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7/30/2014 ITM Power PLC | Final Results | FE InvestEgate
http://www.investegate.co.uk/ArticlePrint.aspx?id=201407300700156678N 1/10
ITM Power PLC
Final ResultsRNS Number : 6678NITM Power PLC30 July 2014
30 July 2014
ITM Power plc("ITM Power" or the "Company")
Results for the year ended 30 April 2014
ITM Power (AIM: ITM), the energy storage and clean fuel company, announcesits audited results for the year ended 30 April 2014. The Company currently has£6.550m of projects under contract. Summary Commercial Progress in year
· £5.140m of projects under contract at year end · Won £2.800m contract to supply three refuelling stations in London· A total of £2.000m refueller build contracts won with Californian Energy
Commission· Thüga Group's Power-to-Gas plant officially commissioned and
operational on schedule· Successful injection of hydrogen into the German gas grid· Participation in the UK, US, Swiss and French Hydrogen Infrastructure
Programmes· Optimisation of standard product platforms and reduction in standard
product cost· Partnership with NRM, Germany for Power-to-Gas projects· Gas network optimisation contract with AMEC and National Grid
Commercial Progress since year end· A further £1.330m of products under contract secured since year end· £3.010m of contracts in final stages of negotiation· Repeat sales of Electrolyser plant to a UK government agency
Key Financial Results For the year ended 30 April 2014
· Total revenue and Grant Funding of £3.077m (2013: £1.44m) up 114%,comprising:
o Revenue £1.127m (2013: £0.087m) up £1.040m
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o Grant income £1.370m (2013: £1.358m)o Grants receivable for capital projects £0.580m (2013: £nil)
· Increase in fixed assets to £1.755m from £1.463m, up 20%· Loss from operations £7.978m (2013: £6.518m)· Cash burn*, £7.568m (2013: £6.063m)· Cash balance £9.763m (2013: £5.943m)· Two placings creating proceeds of £12.0m before expenses*Cash burn is a non-statutory measure and is defined underneath the CashFlow Statement
Corporate Development
· Incorporation of ITM Power ApS in Denmark· ITM Power Inc. joins Californian Hydrogen Business Council Hydrogen
Energy Storage (HES) Program· ITM Power GmbH Joins German Energy Agency's Power-to-Gas
Strategy Platform
Corporate Development post year end· Sir Roger Bone joins the board as a Non-Executive Director
Graham Cooley, CEO, commented: "This has been a very productive periodfor us with solid progress in technology, sales, partnerships and project income.We built, CE marked, commissioned and consented the world's largest PEMelectrolyser and have proved the Company's technology and projectmanagement ability. We now have a major reference plant with the ThügaGroup, the largest utility grouping in the world. This solid progress directlyreflects the achievements of our highly talented team." Roger Putnam, Chairman, added: "Our staff, through their hard work anddedication, have developed ITM Power's technology platforms into a broadproduct offering. ITM Power is today firmly established as a world leader inPEM 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
Tim Metcalfe (Nominated Adviser)John Goold (Institutional sales)
+44 (0)20 7533 7727
Tavistock Communications
Simon Hudson / James Collins+44 (0)20 7920 3150
About ITM Power
The principal activity of ITM Power is the design, manufacture and sale ofhydrogen energy systems for energy storage and clean fuel production. ITM Power plc was admitted to the AIM market of the London Stock Exchangein 2004 and raised its initial funding of £10m gross in its IPO. Further fundingrounds of £28.5m in 2006, £5.4m in 2012, £2m in 2013 and £10m in 2014 havebeen completed. The Company has now made the transition from a researchand development company to a product manufacturer and technology provider. The Company has both a strong base of intellectual property and engineeringexpertise for providing complete hydrogen solutions. STRATEGIC REPORT
Business Model
SummaryITM Power designs and manufactures hydrogen energy systems for energystorage and clean fuel production. At the heart of all these systems is a proton
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exchange membrane/polymer electrolyte membrane ('PEM') electrolyser built
from ITM Power's own electrolyser stacks. These stacks, at pressure, take
excess energy from the electricity grid or directly from a renewable energy
source and convert it into hydrogen which can then be stored for deployment in
a range of applications.
The ITM Power business model is about developing innovative products, which
utilise this technology to meet the growing demand for clean fuel. The two main
applications for ITM Power's electrolyser hydrogen systems are Power-to-Gas
and Clean Fuel production for National Mobility Programmes.
