Itm Power Regulatory News (ITM)

31 Jan 2007 07:02

ITM Power PLC31 January 2007 Strictly embargoed until: 0700 hrs, 31 January 2007 ITM Power Plc ('ITM' or 'the Company') Interim Results for the six months ended 31 October 2006 Highlights: • Progress in ITM's commercialisation programme is on plan • Agreed terms, subject to contract, on a new 15,000sq ft production facility in Sheffield • Agreement signed with ABRO (Ministry of Defence) to field trial onboard vehicle electrolysers • Agreement signed with Hydrogen Engine Center Inc to develop non-polluting hydrogen energy systems • New joint development programme initiated for the use of hydrogen in vehicle engines with the University of Hertfordshire • Pre tax loss for the period in review increased from £0.91m to £1.42m in line with budget reflecting the increased level of development activity which has taken place in 2006 • ITM's membrane technology as applied to electrolysers has now reached 10,000 hours of operation without evidence of degradation. This lifetime exceeds the durability requirements of commercially viable systems • Successfully built and operated a completely platinum free 5kW solid polymer electrolyser stack, which reduces cost per kilowatt below the previously stated $164/kW Stephen Massey, Chairman, commented: "The important scientific advances that wehave achieved to date have created substantial intellectual property which isthe most valuable asset in the Company. Our objectives over the next year are tofocus on successful field trials of our existing technology, to complete thebuilding of our production facilities and further expand our commercialrelationships. Subject to completion of successful field trials, we anticipate enteringnegotiations and plan rapid commercialisation using the new Sheffield facilitiesto manufacture the initial commercial units. We anticipate product orders andrevenues to commence in early 2008. ITM has made excellent progress and is now entering the commercial phase of itsdevelopment. I am looking forward to another exciting year for the Company." For further information please contact: Gemma ChandlerITM Power PlcTel: +44 (0)1799 532 860Mob:+44 (0)7921 057712or visit www.itm-power.com Chairman's statement: I am pleased to report the interim results for the six months ended 31 October2006 and update shareholders on new developments. The Company has made significant progress since I last wrote to shareholders inJuly in achieving all the technical milestones set out at that time, and movingtowards the commercial realisation of its technology. ITM is now entering into anew phase of its development as a leading innovator of fuel cell andelectrolyser technologies as we seek to bring commercial products to market in arealistic timeframe. The Company has agreed terms on a new facility in Sheffieldwhich will produce prototypes and small scale production in order to take ITM'sproducts to market next year. The agreements signed with Hydrogen Engine Centre Inc and with ABRO (Ministry ofDefence) demonstrate the exciting potential of ITM's technology to theautomotive and power sectors. The development programme initiated with theUniversity of Hertfordshire will help determine the scale of the opportunity ofintroducing hydrogen to enhance the performance of internal combustion vehicles. Given the macro economic background of persistently high energy prices and thethreat of global warming, the practical implementation of this technology ismore urgently needed than ever. Financials: During the six months under review, pre-tax losses widened to £1.42m (31 October2005: £0.91m), reflecting the budgeted increased level of development activityduring 2006. The increased activity has required additional technical staff,equipment and space, the expenditure on which was in line with budget. At theend of the period, activity further increased and extra staff and space wereadded to the Sheffield facility, which will result in increased operating costsduring the second half of the financial year. This increase, which is also inline with budget, will be mitigated by the receipt of the second tranche of£0.30m grant awarded during the first half of the previous financial year by Yorkshire Forward. In May 2006, the Company completed a successful secondary fundraising in whichit raised £29.41m before expenses. This capital has generated significantinterest income in the six months in review of £0.75m compared to £0.16m for thesame period in 2005. Capital expenditure on facilities and test equipment reduced by 64% to £0.14m(31 October 2005: £0.37m), we expect to increase capital expenditure in thesecond half of the financial year due to further spend on the Company'sfacilities in Sheffield to support projects already underway. At the end of theperiod in review, net current assets had increased by 375% to £32.84m (31October 2005: £6.89m), of which £32.66m was in cash and short term deposits,which is considered a good position from which to achieve ITM's commercialobjectives. The Board is not recommending payment of a dividend in accordance with thedividend policy stated at the time of the IPO. Commercial developments: We have recently agreed terms, subject to contract, on a