Interim Results
ITM Power PLC
31 January 2007
Strictly embargoed until: 0700 hrs, 31 January 2007
ITM Power Plc
('ITM' or 'the Company')
Interim Results for the six months ended 31 October 2006
Highlights:
• Progress in ITM's commercialisation programme is on plan
• Agreed terms, subject to contract, on a new 15,000sq ft production
facility in Sheffield
• Agreement signed with ABRO (Ministry of Defence) to field trial onboard
vehicle electrolysers
• Agreement signed with Hydrogen Engine Center Inc to develop
non-polluting hydrogen energy systems
• New joint development programme initiated for the use of hydrogen in
vehicle engines with the University of Hertfordshire
• Pre tax loss for the period in review increased from £0.91m to £1.42m in
line with budget reflecting the increased level of development activity
which has taken place in 2006
• ITM's membrane technology as applied to electrolysers has now reached
10,000 hours of operation without evidence of degradation. This lifetime
exceeds the durability requirements of commercially viable systems
• Successfully built and operated a completely platinum free 5kW solid
polymer electrolyser stack, which reduces cost per kilowatt below the
previously stated $164/kW
Stephen Massey, Chairman, commented: 'The important scientific advances that we
have achieved to date have created substantial intellectual property which is
the most valuable asset in the Company. Our objectives over the next year are to
focus on successful field trials of our existing technology, to complete the
building of our production facilities and further expand our commercial
relationships.
Subject to completion of successful field trials, we anticipate entering
negotiations and plan rapid commercialisation using the new Sheffield facilities
to manufacture the initial commercial units. We anticipate product orders and
revenues to commence in early 2008.
ITM has made excellent progress and is now entering the commercial phase of its
development. I am looking forward to another exciting year for the Company.'
For further information please contact:
Gemma Chandler
ITM Power Plc
Tel: +44 (0)1799 532 860
Mob:+44 (0)7921 057712
or visit www.itm-power.com
Chairman's statement:
I am pleased to report the interim results for the six months ended 31 October
2006 and update shareholders on new developments.
The Company has made significant progress since I last wrote to shareholders in
July in achieving all the technical milestones set out at that time, and moving
towards the commercial realisation of its technology. ITM is now entering into a
new phase of its development as a leading innovator of fuel cell and
electrolyser technologies as we seek to bring commercial products to market in a
realistic timeframe. The Company has agreed terms on a new facility in Sheffield
which will produce prototypes and small scale production in order to take ITM's
products to market next year.
The agreements signed with Hydrogen Engine Centre Inc and with ABRO (Ministry of
Defence) demonstrate the exciting potential of ITM's technology to the
automotive and power sectors. The development programme initiated with the
University of Hertfordshire will help determine the scale of the opportunity of
introducing hydrogen to enhance the performance of internal combustion vehicles.
Given the macro economic background of persistently high energy prices and the
threat of global warming, the practical implementation of this technology is
more urgently needed than ever.
Financials:
During the six months under review, pre-tax losses widened to £1.42m (31 October
2005: £0.91m), reflecting the budgeted increased level of development activity
during 2006. The increased activity has required additional technical staff,
equipment and space, the expenditure on which was in line with budget. At the
end of the period, activity further increased and extra staff and space were
added to the Sheffield facility, which will result in increased operating costs
during the second half of the financial year. This increase, which is also in
line with budget, will be mitigated by the receipt of the second tranche of
£0.30m grant awarded during the first half of the previous financial year by
Yorkshire Forward.
In May 2006, the Company completed a successful secondary fundraising in which
it raised £29.41m before expenses. This capital has generated significant
interest income in the six months in review of £0.75m compared to £0.16m for the
same period in 2005.
Capital expenditure on facilities and test equipment reduced by 64% to £0.14m
(31 October 2005: £0.37m), we expect to increase capital expenditure in the
second half of the financial year due to further spend on the Company's
facilities in Sheffield to support projects already underway. At the end of the
period in review, net current assets had increased by 375% to £32.84m (31
October 2005: £6.89m), of which £32.66m was in cash and short term deposits,
which is considered a good position from which to achieve ITM's commercial
objectives.
The Board is not recommending payment of a dividend in accordance with the
dividend policy stated at the time of the IPO.
