TIDMITM
RNS Number : 3324O
ITM Power PLC
31 January 2023
31 January 2023
ITM Power PLC
("ITM" or the "Company")
Interim Results for the Six Months to 31 October 2022 and
Strategic Update
Interim results summary
-- Revenue GBP2.0m (H122: GBP4.2m)
-- Adjusted EBITDA loss GBP54.1m (H122: GBP12.9m) *
-- Net cash at the end of the H123 of GBP317.7m (H122: GBP164.2m)
-- Majority of Leuna project revenue deferred due to delays and changed delivery model
* Adjusted EBITDA is a non-statutory measure. The calculation
methodology is set out in the Note 3
Two 100 MW contracts signed with Linde Engineering
-- Largest PEM electrolyser under execution in the world today
-- Deploying the new Linde / ITM Power 10 MW standard modules
based on state-of-the-art 3MEP 30bar stacks
-- To be installed at RWE's site in Lingen, Germany
Strategic update: 12-month priorities to solidify our
foundations for growth
-- Concentrating our portfolio on a core product suite, with
robust product validation, and preparing for manufacturing at
scale
-- A rigorous approach to capital allocation and cost
management, including a headcount reduction equating to a 30%
(GBP9m) annualised saving on personnel cost, professionalising
engineering and manufacturing, and increasing control over
spend
-- Plans for future testing capacity and incremental automation,
improving cycle times, volume output and build quality
Agreement with Vitol to review strategic options for their joint
venture Motive Fuels Ltd
-- Options to be considered by the shareholders range from the
sale of the business to discontinuing activities, and are subject
to appropriate consultation
-- This is intended to save ITM Power c.GBP28m to be rerouted to our core business
Financial guidance for FY23
-- As previously announced, materially changing earlier guidance
-- Full-year revenue now expected to be c.GBP2m with further
revenue deferred into the next financial year
-- Adjusted EBITDA loss expected to be in the range of GBP85m to GBP95m
-- Net cash at year-end expected to be in the range of GBP245m to GBP270m
Board change
-- Dr Rachel Smith to step down from the Board of Directors from
1 February 2023 and assume a new role in the Company
Sir Roger Bone, Chairman, said: "We raised capital to pursue an
expansion strategy and in doing so underestimated the competencies
and capabilities required to scale up and to transition from an
R&D company to a volume manufacturer. As a consequence, we set
unrealistic targets for project completion. This has produced an
unacceptable financial performance.
"We have acted swiftly by appointing Dennis as our new CEO.
During his 2 months at ITM, Dennis has developed a 12-month plan
which lays out the underlying challenges of the business as well as
the solutions which we will put into place. I have no doubt that
the immediate actions being taken will provide strong foundations
for the future which will enable ITM to move into its next phase of
development and to play a leading role in the journey to net
zero.
"On a separate note, Dr Rachel Smith will step down from the
Board on 1 February. With her knowledge, expertise and passion for
the Company, Rachel has been pivotal in the delivery of several key
strategic projects for a number of years. On behalf of the Board, I
would like to thank Rachel for her continued commitment to ITM as
she works with the Company in her new role."
Dennis Schulz, CEO, said: "As a former customer of ITM, I had a
good understanding of the company's situation before I took on the
challenge of leading its transformation. Prior to committing
myself, I questioned:
1. Does ITM have a cutting-edge electrolyser technology with the
potential to outperform its competitors?
2. Does ITM have a strong enough balance sheet to support the
necessary strategic and operational changes required to strengthen
the company's foundations?
3. Does the market give us the time window needed to solve the
growing pains ITM is encountering?
"In answer, I am confident these crucial preconditions are
met.
"Having worked in close partnership with ITM, and selectively
with competitors, I am convinced that ITM's technology can
outperform the competition. However, product focus must be narrowed
significantly. Our balance sheet is robust, but we need a much more
rigorous approach to managing cost. This requires scrutinising
every aspect of the business for cost saving potential, and it will
make difficult decisions necessary. One of those is the need to
streamline our organisation via a headcount reduction
programme.
"We need to transform ITM from an R&D culture company to a
professional and credible delivery organisation ready for volume
manufacturing - sustainably growing into a profitable business.
Most issues today arise from immature engineering processes, which
materialise during manufacturing and lead to project delays and
cost overruns. As one key priority, we will change the way we
engineer our products and control design changes.
"The market for green hydrogen is real, driven by climate
change, and decarbonisation imperatives. Increasing carbon taxation
in combination with green funding programmes make previously
unattractive business cases viable. Recent energy independence
considerations are further fuelling demand growth. However, peak
electricity prices and inflation have temporarily slowed down
customer investment decisions. This gives ITM time to have the
breathing space required to focus on getting the fundamentals of
the business in order, while delivering on our contractual customer
commitments.