The Power-to-Gas model is a commercial proposition and our first product was
delivered to site near Frankfurt in the year. This takes excess energy from the
grid and converts it into hydrogen to put back into the gas grid, thereby enabling
supply to better match demand.
The refuelling model is one that incorporates the work of national hydrogen
infrastructure initiatives to support the growth of hydrogen as a transport fuel,
both for use in cars and buses initially, and with further transport applications in
the future.
The refuelling modules for ITM Power will be showcased first in California later
in the current calendar year. In the US, the opportunities for ITM Power have
developed significantly through legislative direction stating that 33% of all
refuelled hydrogen in California is required to be from renewable sources.
A developing tertiary application for the technology is through the use of
producing fertiliser through renewable energy to decarbonise the production of
fertiliser. Collaborative work in this field has begun and an integration
programme within a system will be delivered during 2015.
Enabling FundingITM Power utilises funding from grant bodies to enable technological
advancement and realisation of technologies held within ITM Power's patent
suites. The funding received from the Technology Strategy Board and EU has
enabled an acceleration of development to drive the company's innovative
technology in to these rapidly growing markets.
Global MarketsMarkets for hydrogen electrolysis as an infrastructure solution are developing in
the UK, as showcased by the Island Hydrogen (formerly, Ecolsland) project and
through the UKH2Mobility initiative, as well as in France, Denmark, Germany,
Japan and the US. ITM has a model of locating agents in key territories to
position ITM Power as a world leading global technology developer. Initial
market opportunities usually begin with collaborative projects with blue chip
companies before leading to sales and maintenance contracts of established,
CE marked units. ITM Power has five business development personnel 'in the
field', and has also used the expertise of existing personnel to form the
backbone of a fieldwork commissioning and maintenance team.
ProfitabilityITM Power sees its route to product and maintenance sales and profitability
through the increasing deployment of its products in the key power to gas
energy storage and clean fuel sectors. The Company is well represented in
these commercial sectors and territories where market growth is now
accelerating. The Company is now undertaking a program of product scale up
and product cost reduction through both design improvements and supply chain
efficiencies.
REVIEW OF THE BUSINESS
Business environmentThe year under review has seen increasing acknowledgement of the importance
of hydrogen for future energy markets. Major national initiatives in Europe and
the US to adopt hydrogen technologies, supported at the highest political level,
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are now regular events. ITM Power continues to develop strong relationships
with large multinational companies, as well as with the governments of the
pioneer countries as a result of these initiatives. Consequently, we are very well
placed to offer our expertise and products and are increasingly being consulted
as a leading expert in energy storage solutions and clean fuel.
Outside Europe, we have established strong relationships in California through
our US subsidiary, and have successfully tendered for a further project in the
Chino area, and the city of Riverside.
This year has seen clear momentum from the previous year, resulting in
increased enquiries, and pipeline. ITM Power is well positioned to address
commercial opportunities within the energy storage and clean fuel generation
from renewable power markets.
ITM Power has built on key relationships and become a member of new
initiatives around the world as the hydrogen industry's growth accelerates. We
have won consecutive tenders with the California Energy commission, and have
received repeat order from a UK government agency. As the technology on offer
matures and is proven in the field, key customer relationships are strengthened.
ITM Power is now seen as a credible supplier of hydrogen systems into our
chosen markets by major international customers
Key financialsA summary of the key financial results is set out in the table below and
discussed in this section.
2014 2013 2012 2011Total revenue
and grant
funding £3.077m £1.44m £1.46m £1.02m
Of which:
Sales
Revenue £1.127m £0.087m £0.480m £0.001m
Of Which:
Grants
recognised in
the income
statement £1.370m £1.350m £0.980m £0.610m
Of Which:
Grants
recognised on
the balance
sheet
(offsetting
asset build) £0.580m £nil £nil £0.400m
Net cash
burn* £7.568m £6.063m £5.600m £4.800m
New grant
project awards
£3.380m (and
a further
£3.010m in
negotiation) £3.660m £2.700m £0.940m
Pre-tax loss £7.950m £6.170m £6.470m £6.400m
Projects
Under
Contract or in
final stage of
negotiation £9.250m
Not
measured
Not
measured
Not
measured
*Cash burn is defined as the underlying cash outflow after adjusting for
movements on short term deposit balances and fund raising activities. It is
calculated on the cash flow page.