Commercial developments:
We have recently agreed terms, subject to contract, on a new 15,000sq ft
production facility in Sheffield. We expect it to be operational during the 1st
quarter 2008. This facility will enable production of electrolysers and fuel
cells and is in addition to our current research facility. We anticipate
starting small scale production of prototypes and low volume commercial
production during the first half of 2008. We believe the facility has scope for
future capacity expansion.
Since the period end, we have signed agreements with significant corporations to
provide a platform from which ITM and the two organisations can develop their
respective technologies:
•In November 2006, ITM signed a Memorandum of Understanding with Hydrogen
Engine Center Inc ('HEC'), a US company that designs, manufactures and
distributes alternative fuel internal combustion engines for the industrial
and power generation markets. The joint objective is to develop products for
a non polluting grid independent energy system which can undergo early field
trial testing. HEC anticipates that ITM can offer an assured supply of
hydrogen using ITM's low cost electrolyser technology. ITM anticipates that
HEC provides an early route to the provision of a complete system package
using HEC's proven engine technology.
•In December 2006, ITM signed a Memorandum of Understanding with ABRO, a
Trading Fund of the Ministry of Defence which maintains vehicles and
equipments owned and operated by the British Armed Forces, and in addition
offers a maintenance service to commercial organisations including Emergency
Services, Local Authorities and Airports. The joint objective of the parties
is to use ITM's technology to develop equipment which improves the capability
(fuel efficiency and/or pollution control) of diesel engines operating in
military and civilian environments. Field trial testing of the developed
equipment will begin in the first quarter of 2007.
Technical developments:
•In July 2006, ITM initiated a joint development programme for the use of
hydrogen in vehicle engines with The University of Hertfordshire. The
programme includes the development of a Home Electrolyser Refuelling system
that can create hydrogen fuel anywhere that has access to electricity and
water. This important programme helps solve the requirement to build a new
hydrogen refuelling infrastructure. The development of a Home Electrolyser
Refuelling System and Bi-Fuel car is progressing satisfactorily and is on
track to roll out a 10kW ITM electrolyser home refuelling device and a
Bi-Fuel vehicle before the end of June 2007.
In addition, ITM is investigating how the addition of hydrogen to the diesel
combustion process can either reduce fuel consumption or pollutants and how
to provide the necessary on-board hydrogen generator system for diesel engines.
Since the period in review and as a result of initial tests, the University has
reported significant results indicating that the addition of hydrogen has a
positive impact in the compression ignition combustion process. The Company has
been advised by the University that it also expects significant improvements to
be achieved to the emissions output from the engine.
•In October 2006, ITM successfully achieved the following technical
advances:
Fuel Cells: The Company demonstrated the technology necessary to reduce the cost
of fuel cells to $900/kW by increasing the power output of its cells to 360mW/
cm2. ITM materials have now been successfully operated at powers in excess of
this level. Consistent and repeatable performance at these power densities has
been achieved.
Electrolysers: ITM's long duration test of its unique low cost membrane
technology as applied to electrolysers achieved 6,000 hours of operation on an
intermittent test cycle without external evidence of degradation or loss of
performance.
•ITM successfully achieved its milestone objectives for the end of
December 2006 on time and on budget. In summary the Company announced, that
it had successfully operated a 5kW electrolyser stack based upon its Nickel/
platinum technology using an intermittent (on-off) test cycle such as would
be necessary if the device were to be used in conjunction with intermittent
renewable or off-peak electricity supplies. This device has been
independently costed at less than $250/kW notwithstanding the recent
increases in the cost of platinum. ITM also operated a self pressuring
electrolyser at 20bar, developed a dual liquid fuelled fuel cell including
rapid refuelling system and further reduced the costs of the necessary
technology to enable a Hydrogen Oxygen fuel cell to be manufactured for less
than $700 per kW.
New Developments as at 31 January 2007:
ITM has now successfully built and operated a completely platinum free 5k/W
solid polymer electrolyser stack. The complete elimination of platinum reduces
our cost per kilowatt below the previously stated $164/kW (which included
Platinum on one side of the membrane).
The ongoing durability testing of our membranes in electrolysis mode shows no
external signs of degradation and we have now further increased durability from
previously mentioned 6,000 hours to in excess of 10,000 hours of operation in a
total test programme approaching 2 years. This lifetime substantially exceeds
the durability requirements of PEM membranes outlined by the automotive industry
and the Company believes it meets the lifetime requirements for commercially
viable systems.
In addition to the long-term durability testing of our membranes, all the
components, which would be in a non-platinum electrolyser cell, specifically
catalysts, membrane and support materials have exceeded 3,000 hours of
successful operation.
