Itm Power Regulatory News (ITM)

31 Jan 2008 07:00

ITM Power PLC31 January 2008 Immediate Release 31 January 2008 ITM Power plc ("ITM" or "the Company") Interim Results for the six months ended 31 October 2007 ITM Power Plc (AIM:ITM) is a clean energy company focused on developingtechnology to alleviate the present dependence on hydrocarbon fuels. Today itannounces its Interim Results for the six months ended 31 October 2007. Highlights • Completion of phase one of the new 15,000sq ft production facility in Sheffield on time and within budget • Important agreements signed for medium term applications of ITM technology: • Co-operative Research and Development Agreement (CRADA) with United States Naval Undersea Warfare Center Division Newport • Agreement with Boeing to design an Unmanned Aerial Vehicle refueling system • Key US patent granted for ITM's unique crosslinked hydrophilic ionic materials • Completion of development of Hydrogen Petrol Bi-fuel car • Successful development of a low cost ($250/kW) fuel cell stack technology • Successful design and construction of a 100 watt hydrogen oxygen fuel cell stack • New commercial initiatives: • Program to develop 1kW fuel cell for commercial production in late 2009 •Design of a 5kW electrolyser to interface with wind or photovoltaic power generation devices •Design of a low pressure 10kW electrolyser for use in low carbon domestic housing projects •Design of a 1-3kW electrolyser for on site hydrogen generation for laboratories and other low demand customers • Pre tax loss for the period increased from £1.42 million to £1.91 million in line with budget and reflects the increased level of development activity which has taken place in 2007 • Cash at bank and in hand as at 31 October 2007 - £29.68 million Peter Hargreaves, Chairman of ITM commented: "I feel fortunate to have assumed the Chair at ITM at such a strategic juncturein the Company's existence. All the technology we have been developing is notonly coming to fruition but also gaining international recognition. When theworld adopts hydrogen as one of the fuels of the future our electrolyser unitsand the technology within will be much sought after. Elsewhere our superior fuelcell construction methods are also being sought as far afield as Boeing inMadrid and the United States Naval Undersea Warfare Center Division Newport. Ourlabs, which are working in close conjunction with our new production facility,should enhance the Company's reputation." For further information please contact: ITM Power plc 01799 542 222Jim Heathcote, Chief Executive Officer Panmure Gordon & Co. 020 7459 3600Katherine Roe Buchanan Communications 020 7466 5000Ben WilleyRichard DarbyBen Romney Chairman's statement I am pleased to report the interim results for the six months ended 31 October2007 and update shareholders on new developments. The Company is in transition from a research company into a low volumemanufacturer of high technology products. This is a challenging phase in thelife of the Company. Numerous strands of novel technology have been developedinternally, which must be combined with externally sourced components andsubsequently integrated into complete systems. ITM has made significant progressin developing the systems and the required ancillary equipment for theconstruction of a 10kW electrolyser home refueller system. We are well advancedin the process of proving our home refueller electrolyser but we wish to perfectthe advanced injection moulding method to ensure its robust construction. Since July all the technical milestones set out at that time have been achieved.The Company has completed the initial stages for the new facility in Sheffieldand this will produce prototypes and small scale production to take ITM'sproducts to market later this year. Given the macro economic background of persistently high energy prices and thethreat of global warming, the requirement of this technology is more urgentlyneeded than ever. We await for the world to embrace hydrogen as a real answer tothe need for pollution free energy. Financials During the six months under review, pre-tax losses increased to £1.91 million(31 October 2006: £1.42 million), reflecting the planned increase in bothdevelopment activity on future products and on the new 15,000sq ft productionfacility in Sheffield. The Company continues to build its scientific andtechnical teams alongside the new team at the production site. Staff costscontinue to account for about half of the Company's cost base. The Company'sinvestment in the production facility was carried out on time and within budget.It is anticipated that the full cost of fitting out the production should beconcluded during the current financial year. During the period, the Company benefited from increased interest rates on its UKSterling Cash Deposits producing £902,000 in interest receivable, compared with£752,000 for the same period last year. At the period end the Company held cashand cash equivalents of £29.68 million (31 October 2006: £32.66 million). Thedirectors consider this adequate to achieve ITM's commercial objectives. The Company presents these interim accounts under International Financial Reporting Standards (IFRS) having