Itm Power Regulatory News (ITM)

31 Jul 2007 07:01

ITM Power PLC31 July 2007 31 July 2007 ITM Power Plc ('ITM' or 'the Company' or 'the Group') Full Year Results for the year ended 30 April 2007 Highlights: • Successfully completed all milestones set out for the year on schedule • Significant progress has been made in the development of a 'home refuelling' system using ITM's electrolyser technology • Hydrogen fuelled vehicle has been successfully developed • Design and construction of manufacturing facility is on plan • Commercial partner discussions are underway • Loss for the period in review, increased from £1.9m to £2.7m, in line with Group's budget • At year end, cash at the bank and on deposits of £31.8m Stephen Massey, Chairman commented: "ITM has made excellent progress in buildingsolid financial and technical foundations for the commercialisation of itsexciting and revolutionary technology. Considerable efforts have been made overthe last year to move towards the commercial realisation of ITM's technologywith the objective of maximising income potential by controlling key processesfor the use of hydrogen in sustainable energy systems. The Company believes there are many applications for hydrogen. These includezero carbon housing, hydrogen fuels for the automotive industry, back-up powersystems and energy storage using hydrogen for renewable energy systems.Relationships with potential commercial partners are being developed and Ibelieve that we are in a good position to exploit market opportunities." For further information please contact: Gemma ChandlerITM Power PlcTel: + 44 (0) 1799 542 222Mob: + 44 (0) 7921 057712 or visit www.itm-power.com CHAIRMAN'S STATEMENT I am pleased to report the full year results for the year ended 30 April 2007.On behalf of the Board, I would like to thank our existing shareholders fortheir continued support and welcome new shareholders that have invested in theCompany over the past year. Review ITM has made excellent progress in building solid financial and technicalfoundations for the commercialisation of its exciting and revolutionarytechnology. Considerable efforts have been made over the last year to movetowards the commercial realisation of ITM's technology with the objective ofmaximising income potential by controlling key processes for the use of hydrogenin sustainable energy systems. The Company believes there are many applications for hydrogen. These includezero carbon housing, hydrogen fuels for the automotive industry, back-up powersystems and energy storage using hydrogen for renewable energy systems.Relationships with potential commercial partners are being developed and Ibelieve that we are in a good position to exploit market opportunities. During the year in review, terms were agreed on a new manufacturing facility inSheffield. The design work for the new Sheffield site is now nearing completionand preparation work has begun for the installation of the manufacturingequipment. This plant will have an annual electrolyser production capability of10 Megawatts which will be one of the largest electrolyser productioncapabilities in the world. The Group is now designing the pre-productionprototype units which are anticipated to be produced next year. This is anenormous undertaking for a relatively small company and brings our science,engineering and production skills together for the first time. The dedicationand commitment to this project by our staff is humbling and no level of praiseis high enough. So far this programme is on time and budget. ITM successfully completed all the milestones set out for the year on schedule.In summary, the Company announced that it had successfully built and operated acompletely platinum free 5 kW solid polymer electrolyser stack. The completeelimination of platinum reduces our stack cost per kilowatt below the previouslystated $164/kW (which included Platinum on one side of the membrane). The Groupalso operated a self pressuring electrolyser at 20 bar. Since the period end,the pressure test target of 75 bar (or 1125lb/sq inch), which was originally setfor December 2007 was achieved. This programme was accelerated to provideimportant early technical information for the design of the 2008 factoryproduction units which are anticipated to combine both pressure and powercapabilities in a single unit. The Group successfully made and operated a portable 2-liquid fuel cell, whichincludes a fuel cassette able to be removed without loss of power; a so-called'hot-swappable' function. This device also contains all the balance of plant andoutput electronics. This device has been used in commercial presentations, andwe are continuing discussions with military organisations where the uniqueattributes of the 2-liquid system, independence of the environment, and neutralbuoyancy for marine applications are of special interest. The progress made in the Oxy-hydrogen fuel cell systems where performanceimprovements