27th Jan 2009 07:00
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For immediate release |
27 January 2009 |
ITM Power plc
("ITM" or "the Company")
Interim Results
for the six months ended 31 October 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 Interim Results for the six months ended 31 October 2008.
For further information please contact:
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ITM Power plc |
01799 542 222 |
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Jim Heathcote, Chief Executive Officer |
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Panmure Gordon & Co. |
020 7459 3600 |
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Katherine Roe |
Chairman's statement
I present the report covering the interim results for the six months ended 31 October 2008 and shareholder update on new developments.
The Company is in transition from a research company into commercialising the science. As I have mentioned previously this is a challenging phase in the life of the Company. We have considerably strengthened our engineering and production team in order to combine ITM technology with externally sourced components for integration into complete systems. This has highlighted science and hardware compatibility problems.
Since becoming chairman of ITM I have expended a great deal of time and effort in establishing the value of ITM's science. I still think the Company's method of making and using the ion transfer membrane has commercial advantages. Our development of the membranes for use in fuel cells has demonstrated high power densities and we believe, based on the present state of the research, that they may have more demonstrable advantages in fuel cells than in electrolysers. However, five years ago we established that the biggest commercial opportunity is in the manufacture of electrolysers. Currently the membrane that we are producing for the use in electrolysers is showing little commercial advantage when manufactured into a complete system and is actually showing a worse performance than competitive systems under some conditions. Possible solutions for this disappointing performance have been identified but we are unable to quantify the timescale which will be required. I am, as I have been doing for two months, seeking clarification of performance and manufacturing advantages, if any, and asking the scientists to continue their research and improvements to the membrane.
The macro economic background has undergone a dramatic change over the past six months. The price of oil has fallen at a remarkable speed reflecting the recession. Corporations are cutting capital spending; not an opportune time to commercialize a new technology. I do however still believe energy continuity and security will become increasingly important issues and the solution to these concerns is the route to our first significant markets.
Financials
During the six months under review, pre-tax losses increased to £2.25 million (31 October 2007: £1.91 million), reflecting the planned increase in product development activity in Sheffield. Staff costs continue to account for about half of the Company's cost base. These development activities have focused on the products and projects that the Company has previously disclosed in its public statements.
During what has been an unprecedented and uncertain period in the financial markets the Company reviewed its investment strategy and made the prudent decision to invest a significant portion of its development capital in short dated UK government gilts. The interest rate on these gilts and on the Company's UK Sterling Cash Deposits produced £0.67m in interest receivable, compared with £0.90m for the same period last year. At the period end the Company held cash and cash equivalents of £24.61 million (31 October 2007: £29.68 million).
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 the dividend policy stated at the time of the IPO.
Commercial developments
The systems surrounding the stack (to ensure safe and reliable operation) are complex and have required computer software programmers to coordinate closely with other members of ITMs hardware development team. A large amount of the hardware for the system has had to be specifically designed and built from scratch. They must survive the combination of an extremely aggressive chemical environment and high pressure.
At this time the first cost estimates of our complete prototype electrolyser units indicate they could be manufactured to be commercially competitive with existing available systems, but as yet, there is no firm evidence of a significant step change in cost reduction that will create large new markets for electrolysis. Internal development programs involving our science, engineering and production teams have already commenced to establish the extent of any step change cost reduction at a full system level.
The first prototypes are being built with the objective of demonstrating that ITMs new stack technology can be assembled, operated and demonstrated in a real world product. With the basic design established and once we are satisfied that the prototype units have successfully undergone durability testing the development programs will accelerate.
Since the highly publicized vehicle launch in July we have established there is a market. Commercial enquiries have been received from around the world. These enquiries are from both large multinational companies interested in using our products, smaller groups seeking distribution agreements and private individuals interested in hydrogen for use in transportation and the home. It is encouraging that we have received such a high level of interest.