adopted these standards on 1 May 2007. Management has performed an assessment of the impact of IFRS and has not identified any material differences resulting from the transition to IFRS other than certain presentational changes which do not impact the Company's previously reported results. The Company has therefore not provided a reconciliation of UK GAAP to IFRS financial information. Details of the Company's significant accounting policies can be found on the company's website (www.itm-power.com/investors.html) The Board is not recommending payment of a dividend in accordance with thedividend policy stated at the time of the IPO. Commercial developments The initial phase of the new 15,000sq ft production facility in Sheffield wascompleted on time and within budget. As well as installing the productionequipment we have recruited new staff to operate the facility, as mentionedabove. We expect several months of trial production and, as reported a year ago,we expect it to be operational during the first quarter of 2008 with firstproduction units available for demonstration and testing with customers early inthe third quarter of 2008. We believe the facility has scope for future capacityexpansion. Since the period end, we have signed agreements with significant organisations: • In November 2007, ITM signed an agreement with Boeing to design an environmentally friendly Unmanned Aerial Vehicle refueling system. • In December 2007, ITM signed a Co-operative Research and Development Agreement with the United States Naval Undersea Warfare Center Division Newport to collaborate in the development of advanced power systems for unmanned undersea vehicles (UUV) applications. Technical developments FUEL CELL DEVELOPMENTS A 100 watt demonstration fuel cell stack ITM has successfully developed a fuel cell stack design which it believes issuited for high power density operation in commercial devices and this designhas been used to construct a 100W stack. In addition, the Company has sought toreduce the cost of the entire system by designing a passive hydration managementsystem based upon its low cost hydrophilic materials. The resulting fuel cellemploys the '$500/kW' membrane catalyst technology announced in June 2007 andhas operated repeatedly at powers above 100W in a number of stack configurations(including a 5 cell, high current and a 10 cell, high voltage array). The development of a Hydrogen-Oxygen fuel cell stack with an estimatedproduction cost of less than $250/kW The Company is pleased that it has succeeded in meeting the fuel cell stack costreduction target of less than $250/kW if produced in accordance with theassumptions set out previously on the 18 October 2006. The reduction in cost hasbeen achieved both by increasing the power density per unit area of the cell andreducing the loading of the platinum catalyst. The Company has successfullyoperated cells using the lowest catalyst loading currently available in thecommercial market. ELECTROLYSER DEVELOPMENTS A 25kW stack has been constructed using ITM's nickel (hydrogen) catalyst and lowdensity platinum (oxygen) catalyst, which allows it to meet the projectedproduction cost (for the stack) of less than $200/kW. It has operatedsuccessfully at low pressure when tested using inputs in excess of 25kW and atransient (i.e. 30 minute on-off) load cycle. The unit proved well able tohandle the large gas volumes associated with low pressure operation withoutexcessive heating or hydraulic problems. The use of a low platinum loading catalyst has allowed the Company to meet itscost target. However, one of ITM's preferred non-platinum oxygen catalystsystems has now achieved longevity in excess of 10,000 hours and thus anon-platinum system is available for use to interface with commercial scalerenewable energy systems (photovoltaic or wind powered) and commercialtransportation, if required. THE 'ONE-STEP' PRODUCTION PROCESS The basic concept of a 'one-step' method of manufacture in which the ionicmembrane is polymerised in-situ within the catalyst electrode structure to formthe Membrane Electrode Assembly (MEA) or cell, is a basic part of ITM's primarypatent portfolio which has now been granted widely around the world. Development in this area has progressed steadily with the initial objective ofsupporting the engineering of the prototype Home Refueller Unit. ITM is pleasedto announce that MEAs made by a one-step process can now be produced inpre-production batches with excellent reproducibility and performance. TheseMEAs have been extensively tested in electrolyser cells as incorporated into the25kW electrolyser stack referred to above. On this basis the 'one-step' processis now considered by the Company to be suitable for the electrolyser productionteam to utilise as appropriate. New Developments as of 31 January 2008 ITM is now examining additional potential product lines that can supplement the10kW home refueling system. The initial objective is to widen the potentialapplications that can create revenues from the already developed technology inorder to maximize the return on our substantial investment. The Company will beexamining the development of three further electrolyser systems. The first