Last checked at 28 Jul 2008 07:00
| For Immediate Release | 28 July 2008 |
ITM Power plc
("ITM" or "the Company")
Full year Results
for the year ended 30 April 2008 ("FY 2008")
ITM Power Plc (AIM:ITM) is a clean energy company focused on developing technology to alleviate the present dependence on hydrocarbon fuels. Today it announces its Final Results for the year ended 30 April 2008.
Highlights
Peter Hargreaves, Chairman of ITM commented:
"It is my belief that in the next twelve months hydrogen will be increasingly considered and discussed in connection with pollution free transport and its use in conjunction with renewable power. We shall be at the forefront of promoting hydrogen and we also trust that you will see ITM increasingly mentioned in the media."
For further information please contact:
| ITM Power plc | 01799 542 222 |
| Jim Heathcote, Chief Executive Officer | |
| Panmure Gordon & Co. | 020 7459 3600 |
| Katherine Roe | |
| Buchanan Communications | 020 7466 5000 |
| Ben Willey Ben Romney |
Chairman's statement
I am pleased to report the final results for the year ended 30 April 2008 and update shareholders on new developments.
The Company is in transition from a research company into a low volume manufacturer of high technology products. This is a challenging phase in the life of the Company however we believe that it is essential to show working examples of our products as a step in the wider adoption of the technology. Our internal analysis indicates that our first electrolyser units can be priced below existing market prices whilst still being profitable. This is extremely encouraging because this is before we have even begun the process of cost reduction. We have already initiated an internal cost reduction program firstly by refining the prototype designs, following which we believe that there is plenty of scope for additional cost reductions through economies of scale. Our objective is to drive costs and prices down until our Sheffield factory limits capacity. If we are successful the full potential of the hydrogen economy will become apparent to a much wider audience.
It has been a very difficult year for the Company because we have had to access externally sourced engineering skills and components to integrate into our first complete systems. Quality control of components and manufacturing reproducibility delayed the demonstration of our refuelling system and the hydrogen petrol bi-fuel car until July.
In order to reduce the Company's risk to third party component suppliers, ITM has developed three different stack technologies in parallel which have all been successfully tested. Having achieved the 'gold standard' of a high pressure electrolyser operating without additional costs of compression, these different stack designs will ensure that we can offer an optimized and cost effective solution to a wide range of applications.
The concept of Peak Oil is becoming more generally understood and we must demonstrate to the world that hydrogen can now become an important solution to the need for a pollution free energy system.
Financials
The loss for the year increased from £2.7m to £4.0m, in line with the Group's budget. Capital expenditure for the year under review increased from £0.5m to £1.1m. Most of the capital expenditure was incurred at the Company's new production unit in Sheffield as previewed in the Chairman's statement last year. I am pleased to inform our shareholders that the unit was completed on time and on budget and will enable the Group to make the transition to a low volume manufacturer of high technology products. The increase in operating costs reflects the addition of this unit and its staff, as well as a strengthening of the technical and corporate teams which have taken the Company's average headcount from 37 to 52.
At the year end, the Group held cash at bank and on short term deposit of £26.9m putting the Group in a strong position to execute its commercial plans. In the year under review the Group had interest receivable of £1.7m and expects to continue to earn significant interest from its cash and short term deposits which will continue to partially offset operating costs.
ITM continued to maintain tight control over cash expenditures during the year under review and we shall continue to monitor budgets carefully. Operating costs in FY 2009 will increase as we see the full year impact of employees hired during FY 2008. In addition our engineering development work will increase to take our technology from the labs through to finished products. Expenditure on Intellectual Property protection and patents will continue to be an important part of the ongoing cost base.
The Board is not recommending payment of a dividend in accordance with the dividend policy stated at the time of the IPO.
Commercial developments
The new 15,000sq ft production facility in Sheffield was completed on time and within budget as outlined above. As well as installing the production equipment we have recruited new staff to operate the facility. They have been undergoing intense training on hydrogen safety and have built some of our product test equipment. The team has begun the construction of the first electrolyser units which we are planning to test as soon as they are completed. Certification and permitting work for the installation of electrolysers is also currently underway. We now expect first production units available for demonstration and testing with customers in the fourth quarter of 2008. We believe the facility has scope for future capacity expansion.
During the year, we have signed agreements with significant organisations:
In December 2007, ITM signed a Cooperation Research and Development Agreement with the United States Naval Undersea Warfare Center to collaborate in the development of advanced power systems for unmanned undersea vehicle (UUV) applications.