new 15,000sq ftproduction facility in Sheffield. We expect it to be operational during the 1stquarter 2008. This facility will enable production of electrolysers and fuelcells and is in addition to our current research facility. We anticipatestarting small scale production of prototypes and low volume commercialproduction during the first half of 2008. We believe the facility has scope forfuture capacity expansion. Since the period end, we have signed agreements with significant corporations toprovide a platform from which ITM and the two organisations can develop theirrespective technologies: •In November 2006, ITM signed a Memorandum of Understanding with Hydrogen Engine Center Inc ("HEC"), a US company that designs, manufactures and distributes alternative fuel internal combustion engines for the industrial and power generation markets. The joint objective is to develop products for a non polluting grid independent energy system which can undergo early field trial testing. HEC anticipates that ITM can offer an assured supply of hydrogen using ITM's low cost electrolyser technology. ITM anticipates that HEC provides an early route to the provision of a complete system package using HEC's proven engine technology. •In December 2006, ITM signed a Memorandum of Understanding with ABRO, a Trading Fund of the Ministry of Defence which maintains vehicles and equipments owned and operated by the British Armed Forces, and in addition offers a maintenance service to commercial organisations including Emergency Services, Local Authorities and Airports. The joint objective of the parties is to use ITM's technology to develop equipment which improves the capability (fuel efficiency and/or pollution control) of diesel engines operating in military and civilian environments. Field trial testing of the developed equipment will begin in the first quarter of 2007. Technical developments: •In July 2006, ITM initiated a joint development programme for the use of hydrogen in vehicle engines with The University of Hertfordshire. The programme includes the development of a Home Electrolyser Refuelling system that can create hydrogen fuel anywhere that has access to electricity and water. This important programme helps solve the requirement to build a new hydrogen refuelling infrastructure. The development of a Home Electrolyser Refuelling System and Bi-Fuel car is progressing satisfactorily and is on track to roll out a 10kW ITM electrolyser home refuelling device and a Bi-Fuel vehicle before the end of June 2007. In addition, ITM is investigating how the addition of hydrogen to the diesel combustion process can either reduce fuel consumption or pollutants and how to provide the necessary on-board hydrogen generator system for diesel engines. Since the period in review and as a result of initial tests, the University has reported significant results indicating that the addition of hydrogen has a positive impact in the compression ignition combustion process. The Company has been advised by the University that it also expects significant improvements to be achieved to the emissions output from the engine. •In October 2006, ITM successfully achieved the following technical advances: Fuel Cells: The Company demonstrated the technology necessary to reduce the cost of fuel cells to $900/kW by increasing the power output of its cells to 360mW/ cm2. ITM materials have now been successfully operated at powers in excess of this level. Consistent and repeatable performance at these power densities has been achieved. Electrolysers: ITM's long duration test of its unique low cost membrane technology as applied to electrolysers achieved 6,000 hours of operation on an intermittent test cycle without external evidence of degradation or loss of performance. •ITM successfully achieved its milestone objectives for the end of December 2006 on time and on budget. In summary the Company announced, that it had successfully operated a 5kW electrolyser stack based upon its Nickel/ platinum technology using an intermittent (on-off) test cycle such as would be necessary if the device were to be used in conjunction with intermittent renewable or off-peak electricity supplies. This device has been independently costed at less than $250/kW notwithstanding the recent increases in the cost of platinum. ITM also operated a self pressuring electrolyser at 20bar, developed a dual liquid fuelled fuel cell including rapid refuelling system and further reduced the costs of the necessary technology to enable a Hydrogen Oxygen fuel cell to be manufactured for less than $700 per kW. New Developments as at 31 January 2007: ITM has now successfully built and operated a completely platinum free 5k/Wsolid polymer electrolyser stack. The complete elimination of platinum reducesour cost per kilowatt below the previously stated $164/kW (which includedPlatinum on one side of the membrane). The ongoing durability testing of our membranes in electrolysis mode shows noexternal signs of degradation and we have now further increased durability frompreviously mentioned 6,000 hours to in excess of 10,000 hours of operation in atotal test programme approaching 2 years. This lifetime substantially exceedsthe durability