have allowed ITM to reach its cost reduction targets, suggests thatthe best use of limited company resources is to develop a working prototype of afuel cell using the $500/kW technology achieved in June 2007 (in accordance withthe production assumptions set out on 18 October 2006). This cost isapproximately 15% of the present price of solid polymer fuel cells, and has asignificant commercial value if it can be brought into production. In order tomaximise benefit to the Company, it has been decided to build a 100W stackdemonstrating this technology to advance product development and allow real lifeperformance and longevity testing of the stack and its balance of plant to beundertaken prior to entering into commercial discussions. The Company hastherefore decided to substitute the production of a 100W Oxy-hydrogen fuel cellstack for the existing 20W December 2007 milestone of a 2-liquid fuel cell. The achievement of these milestones has underpinned the Company's ability to seek commercial collaborations as they begin to demonstrate ITM's electrolyser and fuel cell equipment in real world environments. These include collaboration with ABRO, a trading fund of the Ministry of Defence, to operate diesel engines using a small addition of hydrogen from an on-board ITM electrolyser to the existing diesel fuel and collaboration with Hydrogen Engine Center Inc to develop products for a non polluting grid independent energy system which can undergo field trial testing. During the year, ITM joined the US Fuel Cell Council, an organisation dedicatedto commercialisation of fuel cells in the United States. The Company also joinedthe US National Hydrogen Association and UK Hydrogen Association. Recent Developments Significant progress has been made in the development of a 'home refuelling'system using an electrolyser to convert renewable or off peak electricity intohydrogen. This device depends upon a 10kW electrolyser operating at pressures of75 bar. The Company announced in June 2007 that a prototype electrolyseroperated at 10kW. In conjunction with the University of Hertfordshire, ITM hasmodified a petrol engine Ford Focus to operate using pure hydrogen able to besupplied by an ITM electrolyser before switching to petrol. An ITM selfpressuring electrolyser has now successfully fuelled this vehicle. The vehiclehas exceeded 25 miles on a single charge of hydrogen both when tested on arolling road, and during testing on public highways. Drivability in public roadconditions when using hydrogen has proved to be excellent. ITM believes the hydrogen infrastructure has already been built because a lowcost electrolyser can produce hydrogen wherever water and electricity areavailable. Furthermore, it is possible to inexpensively convert most petrolengines to run on hydrogen. We believe these developments bring low costnon-polluting transportation forward by many years. As a separate programme, ITM has also installed a much smaller electrolyseron-board a 3 litre diesel Range Rover. The trace amounts of hydrogen producedare fed to the engine. This equipment has demonstrated that an ITM electrolysercan operate successfully in the demanding environment of a moving vehicle, anddirect observations of reproducible reductions in the principal emissions havebeen recorded while the electrolyser was active. However, the full commercial ormilitary implications of the results cannot be judged in advance of a researchprogramme such as that agreed with ABRO. ITM has also been working on two long-term research programmes that rely on thesame basic understanding of chemistry to our electrolysis and fuel cell work.The organic solar photovoltaic research programme continues to suggestencouraging possible solutions to the development of much lower costphotovoltaic systems by eliminating silicon. Secondly, we have begun to testways of combining gaseous carbon dioxide with electrolytic hydrogen to createliquid fuels. Our initial small scale laboratory tests have been encouraging andwe have successfully achieved gas to liquid production in an electrochemicalcell based on our membrane technology. These are very early days and muchfurther work will be needed to confirm the commercial value of such adevelopment. Financials The loss for the year increased from £1.9 million to £2.7 million, in line withthe Group's budget. Capital expenditure in the year under review was £0.49million most of which went to provide additional laboratory and test equipmentand further expansion to our laboratories in Sheffield. We further strengthenedthe scientific and technical team at our laboratories as well as strengtheningour management and corporate team at our head office in Cambridge. Averageheadcount for the year grew from 25 to 37 people. At the year end, the Group held cash at the bank and on deposits of £31.8million, following the successful raising of £29.4 million funds through aPlacing of ordinary shares with