programme would add a 5kW electrolyser system to the product family.This could be used in conjunction with a small wind machine or solar(photovoltaic) panels to create a reliable grid independent back-up powersystem, or to make on site hydrogen for mobile phone mast fuel cell back-uppower systems. In addition ITM will be considering the development of a lower pressure, lowercost 10kW system that could be used in low carbon housing projects to supplyhydrogen to a gas boiler, cooker and a small fuel cell. The third route to providing an additional commercial product involves thedesign of a much smaller system in the one to three kilowatt range for on sitehydrogen generation at laboratories and other low demand hydrogen customers. Inaddition it is intended that this device will also provide a 'test bed' for theapplication of a further extension of the ITM 'one-step' cell manufacturingprocess. Finally, building upon the successful research in fuel cells, reported in thepast year, we are now setting out a major new programme to develop a 1kW fuelcell system for demonstration in mid 2009 with the objective of sale andproduction in the second half of next year. The fuel cell will be designed tointegrate as a pair with one of ITM's electrolysers. The Company intends to useboth the hydrogen and oxygen from the electrolyser to create a complete energystorage system with the minimum balance of plant. The programme will require the development of a new gas storage system for bothhydrogen and oxygen. The Company has already filed patent applications on a newdesign concept. In addition the programme will require the development of ahydration system, gas control system and the electronics required to control thefuel cell system. Board and staff To enable further acceleration of ITM's development activity, the Company hasrecruited a further 18 staff to the sales, production and engineering teamssince last financial year end. We welcome the new recruits to ITM and thank allof our staff for their hard work and commitment during the last six months,especially those who were involved with the completion of the milestones. Outlook ITM's continuing objectives over the next year are to further expand ourcommercial relationships and supply initial demonstration and test units forevaluation to partners with the objective of substantial commercial sales. Subject to completion of these successful field trials, we anticipate enteringnegotiations and plan rapid commercialisation using the new Sheffield facilitiesto manufacture initial commercial units. ITM has made excellent progress and is now entering the commercial phase of itsdevelopment. I feel privileged to be assuming the position of Chairman at such apivotal time for the Company. Peter HargreavesChairman31 January 2008 CONSOLIDATEDINCOMESTATEMENT(UNAUDITED)Results for thesix monthsended 31October 2007 Six months Six months Year ended 30 ended 31 ended 31 April 2007 October 2007 October 2006 (audited) (unaudited) (unaudited) £'000 £'000 £'000 Operating costs- Research anddevelopment (2,028) (1,547) (3,428)- Production (84) - -- Sales andmarketing (70) (23) (35)-Administration (625) (624) (1,193) --------- --------- ---------Loss fromoperations (2,807) (2,194) (4,656) Interestreceivable 902 752 1,584Grant income - 18 330Interestpayable (1) - - --------- --------- ---------Loss beforetax (1,906) (1,424) (2,742)Tax - - - --------- --------- ---------Loss after tax (1,906) (1,424) (2,742) ========= ========= =========Loss per shareBasic anddiluted (1.9p) (1.4p) (2.7p) ========= ========= ========= 102,060,092 101,009,661 101,060,568 ========= ========= ========= The 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. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)Results for the six months ended 31 October 2007 Called up share Share premium Merger reserve Retained loss Equity capital account £'000 £'000 £'000 £'000 shareholders' funds £'000 At 1 May 5,098 36,271 (1,973) (6,861) 32,5352007Issue ofshares 7 1 - - 8Shareoption - - - 13 13chargesRetainedloss - - - (1,906) (1,906)for the -------- ------- -------- ------- ----------periodAt 31October 5,105 36,272 (1,973) (8,754) 30,6502007 ======== ======= ======== ======= ========== CONSOLIDATED BALANCE SHEET (UNAUDITED)As at 31 October 2007 As at 31 As at 31 As at 30 April October 2007 October 2006 2007 (audited) (unaudited) (unaudited) £'000 £'000 £'000NON CURRENT ASSETSProperty,plant andequipment 1,451 821 990 ---------- --------- --------CURRENT ASSETSTrade andotherreceivables 381 413 189Cash and cashequivalents 29,682 32,664 31,833 ---------- --------- --------TOTAL CURRENTASSETS 30,063 33,077 32,022CURRENT LIABILITIESTrade andother payables (864) (241) (477) ---------- --------- --------NET CURRENTASSETS 29,199 32,836 31,545 ---------- --------- --------NET ASSETS 30,650 33,657 32,535 ========== ========= ======== EQUITYCalled upshare capital 5,105 5,058 5,098Share premiumaccount 36,272 36,130 36,271Merger reserve (1,973) (1,973) (1,973)Retained loss (8,754) (5,558) (6,861) ---------- --------- --------EQUITYSHAREHOLDERS'FUNDS 30,650 33,657 32,535 ========== ========= ======== CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)Results for the six months