requirements of PEM membranes outlined by the automotive industryand the Company believes it meets the lifetime requirements for commerciallyviable systems. In addition to the long-term durability testing of our membranes, all thecomponents, which would be in a non-platinum electrolyser cell, specificallycatalysts, membrane and support materials have exceeded 3,000 hours ofsuccessful operation. It is worth highlighting two of our long-term research programmes which may haveincreasing importance over the next 12 months. These programmes have beenrunning since we became a public company in 2004 and are firstly, the organicphotovoltaic research programme which continues to suggest encouraging possiblesolutions to the development of much lower cost photovoltaic systems byeliminating silicon. Secondly, we have been modelling ways of combiningatmospheric carbon dioxide with electrolytic hydrogen to create liquid fuels.These programmes are in addition to our electrolysis and fuel cell work but relyon the same basic understanding of chemistry. We have filed patents in the abovedevelopments. Board and staff: To enable further acceleration of ITM's development activity, we have recentlyrecruited a further 10 new staff to our technical and support team. We welcomethe new recruits to ITM and thank all of our staff for their hard work andcommitment during the last six months, especially those who were involved withthe completion of the milestones. I would like to advise shareholders that I do not intend to seek re-election tothe Board at the AGM in September 2007, which will mark the completion of mythird year of office as your Non Executive Chairman. My executiveresponsibilities and business interests outside the Company are such that itwill be increasingly difficult for me to devote the appropriate degree ofattention to the next phase of ITM's development. I will be working very closelywith the Board over the coming months to plan my succession.Outlook: The important scientific advances that we have achieved to date have createdsubstantial intellectual property which is the most valuable asset in theCompany. Our objectives over the next year are to focus on successful fieldtrials of our existing technology, to complete the building of our productionfacilities and to expand our commercial relationships. Subject to completion of successful field trials, we anticipate enteringnegotiations and plan rapid commercialisation using the new Sheffield facilitiesto manufacture initial commercial units. We anticipate product orders andrevenues to commence in early 2008. ITM has made excellent progress and is now entering the commercial phase of itsdevelopment. I am looking forward to another exciting year for the Company. Stephen MasseyChairman31 January 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)Results for the six months ended 31 October 2006 Six months Six months Year ended 30 ended 31 ended 31 April 2006 October 2006 October 2005 (audited) (unaudited) (unaudited) as restated as restated (see note 4) (see note 4) £ £ £ Administrative expenses- Research and development (1,545,384) (718,951) (1,608,044)- Share option charges (5,222) (1,150) (2,300)- Other (644,333) (391,123) (901,462) ----------- ------------ ----------- (2,194,939) (1,111,224) (2,511,806)Other operating income 18,393 40,178 361,678 ----------- ------------ -----------Operating loss (2,176,546) (1,071,046) (2,150,128) Interest receivable and similar income 752,135 161,080 290,212 --------- --------- ---------Loss on ordinary activities before taxation (1,424,411) (909,966) (1,859,916) Tax on loss on ordinaryactivities - 30,000 208 --------- --------- ---------Loss on ordinary activities after taxation, being retained loss for the financial period (1,424,411) (879,966) (1,859,708) ========= ========= ===========Loss per shareBasic and diluted (1.4p) (1.0p) (2.0p) ========= ========= ========= There are no recognised gains or losses for the current financial period andpreceding financial periods other than as stated in the profit and loss account. CONSOLIDATED BALANCE SHEET (UNAUDITED)As at 31 October 2006 As at 31 As at 31 As at 30 October 2006 October 2005 April 2006 (unaudited) (unaudited) (audited) £ £ £FIXED ASSETSTangible assets 821,425 673,596 827,402 --------- --------- --------CURRENT ASSETSDebtors 412,494 393,352 594,203Investments -short term deposits 32,550,346 6,553,155 5,400,000Cash at bank and in hand 114,015 206,749 62,564 ----------- ----------- ---------- 33,076,855 7,153,256 6,056,767 ------------ ----------- ---------- CREDITORS:amounts falling due within one year (240,761) (261,931) (293,440) ------------ --------- ----------NET CURRENT ASSETS 32,836,094 6,891,325 5,763,327 ------------ --------- ----------TOTAL ASSETS LESS CURRENTLIABILITIES, BEING NET ASSETS 33,657,519 7,564,921 6,590,729 ============ ========== ========== CAPITAL AND RESERVESCalled up share capital 5,057,974 4,594,663 4,598,513Share premium account 36,130,054 8,102,986 8,103,536Merger reserve (1,972,820) (1,972,820) (1,972,820)Profit and loss account (5,557,689) (3,159,908) (4,138,500) --------- ----------- -----------EQUITY SHAREHOLDERS' FUNDS 33,657,519 7,564,921 6,590,729 CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)Results for the six months ended 31 October 2006 Six months Six months Year ended ended 31 ended 31 30 April October 2006 October 2005 2006 (unaudited) (unaudited) (audited) £ £ £ Net cash outflow from operations (1,701,997) (780,101) (1,910,873) ----------- --------- -----------Returns on investments and servicing of finance Interest received 577,119 161,080 189,832 ----------- --------- ----------- TaxationResearch and development tax credit - - 58,316 ----------- --------- ----------- Capital expenditure and financial investment Purchase of tangible fixed assets (141,311) (365,630) (641,660) ----------- --------- ---------- Net cash outflow before management of liquid resources and financing (1,266,189) (984,651) (2,304,385) ----------- --------- ----------- Management of liquid resourcesCash (placed on) withdrawnfrom term deposits (27,150,346) 996,845 2,150,000 ------------ ---------- ----------- FinancingIssue of ordinary share capital (net of expenses) 28,485,979 1,086 5,486 ------------ ---------- -----------Increase(decrease) in cash 69,444 13,280 (148,899) ============ ========== =========== 1. 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. Six months Six months Year ended 30 ended 31 ended 31 April 2006 October 2006 October 2005 (audited) (unaudited) (unaudited) as restated as restated (see note 4) (see note 4) £ £ £ Loss (£) (1,424,411) (879,966) (1,859,708) ========== =========== ==========Weighted average number of shares 101,009,661 91,877,761 91,899,614 ========== =========== ========== 2. Reserves and reconciliation of movement in shareholders' funds Called up Share Merger Profit and Shareholders' share premium reserve loss funds capital account account £ £ £ £ £ At 1 May 2006 4,598,513 8,103,536 (1,972,820) (4,138,500) 6,590,729Issue of shares 459,461 28,026,518 - - 28,485,979Share option charges - - - 5,222 5,222Retained lossfor the period - - - (1,424,411) (1,424,411) ---------- ---------- ----------- ----------- ------------At 31 October 2006 5,057,974 36,130,054 (1,972,820) (5,557,689) 33,657,519 ========== ========== =========== =========== ============ 3. Basis of interim figuresThis interim financial information does not constitute statutory financialstatements within the meaning of section 240 of the Companies Act 1985. Thefinancial information for the six months ended 31 October 2006 and 31 October2005 has not been audited. The information relating to the year ended 30 April2006 is an extract from the audited financial statements for that year on whichthe auditors gave an unqualified audit report and did not contain a statementunder s237(2) or (3) of the Companies Act 1985. A copy of those financialstatements has been filed with the Registrar of Companies. 4. Prior year restatement - Implementation of FRS 20 "Share-based payment" Accounting policy change The group has applied the requirements of FRS 20 Share-based payments. Inaccordance with the transitional provisions, FRS 20 has been applied to allgrants of equity instruments after 7 November 2002 that were unvested as of 1May 2006. The group issues equity-settled share-based payments to certainemployees and directors. Equity-settled share-based payments are measured atfair value at the date of grant. The fair value determined at the grant date ofthe equity-settled share-based payments is expensed on a straight-line basisover the vesting period, based on the group's estimate of shares that willeventually vest. Fair value is measured by use of a Black-Scholes model. The expected life usedin the model has been adjusted, based on management's best estimate, for theeffects of non-transferability, exercise restrictions, and behaviouralconsiderations. Impact of restatementThe impact of implementing FRS 20 "Share based payment" has had the followingimpact on the financial statements. PROFIT AND LOSS ACCOUNT Six months Year ended 30 ended 31 April 2006 October 2005 (audited) (unaudited) £ £ Administrative expenses as previously stated 1,110,074 2,509,506FRS 20"Share-based payment" charge 1,150 2,300 --------- ---------Administrative expenses as restated 1,111,224 2,511,806 ========= ========= The impact of this accounting policy change does not affect the reported lossper share in either of the comparative periods which remain unchanged at 1.0pfor the six months ended 31 October 2005 and 2.0p for the year ended 30 April2006. INDEPENDENT REVIEW REPORT TO ITM POWER PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 31 October 2006 which comprises the profit and lossaccount, the balance sheet, the cash flow statement and related notes 1 to 4. Wehave read the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company, in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare also responsible for ensuring that the accounting policies and presentationapplied to the interim figures are consistent with those applied in preparingthe preceding annual accounts except where any changes, and the reasons forthem, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 October 2006. Deloitte & Touche LLPChartered AccountantsCambridge31 January 2007 This information is provided by RNS The company news service from the London Stock Exchange