Itm Power Regulatory News (ITM)

8 January 2019

ITM Power plc

("ITM Power", "the Group" or the "Company")

Half Year Results for the Period ended 31 October 2018

ITM Power (AIM: ITM), the energy storage and clean fuel company, announces half year results for the six month period ended 31 October 2018. Comparable figures, where stated, refer to the corresponding period in 2017 unless otherwise indicated.

Commercial Progress:

· As of today, £23.2m (£27.0m) of projects are under contract and a further £10.4m (£10.4m) are in the final stages of negotiation, making a total backlog of £33.6m (£37.4m).

· The tender opportunity pipeline has grown steadily and is now over £240m (£200m), representing 36 commercial tender responses within the last 12 months. The average project size of £6m (£3.5m) reflects strong industrial demand for larger systems.

· Hydrogen sales, with a new total of 29 (20) hydrogen fuel contracts, totalled £295k (£93k) over the last 12 months up with the strongest demand from Green Tomato Cars and the Metropolitan Police.

· The seventh ITM Power owned UK hydrogen refuelling station (HRS) opened in Swindon, next to the M4, in September 2018

· Gatwick and Derby HRSs are under construction and due to open at the end of Q1 2019.

· Civil works are underway on the Birmingham 3MW Bus Project, due to be operational in Q3 2019

· UK Government funding received for 100MW Power-to-Gas energy storage feasibility study in Cheshire.

· Green-light given for HyDeploy trial and further funding received for HyDeploy phase 2.

· Strategic partnership agreed with Sumitomo Corporation, covering Japan and Australasia, with commercial discussions continuing to progress as expected.

· The Company continues to make positive progress in Australia, with discussions with various counterparties progressing as planned.

Financial:

· Total income of £5.0m (£4.4m), comprising:

o Revenue - £1.2m (£1.7m)

o Grant income plus grants receivable for capital projects - £3.8m (£2.7m)

· As in previous years, revenue is expected to be weighted towards the second half of the year with an increased value of contracts expected.

· Loss from operations £5.3m (£2.9m), greater than originally anticipated, due to cost overruns on four 'first-of-a-kind' projects as well as significant investments made in people, resources and capacity during the period.

· Strong balance sheet: total financial assets constitute £24.9m with £15.6m of cash, £1.7m of cash on guarantee and deployed working capital (debtors less creditors) of £7.6m.

Operational Developments:

· Production and design staff materially expanded.

· New hires in Procurement, Legal, QHSE, Project Management, Manufacturing and Field Support.

· New factory manufacturing process design completed; tender processes underway.

· A dedicated team and project office established to focus on the 10MW Shell refinery project.

· Expansion of the German subsidiary team to support our European customer commitments and new German premises to hold spares and support a growing recurring maintenance income.

Graham Cooley, CEO, commented: "The six months under review have been a major transition for the company having expanded the skill base and delivered many MW scale industrial deployments. The company is highly regarded internationally and solid progress is being made on all fronts."

Roger Putnam, Chairman, added: "The Board is pleased with the significant progress that has been achieved over the last six months. Deploying increasing numbers of MW scale equipment in challenging industrial environments has certainly proved the company's credentials to many industrial partners and we look forward to a very busy second half."

For further information please visit www.itm-power.com or contact:

About ITM Power plc:

ITM Power manufactures integrated hydrogen energy solutions for grid balancing, energy storage and the production of green hydrogen for transport, renewable heat and chemicals. ITM Power was admitted to the AIM market of the London Stock Exchange in 2004. In September 2017 the Company announced the completion of a GBP29.4m working capital fundraise. The Company signed a forecourt siting agreement with Shell for hydrogen refuelling stations in September 2015 and subsequently a deal to deploy a 10MW electrolyser at Shell's Rhineland refinery. The company entered into a Strategic Partnership Agreement with Sumitomo Corporation in July 2018 for the development of multi-megawatt projects in Japan. Additional customers and partners include National Grid, Cadent, Northern Gas Networks, RWE, Engie, BOC Linde, Toyota, Honda, Hyundai, Anglo American among others.