In March 2008, ITM Power announced a collaboration agreement with Roush Technologies Limited to jointly offer a complete package of hydrogen refueling systems and hydrogen vehicles to customers.
In addition, we are currently working with Renewable Energy International (REI) on solar hydrogen homes. REI have built the first solar hydrogen home in the United States after a three and a half year process of establishing the permitting requirements. They are currently building their second hydrogen home on Grand Cayman Island.
Technical developments
FUEL CELL DEVELOPMENTS
A 100 watt demonstration fuel cell stack
ITM has successfully developed a fuel cell stack design which it believes is suited for high power density operation in commercial devices and this design has been used to construct a 100W stack. The resulting fuel cell employs the '$500/kW' membrane catalyst technology announced in June 2007 and has 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). In addition, the Company has begun to reduce the cost of the entire system by designing a passive hydration management system based upon its low cost hydrophilic materials.
The development of a Hydrogen-Oxygen fuel cell stack with an estimated production cost of less than $250/kW
The Company is pleased that it has succeeded in meeting the fuel cell stack cost reduction target of less than $250/kW if produced in accordance with the assumptions set out previously on 18 October 2006. The reduction in cost has been achieved both by increasing the power density per unit area of the cell and reducing the loading of the platinum catalyst. The Company has successfully operated cells using the lowest catalyst loading currently available in the commercial market.
Preliminary results from Hydrogen Diesel co-combustion from tests with Bi-fuel International
The hydrogen diesel test results are not fully completed but early indications show that it is possible to substitute 20-30% of the energy content of the diesel fuel with hydrogen in a diesel engine and achieve a proportionate reduction in diesel consumption without significant or costly modifications to the existing engine. This has important commercial implications for communities dependent on diesel generators for their electricity supply because they will have the ability to displace some of their diesel requirements through the use of locally produced renewable hydrogen. It also offers the possibility of reducing the pollution produced by an existing bus or lorry engine to satisfy local pollution restrictions. Unfortunately our initial test results of adding trace hydrogen to the manifold of a diesel engine does not indicate any commercially useful fuel savings.
ELECTROLYSER DEVELOPMENTS
A 25kW stack has been constructed using ITM's nickel (hydrogen) catalyst and low density platinum (oxygen) catalyst, which allows it to meet the projected production cost (for the stack) of less than $200/kW. It has operated successfully at low pressure when tested using inputs in excess of 25kW and a transient (i.e. 30 minute on-off) load cycle. The unit proved well able to handle the large gas volumes associated with low pressure operation without excessive heating or hydraulic problems.
The use of a low platinum loading catalyst has allowed the Company to meet its cost target. However, one of ITM's preferred non-platinum oxygen catalyst systems has now achieved longevity in excess of 10,000 hours and thus a non-platinum system is available for use to interface with commercial scale renewable energy systems (photovoltaic or wind powered) and commercial transportation, and the Company is now liaising with manufacturers to procure production quantities of ITM electrodes coated with the preferred catalysts.
THE 'ONE-STEP' PRODUCTION PROCESS
The basic concept of a 'one-step' method of manufacture in which the ionic membrane is polymerised in-situ within the catalyst electrode structure to form the Membrane Electrode Assembly (MEA) or cell, is a basic part of ITM's primary patent portfolio which has now been granted widely around the world.
Development in this area has progressed steadily with the initial objective of supporting the engineering of the prototype Home Refueller Unit. ITM is pleased to announce that MEAs made by a one-step process can now be produced in pre-production batches with excellent reproducibility and performance. These MEAs have been extensively tested in electrolyser cells as incorporated into the 25kW electrolyser stack referred to above and the Home refueller Unit recently demonstrated publicly. On this basis the 'one-step' process is now considered by the Company to be suitable for the electrolyser production team to utilize.
New Developments as of 28 July 2008
ITM has now begun planning the next logical step for hydrogen vehicles whereby a new low cost, light weight electrolyser stack is placed inside the high pressure hydrogen storage tank which is required on-board any hydrogen vehicle. The ultimate objective being a vehicle that is refueled with water and capable of producing and storing high pressure hydrogen onboard. This will require a combination of the Company's one-step 'flexible' cell technology with a suitable hydrogen storage vessel.
Electrolysis usually requires pure deionized water which produces hydrogen and oxygen. When the hydrogen and oxygen recombine they release energy and a potentially useful byproduct; pure drinking water. We are currently testing the water quality required to be used in our different electrolyser chemistries to achieve both a useful renewable hydrogen fuel and clean drinking water. Our prime focus is to develop the capability to use sea water so that the electrolyser combines the functions of a desalinization plant and energy storage system. This will be very useful both in island locations and desert environments. The work is progressing satisfactorily as a basic research activity focusing upon the use of the Company's AE membrane materials (alkaline materials) which are less affected by the impurities found in sea water which adversely affect efficiency and cause operational problems in more conventional, acid chemistry materials.
