Itm Power Regulatory News (ITM)

1 Jul 2005 07:00

ITM Power PLC01 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 hydrogeneconomy, 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 allfronts since becoming a publicly traded company. The team has delivered againstthe milestones set out in the prospectus. We have strengthened the Board, ourscientific personnel and we have accelerated the R&D programme. As the focus onrenewable energy sources continues to increase, we expect more and moreattention to be directed towards the hydrogen economy. ITM intends to become aworld leader in enabling hydrogen to become the fuel of the future." For further information please contact: Jim Heathcote, Chief Executive Gemma ChandlerITM Power PLC Tavistock CommunicationsTel: 01780 740574 Tel: 020 7920 3150 Simon Hurst/ Richard Swindells/Katherine RoePanmure Gordon & CoTel: 020 7459 3600 Chairman's StatementI am pleased to report the first set of annual results for the year ended 30April 2005 since ITM's admission to AIM in June 2004. On behalf of the Board, Ithank the pre-IPO shareholders for their support and welcome the newshareholders resulting from the Placing and ITM's public listing. World Energy OverviewIt is increasingly becoming accepted that the current resilient price of oil isa reflection of an approaching historic peak in global oil production that isunable 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 theserious energy crisis that could occur unless new reliable energy sources aredeveloped. In February the Kyoto Treaty became legally binding. Some 141 countries,accounting for 55% of greenhouse gas emissions, have ratified the treaty, whichpledges to cut these emissions by 5.2% by 2012. In order to sustain economic growth the world needs to develop new energysources that can supplement our current energy system and do not produce harmfulemissions. This is driving further interest into expanding nuclear powerproduction and renewable energy sources. The conversion of renewable low value intermittent energy into high valuereliable energy is at the heart of ITM's strategy and can be achieved by thedevelopment of low cost and durable electrolysers. The electrolyser has thepotential to transform the economics of renewable energy. ResultsWhen reporting the interim results for the half year we stated that we wereoperating well within budget, and this has continued to be the case in thesecond half. The Operating Loss for the year was £1.61m, and the Loss before Taxwas £1.26m. Cash balances including interest receivable totals £8m, which is astrong financial position from which to continue our technical developmentprogrammes. The policy of maintaining tight control over cash expenditure willcontinue ensuring that resources available for ITM's technical programmes aremaximised. In line with prospectus statements the Directors are not recommending payment ofa dividend. ReviewITM's research and development activities, which provide the platform foreventual revenues from licensees, have been expanded during the year. Thetechnical team has been increased significantly and laboratory R&D facilitiesenhanced following the move in November to new premises in Sheffield. ITM'sintellectual property in fuel cell and electrolyser technology, affordablematerials and efficient production processes mean that the Company is wellplaced to benefit from the greatly increased worldwide interest in a sustainablenon-polluting hydrogen economy. Significant technical developments have been achieved in the year under review: Independent costings of the Mk III electrolyser showed significant costreduction compared with Mk II, plus a doubling of power input. The GenericsGroup, an independent scientific consultancy, has estimated that in massproduction it would be possible to achieve a cost level below $300 per kW. Thisrepresented an important step forward in ITM's development plan. Electrolyserswill play a pivotal role in maximising the potential of transient renewablepower generation systems such as a wind turbine. ITM has formulated and produced a range of hydrophilic alkaline solid polymerelectrolyte materials, which have now been operated in fuel cell mode. Alkalineelectrochemistry opens the route to new lower cost catalysts, which promisefurther cost reduction potential. With the support of the Department of Trade and Industry, the Companysuccessfully tested fuel cells that operate using liquid (specifically alcohol)fuels introduced directly into the cell. This has significance for smallportable electronic devices and opens a large field of potential licensees notincluded in our original revenue model. In April, the BOC Foundation, an independent organisation, established in 1990by the BOC Group plc, awarded ITM a grant to further develop low costelectrolysers. As a part of the agreement, a high-level expert researchcommittee was formed to consider electrolyser development. This committee willbe hosted by ITM and will include participants from the BOC Foundation, the BOCGroup plc and Professor Marcus Newborough (Scottish Power:- Royal Academy ofEngineering, Professor in Energy & Environmental Engineering at Heriot WattUniversity). The committee reviews areas of mutual interest arising from ITM'sresearch into the manufacture and use of low cost electrolysers for hydrogenproduction from renewable resources. ITM will own all intellectual property (IPrights) to any new discoveries made during the research carried out under theagreement. ITM announced in March 2005 that it had successfully demonstrated an alkalinesolid polymer fuel cell. ITM's unique alkaline membrane technology has beendemonstrated operating using two liquids: a liquid fuel and a liquid oxidant.The device was built to demonstrate the application of ITM's technology to amicro-fuel cell, a size that could be compatible with use, for example, in ahand held telecommunication or other portable electronic devices. It has thepotential to be operated at high energy density at room temperature using a safefuel / oxidant combination: sodium boro-hydride (non-flammable, as it is used asa solution in water) and hydrogen peroxide (a similar dilution to an antisepticthat can be bought at a high street chemist). Using two liquids enables thedevice to operate at high altitudes, such as in an aircraft; in pollutedenvironments (including the presence of carbon monoxide in atmospheric air), aswell as underwater. The demonstration device was an additional strong indication of the diversityand commercial potential of ITM's core materials and processes and furtherbroadens the potential addressable markets for future licensing deals. Intellectual PropertyIn August 2004, the Company filed three UK provisional patent applicationscovering: • 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 allowsthe 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 rapiddrop in performance was the only means of detecting that the fuel neededre-charging. UK patent applications have been made to include: the early warningrefuelling colour indicator and a sealed refuelling cassette designedspecifically to enable the rapid and convenient refuelling