Itm Power Regulatory News (ITM)

31 January 2014

ITM Power plc

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

Half-Year Results

For the six months ended 31st October 2013

ITM Power (AIM: ITM), the energy storage and clean fuel company, announces half-year results for the six months ended 31st October 2013.

Summary

During the period, the Company's pipeline of project quotations has increased significantly, both in number and value. Both power-to-gas energy storage projects and refuelling station projects have been tendered in significant numbers. The completion of the Thüga plant commissioning is expected to further increase customer traction. To meet this increased activity ITM Power has separately announced today a conditional equity raising of £10.0m gross to fund working and expansion capital.

Operational

Financials

Outlook

Prof Roger Putnam, Chairman of ITM Power commented: "We are aggressively pursuing opportunities to reinforce our position as a global leader in energy storage and clean fuel, and we seek to turn that position into increased revenues for the Company as our markets mature and become mainstream. We are pleased with the progress made to date and look forward to an active second half of the year."

Dr Graham Cooley, Chief Executive of ITM Power, added: 

"In the last two years, ITM Power has transformed its business by migrating from the sale of small hydrogen equipment to large scale electrolyser plant installations. Having done so, we have demonstrated the successful application of our technology, the strength of our engineering capability, and our ability to deliver on the projects we undertake. Today we are a proven player in this dynamic industry and as a result, ITM Power is well placed to capitalise on the growing global demand for energy storage."

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

About ITM Power plc

ITM Power plc was admitted to the AIM market of the London Stock Exchange in 2004 and raised its initial funding of £10m gross in its IPO. Further funding rounds of £28.5m in 2006, £5.4m in 2012 and £2m in 2013 have been completed. The Company has now made the transition from a research and development company to a plant manufacturer and installer. The Company has both a strong base of intellectual property and engineering expertise for providing complete hydrogen solutions.

CHAIRMAN'S STATEMENT

Our focus during the first half of this financial year has been on the two largest potential markets for ITM Power's products - refuelling stations and power-to-gas, both using the renewable energy sources that are often wasted. Governments around the world have made commitments to substantially reduce their countries' carbon dioxide output and, as a result, have encouraged the construction of sizeable clean energy generation capacity. This capacity for clean energy now represents a significant proportion of the total power produced in many leading countries. The problem is that energy from wind and solar power is unpredictable in its delivery, and this has meant that much of the renewable energy that could be delivered to national grids is not required and is currently 'constrained off', with producers being paid not to deliver their clean energy.

The keys to unlocking the full potential of renewable energy are: firstly the ability to store energy efficiently and economically, and secondly the ability to convert renewables - at or close to the point of generation - into a usable product such as fuel for transport. ITM Power's technology and existing, proven products address both of these requirements.

The efficient use of renewables is a global issue and this is reflected in the Company's activities and progress during the period under review. We entered our first contract for the delivery of a refuelling station in California, and we continued to work with partners in hydrogen fuel infrastructure programmes in the US, UK, France, Germany, Switzerland and Denmark. Our power-to-gas product has been installed and is operating in Germany for a leading consortium of utilities. ITM Power's traction in world markets which I have previously reported on is undoubtedly accelerating. We have become a global leader in the rapidly emerging energy storage and clean fuel markets.

Financials

Revenues for the period under review were £0.7m (2012: £nil) primarily reflecting the completion of a substantial proportion of the power-to-gas project in Germany. The pre-tax loss for the period was £3.3m (2012: £3.7m), with the improved result net of the impact of one-off engineering costs incurred on the power-to-gas project of £0.3m (2012: £nil). Total grant funding accounted for in the period was £0.9m (2012: £0.3m).

Cash and short-term deposits at the period end were £3.7m (£5.9m at 30 April 2013 and £8.0m at 31 October 2012) reflecting the ongoing investment in the business and roll-out of keystone projects.

The company separately announces today an equity raise of £10.0m gross which is subject to shareholder approval. This additional capital will facilitate the delivery of an expanded programme of refuelling and power-to-gas contracts in our chosen markets.

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

Team

In order to deliver on our ambition ITM Power must maintain an international presence with top quality scientists, engineers, managers and support staff. However, in this development phase, we must do so on very tightly controlled budgets and this means that we ask a lot of our people. Once again, I would like to record the Board's appreciation of their effort and hard work on behalf of shareholders to execute our strategy to grow the Company. We would also like to welcome Brian Jackson as our new CFO and Company Secretary and thank Barry Cunliffe for his 4 years of service, we wish him well in his new appointment.

