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ITM Power PLC - Final Results

RNS Number : 9760C
ITM Power PLC
22 October 2020
 

22 October 2020

 

ITM Power plc

("ITM Power", "the Group" or the "Company")

 

PRELIMINARY FINAL RESULTS FOR THE YEAR TO 30 APRIL 2020

 

ITM Power (AIM: ITM), the energy storage and clean fuel company, announces preliminary final results for the year ended 30 April 2020. The full annual report and financial statements will be available on our website shortly.

 

HIGHLIGHTS

 

Developments In the last 12 months:

·    Strategic partnership with Linde announced in October 2019 and formation of ITM Linde Electrolysis (ILE) GmbH joint venture, allowing ITM Power to focus exclusively on the manufacture of electrolysis equipment for larger scale systems

·    Commercial partnership agreement with Snam S.p.A. (one of the world's leading energy infrastructure operators) announced today, including a £30m strategic equity investment in the Company, together with an initial 100MW preferred supplier indicative commitment to 2024

·    Proposed equity fund raise of £150m (including the Snam investment) plus an up to £7m open offer (to existing shareholders) to accelerate  the  Company's development also announced today

·    Record current backlog of £118.7m (previous high £55.0m) and tender opportunity pipeline of £324.9m (£263m as at June 20)

·    Near completion of the worlds' first Gigafactory at Bessemer Park, Sheffield, expected to reach annual production capacity of 1,000MW per annum by end 2023

·    EU funding of €150 billion announced for green hydrogen in the 10 years to 2030

·    A total of five European governments have now stated explicit electrolyser targets for 2030: France 6.5GW, Germany 5GW, Spain 4GW, Holland 3-4GW and Portugal 2GW

 

FY2020 Financials:

·    Transition year with revenues and EBITDA adversely affected by COVID-19, Brexit and the adoption of IFRS 15

·    Total Revenue & Project Grant Funding of £5.4m (2019: £17.5m) down 69%, comprising:

o Sales revenue: £3.3m (2019: £4.6m) down 28%

o Collaborative grant income recognised: £2.1m (2019: £12.9m) down 84%

·    Loss from operations £29.4m (2019: £9.3m),

·    Adjusted EBITDA loss (see note 7) £18.1m (2019: loss £7.3m), increased 148%

·    Available cash balance of £39.9m at year-end (2019: £5.2m)

 

Graham Cooley, CEO, commented, "2020 has been a transformational year for ITM Power.  We attracted a strategic investor and joint-venture partner in Linde, the world's largest speciality gases company, we strengthened our balance sheet so that we can take full advantage of the rapidly expanding green hydrogen market and we put the finishing touches to the world's largest electrolyser factory in Sheffield.  I believe we have the right products at the right time and the capacity to produce them at scale.  Today's partnership agreement with Snam and the fund raise means that we are very well positioned for the future."

 

Sir Roger Bone, Chairman, added, "One of the long-term impacts of Covid-19 will be to accelerate green strategies as part of a recovery package for individual economies. As such, I see ITM Power, with the capabilities it has developed, the new factory in Bessemer park, and its strategically-aligned partnerships with global companies very well placed to offer solutions to the demand seen in the global market. Our staff are our greatest asset and I am consequently delighted that we have been able to establish a new incentive scheme for all our employees "

 

For further information please visit www.itm-power.com or contact:

 

ITM Power plc

+44 (0)114 244 5111

Graham Cooley, CEO / James Collins, IR

 

 

 

Investec Bank plc (Nominated Adviser and Broker)

+44 (0)20 7597 5970

Jeremy Ellis / Chris Sim / Ben Griffiths

 

 

 

Tavistock (Financial PR and IR)

+44 (0)20 7920 3150

Simon Hudson / Nick Elwes / Barney Hayward

 

 

About ITM Power plc:

ITM Power plc manufactures integrated hydrogen energy solutions for grid balancing, energy storage and the production of renewable hydrogen for transport, renewable heat and chemicals. ITM Power plc was admitted to the AIM market of the London Stock Exchange in 2004.  In October 2019, the Company announced the completion of a £58.8 million fundraise, including a subscription by Linde of £38 million, together with the formation of a joint-venture with Linde to focus on delivering renewable hydrogen to large scale industrial projects worldwide.  In October 2020, ITM Power announced a proposed equity fund raise of at least £150m, including £30m from Snam, one of the world's leading energy infrastructure operators. ITM Power signed a forecourt siting agreement with Shell for hydrogen refuelling stations in September 2015, (which was extended in May 2019 to include buses, trucks, trains and ships) and in January 2018 a deal to deploy a 10MW electrolyser at Shell's Rhineland refinery. ITM Power announced the lease of the world's largest electrolyser factory in Sheffield with a capacity of 1GW (1,000MW) per annum in July 2019. Customers and partners include Sumitomo, Ørsted, Phillips 66, National Grid, Cadent, Northern Gas Networks, Gasunie, RWE, Engie, BOC Linde, Toyota, Honda, Hyundai and Anglo American among others.