"Our detailed 12-month plan will make ITM a stronger, more
focused and more capable company. The large-scale opportunities in
the market are yet to come, and by putting these foundations in
place ITM will be ready for the significant market demand ahead of
us."
A presentation for analysts and investors by Dennis Schulz, CEO,
and Andy Allen, CFO, will be held at 9.00am GMT.
The presentation will be via the Investor Meet Company platform.
Questions can be submitted pre-event via the Investor Meet Company
dashboard at any time during the live presentation. Analysts and
investors can sign up to Investor Meet Company for free via:
https://www.investormeetcompany.com/itm-power-plc/register-investor.
Those who already follow the Company on the Investor Meet Company
platform will automatically be invited.
A recording will be made available on the Investor Relations
section of the ITM website after the event.
For further information please visit www.itm-power.com or
contact:
ITM Power PLC
James Collins, Investor Relations +44 (0)114 551 1205
Justin Scarborough, Investor Relations +44 (0)114 551 1080
Investec Bank plc (Nominated Adviser
and Broker) +44 (0)20 7597 5970
James Rudd / Chris Sim / Ben Griffiths
Tavistock (Financial PR and IR) +44 (0)20 7920 3150
Simon Hudson / Tim Pearson / Charlie
Baister
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the company's obligations under Article 17 of MAR
About ITM Power PLC:
ITM Power was founded in 2000 and ITM Power PLC was admitted to
the AIM market of the London Stock Exchange in 2004. Headquartered
in Sheffield, England, ITM Power designs and manufactures
electrolysers based on proton exchange membrane (PEM) technology to
produce green hydrogen, the only net zero energy gas, using
renewable electricity and water.
Interim results
The results for the period to 31 October 2022 reflect the impact
of provisions taken for project cost overruns and inventory losses.
The causes are discussed below.
Revenue
Revenue for the period was GBP2.0m (H122: GBP4.2m). The Leuna
project consists of 12 x 2 MW Cube modules and GBP1.8m was
recognised in the first half following completion of the Factory
Acceptance Test (FAT) for 2 Cube modules. In order to mitigate on
site delays, our customer Linde requested split delivery of Cubes
and Stacks for the remaining 10 Cubes meaning revenue will be
recognised upon successful Site Acceptance Test (SAT). All Cubes
have now been delivered to site. The project now awaits the
upgraded MEP 30 bar stacks to be delivered to site for SAT by
Linde.
Gross margin
The gross loss was GBP45.6m (H122: GBP2.6m) reflecting increased
losses on inventory and customer contracts, and a prudent
assessment of warranty commitments.
Costs recognised in the period relating to inventory were
GBP15.7m, constituting a GBP1.6m write-off and a provision of
GBP14.1m. The losses originate from continued iterations of product
designs during manufacturing, together with some manufactured
products being considered obsolete or in need of rework.
Contract loss provisions relate to a number of factors including
changes of scope to projects, additional on-site engineering works,
increased energy and labour costs due to extended stack testing
times and future costings updated for inflation. Net contract loss
provisions increased by GBP18.0m, with GBP27.3m created and GBP9.3m
utilised in the period. The total contract loss provision at the
period end stood at GBP30.4m.
The warranty provision increased by a net GBP2.3m in the period
with a GBP2.8m increase in provision offset by the utilisation of
GBP0.5m. The balance at period end was GBP5.3m. This includes all
projects contracted at period end. We expect to continue to review
product performance in the field and for future products to reflect
the benefits of the manufacturing we are making.
Adjusted EBITDA
The company posted an adjusted EBITDA loss of GBP54.1m
(GBP12.9m) for the period. Adjusted EBITDA is a non-statutory
measure and is detailed in Note 3.
Capital expenditure
Capital expenditure totalled GBP7.2m in the period, with GBP3.5m
invested on capital projects, namely Bessemer Park improvements and
machinery, and GBP3.7m on intangible assets.
Working capital
The working capital outflow in the first half was GBP6.9m, with
inventories and receivables increasing by GBP14.8m and GBP7.6m
respectively, partly offset by an increase in payables of
GBP15.5m.
Cash
Net cash at the period end was GBP318m (H122: GBP164m),
benefiting from the net GBP242m raised in November 2021.
Two 100 MW contracts signed with Linde Engineering
ITM Power has signed two contracts, each for the sale of 100 MW
of PEM electrolysers to Linde Engineering. Both plants will be
installed at a site operated by RWE in Lingen, Germany, and are the
largest PEM electrolysers under execution worldwide today.