Financial performance
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The pre-tax loss for the year under review increased to £7.950m (2013:£6.170m) and net cash burn before fund raise increased to £7.568m (2013:£6.063m). The loss can be attributed to three major factors - the losses incurred indelivering the Thüga unit to demanding timescales, the increase in businessdevelopment activity and provisions for contracts and stock that are consideredto have lower net realisable values than their purchase price. The cash burnincrease is a result of similar factors, with the increase in components heldbeing the other driver for this. Increased business development costs have occurred as ITM Power ramps upits representation and coverage of key geographical areas and businesssegments. This increased representation has led to improved collaborativeprojects, such as the follow-on awards of a project in the California refuellingmarkets, and the opportunity to showcase the plant in Frankfurt as a world-classreference plant. The deployment of the Thüga unit which absorbed, as part of the cost of sales,a series of non-recurring engineering costs led to a gross loss. The build costfor the unit was in line with expectations. However, as a result of it being 'first oftype', site commissioning costs exceeding those estimated as the originaltechnical signoff target was met. Operationally, the deployment of the unit ontime took ITM Power through a steep learning curve that has enabled us to bidmore competitively and with a track record of delivering within much shortertimescales than can be quoted by our competitors. There will be an element of non-recurring engineering costs in every first-of-kindbuild, as the company enters new geographical markets and industries. Theelectrolyser system supplied to Thüga represented a step change in technology,being the first deployment of the Company's large product platform and its firstpower to gas installation. ITM Power chose to fully support the systemintegration as part of a commercial decision to build a comprehensiveknowledge base surrounding the product, the application and the rigorouscompliance requirements. Whilst this has meant ITM Power has recognized agross loss in the current financial year, the Company has accrued significantknowledge and expertise which will benefit all subsequent deployments. Furthermore, the Company delivered the world's first PEM power to gas systemin a strategic territory within the largest grouping of utility companies inGermany. The system is serving as an important reference plant to potentialcustomers from all over the world and generating data to underpin thefundamental benefits of ITM Power's integrated PEM electrolyser technology. Subsequent deployments of the same system would not incur the same costsand all potential sales are being bid with positive margins. Total collaborative project funding recognised in the period was £1.960m ofwhich £1.370m is recognised on the income statement (2013: £1.36m, all ofwhich was on the income statement). The strength of many of the projects ITMPower is now working on is the key invaluable partnerships created through theventures. ITM Power is proud to lead consortia to deliver innovative, cuttingedge solutions to applications whilst relying on and developing our core stacktechnology. Commentary on the year's revenueThe measure that management and the Board had previously focussed on isSales order book, and at the year end this stood at £0.80m (2013: £0.90 millionand 2012: £66,000). The drop in the Sales order book is symptomatic of thenature of the projects under contract currently, and most notably two largerefuelling construction projects totalling four refuelling stations, contributing to£9.25m of projects under contract and in negotiation. Projects under contractrepresents the value of contracted Revenue and Grant Funding yet to berecognised by ITM Power in the future, and the board find this a more accuratereflection of the increase in activity the company has experienced in the year. Projects under contract is seen as a more definitive measure of growth, as ITM
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Power develops some collaborative contracts as ways to manufacture assets
whilst retaining ownership and providing an income stream through sales of
hydrogen. Examples of this are the Island Hydrogen and HyFive projects which
have a period of operation as part of the project (12 and 36 months
respectively).
Whilst projects under contract continue to accelerate ITM Power's growth and
products in the market, the board is aware of the continued potential for revenue
volatility (as experienced in 2013) as projects grow in size and complexity.
Revenue volatility will continue to decrease as the business matures and grows,
and as ITM Power realises opportunities in large markets.
This is the first financial year in which ITM Power has entered into contracts
which have been required to be accounted for as construction contracts. This is
due to the increased size and output of each project leading to a need to treat
projects individually. The only revenue project at the year end that was in build
was the California refuelling station to be delivered to Chino later in the calendar
year. The Island Hydrogen rigs were also in build as ITM develops a portfolio of
assets.
Financial position
At year end, ITM Power had £9.8m (2013: £5.9m) of funds in the bank, and
trade and other receivables of £1.2m (2013: £1.5m), which predominantly relate
to grant income debtors. Recognising the need to be lean with working capital,
ITM Power structures quotes to include upfront payment with orders so that
working capital is not impacted adversely by increased activity.