CHAIRMAN'S STATEMENT

The last 18 months have seen a significant increase in the level of enquiries and subsequently tender opportunities for industrial scale hydrogen electrolysis systems as major global companies seek to reduce the carbon footprint of their substantial hydrogen production. We are pursuing this potentially very large worldwide market by focusing our efforts on bigger systems and ensuring that we learn as much as we can from our first deployments in industrial settings. This has meant a significant increase in investment in people, resources and capacity in the first half that has inevitably led to increased losses. The Board believes strongly that the opportunities presented by industrial scale green electrolysis have the potential to deliver great value to our shareholders and we are excited about our prospects.

Financial results

Revenue recognised for the period was £1.2m (2017: £1.7m). This was supplemented by grant income of £2.5m (2017: £1.9m) and £1.3m (2017: £0.8m) of grants receivable for capital projects, which impacts directly on the balance sheet. Historically, the Company has enjoyed a stronger second half of its financial year than the first, and delivery of contracted sales for this year show a similar trajectory. The loss before tax for the half year was £5.2m (2017: £2.9m). This is greater than we had originally anticipated and is due to two principle contributory factors.

The first of these is the increase in underlying overhead.  In the past 12 months the Company has invested heavily in people and capacity, and as the product delivery functions have increased significantly, so too has our capability to deliver complex projects consecutively. We recognise that new starters at ITM Power require a period of induction before they can contribute fully and for a company of our size to carry, albeit temporarily, non-productive staff represents an investment in the future. The headcount has more than doubled over the past year as we have recruited new, skilled people in Process, Production, Commissioning, Maintenance, Health & Safety and Quality. ITM Power is now a manufacturing business and we must demonstrate to our blue-chip customers that we have all the resources required to deliver the complex projects they commission.

The second factor has been the natural challenges that arise with the delivery of 'first-of-a-kind' projects. These include deployment in buildings for the first time (as opposed to a containerised system), deployments underground, and deployment in harsh and variable environments. As a result, there have been cost overruns on four projects that were deployed in the period, leading to a gross loss. However, the lessons learned on these deployments have been invaluable and will stand us in good stead for many of the future projects for which we are currently tendering.

Cash and debtors

Cash and short-term deposits at the period end were £15.6m (£20.4m at 30 April 2018 and £26.1m at 31 October 2017). Debtor balances increased to £19.2m (2017: £14m) reflecting grants for capital projects yet to be received and the balances yet to be paid on projects underway at period end.

The Board is not recommending the payment of a dividend for the period in accordance with our stated policy.

Outlook

The Company has significantly strengthened its capability to deliver the larger industrial scale projects which we have won and for which we continue to tender. Chemical plant, refinery and MW scale Power-to-Gas studies and projects are now deliverable and being tendered for in increasing numbers. To support this focus, progress has also been made on the move to new premises, for which terms are expected to be signed in Q1 2019. It is anticipated that the first area of works once the lease is signed will be the installation of an upgraded power connection to facilitate the on-site testing of our ever-larger products.

We expect to deliver an increased value of contracts in the current second half of this financial year. The value of the projects for which we are tendering has never been higher and we are almost entirely focused on those of larger scale as we bid to become the world leaders in industrial scale green electrolysis. The Board looks forward to a very busy second half.

Team

Our staff has been growing across all areas of the business as we strengthen the capability of the Company to win and deliver larger contracts, building on the experience of working with multinational industrials throughout the world. Once again, the Board would like to recognise the commitment of the staff who have been with us for many years and also welcome the new recruits to the team, as we set up for the future.

Prof Roger Putnam CBE,

Chairman

7 January 2019

CEO's REVIEW

ITM Power is a world leading manufacturing business focused on Power-to-Gas energy storage, clean fuel and the decarbonisation of large scale industrial processes. Our current tender opportunity pipeline of some £240m includes projects from all three of these important sectors. As we have already reported the size of projects for which we are tendering is growing significantly and the 36 commercial tender responses we have made within the last 12 months to make up the pipeline number have an average project size of £6m (2017: £3.5m). This is a reflection of strong industrial demand for larger systems as the hydrogen and energy storage markets continue to grow rapidly worldwide.

Over the last 12 months, we have been investing in our ability to deliver these larger scale contracts. This has meant more people in key functions where we were beginning to experience bottlenecks, additional marketing and support staff in overseas locations such as Germany, Australia and France where we have developed considerable traction.

Considerable learning has resulted in many first of kind deployments including new skid mounted technology and deployments housed in buildings. Product standardisation has also been a key focus resulting in a lower future cost of our products. Considerable time has also been invested in designing and planning the new manufacturing process and the facilities needed to deliver the lowest cost products. New processes have been developed to reduce cost and speed up production and will result in a state-of-the-art manufacturing plant.