The plants will be the first deployment of the Linde Engineering
/ ITM Power 10 MW standard module skids for large-scale
installations, utilising state-of-the-art MEP 30 bar electrolyser
stacks. Whilst we do not expect the project to contribute to our
margin, delivery for these two projects will represent a key
milestone on ITM Power's journey towards high volume manufacturing
of an industrialised product.
As part of its "Growing Green" strategy, RWE announced in
November 2021 that it aimed to create electrolyser capacity of at
least 2 GW to generate green hydrogen by 2030. The two 100 MW
electrolyser plants at Lingen are part of this ambition. In
December 2021, Linde Engineering and ITM Power were preselected by
RWE as technical provider for the first two 100 MW installations of
the so-called GET H2 Nukleus project in Lingen.
Products
Our core electrochemical technology works well. At this stage,
we are testing and verifying the latest iteration of our
state-of-the-art MEP 30 bar stack which we expect to deploy into
existing projects.
Today our product suite is too wide. The services we provide to
support older generation technologies are disruptive to our
manufacturing process and have become too costly.
Historically, we have started to develop the second generation
of an existing product in advance of the first generation having
been fully verified for field deployment. This will no longer be
the case.
Our portfolio will be rationalised and our focus in the future
will be on two core products, our MEP 30 bar stack platform and our
Plug and Play containers. The MEP stack platform will benefit from
design, manufacture and assembly improvements, thereby reducing
production costs, assembly time and delivery lead times. For
large-scale installations we are looking forward to deploying Stack
& Skid Modules. With regards to Plug and Play containers, some
of our engineering processes have been immature and at times
disruptive. Remedial actions to address these issues are being put
into place from design, to piloting, and validation.
Capital discipline and cost reduction
It is common for a growing technology company developing
first-of-a-kind products which need to be manufactured at scale, to
be loss making. However, our cost discipline has not been rigorous
enough. Constant design changes led to unwelcomed inventory
write-downs. In addition, delays in project deliveries caused
excessive consumption of working hours. Finally, an
overly-optimistic recruitment programme has led to organisational
overcapacity. We will address the underlying causes of these issues
as three parts of a 12-month priorities plan.
First, we are in the process of reshaping our organisational
structure to be leaner and flatter, where accountability is clear
and which will create an environment for effective engineering,
manufacturing and project delivery. Today we have announced an
anticipated 25% headcount reduction in full-time equivalents
(FTEs), subject to employee consultation, leading to a GBP9m (30%)
cost reduction on an annualised basis. The benefits will start to
be recognised in FY24.
Second, to address the causes of the inventory losses for FY23,
we will bring in new capabilities in design to professionalise
engineering, including enhanced simulation tools as well as a
strengthening of the compliance and validation function. We will
improve supplier audits on quality and will develop inspection and
test planning to reflect our supplier capability risk. A new
process for enhanced parts traceability from incoming goods to
shipping will be introduced into our warehousing and a new
Enterprise Resource Planning (ERP) system will ensure seamless
tracking of warehouse stock to work orders.
Lastly, to avoid future project losses, there will be enhanced
discipline around the sale of standard products as opposed to
customised solutions with a strengthening of sales governance from
the initial bid phase through to project execution and covering
areas such as costings, scheduling and risk estimations. Our
project management requires the strengthening of capabilities and
accountability. Controls will be strengthened with the introduction
of a clear phase gate process which will be strictly adhered
to.
Agreement with Vitol to review strategic options for their joint
venture Motive Fuels Ltd
Today the Company also announces it has agreed with Vitol to
review the strategic options for Motive Fuels Ltd. Options to be
considered by the shareholders range from the sale of the business
to discontinuing activities, subject to appropriate
consultation.
The vision of the JV partners was one of building a significant
UK refuelling business, with GBP30m committed by each party as seed
funding to be geared to create a refuelling network. However, the
landscape has changed since the establishment of the joint venture,
with lower availability of heavy-duty hydrogen vehicles than
originally anticipated adversely affecting fuelling asset
utilisation.
ITM expects to save GBP28m of the original committed sum, which
will support the core business of electrolyser manufacturing.
De-bottlenecking
One of the challenges over the past year has been managing our
testing capacity alongside our expected manufacturing output. It is
our intention to locate increased testing capacity as near to
manufacturing as possible with a phased approach in order to
satisfy project delivery needs.
Looking ahead, automation will play an important role in
optimising build quality, reducing manufacturing costs,
accelerating output and reducing delivery lead times. We will
incrementally introduce automation into Bessemer Park in a
controlled way and only after new equipment and new processes have
been validated.
Financial Guidance for FY23
The main factors which will impact the outcome for the financial
year are expected losses on customer contracts, legacy commitments
for earlier product generations causing on-site support costs,
warranty provisions, and inventory write-downs and provisions
originating from iterations of product designs during
manufacturing. Another important factor affecting guidance is the
revenue recognition timing for contracted projects.