ITM Power has seen an increase in fixed assets to £1.76m from £1.46m in the
prior year as the company engages in projects that create assets for the future.
This is a policy that will continue, especially with the completion of the Island
Hydrogen and HyFive projects.
STRATEGY AND OBJECTIVES
Strategies
ITM Power is now firmly focused on large scale solutions. The current strategy
is to use the existing, operational Thüga project as a reference plant for Power-
to-Gas sales.
Using the same initial platform, the company will also be able to show
demonstrable success in the near future of hydrogen refuelling, using the Island
Hydrogen and HyFive stations, which will be used as reference plant for
refuelling stations
In the medium term, the national mobility programmes, in which ITM Power has
positioned itself as a key partner for refuelling through electrolysis, will drive
initial refuelling station sales.
Objectives
ITM Power has immediate objectives in terms of product development and in
particular scale up of our proven electrolysis equipment. This will allow
penetration of larger markets, and is a direct response to market demand from
sales enquiries and trade fairs and events.
Cash flow remains a key measure for the Board, with the other key objective for
ITM Power being the achievement of a positive cash flow in the shortest
possible time.
Strategies for achieving our objectives
Product development, and in particular upscaling of product offering, will be
achieved through securing and utilising project funding. This serves the dual
purpose of reducing cash outflow and creating strong key partnerships within
industry.
Short term cash flow is aided by ITM Power quoting for sales with upfront
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payments which reduces reliance on working capital. Cash outflow is minimised
through working with support from partners on the development of technology
whilst we are continuing to build a contract pipeline. Historically, it has taken
two years for potential customers to move through a learning curve and to reach
the point of purchasing equipment, and it is with this in mind that we are
creating a larger pipeline.
NON-FINANCIAL KEY PERFORMANCE INDICATORS
2014 2013 ChangeStack Efficiency* 80% 77% Up 6%
Test hourscompleted 750,000 500,000 Up 50%
*The efficiency of our electrolyser stack is a measure of the electrical energy
input against the chemical energy content of the hydrogen produced.
2015 2014 2013 2012
Hydrogen
production
capacity under
contract 1,613 472 65 50
The Company has achieved an overall efficiency improvement to its rapid
response stack platform, to greater than 80% (2013: 77%). This was recorded
from plant in the field and represents a real-world reference which can be
showcased and repeated. This will provide further significant benefit to end
users and will produce a positive impact on the economics of both hydrogen
refuelling and power to gas applications.
The level of knowledge gained within stack development has increased with
longevity testing and cyclic testing all contributing to a total of 750,000 hours
assembled knowledge. This testing has enabled rapid scale up to date as
demonstrated by the largest stack capacity compared with that of prior years.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEYear ended 30 April 2014
2014£'000
2013£'000
Revenue 1,127 87
Cost of sales (2,026) (138)
Gross loss (899) (51)
Operating costs- Research and development (3,979) (4,453)
- Prototype production and engineering (2,171) (1,057)
- Sales and marketing (695) (646)
- Administration (1,604) (1,508)
Other operating income - grant income 1,370 1,358
Loss from operations (7,978) (6,357)
Investment revenues 25 189
Loss before tax (7,953) (6,168)
Tax 164 265
Loss for the year, being total comprehensiveexpense for the year (7,789) (5,903)
Loss per shareBasic and diluted (5.9p) (4.9p)
All results presented above are derived from continuing operations and are
attributable to owners of the Company.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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Year ended 30 April 2014
Calledup
sharecapital£'000
Sharepremiumaccount
£'000
Mergerreserve£'000
Retainedloss£'000
Totalequity£'000
At 1 May 2012 5,549 36,413 (1,973) (32,284) 7,705Issue of shares 586 4,860 - - 5,446Credit to equity forshare based payments - - - 131 131Loss, being totalcomprehensiveexpense for the year - - - (5,903) (5,903)At 30 April 2013 6,135 41,273 (1,973) (38,056) 7,379
At 1 May 2013 6,135 41,273 (1,973) (38,056) 7,379Issue of shares 1,958 9,430 - - 11,388Credit to equity forshare based payments - - - 22 22Loss, being totalcomprehensiveexpense for the year - - - (7,789) (7,789)At 30 April 2014 8,093 50,703 (1,973) (45,823) 11,000