institutional investors in May 2006. The purposeof the secondary fund raise was to obtain the financial resources necessary toengineer, develop and commercialise ITM's first products. The Company earned£1.58m in interest during the year from the investment of the funds andcontinues to benefit from increasing deposit rates. The Group expects to spendapproximately £1million fitting out its new production facility. ITM maintained tight control over cash expenditures during the year in reviewand we will continue to monitor budgets carefully. Our costs will graduallyincrease over the next year to support accelerated development and engineeringactivity. Whilst staff costs remain the biggest single cost element, activitywith third parties will continue to increase as the Group works on developmentof complete product solutions in line with our published milestones. Expenditureon patents and IP protection also continues to be an important part of the costbase. The Board is not recommending payment of a dividend in accordance with thedividend policy stated at the time of the IPO. Board and Staff In my interim statement in January 2007, I stated that I would not be seekingre-election to the Board of ITM in September. We have now concluded a successionplanning process and we are close to finalising an appointment. I hope to be in a position to announce my successor at the AGM in September witha view to him taking office in January 2008. The Board has requested that Iremain in office until that time in order to facilitate a smooth transition.Consequently, l will be standing for re-election as Chairman for an interimbasis until the end of December 2007. We are continuing to recruit and strengthen our capabilities throughout theCompany. We have hired a production manager for our new factory and arecurrently recruiting additional scientists, production technicians and membersfor our commercial team. I would like to welcome new members of staff to ITM and thank all our staff fortheir tremendous dedication and commitment during the year. Outlook Before the end of the calendar year the Company plans to publicly demonstrateboth the Bi-fuel Ford Focus and refuelling system using electrolyser prototypesthat will closely resemble the initial systems to be manufactured. This will bea very exciting and important step forward because ITM's technology will becomevisible and the benefits of our advances will become more easily understood. We will continue to expand our commercial relationships over the coming monthsand prepare the Group for first orders and sales. Stephen MasseyChairman31 July 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNTYear ended 30 April 2007 Note 2007 2006 (restated as shown in note 1) £ £ Administrative expenses - research and development (3,373,672) (1,608,044) - share based payments 1 (18,798) (2,300) - other (1,263,034) (901,462) ---------- ---------- (4,655,504) (2,511,806) Other operating income 330,393 361,678 ---------- ---------- OPERATING LOSS (4,325,111) (2,150,128) Interest receivable - bankinterest 1,583,533 290,212 ---------- ---------- LOSS ON ORDINARY ACTIVITIESBEFORE TAXATION (2,741,578) (1,859,916) Tax on loss on ordinaryactivities - 208 ---------- ---------- LOSS FOR THE FINANCIAL YEAR (2,741,578) (1,859,708) ========== ========== LOSS PER ORDINARY SHAREBasic and diluted 2 (2.7p) (2.0p) ========== ========== All activities derive from continuing operations. There are no recognised gains or losses for the current financial year orpreceding financial year other than as stated above. Therefore no statement oftotal recognised gains and losses are presented in these financial statements. Comparative figures for 2006 have been restated to include share-based paymentsin accordance with FRS20 as detailed in note 1. CONSOLIDATED BALANCE SHEET30 April 2007 Note 2007 2006 £ £ FIXED ASSETSTangible assets 989,700 827,402 ----------- ---------- CURRENT ASSETSDebtors 188,740 594,203Investments - cash on deposit 31,650,000 5,400,000Cash at bank and in hand 183,026 62,564 ----------- ---------- 32,021,766 6,056,767 CREDITORS: amounts falling due (476,867) (293,440)within one year ----------- ---------- NET CURRENT ASSETS 31,544,899 5,763,327 ----------- ---------- TOTAL ASSETS LESS CURRENT LIABILITIES, BEINGNET ASSETS 32,534,599 6,590,729 =========== ========== CAPITAL AND RESERVESCalled up share capital 5,097,937 4,598,513Share premium account 3 36,270,762 8,103,536Merger reserve 3 (1,972,820) (1,972,820)Profit and loss account 3 (6,861,280) (4,138,500) ----------- ---------- SHAREHOLDERS' FUNDS 4 32,534,599 6,590,729 =========== ========== CONSOLIDATED CASH FLOW STATEMENT30 APRIL 2007 2007 2006 Note £ £ Net cash outflow from operating activities 5 (3,374,869) (1,910,873) Returns on investments and servicing of 1,583,533 189,832finance Taxation - 58,316 Capital expenditure and financial investment (486,858) (641,660) ---------- ---------- Net cash outflow before