The guidance for FY23 is:
-- Full year product revenue of c.GBP2.0m
-- Adjusted EBITDA loss of GBP85m to GBP95m
-- Net cash of GBP245m to GBP270m
Revenue
Design, manufacturing and testing bottlenecks have affected our
original plan to fully recognise the revenues associated with
notable projects such as Leuna and Yara. For Leuna, whilst we
anticipate delivering all elements of the project to site before
year end, we do not expect that customer-led SAT will be completed
for ITM to recognise revenue in the current financial year. SAT and
therefore revenue recognition for the Yara project will also occur
after year end in April.
Based on the products revenue recognised in the first half, we
therefore expect revenue for the full year to be c.GBP2.0m.
As set out in the strategic update, decisive actions have been
identified to limit the recurrence of these predominantly
process-based factors on our future product delivery
capabilities.
EBITDA
EBITDA guidance includes the contract loss provisions taken in
the first half which are expected to unwind with project progress.
Further details are in Note 5. All contracted warranty obligations
including those relating to the Lingen project announced today are
reflected in the full year guidance. The warranty provisions will
be included within contract loss provisions prior to
deployment.
We expect inventory write-downs for the full-year of GBP18-23m.
The majority of write-down, consisting of GBP15.7m, was recognised
in H1, with the balance projected against production volumes in
H2.
Net cash
Our balance sheet remains strong, with net cash at the year-end
expected to be in the range of GBP245m to GBP270m. Capital
discipline and rigour will be at the heart of every spending
decision that we take.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Results for the six months ended 31 October 2022
Six months Year ended
Six months to 31 October 2022 to 31 October 30 April
(unaudited) 2021 (unaudited) 2022 (audited)
Note GBP'000 GBP'000 GBP'000
Revenue 2 2,031 4,156 5,627
Cost of sales (47,590) (6,766) (29,104)
Gross loss (45,559) (2,610) (23,477)
Operating costs
Staff and employment costs (4,284) (7,662) (4,316)
Consultancy and consumables (3,699) (1,902) (11,225)
Building overheads (871) (1,276) (2,564)
Depreciation and amortisation (877) (1,538) (3,189)
Impairment of obsolete assets (1,193) - -
Other 158 (241) (609)
Expected credit risk (11) 18 84
Other income - government grants 175 172 560
------------------------------------ -----------------
Loss from operations (56,161) (15,039) (44,736)
Share of loss of associate companies
and joint ventures (1,384) (82) (10)
Finance income 1,282 38 325
Finance costs (270) (259) (532)
Loss on deemed disposal of subsidiary - - (1,710)
------------------------------------ -----------------
Loss before tax (56,533) (15,342) (46,663)
Tax (15) (21) (31)
Loss for the period (56,548) (15,363) (46,694)
------------------------------------ ----------------- ---------------
Other total comprehensive income:
Foreign currency translation differences
on foreign operations (260) (141) (71)
Total comprehensive loss for
the period (56,808) (15,504) (46,765)
==================================== ================= ===============
Basic and diluted loss per share (9.2p) (2.8p) (8.1p)
==================================== ================= ===============
Weighted average number of shares 613,658,155 550,658,155 576,699,822
==================================== ================= ===============
All results presented above are derived from continuing
operations. 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. The number of potentially
dilutive shares not included in the calculation above due to being
anti-dilutive at 31 October 2022 were 7,991,625 (31 October 2021:
7,460,734; 30 April 2022: 45,064,658).