It is worth highlighting two of our long-term research programmes which may have
increasing importance over the next 12 months. These programmes have been
running since we became a public company in 2004 and are firstly, the organic
photovoltaic research programme which continues to suggest encouraging possible
solutions to the development of much lower cost photovoltaic systems by
eliminating silicon. Secondly, we have been modelling ways of combining
atmospheric carbon dioxide with electrolytic hydrogen to create liquid fuels.
These programmes are in addition to our electrolysis and fuel cell work but rely
on the same basic understanding of chemistry. We have filed patents in the above
developments.
Board and staff:
To enable further acceleration of ITM's development activity, we have recently
recruited a further 10 new staff to our technical and support team. We welcome
the new recruits to ITM and thank all of our staff for their hard work and
commitment during the last six months, especially those who were involved with
the completion of the milestones.
I would like to advise shareholders that I do not intend to seek re-election to
the Board at the AGM in September 2007, which will mark the completion of my
third year of office as your Non Executive Chairman. My executive
responsibilities and business interests outside the Company are such that it
will be increasingly difficult for me to devote the appropriate degree of
attention to the next phase of ITM's development. I will be working very closely
with the Board over the coming months to plan my succession.
Outlook:
The important scientific advances that we have achieved to date have created
substantial intellectual property which is the most valuable asset in the
Company. Our objectives over the next year are to focus on successful field
trials of our existing technology, to complete the building of our production
facilities and to expand our commercial relationships.
Subject to completion of successful field trials, we anticipate entering
negotiations and plan rapid commercialisation using the new Sheffield facilities
to manufacture initial commercial units. We anticipate product orders and
revenues to commence in early 2008.
ITM has made excellent progress and is now entering the commercial phase of its
development. I am looking forward to another exciting year for the Company.
Stephen Massey
Chairman
31 January 2007
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
Results for the six months ended 31 October 2006
Six months Six months Year ended 30
ended 31 ended 31 April 2006
October 2006 October 2005 (audited)
(unaudited) (unaudited) as restated
as restated
(see note 4) (see note 4)
£ £ £
Administrative expenses
- Research and development (1,545,384) (718,951) (1,608,044)
- Share option charges (5,222) (1,150) (2,300)
- Other (644,333) (391,123) (901,462)
----------- ------------ -----------
(2,194,939) (1,111,224) (2,511,806)
Other operating income 18,393 40,178 361,678
----------- ------------ -----------
Operating loss (2,176,546) (1,071,046) (2,150,128)
Interest receivable and
similar income 752,135 161,080 290,212
--------- --------- ---------
Loss on ordinary activities
before taxation (1,424,411) (909,966) (1,859,916)
Tax on loss on ordinary
activities - 30,000 208
--------- --------- ---------
Loss on ordinary activities
after taxation, being retained
loss for the financial period (1,424,411) (879,966) (1,859,708)
========= ========= ===========
Loss per share
Basic and diluted (1.4p) (1.0p) (2.0p)
========= ========= =========
There are no recognised gains or losses for the current financial period and
preceding financial periods other than as stated in the profit and loss account.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at 31 October 2006
As at 31 As at 31 As at 30
October 2006 October 2005 April 2006
(unaudited) (unaudited) (audited)
£ £ £
FIXED ASSETS
Tangible assets 821,425 673,596 827,402
--------- --------- --------
CURRENT ASSETS
Debtors 412,494 393,352 594,203
Investments -
short term deposits 32,550,346 6,553,155 5,400,000
Cash at bank and in hand 114,015 206,749 62,564
----------- ----------- ----------
33,076,855 7,153,256 6,056,767
------------ ----------- ----------
CREDITORS:amounts falling
due within one year (240,761) (261,931) (293,440)
------------ --------- ----------
NET CURRENT ASSETS 32,836,094 6,891,325 5,763,327
------------ --------- ----------
TOTAL ASSETS LESS CURRENT
LIABILITIES,
BEING NET ASSETS 33,657,519 7,564,921 6,590,729
============ ========== ==========
CAPITAL AND RESERVES
Called up share capital 5,057,974 4,594,663 4,598,513
Share premium account 36,130,054 8,102,986 8,103,536
Merger reserve (1,972,820) (1,972,820) (1,972,820)
Profit and loss account (5,557,689) (3,159,908) (4,138,500)
--------- ----------- -----------
EQUITY SHAREHOLDERS' FUNDS 33,657,519 7,564,921 6,590,729
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Results for the six months ended 31 October 2006
Six months Six months Year ended
ended 31 ended 31 30 April
October 2006 October 2005 2006
(unaudited) (unaudited) (audited)
£ £ £
Net cash outflow from operations (1,701,997) (780,101) (1,910,873)
----------- --------- -----------
Returns on investments and servicing
of finance Interest received 577,119 161,080 189,832
----------- --------- -----------
Taxation
Research and development tax credit - - 58,316
----------- --------- -----------
Capital expenditure and financial
investment
Purchase of tangible fixed assets (141,311) (365,630) (641,660)
----------- --------- ----------
Net cash outflow before management
of liquid resources and financing (1,266,189) (984,651) (2,304,385)
----------- --------- -----------
Management of liquid resources
Cash (placed on) withdrawn
from term deposits (27,150,346) 996,845 2,150,000
------------ ---------- -----------
Financing
Issue of ordinary share capital
(net of expenses) 28,485,979 1,086 5,486
------------ ---------- -----------
Increase(decrease) in cash 69,444 13,280 (148,899)
============ ========== ===========
1. 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.