Technical developments
Technology Strategy Board Grant for Alkaline Electrolyser Development
The unique properties of ITM materials have allowed ITM to replace platinum with nickel catalysts in the hydrogen generation stage of our solid polymer electrolyser. Now a Technology Strategy Board supported programme has been agreed which recognises this and is funding ITM to work with The University of Southampton and Teer Coatings Limited (the Company's principal supplier of catalyst coated electrodes) to develop catalysts specifically for use with our alkaline membrane system to produce a solid polymer alkaline electrolyser system. This will provide financial support and also ensure that ITM will have a ready-made route to access catalyst materials in commercial quantities when necessary. This is vital because difficulties in sourcing catalyst/electrode materials have been a significant problem to ITM in its solid polymer electrolyser systems.
PEM Electrolyser Developments
The first demonstration High Pressure Refuelling Unit is nearing completion at our factory in Sheffield. This unit consists of several 15bar electrolysers operating in parallel to fill intermediate hydrogen storage tanks. The hydrogen is then passed through a compressor and used to refuel a vehicle. The refuelling pressure can be specified up to the limitations of current compressor technology. The Company intends to operate the first system with a 350bar capability. It is anticipated commercial vehicles using 350bar hydrogen will have significant cost and performance advantages over existing battery technology competitors including rapid refill, range and uphill performance. The higher the storage pressure the greater the range of the vehicle. For example, the ITM hydrogen Ford Focus has been modified to accept 350bar hydrogen and will have a hydrogen only range increased from 25 miles to over 100 miles before being required to switch over to petrol.
The low pressure electrolyser unit designed to make viable low carbon housing a reality is also close to completion. It is anticipated that units will be placed at carefully selected field trial sites and these will be used to demonstrate the importance of energy storage to renewable energy systems and the ability to create and store a clean non-polluting fuel anywhere. These demonstrations have great significance to energy security.
Board and staff
To enable further acceleration of ITM's development activity, the Company has strengthened the marketing and engineering teams since the 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 six months.
Outlook
ITM's continuing objectives over the next year are to supply initial demonstration and test units for evaluation to partners with the objective of substantial commercial sales. Subject to successful completion of these field trials, we anticipate entering licensing negotiations and plan using the new Sheffield facilities to manufacture these initial demonstration units.
ITM is working through a difficult and testing phase of the company's life and is now nearing the exciting real world demonstration phase of its technology. I would like to thank our shareholders for their continuing support and patience.
Peter Hargreaves
Chairman
27th January 2009
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CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED) Results for the six months ended 31 October 2008 |
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Six months ended 31 October 2008 (unaudited) £'000 |
Six months ended 31 October 2007 (unaudited) £'000 |
Year ended 30 April 2008 (audited) £'000 |
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Revenue - consulting services |
- |
- |
9 |
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Cost of revenue - consulting services |
- |
- |
(9) |
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Gross profit |
- |
- |
- |
|||||
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Operating costs |
||||||||
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- Research and development |
(1,801) |
(2,028) |
(3,926) |
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- Production |
(447) |
(84) |
(396) |
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- Sales and marketing |
(166) |
(70) |
(236) |
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- Administration |
(505) |
(625) |
(1,146) |
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Other operating income - grant income |
- |
- |
9 |
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Loss from operations |
(2,919) |
(2,807) |
(5,695) |
|||||
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Interest receivable |
674 |
902 |
1,705 |
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Interest payable |
(1) |
(1) |
(2) |
|||||
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Loss before tax |
(2,246) |
(1,906) |
(3,992) |
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Tax |
- |
- |
- |
|||||
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Loss for the period |
(2,246) |
(1,906) |
(3,992) |
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Loss per share |
||||||||
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Basic and diluted |
(2.2p) |
(1.9p) |
(3.9p) |
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Weighted average number of shares |
102,079,609 |
102,060,092 |
102,079,609 |
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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.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Results for the six months ended 31 October 2008
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Called up share capital £'000 |
Share premium account £'000 |
Merger reserve £'000 |
Retained loss £'000 |
Equity shareholders' funds £'000 |
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At 1 May 2008 |
5,105 |
36,272 |
(1,973) |
(10,828) |
28,576 |
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Share based payments |
- |
- |
- |
54 |
54 |
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Retained loss for the period |
- |
- |
- |
(2,246) |
(2,246) |
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At 31 October 2008 |
5,105 |
36,272 |
(1,973) |