CONSOLIDATED BALANCE SHEET
As at 31 October 2022
Note As at 31 October 2022 As at 31 October 2021 As at 30
(unaudited) (unaudited) April 2022
(audited)
GBP'000 GBP'000 GBP'000
Non-current assets
Investment in associate 720 155 1,662
Loan notes 1,577 - 1,548
Intangible assets 11,916 3,856 9,081
Right of use assets 6,095 6,203 6,454
Property, plant and equipment 17,400 13,732 15,637
Financial asset at amortised
cost 168 155 161
--------------------- --------------------- -----------
Total non-current assets 37,876 24,101 34,543
--------------------- --------------------- -----------
Current assets
Inventories 4 47,003 11,742 32,198
Trade and other receivables 33,073 21,481 25,542
Cash and cash equivalents 317,738 164,235 365,882
--------------------- --------------------- -----------
Total current assets 397,814 197,458 423,622
Current liabilities
Trade and other payables (49,785) (22,487) (34,296)
Provisions 5 (19,702) (10,237) (15,207)
Lease liability (755) (512) (626)
-----------
Total current liabilities (70,242) (33,236) (50,129)
Net current assets 327,572 164,222 373,493
--------------------- --------------------- -----------
Non-current liabilities
Lease liability (6,271) (6,033) (6,522)
Provisions 5 (20,034) - (6,561)
--------------------- --------------------- -----------
Total non-current liabilities (26,305) (6,033) (13,083)
--------------------- --------------------- -----------
Net assets 339,143 182,290 394,953
===================== =====================
Equity
Called up share capital 30,808 27,533 30,658
Share premium account 542,461 302,248 542,323
Merger reserve (1,973) (1,973) (1,973)
Foreign exchange reserve (248) (58) 12
Retained loss (231,905) (145,460) (176,067)
--------------------- --------------------- -----------
Total Equity 339,143 182,290 394,953
===================== ===================== ===========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Results for the six months ended 31 October 2022
Foreign
Share Exchange Retained Total
capital Share premium Merger reserve reserve loss Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 May 2022 30,658 542,323 (1,973) 12 (176,067) 394,953
Transactions with Owners
Issue of shares 150 138 - - - 288
Credit to equity for
share based payment - - - - 710 710
-------- ------------- -------------- --------- --------- ---------
Total Transactions with
Owners 150 138 - - 710 998
Loss for the period - - - - (56,548) (56,548)
Other comprehensive income - - - (260) - (260)
-------- ------------- -------------- --------- --------- ---------
Total comprehensive
income - - - (260) (56,548) (56,808)
At 31 October 2022 (unaudited) 30,808 542,461 (1,973) (248) (231,905) (339,143)
======== ============= ============== ========= ========= =========
At 1 May 2021 27,533 302,248 (1,973) 83 (130,444) 197,447
Transactions with Owners
Issue of shares - - - - - -
Credit to equity for
share based payment - - - - 347 347
-------- ------------- -------------- --------- --------- ---------
Total Transactions with
Owners - - - - 347 347
Loss for the period - - - - (15,363) (15,363)
Other comprehensive income - - - (141) - (141)
-------- ------------- -------------- --------- --------- ---------
Total comprehensive
income - - - (141) (15,363) (15,504)
At 31 October 2021 (unaudited) 27,533 302,248 (1,973) (58) (145,807) 182,285
======== ============= ============== ========= ========= =========
At 1 May 2021 27,533 302,248 (1,973) 83 (130,444) 197,447
Transactions with Owners
Issue of shares 3,125 240,075 - - - 243,200
Credit to equity for
share based payment - - - - 1,071 1,071
-------- ------------- -------------- --------- --------- ---------
Total Transactions with
Owners 3,125 240,075 - - 1,071 244,271
Loss for the year - - - - (46,694) (46,694)
Other comprehensive income - - - (71) (71)
-------- ------------- -------------- --------- --------- ---------
Total comprehensive
income - - - (71) (46,694) (46,765)
At 30 April 2022 (audited) 30,658 542,323 (1,973) 12 (176,067) 394,953
======== ============= ============== ========= ========= =========
CONSOLIDATED CASH FLOW STATEMENT
Results for the six months ended 31 October 2022
Note Six months Year ended
Six months to 31 October 2022 to 31 October 30 April
(unaudited) 2021 (unaudited) 2022 (audited)
GBP'000 GBP'000 GBP'000
Net cash used in operating activities 6 (41,818) (9,800) (38,155)
Investing activities
Investment in associate (428) - (1,838)
Cashflows arising from loss of control of
subsidiary - - (993)
Loan notes (loan to joint venture) - - (1,899)
Purchases of property, plant and equipment (3,549) (1,064) (4,119)
Capital Grants received against purchases of
non-current assets 4 97 150
Proceeds on disposal of plant & equipment - - 352
Payments for intangible assets (3,667) (1,059) (7,036)
Interest received 1,247 32 304
------------------------------------ ----------------- ---------------
Net cash used in investing activities (6,393) (1,994) (15,079)
------------------------------------ ----------------- ---------------
Financing activities
Issue of ordinary share capital 900 - 250,000
Costs associated with fund raise (612) - (6,800)
Payment of lease liabilities (165) (65) (69)
Net cash from financing activities 123 (65) 243,131
------------------------------------ ----------------- ---------------
(Decrease)/ increase in cash and cash
equivalents (48,088) (11,859) 189,897
Cash and cash equivalents at the beginning
of period 365,882 176,078 176,078
Effect of foreign exchange rate changes (56) 15 (93)
------------------------------------ ----------------- ---------------
Cash and cash equivalents at the end of
period 317,738 164,234 365,882
==================================== ================= ===============
The interim summary accounts were approved by the board of
Directors on 30 January 2023.