Outlook

We now have our first operational reference plant in the power-to-gas market up and running in Frankfurt for the Thüga Group of German power and gas utilities. The demonstration of a full scale installation in operation, and generating vital performance metrics, is creating significant interest from potential partners and customers. We will be taking full advantage of this to promote interest and further sales of our power-to-gas product in 2014.

In refuelling, the national hydrogen mobility programmes in which ITM Power is participating are ramping up. We will be progressing our first contract in California and will use this success, as well as our membership of the US group responsible for setting strategy in this area - H2USA - to broaden our involvement in the North American market as a whole. We will also be building on our presence in Germany and France, as well as here in the UK, where the EcoIsland project on the Isle of Wight will give us additional important reference sites.

Shareholders should note that we are aggressively pursuing opportunities to reinforce our position as a leader in energy storage and clean fuel internationally and to turn that position into increased revenues for the Company as our markets mature and become mainstream. The Board is pleased with the progress made to date and looks forward to an active second half of the year.

Prof Roger Putnam CBE

Chairman

31 January 2014

CEO's REVIEW

The global hydrogen industry continues to develop and ITM Power, as an entrenched participant, has continued to develop key opportunities. Of particular note over the last twelve months is the rapidly accelerating interest in using our electrolyser technology to convert surplus or redundant renewable energy into hydrogen and then injecting it into national and regional gas grids. This power-to-gas product gives utilities an additional method of balancing the grid for fluctuations in electricity demand and provides additional renewable energy into gas grids as renewable hydrogen gas.

Power-to-Gas

We announced a contract for the delivery of a 360 kW power-to-gas energy storage plant to the Thüga Group in Germany in March 2013. Construction of the project commenced in July with the first hydrogen injected into the grid in December 2013, representing the first ever Proton Exchange Membrane (PEM) electrolyser plant to convert electricity into hydrogen and subsequently inject the hydrogen into the German gas distribution network. 

In November, we signed an agreement with the network subsidiary of German utility, Mainova, under which we will jointly identify and quote for PEM Electrolysis power-to-gas projects in Germany and internationally. NRM, the Mainova gas network subsidiary, will have exclusivity to deploy ITM Power plant in its home state of Hessen in Germany and will be the Company's preferred partner for projects in other German states and internationally.

In the United States, energy storage in California has become mandatory for the big three power utilities. We are engaging with electricity and gas utilities to provide advice and proposals for power-to-gas energy storage. We are actively engaging with prospective customers across the United States and providing quotations for innovative solutions, bringing knowledge gained in Europe to the US.

In the UK the Company recently signed an agreement with National Grid and AMEC to assess the deployment of Power-to-Gas Energy Storage technology to reduce the energy losses in the gas network.

Refuelling

We determined early on that we should place ourselves at the centre of those bodies responsible for determining national hydrogen roll-out strategies for transport. This position provides us with vital contacts with much larger organisations and governments, which enables ITM Power to articulate the views of those parties wishing to see a major role for clean fuel produced from renewables. This strategy has been very successful, and we are currently members of the co-ordinating bodies tasked with designing hydrogen fuel strategies in the UK, the US, France, and Switzerland. During the half year, we added two more territories in addition to making our first contract for a refuelling product in the US.

United Kingdom

UK H2Mobility is building on the work it achieved in its first phase, developing a detailed business case for Fuel Cell Electric Vehicles (FCEVs) and establishing a framework within which its members can commit to specific actions. In phase two, the members of the project are now developing a commercial model for building the initial network of hydrogen refuelling stations (HRS).

Further support for FCEVs came in September of last year when the Office for Low Emission Vehicles (OLEV) called for evidence from industry on how best to invest £500m of funding to establish the UK as a premier market for ultra low emission vehicles (ULEVs). The Summary document, 'Preparing for hydrogen fuel cell electric vehicles in the UK', stated that the UK Government is "…actively working with companies in the ground-breaking UK H2Mobility project to develop a business case for the roll-out of hydrogen fuel cell electric vehicles (and the associated hydrogen refuelling infrastructure) in the UK from 2015."

The EcoIsland showcase project on the Isle of Wight, where we lead the £4.45m EcoIsland Hydrogen Vehicle Refueller project, has now come to the end of its first year, on time and on budget. We have made significant progress, having finalised the design of a modular 80kg/day hydrogen generation unit, the first deployment of a station of this size, which ITM Power intends to use for the roll-out of hydrogen refuelling stations in the UK in the H2Mobility project. Together with EcoIsland partner SSE, we have identified four potential locations for the refuelling stations and submitted planning applications for all four sites. We have also applied for planning permission for the marine refuelling system at partner Cheetah Marine's site in Ventnor. In summary, the project is proceeding well with delivery of our refuelling units anticipated during Autumn 2014.