The number of publicly accessible hydrogen refuelling stations owned and operated by ITM Power in the UK stands at seven following the opening of the Swindon station in September last year.[Two] more are expected to open this year along with the 3MW Birmingham bus refuelling station. Hydrogen sales have risen in step with the roll out of hydrogen vehicles and we now have fuel supply agreements with over 20 organisations, the biggest users being Green Tomato Cars and the Metropolitan Police.

With the expanding network and growing utilisation, we have invested in our resources as an operator of a network of stations. This has included in-field engineers, remote monitoring facilities and training. Station availability has increased steadily with usage and experience. Those sited on Shell forecourts achieved availability in excess of 98 per cent in recent months. In addition to hydrogen sales, selected stations are also generating revenue from participation in the grid balancing market.

Outlook

The quotations pipeline is strong and industrial partnerships continue to develop in all of our chosen sectors. The global growth in demand for hydrogen solutions is encouraging and our traction with customers and partners has been significant. We are all looking forward to a very active second half to the year and to reporting on the development of the sales pipeline at the announcement of the full year results.

Dr Graham Cooley,

Chief Executive Officer

7 January 2019

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

Results for the six months ended 31 October 2018

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.

All results presented above are derived from continuing operations.

The loss for the period is equal to the total comprehensive expense for the period.

The accompanying notes form part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

Results for the six months ended 31 October 2018

The accompanying notes form part of these financial statements.

CONSOLIDATED BALANCE SHEET (UNAUDITED)

31 October 2018

*In the prior interim period restricted cash balances were shown separately but have now been reclassified under Trade and other receivables.

The accompanying notes form part of these financial statements.

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

Results for the six months ended 31 October 2018

The accompanying notes form part of these financial statements.

The condensed Interim Financial Statements were approved by the board of Directors on

7 January 2019

Notes to condensed interim financial statements

1. Basis of preparation of interim figures

The interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs) as adopted for use in the EU. While the financial information included in this interim announcement has been compiled in accordance with the recognition and measurement principles of IFRSs, this announcement does not itself contain sufficient information to comply with IFRSs. This interim financial information does not constitute statutory financial statements within the meaning of section 435 of the Companies Act 2006. The financial information for the six months periods ended 31 October 2017 and 2018 have not been subject to an interim review. The information relating to the year ended 30 April 2018 has been extracted from the Group's published financial statements for that year, which contain an unqualified audit report that does not draw attention to any matters of emphasis, and did not contain statements under section 498(2) and 498(3) of the Companies Act 2006 and which have been filed with the Registrar of Companies.

The Group's condensed interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union. The principle accounting policies adopted by the group are as applied in the Group's latest annual audited financial statements.

The financial statements have been prepared on the historical cost basis. The principle accounting policies adopted by the Group are as applied in the Group's latest audited financial statements.

Going concern

The Directors have prepared a cash flow forecast (the "Forecast") for the period to 31 January 2019 (the "Forecast Period"). The Forecast includes a number of assumptions, including the level of projected sales and grant income, the timing of which is inherently uncertain.

The Directors have a reasonable expectation that the Company and Group can continue to meet their liabilities as they fall due, for a period of not less than twelve months from the date of approval of this condensed set of financial statements.

Accordingly, the financial statements have been prepared on a going concern basis.

2. Revenue, other operating income and Investment Income

The following accounted for more than 10% of total revenue:

Revenues from major products and services

The Group's revenues from its major products and services were as follows:

GEOGRAPHIC ANALYSIS OF REVENUE

A geographic analysis of the Group's revenue is set out below:

Revenue Recognition under new financial standard IFRS 15 'Revenue from Contracts with Customers' effective from 1st May 2018

In May 2014, the International Accounting Standards Board (IASB) jointly with US Financial Accounting Standards Board (FASB) published IFRS 15 'Revenue from Contracts with Customers' to replace IAS 11 'Construction Contracts' for annual reporting periods commencing on or after January 2018. The Group has adopted the new standard in the current financial year using the modified retrospective method with the cumulative effect of initially applying IFRS15 recognised on the opening balances in equity.

Under the modified retrospective model, we have considered all open sales contracts and an adjustment has been applied to the opening balance of retained earnings with other effects on the current year accounts being:

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