Routes to additional commercial Products:
ITM is developing additional potential product lines that can supplement the 10kW home refueling system. The initial objective is to widen the potential applications that can create revenues from the already developed technology in order to maximize the return on our substantial investment.
The Company is now developing a commercial refueling system for use with commercial vehicles, material handling equipment (Fork Lift Trucks) and local public transportation systems. This system will combine a number of home refueling systems, a hydrogen compression system and hydrogen storage to enable fast refueling of high pressure hydrogen. The Company anticipates this system will be demonstrable this autumn.
In addition ITM will be pursuing the development of a lower pressure, lower cost 10kW system that could be used in low carbon housing projects to supply hydrogen to a gas boiler, cooker and a small fuel cell. Our production engineers have begun the process of identifying and acquiring the components for this new product. In the United States a lower pressure system is permitted for solar hydrogen homes. We hope to demonstrate this system in early 2009.
The third route to providing an additional commercial product involves the design of a much smaller system in the one to three kilowatt range to address the existing market for on site hydrogen generation at laboratories and other low demand hydrogen customers. We are now constructing a small electrolyser system to a radical design based upon our core MEA technology to meet the needs of this specialist market. If this design has a successful test program it could open a significant market to the Company.
In our interim results we announced a program to develop a 1kW fuel cell system for demonstration in mid 2009. The program is progressing successfully.
Board and staff
The Company has recruited 18 staff to the sales, production and engineering teams since last financial year end. We welcome the new recruits to ITM and thank all of our staff for their hard work and commitment during the last year, especially those who were involved with the completion of the milestones.
Finally I could not conclude my report without mentioning Dr Jonathan Lloyd who has now decided to retire although he has made himself available should any of the team wish to draw on his vast experience of the business since its conception. We are grateful he held his retirement in abeyance until he was confident that his knowledge and expertise was fully covered. We wish him well in his retirement.
Outlook
I personally think the outlook for ITM has never looked brighter. As the lobby for clean energy gathers more and more momentum hydrogen will be increasingly recognised as one of the primary solutions especially in conjunction with renewable power. It is vital that we continue to promote our proposition and in the next twelve months our aim is to continue demonstrating improvements in our technology. At the same time we shall increase our efforts to educate the media and hopefully benefit from the increased awareness of hydrogen and its benefits and qualities. Until now we have hidden our light under a bushel until we had real demonstrable products derived from our technology. The commercial phase of ITM will be the most exciting and we all look forward to the future of the business.
Peter Hargreaves
Chairman
28 July 2008
CONSOLIDATED INCOME STATEMENT
For the year ended 30 April 2008
| 2008 £'000 | 2007 £'000 | ||
| Revenue - consulting services | 9 | - | |
| Cost of revenue - consulting services | (9) | - | |
| Gross profit | - | - | |
| Operating costs | |||
| - Research and development | (3,926) | (3,428) | |
| - Production | (396) | - | |
| - Sales and marketing | (236) | (35) | |
| - Administration | (1,146) | (1,193) | |
| Grant income | 9 | 330 | |
| Loss from operations | (5,695) | (4,326) | |
| Interest receivable | 1,705 | 1,584 | |
| Interest payable | (2) | - | |
| Loss before tax | (3,992) | (2,742) | |
| Tax | - | - | |
| Loss for the year | (3,992) | (2,742) | |
| Loss per share | |||
| Basic and diluted | (3.9p) | (2.7p) | |
| Weighted average number of ordinary shares | 102,079,609 | 101,060,568 |
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.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
As at 30 April 2008
| Called up share capital £'000 | Share premium account £'000 | Merger reserve £'000 | Retained loss £'000 | Total equity £'000 | |
| 1 May 2006 | 4,599 | 8,104 | (1,973) | (4,138) | 6,592 |
| Issue of shares | 499 | 28,167 | - | - | 28,666 |
| Share based payments | - | - | - | 19 | 19 |
| Retained loss for the year | - | - | - | (2,742) | (2,742) |