Notes to the interim summary accounts
1. Basis of preparation of interim figures
These interim summary accounts have been prepared using
accounting policies consistent with UK-adopted international
accounting standards, in conformity with the requirements of the
Companies Act 2006. Whilst the financial information has been
compiled in accordance with the recognition and measurement
principles of UK-adopted international accounting standards
(IFRSs), it does not 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 has been prepared on the historical
cost basis. The principal accounting policies adopted by the Group
are as applied in the Group's latest audited financial
statements.
The information relating to the year ended 30 April 2022 has
been extracted from the Group's published financial statements for
that year, which contain an unqualified audit report that 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.
Selected explanatory notes are included to explain events and
transactions that are significant to an understanding of the
changes in financial position and performance of the Group since
the last annual consolidated financial statements as at the year
ended 30 April 2022.
Going Concern
The Directors have prepared a cash flow forecast for the period
ending 31 January 2024. This forecast indicates that the Company
would expect to remain cash positive without the requirement for
further fund raising based on delivering the existing pipeline, for
a period of at least 12 months from the date of approval of these
summary accounts.
This cash flow forecast has also been stress tested. As a
worst-case scenario, if all payments had to continue as forecast
while receipts were not received at all, the business would remain
cash positive for the full twelve months from the date of approval
of these summary accounts.
The interim summary accounts have therefore been prepared on a
going concern basis.
2. Revenue and other operating income
An analysis of the Group's revenue is as follows:
Six months Year ended
Six months to 31 October 2022 to 31 October 30 April
(unaudited) 2021 (unaudited) 2022 (audited)
GBP'000 GBP'000 GBP'000
Revenue from product sales recognised
over time - 510 808
Revenue from product sales recognised
at point in time 1,751 670 1,231
Consulting contracts recognised over
time - 2,840 2,948
Maintenance contracts recognised at
point in time 169 32 43
Fuel sales 111 104 229
Other - - 368
---------------------------------------- ----------------- ---------------
Revenue in the Consolidated Income
Statement 2,031 4,156 5,627
Grant income (claims made for projects) 52 61 271
Other government grants (R&D claims) 123 111 289
Grant income in the Consolidated Income
Statement 175 172 560
2,206 4,328 6,187
======================================== ================= ===============
Revenues from major products and services
The Group's revenues from its major products and services were
as follows:
Six months Year ended
to 31 October 30 April
Six months to 31 October 2022 (unaudited) 2021 (unaudited) 2022 (audited)
GBP'000 GBP'000 GBP'000
Power-to gas 107 16 207
Refuelling 173 859 1,704
Industrial 1,751 412 507
Other - 2,869 3,209
----------------------------------------- ----------------- ---------------
2,031 4,156 5,627
========================================= ================= ===============
GEOGRAPHIC ANALYSIS OF REVENUE
A geographical analysis of the Group's revenue is set out
below:
Year ended
30 April
2022
(audited)
Six months
to 31 October
2021 (unaudited)
Six months to 31 October 2022 (unaudited) GBP'000 GBP'000 GBP'000
United Kingdom 45 2,976 3,359
Germany 1,751 425 770
Rest of Europe 124 85 246
United States 111 - 22
Australia - 670 1,230
------------------------------------------------- ----------------- ----------
2,031 4,156 5,627
================================================= ================= ==========
The following accounted for more than 10% of total revenue:
Six months to 31 October 2022 Six months to 31 October 2021 Year ended
(unaudited) GBP'000 (unaudited) GBP'000 30 April 2022 (audited) GBP'000
Customer A 1,751 N/A N/A
Customer B N/A 2,840 2,840
Customer C N/A 670 673
================================== ================================= =================================
3. Calculation of Adjusted EBITDA
In reporting EBITDA, management use the metric of adjusted
EBITDA, to better reflect underlying performance and remove the
effect of the following items:
Six months Year ended
to 31 October 30 April
Six months to 31 October 2022 2021 (unaudited) 2022 (audited)
(unaudited) GBP'000 GBP'000 GBP'000
Loss from operations (56,161) (15,039) (44,736)
Add back:
Depreciation 1,318 1,149 2,340
Impairment 1,193 - -
Amortisation 482 396 849
Loss on disposal 35 - -
Fair value loss on loan notes - - 344
Share based payment (credit) / charge (952) 552 1,429
-------------------------------------- ------------------ ----------------
(54,085) (12,942) (39,774)
====================================== ================== ================
4. Inventories
October October April
2022 2021 2022
GBP000 GBP000 GBP000
Raw Materials 36,013 9,486 24,311
Work in progress 10,990 2,256 7,887
------- ------- -------
47,003 11,742 32,198
======= ======= =======
Inventories are stated after a provision for impairment of
GBP18.1 million (October 2021: GBP1.5 million; April 2022: GBP2.7
million).