management of liquidresources and financing (2,278,194) (2,304,385) Management of liquid resources 6 (26,250,000) 2,150,000 Financing 28,666,650 5,486 ---------- ---------- Increase (decrease) in cash 6 138,456 (148,899) ========== ========== NOTES TO THE FINANCIAL STATEMENTSYear ended 30 April 2007 1. PRIOR YEAR RESTATEMENT - adoption of financial reporting standard 20 In the current year, the Group has adopted FRS 20 "Share-based payments" whichhas resulted in a change to the Group's accounting policy for share basedcompensation arrangements and has affected the amounts reported for the currentand prior year. In accordance with the transitional provisions, FRS 20 has been applied to allgrants of equity instruments after 7 November 2002 that were unvested on 1 May2006. This change in accounting policy has had the following impact on the financialstatements. 2006 £PROFIT AND LOSS ACCOUNTAdministrative expenses as previously stated 2,509,506FRS 20 "Share-based payment" charge 2,300 ---------- Administrative expenses as restated 2,511,806 ========== 2. LOSS PER ORDINARY SHARE The calculations of earnings per share are based on the following losses andnumber of shares: Basic and diluted 2007 2006 (as restated) £ £ Retained loss for the financial period (2,741,578) (1,859,708) ========== ========== Weighted average number of ordinary shares forbasic loss per share 101,060,568 91,899,614 ========== ========== FRS 14 requires presentation of diluted earnings per share when a company couldbe called upon to issue shares that would decrease net profit or increase netloss per share. For a loss making company with outstanding share options, thenet loss per share would be decreased by the exercise of options, and hence noadjustment has been made to the diluted loss per share as presented. 3. RESERVES GROUP Share premium Merger reserve Profit and loss Total account account £ £ £ £ At 1 May 2006 8,103,536 (1,972,820) (4,138,500) 1,992,216 Retainedloss for the year - - (2,741,578) (2,741,578) Sharesissued in the year 28,167,226 - - 28,167,226(net of expenses) Share based payments - - 18,798 18,798 ------------ ------------ ------------ ------------At 30 April 2007 36,270,762 (1,972,820) (6,861,280) 27,436,662 ============ ============ ============ ============ 4. RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS 2007 2006 (as restated) £ £ Loss for the year (2,741,578) (1,859,708)Share based payments 18,798 2,300New shares issued (net of expenses) 28,666,650 5,486 ---------- ---------- Addition to (reduction in) shareholders' funds 25,943,870 (1,851,922)Opening shareholders' funds 6,590,729 8,442,651 ---------- ---------- Closing shareholders' funds 32,534,599 6,590,729 ========== ========== 5. RECONCILIATION OF OPERATING LOSS TO OPERATING CASH FLOWS 2007 2006 (as restated) £ £ Operating loss (4,325,111) (2,150,128)Depreciation charge 316,614 210,739Loss on disposal of fixed assets 7,946 -Decrease (increase) in debtors 405,463 (87,431)Increase in creditors 201,421 113,647Share based payments 18,798 2,300 ----------- ---------- Net cash outflow from operating activities (3,374,869) (1,910,873) =========== ========== 6. ANALYSIS AND RECONCILIATION OF NET FUNDS 1 May Cash 30 April 2006 flow 2007 £ £ £ Cash at bank and in hand 62,564 120,462 183,026Bank overdraft (17,994) 17,994 - -------- 138,456Current asset investments 5,400,000 26,250,000 31,650,000 --------- ---------- ---------- Net funds 5,444,570 26,388,456 31,833,026 ========= ========== ========== 2007 2006 £ £ Increase (decrease) in cash in the year 138,456 (148,899)Cash outflow (inflow) from increase (decrease) inliquid resources 26,250,000 (2,150,000) ---------- ---------- Change in net funds resulting from cash flows 26,388,456 (2,298,899)Net funds at beginning of year 5,444,570 7,743,469 ---------- ---------- Net funds at end of year 31,833,026 5,444,570 ========== ========== 7. FINANCIAL INFORMATION The financial information set out in the announcement does not constitutestatutory financial statements for the years ended 30 April 2006 or 30 April2007 within the meaning of section 240 of the Companies Act 1985, but is derivedfrom these statutory accounts, which have been reported on by the Company'sauditors. Statutory accounts for the year ended 30 April 2006 have beendelivered to the Registrar of Companies and those for 2007 will be deliveredfollowing the Company's Annual General Meeting. The auditors have reported onthose accounts; their reports were unqualified and did not contain adversestatements under section 237(2) or (3) of the Companies Act. The financial information is prepared on the basis of accounting policies asstated in the previous year, amended for the adoption of FRS (20) (see note 1). Copies of the announcement will be available for collection from the Company'shead office at Mill House, Royston Road, Wendens Ambo, Saffron Walden, CB11 4JX. 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