(13,020) |
26,384 |
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CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at 31 October 2008
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As at 31 October 2008 (unaudited) £'000 |
As at 31 October 2007 (unaudited) £'000 |
As at 30 April 2008 (audited) £'000 |
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NON CURRENT ASSETS |
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Property, plant and equipment |
1,496 |
1,451 |
1,655 |
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CURRENT ASSETS |
|||||||
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Inventories |
246 |
- |
95 |
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Trade and other receivables |
508 |
381 |
511 |
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Investments - short term deposits |
20,016 |
- |
20,000 |
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Cash and cash equivalents |
4,597 |
29,682 |
6,947 |
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TOTAL CURRENT ASSETS |
25,367 |
30,063 |
27,553 |
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CURRENT LIABILITIES |
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Trade and other payables |
(479) |
(864) |
(632) |
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NET CURRENT ASSETS |
24,888 |
29,199 |
26,921 |
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NET ASSETS |
26,384 |
30,650 |
28,576 |
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EQUITY |
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Called up share capital |
5,105 |
5,105 |
5,105 |
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Share premium account |
36,272 |
36,272 |
36,272 |
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Merger reserve |
(1,973) |
(1,973) |
(1,973) |
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Retained loss |
(13,020) |
(8,754) |
(10,828) |
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EQUITY SHAREHOLDERS' FUNDS |
26,384 |
30,650 |
28,576 |
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Results for the six months ended 31 October 2008
|
Six months ended 31 October 2008 (unaudited) £'000 |
Six months ended 31 October 2007 (unaudited) £'000 |
Year ended 30 April 2008 (audited) £'000 |
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Net cash used in operating activities |
(2,897) |
(2,402) |
(5,195) |
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Investing activities |
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Interest received |
810 |
902 |
1,441 |
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Interest paid |
(1) |
(1) |
(2) |
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Purchases of property, plant and equipment |
(240) |
(658) |
(1,138) |
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Short term deposits |
(22) |
- |
(20,000) |
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Net cash from (used in) investing activities |
547 |
243 |
(19,699) |
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Financing activities |
||||||
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Issue of ordinary share capital |
- |
8 |
8 |
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Net cash from financing activities |
- |
8 |
8 |
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Decrease in cash and cash equivalents |
(2,350) |
(2,151) |
(24,886) |
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Cash and cash equivalents at the beginning of the period |
6,947 |
31,833 |
31,833 |
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Cash and cash equivalents at the end of the period |
4,597 |
29,682 |
6,947 |
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Cash, cash equivalents and short term deposits at the beginning of the period |
26,947 |
31,833 |
31,833 |
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(Decrease) increase in the period |
(2,334) |
(2,151) |
(4,886) |
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Cash, cash equivalents and short term deposits at the end of the period |
24,613 |
29,682 |
26,947 |
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 240 of the Companies Act 1985.
The financial information for the six months ended 31 October 2008 and 31 October 2007 has not been audited. The information relating to the year ended 30 April 2008 is 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.
2. Significant accounting policies
The financial statements have been prepared on the historical cost basis.
The principal accounting policies adopted by the Company are available from the website at www.itm-power.com
INDEPENDENT REVIEW REPORT TO ITM POWER PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the interim report for the six months ended 31 October 2008 which comprises the consolidated income statement, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 and 2. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information on the condensed set of financial statements.
This report is made solely to the Company, in accordance with International Standard on Review Engagements 2410 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 interim report is the responsibility of, and has been approved by, the directors. The directors are also responsible for preparing the interim report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the EU. The condensed financial statements included in this interim report have been prepared in accordance with the accounting policies the Group intends to use in preparing its next annual report.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed financial statements in the interim report based on our review.
Review work performed
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 enquiries, 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 performed 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 financial statements in the interim report for the six months ended 31 October 2008 is not prepared, in all material respects, in accordance with the AIM Rules of the London Stock Exchange.
Deloitte LLP
Chartered Accountants and Statutory Auditors, Cambridge, United Kingdom
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