5. Provisions
Leasehold
Half year to October Property Provision Employers' National Total
2022 Provision Warranty for contract losses Other Provisions Insurance Provision Provisions
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 May
2022 (854) (2,938) (12,493) (1,330) (4,153) (21,768)
Provision created
in the period (21) (2,842) (27,255) (1,454) - (31,572)
Use of the provision - 496 9,304 - 376 10,176
Release in the period - - - - 3,428 3,428
---------- -------- -------------------- ---------------- -------------------- -----------
Balance at 31 October
2022 (875) (5,284) (30,444) (2,784) (349) (39,736)
---------- -------- -------------------- ---------------- -------------------- -----------
In the balance sheet:
Expected within
12 months
(current) - (534) (16,954) (2,214) - (19,702)
Expected after 12
months
(non-current) (875) (4,750) (13,490) (570) (349) (20,034)
========== ======== ==================== ================ ==================== ===========
Employers'
Leasehold Provision National
Full year to April Property for contract Insurance Total
2022 Provision Warranty losses Other Provisions Provision Provisions
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 May
2021 (1,024) (797) (4,820) (677) (4,958) (12,276)
Provision created
in the year (36) (2,163) (15,052) (1,330) - (18,581)
Use of the provision 206 18 7,379 509 - 8,112
Release in the year - 4 - 168 805 977
---------- -------- ------------- ---------------- ---------- -----------
Balance at 30 April
2022 (854) (2,938) (12,493) (1,330) (4,153) (21,768)
---------- -------- ------------- ---------------- ---------- -----------
In the balance sheet:
Expected within
12 months
(current) - (1,145) (9,453) (456) (4,153) (15,207)
Expected after 12
months
(non-current) (854) (1,793) (3,040) (874) - (6,561)
========== ======== ============= ================ ========== ===========
Employers'
Leasehold Provision National
Half year to October Property for contract Insurance Total
2021 Provision Warranty losses Other Provisions Provision Provisions
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 May
2021 (1,024) (797) (4,820) (677) (4,958) (12,276)
Provision created
in the year (20) (569) (1,344) (313) (7) (2,253)
Use of the provision 142 18 4,065 67 - 4,292
Balance at 31 October
2021 (902) (1,348) (2,099) (923) (4,965) (10,237)
---------- -------- ------------- ---------------- ---------- -----------
The leasehold property provision represents management's best
estimate of the present value of the dilapidations work that may be
required to return our leased buildings to the landlords at the end
of the lease term. The discount applied to this is amortising over
the lease term.
The warranty provision is recognised in line with revenue
recognition on contracts and represents management's best estimate
of the Group's liability under warranties granted on products. It
is based on historical knowledge of the products or their
components and adjusted for any new knowledge that becomes
available. As with any product warranty, there is an inherent
uncertainty around the likelihood and timing of a fault occurring
that would trigger further work or part replacement.
The provision for contract losses is created when it becomes
known that a commercial contract has become onerous. Project
Managers provide rolling spend forecasts, updating these as quotes
are obtained. The provision is therefore based on best estimates
and information known at the time to ensure the expected losses are
recognised immediately through the statement of comprehensive
income. This provision will be used to offset the costs of the
project as it reaches completion in future periods.
Provision is also made at the point when project forecasts
suggest that the contractual clauses for liquidated damages might
be triggered. The other provisions category relates to potential
liquidated damages for overruns on contracts with customers.
There is a provision for Employer's NIC due on share options as
they exercise.
6. Notes to the Cashflow Statement
Six months Six months Year ended
to 31 October to 31 October 30 April
2022 (unaudited) 2021 (unaudited) 2022 (audited)
GBP'000 GBP'000 GBP'000
Loss from operations (56,161) (15,039) (44,736)
Adjustments:
Depreciation of property, plant and equipment 1,318 1,149 2,340
Loss on disposal 35 - -
Impairment 1,193 - -
Amortisation 482 396 849
Share based payment (as seen through
equity) 710 347 1,071
Foreign exchange on intercompany transactions (270) - (43)
Fair value adjustment and expected credit
loss on loan notes - - 359
-----------------
Operating cash flows before movements
in working capital (52,693) (13,147) (40,160)
Increase in inventories (14,805) (5,324) (25,780)
(Increase)/ decrease in receivables (7,548) 1,377 (2,550)
Increase in payables 15,488 9,630 21,437
Increase/ (decrease) in provisions 17,989 (2,039) 9,492
----------------- ----------------- ---------------
Cash used in operations (41,569) (9,503) (37,561)
Interest paid (249) (235) (532)
Income taxes received - (62) (62)
----------------- ----------------- ---------------
Net cash used in operating activities (41,818) (9,800) (38,155)
----------------- ----------------- ---------------
Cash Burn
Cash burn is a measure used by key management personnel to
monitor the performance of the business.