CONSOLIDATED BALANCE SHEET30 April 2014
2014£'000
2013£'000
NON CURRENT ASSETSProperty, plant and equipment 1,755 1,463
CURRENT ASSETSInventories 762 193Trade and other receivables 1,206 1,528Cash and cash equivalents 9,763 1,943Short term deposits - 4,000TOTAL CURRENT ASSETS 11,731 7,664
CURRENT LIABILITIESTrade and other payables (2,184) (1,711)Provisions (302) (37)TOTAL CURRENT LIABILITIES (2,486) (1,748)
NET CURRENT ASSETS 9,245 5,916
NET ASSETS 11,000 7,379
EQUITYCalled up share capital 8,093 6,135Share premium account 50,703 41,273Merger reserve (1,973) (1,973)Retained loss (45,823) (38,056)TOTAL EQUITY 11,000 7,379
CONSOLIDATED CASH FLOW STATEMENTYear ended 30 April 2014
2014£'000
2013£'000
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Net cash used in operating activities (6,701) (5,380)
Investing activitiesInterest received 62 152
Purchases of property, plant and equipment (929) (835)
Cash received from interest earning deposit 4,000 1,000
Net cash from investing activities 3,133 317
Financing activitiesIssue of ordinary share capital 11,388 5,446
Net cash from financing activities 11,388 5,446
Increase in cash and cash equivalents 7,820 383
Cash and cash equivalents at the beginning ofyear
1,943 1,560
Cash and cash equivalents at the end of year 9,763 1,943
Non-statutory measures Cash burnCash burn is a measure used by key management personnel to monitor the
performance of the business.
2014£'000
2013£'000
Increase in cash and cash equivalents per the
cash flow statement 7,820 383
Less movements in short term deposits (4,000) (1,000)
Less share issue proceeds (11,388) (5,446)
Cash burn (7,568) (6,063)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYear ended 30 April 2014
1. BASIS OF ACCOUNTINGThe preliminary announcement is based on the financial statements which have
been prepared in accordance with International Financial Reporting Standards
(IFRSs) 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 Group expects to publish full financial statements that
comply with IFRS in July 2014.
Going concernThe directors have prepared a cash flow forecast for the period ending 31
December 2015. This forecast indicates that the company and group will be able
to sustain current levels of activity without the requirement for further funding,
for a period of at least 12 months from the date of approval of these financial
statements. The forecast includes certain assumptions about the amount and
timing of cash inflows and outflows, which are inherently uncertain;;
notwithstanding these uncertainties, the directors have a reasonable expectation
that the company and group will be able to meet their obligations as they fall
due, for the foreseeable future.
However, the directors also acknowledge that additional funding will be required
beyond the next 12 months in order to enable them to execute their business
plans.
Accordingly, the financial statements have been prepared on a going concern
basis.
The financial information is prepared on the basis of the accounting policies as
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shown on the Company's website, www.itm-power.com
Copies of the financial statements/annual report will be available on the
Company's web site and for collection from the Company's registered office at
22 Atlas Way, Sheffield, S4 7QQ.
2. NOTES TO THE CASH FLOW STATEMENT2014£'000
2013£'000
Loss from operations (7,978) (6,357)
Adjustments for property, plant and equipment:
- Depreciation 641 601
- Loss on disposal - 3
Share-based payments charge 22 131
Operating cash flows before movements in working
capital
(7,315) (5,622)
Increase in inventories (567) (181)
Decrease / (increase) in receivables 443 (574)
Increase in payables 473 721
Increase in provisions 265 37
Cash used in operations (6,701) (5,619)
Income taxes received - 239
Net cash used in operating activities (6,701) (5,380)
3. FINANCIAL INFORMATIONThe financial information set out in this announcement does not constitute
statutory financial statements for the years ended 30 April 2013 or 30 April
2014, but is derived from these statutory accounts, which have been reported
on by the Group's auditor. Statutory accounts for the year ended 30 April 2013
have been delivered to the Registrar of Companies and those for 2014 will be
delivered following the Group's Annual General Meeting. The financial
statements were approved by the Board of Directors on 30 July 2014. The
auditor has reported on those accounts;; their reports were unqualified and did
not draw attention to any matters by way of emphasis and did not contain
statements under section 498(2) or (3) of the Companies Act 2006.
- ends -
This information is provided by RNSThe company news service from the London Stock Exchange
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