of fuel cellsoperating using one (or two) liquids. It is central to ITM's approach that thetechnology it develops should be actually useable, and it must therefore berobust and easy to refuel using non-hazardous materials. This new system offersa route to a rapid, safe and convenient refuelling process without which suchfuel cells will not become commercially successful. In total the granted or pending patent portfolio has grown and now consists of12 separate applications a significant increase during the year. Board, Management and StaffAt the end of June 2004, I was pleased to welcome The Right Hon. Lord Walker tothe Board as a non-executive Director of the Company. Lord Walker was a memberof all Conservative Cabinets between 1970 and 1990, holding several postsincluding Secretary of State for Trade and Industry (including Energy),Secretary of State for the Environment and Secretary of State for Energy. He isChairman of Allianz Cornhill Insurance plc and a non-executive Director of TheLondon International Financial Futures and Options Exchange. After retiring fromthe Cabinet, Lord Walker became Chairman of international investment bank,Kleinwort Benson Group plc and is now Vice Chairman of Dresdner KleinwortWasserstein. Lord Walker was not the only new arrival at ITM during the year; we furtherstrengthened our team by recruiting five experienced scientists, top-levelgraduates and postgraduates. The Board announces today, John Wreford, who is currently FinanceDirector, has indicated that he will retire from the Board at the end of theyear to pursue other interests. We will make an appropriate announcement as soonas we have found a replacement. I would like to thank John for his significant contribution to the Company sincehe 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 tothank all staff for their hard work and commitment during the year. OutlookWe look to remain on track to achieve further key milestones over the next 12months, including a 250 watt electrolyser and a 250 watt rigid fuel cell. Wewill also be announcing results on longevity testing on both fuel cells andelectrolysers over the next year. ITM believes that the development of its lowcost durable modular electrolysers will be the key contributor to realising thehydrogen economy. If the test results are successful, ITM's innovations willopen the door to the replacement of fossil fuels. However, I would like toemphasize that we are currently at an important stage of development andsubstantial laboratory work still needs to be concluded successfully before anyproduct can be brought to market. This will enable us to generate the additionalIP necessary to protect our core technology and negotiate favourable terms forthe Company. I believe that ITM is in a good position to meet its ongoing objectives and lookforward to updating shareholders on progress at the Annual General Meeting inSeptember. Stephen MasseyChairman1 July 2005 Consolidated Profit and Loss AccountResults 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 ordinaryactivities 58,108 43,579 --------- --------- Loss on ordinary activitiesafter taxation, being retainedloss for the financial period (1,205,588) (595,442) =========== ========= Loss per shareBasic 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 andpreceding 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 ASSETSTangible assets 396,481 75,540 --------- --------- CURRENT ASSETSDebtors 464,500 189,984Investments - short termdeposits 7,550,000 275,476Cash at bank and in hand 193,469 526 --------- --------- 8,207,969 465,986 --------- ---------CREDITORS: amounts falling duewithin one year (161,799) (194,850) --------- --------- NET CURRENT ASSETS 8,046,170 271,136 --------- --------- TOTAL ASSETS LESS CURRENTLIABILITIES, BEING NET ASSETS 8,442,651 346,676 ========= ========= CAPITAL AND RESERVESCalled up share capital 3 4,593,713 3,570,000Share 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 StatementResults 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 TaxationResearch and development tax credit 43,555 82,460 Capital expenditure and financial investmentPurchase 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 resourcesCash (placed on) withdrawn from term deposits (7,274,524) 399,966 FinancingIssue of ordinary share capital (net of expenses) 9,126,563 80,000 --------- ---------Increase (decrease) in cash 278,062 (85,795) ========= ========= 1. Corporate restructuringDuring the statutory reporting period the Group carried out a corporaterestructuring consisting of the introduction of a new holding companyincorporated 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 FuelCells Limited in exchange for the issue of shares to shareholders on a seventyfor one basis.The restructuring represented a change in the identity of the holding companyrather than an acquisition of the business. Consequently, the restructuring hasbeen accounted for using merger accounting principles. Therefore, although ITM Power Plc did not become the parent company of the Groupuntil 29 April 2004, the Group financial information is presented as if thecompanies had always been part of the same group. In accordance with Sections 131 and 133 of the Companies Act 1985, ITM Power Plchas taken no account of any premium on the shares issued to acquire ITM FuelCells Limited and has recorded the cost of the investment at the nominal valueof the shares issued. The resulting difference on consolidation has been debitedto a merger reserve. 2. Loss per shareThe loss per ordinary share and diluted loss per share are equal because shareoptions are only included in the calculation of diluted earnings per share iftheir issue would decrease the net profit per share or increase the net loss pershare. 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) 346,676Issue of shares 1,023,713 9,003,388 - - 10,027,101Share issue costs - (900,538) - - (900,538)Share related charges - - - 175,000 175,000Retained 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 shareoptions granted at less than fair value in accordance with UITF 17. 4. Financial informationThe financial information set out in the announcement does not constitutestatutory financial statements within the meaning of section 240 of theCompanies Act 1985. The information relating to the year ended 30 April 2004 isan extract from the audited financial statements of ITM Fuel Cells Limited forthat year on which the auditors gave an unqualified audit report and did notcontain a statement under s237(2) or (3) of the Companies Act 1985. A copy ofthose financial statements has been filed with the Registrar of Companies. Thestatutory accounts for the period ended 30 April 2005 will be finalised on thebasis of the financial information presented by the directors in thispreliminary announcement and will be delivered to the Registrar of Companiesfollowing the company's Annual General Meeting. The financial information is prepared on the basis of accounting policies asstated in the previous year. Copies of the announcement will be available for collection from the Company'shead 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