for the year ended 30 April 2005 Note As at As at 30 April 30 April 2005 2004 (unaudited) (audited) £ £ FIXED ASSETS Tangible assets 396,481 75,540 --------- --------- CURRENT ASSETS Debtors 464,500 189,984 Investments - short term deposits 7,550,000 275,476 Cash at bank and in hand 193,469 526 --------- --------- 8,207,969 465,986 --------- --------- CREDITORS: amounts falling due within one year (161,799) (194,850) --------- --------- NET CURRENT ASSETS 8,046,170 271,136 --------- --------- TOTAL ASSETS LESS CURRENT LIABILITIES, BEING NET ASSETS 8,442,651 346,676 ========= ========= CAPITAL AND RESERVES Called up share capital 3 4,593,713 3,570,000 Share premium account 3 8,102,850 - Merger reserve 3 (1,972,820) (1,972,820) Profit and loss account 3 (2,281,092) (1,250,504) --------- --------- EQUITY SHAREHOLDERS' FUNDS 3 8,442,651 346,676 ========= ========= Proforma Consolidated Cash Flow Statement Results for the year ended 30 April 2005 Year ended Year ended 30 April 30 April 2005 2004 (unaudited) (audited) £ £ Net cash outflow from operations (1,355,823) (653,876) Returns on investments and servicing of finance Interest received 121,503 12,366 Taxation Research and development tax credit 43,555 82,460 Capital expenditure and financial investment Purchase of tangible fixed assets (383,212) (6,711) --------- --------- Net cash outflow before management of liquid resources and financing (1,573,977) (565,761) Management of liquid resources Cash (placed on) withdrawn from term deposits (7,274,524) 399,966 Financing Issue of ordinary share capital (net of expenses) 9,126,563 80,000 --------- --------- Increase (decrease) in cash 278,062 (85,795) ========= ========= 1. Corporate restructuring During the statutory reporting period the Group carried out a corporate restructuring consisting of the introduction of a new holding company incorporated on 1 March 2004 under the name Quayshelfco 1070 PLC. On 4 May 2004, its name was changed to ITM Power Plc. On 29 April 2004 ITM Power Plc acquired the entire share capital of ITM Fuel Cells Limited in exchange for the issue of shares to shareholders on a seventy for one basis. The restructuring represented a change in the identity of the holding company rather than an acquisition of the business. Consequently, the restructuring has been accounted for using merger accounting principles. Therefore, although ITM Power Plc did not become the parent company of the Group until 29 April 2004, the Group financial information is presented as if the companies had always been part of the same group. In accordance with Sections 131 and 133 of the Companies Act 1985, ITM Power Plc has taken no account of any premium on the shares issued to acquire ITM Fuel Cells Limited and has recorded the cost of the investment at the nominal value of the shares issued. The resulting difference on consolidation has been debited to a merger reserve. 2. Loss per share 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. The calculation is based on information in the table shown below. Year ended Year ended 30 April 30 April 2005 2004 (unaudited) (audited) £ £ Loss (£) (1,205,588) (595,442) Weighted average number of shares 89,501,418 70,176,438 3. Reserves and reconciliation of movement in shareholders' funds Called up Share Profit share premium Merger and loss Shareholders' capital account reserve account funds £ £ £ £ £ At 1 May 2004 3,570,000 - (1,972,820) (1,250,504) 346,676 Issue of shares 1,023,713 9,003,388 - - 10,027,101 Share issue costs - (900,538) - - (900,538) Share related charges - - - 175,000 175,000 Retained loss for the year - - - (1,205,588) (1,205,588) ------ ------ ------- --------- --------- At 30 April 2005 4,593,713 8,102,850 (1,972,820) (2,281,092) 8,442,651 ========= ========= =========== =========== ========= The share related charges represent the profit and loss account charge for share options granted at less than fair value in accordance with UITF 17. 4. Financial information The financial information set out in the announcement does not constitute statutory financial statements within the meaning of section 240 of the Companies Act 1985. The information relating to the year ended 30 April 2004 is an extract from the audited financial statements of ITM Fuel Cells Limited for that year on which the auditors gave an unqualified audit report and did not contain a statement under s237(2) or (3) of the Companies Act 1985. A copy of those financial statements has been filed with the Registrar of Companies. The statutory accounts for the period ended 30 April 2005 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the company's Annual General Meeting. The financial information is prepared on the basis of accounting policies as stated in the previous year. Copies of the announcement will be available for collection from the Company's head office at Villa Farm, Jack Haws Lane, Barnack, Stamford PE9 3DY This information is provided by RNS The company news service from the London Stock Exchange

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