Six months Six months Year ended 30
ended 31 ended 31 April 2006
October 2006 October 2005 (audited)
(unaudited) (unaudited) as restated
as restated (see note 4)
(see note 4)
£ £ £
Loss (£) (1,424,411) (879,966) (1,859,708)
========== =========== ==========
Weighted average
number of shares 101,009,661 91,877,761 91,899,614
========== =========== ==========
2. Reserves and reconciliation of movement in shareholders' funds
Called up Share Merger Profit and Shareholders'
share premium reserve loss funds
capital account account
£ £ £ £ £
At 1 May 2006 4,598,513 8,103,536 (1,972,820) (4,138,500) 6,590,729
Issue of shares 459,461 28,026,518 - - 28,485,979
Share option charges - - - 5,222 5,222
Retained loss
for the period - - - (1,424,411) (1,424,411)
---------- ---------- ----------- ----------- ------------
At 31 October 2006 5,057,974 36,130,054 (1,972,820) (5,557,689) 33,657,519
========== ========== =========== =========== ============
3. Basis of interim figures
This interim financial information does not constitute statutory financial
statements within the meaning of section 240 of the Companies Act 1985. The
financial information for the six months ended 31 October 2006 and 31 October
2005 has not been audited. The information relating to the year ended 30 April
2006 is an extract from the audited financial statements 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.
4. Prior year restatement - Implementation of FRS 20 'Share-based payment'
Accounting policy change
The group has applied the requirements of FRS 20 Share-based payments. In
accordance with the transitional provisions, FRS 20 has been applied to all
grants of equity instruments after 7 November 2002 that were unvested as of 1
May 2006. The group issues equity-settled share-based payments to certain
employees and directors. Equity-settled share-based payments are measured at
fair value at the date of grant. The fair value determined at the grant date of
the equity-settled share-based payments is expensed on a straight-line basis
over the vesting period, based on the group's estimate of shares that will
eventually vest.
Fair value is measured by use of a Black-Scholes model. The expected life used
in the model has been adjusted, based on management's best estimate, for the
effects of non-transferability, exercise restrictions, and behavioural
considerations.
Impact of restatement
The impact of implementing FRS 20 'Share based payment' has had the following
impact on the financial statements.
PROFIT AND LOSS ACCOUNT Six months Year ended 30
ended 31 April 2006
October 2005 (audited)
(unaudited)
£ £
Administrative expenses as previously stated 1,110,074 2,509,506
FRS 20'Share-based payment' charge 1,150 2,300
--------- ---------
Administrative expenses as restated 1,111,224 2,511,806
========= =========
The impact of this accounting policy change does not affect the reported loss
per share in either of the comparative periods which remain unchanged at 1.0p
for the six months ended 31 October 2005 and 2.0p for the year ended 30 April
2006.
INDEPENDENT REVIEW REPORT TO ITM POWER PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 October 2006 which comprises the profit and loss
account, the balance sheet, the cash flow statement and related notes 1 to 4. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
This report is made solely to the company, in accordance with Bulletin 1999/4
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 interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are also responsible for ensuring that the accounting policies and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 October 2006.
Deloitte & Touche LLP
Chartered Accountants
Cambridge
31 January 2007
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