A further expansion of our activities in the UK took place in October when we announced a £1m grant from the Welsh Government to establish a wholly owned subsidiary, ITM Motive, to assist with the establishment of a hydrogen refuelling infrastructure in the region. The Welsh Government recently joined the UK H2Mobility project and is committed to establishing a leading first mover role for Wales in the roll-out of hydrogen refuelling infrastructure.

United States

A highlight of the period under review has been our first contract in the US providing a refueller to Hydrogen Frontier, Inc. This rapid response electrolyser unit will be integrated into Hyundai's hydrogen fuelling station in Chino, California. The contract comes from the California Energy Commission under the 100% renewable and non-road set-aside categories. The refuelling station will be located at the Hyundai America Technical Center testing facility and will be deployed in collaboration with Powertech Labs of Canada. The unit will be capable of generating 100kg/day of hydrogen with the ability to dispense at both 350 and 700bar. It is due for completion in October 2014.

California is leading the way in the US and possibly the world in providing economic and planning permission support for H2 mobility with US$20m per year, for 10 years, dedicated to infrastructure. The state also has a zero carbon transit bus programme with funding available at a state and federal level, and the world's only dedicated H2 ombudsman to streamline the hydrogen station permitting process. California has recently become the first US state to mandate energy storage and electricity providers have started to invite tenders for energy storage solutions.

ITM Power has established a legal entity in California, ITM Power Inc., and a permanent staff presence will soon be in place to undertake business development and provide engineering support for units in the field. ITM Power Inc. is a member of the key hydrogen bodies in the US and is actively engaged in providing multiple mobility station proposals for 2014 and beyond with local partners.

The Future

Hydrogen markets across the world continue to expand as energy companies address the problem of renewable power wastage and the chronic lack of storage facilities. The roll out of hydrogen FCEVs to consumers in the USA by major automotive businesses has commenced and will be shortly followed by the release of models for sale in the UK and Germany.

Governments continue to commit increasing resources to address shortages in clean energy storage and the lack of facilities dedicated to clean, renewable fuel. As ITM Power expands the manufacture and deployment of its unique technology, to satisfy an increase in commercial opportunities, we are excited about the prospects for the remainder of the current financial year and beyond.

Dr Graham Cooley

Chief Executive Officer

31 January 2014

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.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

Results for the six months ended 31 October 2013

CONSOLIDATED BALANCE SHEET (UNAUDITED)

As at 31 October 2013

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

Results for the six months ended 31 October 2013

Notes

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 ended 31 October 2013 and 31 October 2012 has not been audited. The information relating to the year ended 30 April 2013 has been extracted from the Group's published financial statements for that year, which contain an unqualified audit report, 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.

Going concern

The Directors announced today that they have finalised an equity raise of £10.0m gross. However, the successful completion of the funding is conditional on obtaining shareholder approval at an extraordinary general meeting.

The Directors have prepared a cash flow forecast (the "Forecast") for the period to 31 January 2015 (the "Forecast Period"). The Forecast includes the £10.0m gross proceeds from the equity fund raise, together with a number of assumptions, including the level of projected sales and grant income, the timing of which is inherently uncertain.

However, the Directors have not yet received shareholder approval and if the entire proceeds are removed from the Forecast, ITM is forecast to become cash negative within the Forecast Period. Whilst the directors are confident of receiving shareholder approval, they recognise that this constitutes a material uncertainty.

Notwithstanding this material uncertainty, 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. Significant accounting policies

The financial statements have been prepared on the historical cost basis.

The principal accounting policies adopted by the Group are as applied in the Group's latest annual audited financial statements, with the exception of IAS 11 'Construction contracts', which ITM has applied for the first time in the current period. No restatement of the prior period comparatives was required.

Construction contracts

When the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date. This is normally measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable they will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

When contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is shown as the amounts due to customers for contract work. Amounts received before the related work is performed are included in the consolidated balance sheet, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customer are included in the consolidated balance sheet under trade and other receivables.

3. Called up share capital

INDEPENDENT REVIEW REPORT TO ITM POWER PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2013 which comprises the income statement, the balance sheet, the statement of changes in equity, the cash flow statement and related notes 1-3. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" 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 half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with the accounting policies the group intends to use in preparing its next annual financial statements.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2013 is not prepared, in all material respects, in accordance with the AIM Rules of the London Stock Exchange.

Emphasis of matter - uncertainty relating to going concern 

In arriving at our review conclusion, which is not qualified, we have considered the adequacy of the disclosures made in note 1 to the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2013 concerning the material uncertainty in respect of ITM Power plc's ability to continue as a going concern should the share placing not complete.

Deloitte LLP

Chartered Accountants and Statutory Auditor

Leeds, UK

31 January 2014