Six months to Year ended
31 October Six months to 31 October 2021 30 April
2022 (unaudited) (unaudited) 2022 (audited)
GBP'000 GBP'000 GBP'000
(Decrease)/ increase in Cash and Cash
equivalents per the cash flow statement (48,088) (11,859) 189,897
Effect of foreign exchange rates (56) 15 (93)
Less share issue proceeds (net) (288) - (243,200)
-----------------
Cash Burn (48,432) (11,844) (53,396)
================= ======================================= ===============
7. Related Parties
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. All related party transactions which were
not intra-group have been conducted at arms' length.
During the period purchases from Linde/BOC Group, represented on
the Board by J Nowicki, totalled GBP0.3m (H1 2022: GBP0.4m; YE
2022: GBP0.5m) with GBP0.1m outstanding for payment at period-end
(H1 2022: GBP0.1m; YE 2022 GBP0.1m). Furthermore, an amount of
GBP0.6m brought forward from the year-end relates to stage payments
made for goods not yet received (H1 2022 & YE 2022: GBP0.6m).
Sales invoices raised to Linde/BOC group in the period totalled
GBP9.4m (H1 2022: GBPnil; YE 2022: GBP7.0m) with GBP5.3m
outstanding (H1 2022: GBPnil; YE 2022: GBP1.7m).
There were also stage payments of GBPnil (H1 2022: GBP4.1m; YE
2022: GBP5.4m), and GBPnil remained outstanding from ITM Linde
Electrolysis GmbH at period end (H1 2022: GBP0.2m; YE 2022:
GBP1.0m). Purchases from ILE in the period equated to GBPnil (H1
2022: GBP0.2m; YE 2022: GBP0.2m, which was paid immediately and
therefore settled by both period ends). Sales to ILE in the period
were GBP1.8m (H1 2022 and YE 2022: GBPnil). The Group also
continued to pay for the hosting of ILE's website.
Transactions with Motive Fuels Limited amounted to GBP0.1m in
the period with GBP0.3m remaining outstanding at period end (YE
2022: total transactions of GBP0.2m that remained outstanding at
year end).
8. Subsequent events
The Company announced the appointment of Dennis Schulz and the
official resignation of Dr Graham Cooley as Chief Executive Officer
with effect from 1 December 2022.
The Company today announced the official resignation of Dr
Rachel Smith from the Board of Directors with effect from 1
February 2023.
The Company today announced an agreement with Vitol to seek exit
from their joint venture Motive Fuels Ltd.
The Company today announced it has signed two contracts, each
for the sale of 100 MW of PEM electrolysers to Linde Engineering.
Both plants will be installed at a site operated by RWE in Lingen,
Germany.
Independent review report to ITM Power PLC
Conclusion
We have reviewed the summary set of financial statements in the
half-yearly financial report for the six months ended 31 October
2022 which comprises the Consolidated Statement of Comprehensive
Income, the Consolidated Balance Sheet, the Consolidated Statement
of Changes in Equity, the Consolidated Cash Flow Statement and the
related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the summary set of financial statements
in the half-yearly financial report for the six months ended 31
October 2022 is not prepared, in all material respects, in
accordance with the recognition and measurement principles of UK
adopted International Accounting Standards.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (ISRE) 2410 (UK), "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE (UK) 2410). 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 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.
As disclosed in Note 3, the annual financial statements of the
group are prepared in accordance with UK-adopted international
accounting standards. The financial information in the half-yearly
financial report has been prepared in accordance with the basis of
preparation in Note 1.
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 summary set of financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
In our evaluation of the directors' conclusions, we considered
the inherent risks associated with the group's business model
including effects arising from macro-economic uncertainties, we
assessed and challenged the reasonableness of estimates made by the
directors and the related disclosures and analysed how those risks
might affect the group's financial resources or ability to continue
operations over the going concern period.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The AIM rules of the London
Stock Exchange require that the accounting policies and
presentation applied to the financial information in the
half-yearly financial report are consistent with those which will
be adopted in the annual accounts having regard to the accounting
standards applicable for such accounts.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Our responsibility
Our responsibility is to express to the company a conclusion on
the financial information in the half-yearly financial report based
on our review.
Our conclusion, including our Conclusions relating to going
concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in ISRE (UK) 2410. Our review work has been
undertaken so that we might state to the company those matters we
are required to state to it in a 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 conclusion we have
formed.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Sheffield
30 January 2023
-ends-
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END
IR EAEFFDALDEEA
(END) Dow Jones Newswires
January 31, 2023 02:00 ET (07:00 GMT)
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