| At 30 April 2007 | 5,098 | 36,271 | (1,973) | (6,861) | 32,535 |
| 1 May 2007 | 5,098 | 36,271 | (1,973) | (6,861) | 32,535 |
| Issue of shares | 7 | 1 | - | - | 8 |
| Share based payments | - | - | - | 25 | 25 |
| Retained loss for the year | - | - | - | (3,992) | (3,992) |
| At 30 April 2008 | 5,105 | 36,272 | (1,973) | (10,828) | 28,576 |
CONSOLIDATED BALANCE SHEET
As at 30 April 2008
| 2008 £'000 | 2007 £'000 | ||
| NON CURRENT ASSETS | |||
| Property, plant and equipment | 1,655 | 990 | |
| CURRENT ASSETS | |||
| Inventories | 95 | - | |
| Trade and other receivables | 511 | 189 | |
| Investments - short term deposits | 20,000 | - | |
| Cash and cash equivalents | 6,947 | 31,833 | |
| TOTAL CURRENT ASSETS | 27,553 | 32,022 | |
| CURRENT LIABILITIES | |||
| Trade and other payables | (632) | (477) | |
| NET CURRENT ASSETS | 26,921 | 31,545 | |
| NET ASSETS | 28,576 | 32,535 | |
| EQUITY | |||
| Called up share capital | 5,105 | 5,098 | |
| Share premium account | 36,272 | 36,271 | |
| Merger reserve | (1,973) | (1,973) | |
| Retained loss | (10,828) | (6,861) | |
| TOTAL EQUITY | 28,576 | 32,535 |
CONSOLIDATED CASH FLOW STATEMENT
| For the Year ended 30 April 2008 | 2008 £'000 | 2007 £'000 | ||
| Net cash used in operating activities | (5,195) | (3,375) | ||
| Investing activities | ||||
| Interest received | 1,441 | 1,584 | ||
| Interest paid | (2) | - | ||
| Purchases of property, plant and equipment | (1,138) | (487) | ||
| Short term deposits | (20,000) | - | ||
| Net cash from investing activities | (19,699) | 1,097 | ||
| Financing activities | ||||
| Issue of ordinary share capital | 8 | 28,667 | ||
| Net cash from financing activities | 8 | 28,667 | ||
| (Decrease) increase in cash and cash equivalents | (24,886) | 26,389 | ||
| Cash and cash equivalents at the beginning of year | 31,833 | 5,444 | ||
| Cash and cash equivalents at the end of year | 6,947 | 31,833 |
| 2008 £'000 | 2007 £'000 | |
| Cash, cash equivalents and short term deposits at the beginning of year | 31,833 | 5,444 |
| (Decrease) increase in the year | (4,886) | 26,389 |
| Cash, cash equivalents and short term deposits at the end of year | 26,947 | 31,833 |
NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 April 2008
1. basis of accounting
The preliminary announcement is based on the company's financial statements which are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements that comply with IFRS in August 2008.
2. notes to the cash flow statement
| 2008 £'000 | 2007 £'000 | |
| Operating loss | (5,695) | (4,326) |
| Adjustments for property, plant and equipment: | ||
| - Depreciation | 471 | 317 |
| - Loss on disposal | 2 | 8 |
| Share-based payments | 25 | 19 |
| Operating cash flows before movements in working capital | (5,197) | (3,982) |
| Increase in inventories | (95) | - |
| (Increase) decrease in receivables | (58) | 406 |
| Increase in payables | 155 | 201 |
| Cash used in operations | (5,195) | (3,375) |
| Income taxes received | - | - |
| Net cash used in operating activities | (5,195) | (3,375) |
3. eXPLANATION OF tRANSITION TO IFRS
This is the first year that the Company has presented its financial statements under IFRS. The following disclosures are required in the year of transition. The last financial statements under UK GAAP were for the year ended 30 April 2007 and the date of transition to IFRSs was therefore 1 May 2006.
Management has undertaken 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. The Company has therefore not provided a reconciliation of UK GAAP to IFRS financial information.
There has been no balance sheet impact of the adoption of IFRS other than classification differences.
4. FINANCIAL INFORMATION
The financial information set out in the announcement does not constitute statutory financial statements for the years ended 30 April 2007 or 30 April 2008 within the meaning of section 240 of the Companies Act 1985, but is derived from these statutory accounts, which have been reported on by the Company's auditors. Statutory accounts for the year ended 30 April 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the Company's Annual General Meeting. The financial statements were approved by the Board of Directors on 28 July 2008. The auditors have reported on those accounts; their reports were unqualified and did not contain adverse statements under section 237(2) or (3) of the Companies Act.
The financial information is prepared on the basis of accounting policies as shown on the Company's website, www.itm-power.com, amended for the adoption of IFRSs (see note 1).
Copies of the announcement will be available for collection from the Company's head office at Mill House, Royston Road, Wendens Ambo, Saffron Walden, CB11 4JX.