ended 31 October 2007 Six months Six months Year ended 30 ended 31 ended 31 April 2007 October 2007 October (audited) (unaudited) 2006 (unaudited) £'000 £'000 £'000 Net cash fromoperatingactivities (2,402) (1,720) (3,705) --------- --------- --------Investing activitiesInterestreceived 902 577 1,584Interest paid (1) - -Purchases ofproperty,plant andequipment (658) (141) (487) --------- --------- --------Net cash usedin investingactivities 243 436 1,097 --------- --------- --------Financing activitiesIssue ofordinary sharecapital 8 28,486 28,667Grant incomereceived - 18 330 --------- --------- --------Net cash usedin financingactivities 8 28,504 28,997 --------- --------- -------- --------- --------- --------(Decrease)Increase incash and cashequivalents (2,151) 27,220 26,389Cash and cashequivalents atthe beginningof the period 31,833 5,444 5,444 --------- --------- --------Cash and cashequivalents atthe end of theperiod 29,682 32,664 31,833 ========= ========= ======== 1. Basis of preparation of interim figures The interim financial statements have been prepared using accounting policiesconsistent with International Financial Reporting Standards (IFRSs) as adoptedfor use in the EU. While the financial information included in this interimannouncement has been compiled in accordance with the recognition andmeasurement principles of IFRSs, this announcement does not itself containsufficient information to comply with IFRSs. This interim financial informationdoes not constitute statutory financial statements within the meaning of section240 of the Companies Act 1985. The financial information for the six months ended 31 October 2007 and 31 October 2006 has not been audited. The information relating to the year ended 30 April 2007is an extract from the audited financial statements for that year on which the auditors gave an unqualified audit report and did not contain a statement under s237 (2) or (3) of the Companies Act 1985. A copy of those financial statements has been filed with the Registrar of Companies. The Company previously prepared its financial statements under UK Generally Accepted Accounting Principles ('UK GAAP') until 30 April 2007. From 1 May 2007, in line with AIM listing requirements, the Company will prepare its consolidated financial statements in accordance with IFRS. These interim results are the first results to be prepared under IFRS and include IFRS comparative financial information for the six months to 31 October 2006 and for the year ended 30 April 2007. In July 2008, the Company will present its first annual report and accounts under IFRS for the year ended 30 April 2008. Management has performed an assessment of the impact of IFRS and has not identified any material differences resulting from the transition to IFRS other than certain presentational changes which do not impact the Company's previously reported losses or net assets. The Company has therefore not provided a reconciliation of UK GAAP to IFRS financial information. 2. Significant accounting policiesThe financial information presented for the six months ended 31 October 2006 andfor the year ended 30 April 2007 has been restated to comply with IFRS. The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted by the Company are available from thewebsite at www.itm-power.com INDEPENDENT REVIEW REPORT TO ITM POWER PLC IntroductionWe have been engaged by the Company to review the interim set of financialstatements for the six months ended 31 October 2007 which comprises theconsolidated income statement, the consolidated statement of changes in equity,the consolidated balance sheet, the consolidated cash flow statement and relatednotes 1 and 2. We have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company, in accordance with InternationalStandard on Review Engagements 2410 issued by the Auditing Practices Board. Ourwork has been undertaken so that we might state to the Company those matters weare required to state to them in an independent review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company, for our review work, for thisreport, or for the conclusions we have 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 preparing the interim report in accordance with the AIMRules of the London Stock Exchange. As disclosed in note 1, the annual financial statements of the Company will beprepared in accordance with IFRSs as adopted by the EU. The interim financialstatements included in this interim report have been prepared in accordance withthe accounting policies the Company intends to use in preparing its next annualreport. Our responsibility Our responsibility is to express to the Company a conclusion on the interimfinancial statements in the interim report based on our review. Review work performed We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity", issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the accompanying interim financial information is not prepared, in allmaterial respects, in accordance with the AIM Rules of the London StockExchange. Deloitte & Touche LLPChartered Accountants and Registered AuditorCambridge, United Kingdom This information is provided by RNS The company news service from the London Stock Exchange