 

 

REVIEW OF OPERATIONS

 

ITM Power - Building a Global Presence

ITM Power has worked hard to build relationships globally by adding anchor points - via our partnership with Linde and through collaborations - outside of the UK market. This effort will put the Company in a good position to service markets internationally both now and in the future.

 

Highlights for the Year

·     Incorporation of ITM Linde Electrolysis GmbH, partnering in 50/50 joint venture with Linde Engineering, which is focusing on large scale electrolyser deployments

·     Appointment of Juergen Nowicki as non-executive director following the investment received from Linde Engineering

·     Appointment of Martin Green and (post year-end) Katherine Roe as non-executive directors

·     Introduction of new all-employee staff incentive options schemes

 

Clean Fuel

·    15 wholly owned Hydrogen Refuelling Station (HRS) assets in ITM Power's portfolio:

nine are open to the public; six are in various stages of construction

·    Hydrogen fuel contracts now 36 in total (2019: 33) with fuel sales reduced to 31 tonnes for the year (2019: 32 tonnes), down 3%

·    Refuelling assets now grouped together under ITM Motive with Duncan Yellen appointed as MD to implement a strategy to achieve profitability by focusing on larger scale refuelling projects for fleets, buses and trains

 

Power-to-Gas

·    ISCF Green Hydrogen for Humberside award- Hydrogen supply competition, direct coupling with wind turbine and off-shore locations

 

Industrial

·    Completion of the Gigastack feasibility study and award of phase 2 funding (£7.5m) for a Front-End Engineering Design (FEED) study for a 100MW refinery deployment with Orsted, Phillips 66 Limited and Element Energy

·    Shell REFHYNE project programme progressing well with all five 2MW electrolysers built and phase one of factory acceptance testing successfully completed

 

COVID-19

 

ITM Power boasts a resilient and industrious work force who have adapted to the situation created by Covid-19, wherever possible, continuing to progress not only existing contracts but also to support the rapid changes within the business that will benefit the Group as we move forward. This has been aided by an accelerated purchase of new IT equipment and server capabilities, the roll-out of Microsoft Teams as a means of keeping in touch or holding meetings with both internal and external parties, as well as promoting good mental health and continued peer group support.

 

That being said, Covid-19 has had an impact on the financial year-end and the normal operations of the company. The Group acted quickly to ensure the Health and Safety of employees and customer staff, with field engineers leaving customer sites and returning to the UK. All seven customer sites where ITM Power is working to install equipment have seen temporary closures by our customers, leading to delayed site acceptance testing which has impacted revenue recognition for these contracts.

 

The factory was temporarily reduced to a skeleton staff between March and June for the welfare of staff whilst changes were implemented to ensure the premises were considered Covid-secure. 

 

ITM Power hydrogen refuelling stations formed part of a network of essential services, supporting police and medical personnel as well as taxi companies brought into the service of patients and NHS staff. A skeleton staff of materials/logistics personnel, monitoring staff and maintenance engineers remained on site in Sheffield and around London during the lockdown to support these facilities.

At its highest, 32 production staff were furloughed under the government job retention scheme while the factory was modified. For others, work was reallocated around the business wherever possible according to skill-sets and requirements to allow continued remote working.

 

In early June, we began the process of returning people to the factory. This required risk assessments of the areas to make them suitable for work under new social distancing rules, close liaison with shop floor personnel over abilities to return to work and skillset requirements to further the production process at the correct times, as well as return to work inductions to explain the new PPE and location requirements for safe effective working.

 

We have also been undertaking a return to customer sites, although this is dictated by both ITM Power and customer requirements, country and UK government guidelines, quarantine rules and modified working practices.

 

BESSEMER PARK - GLOBAL MANUFACTURING HQ, SHEFFIELD

 

In July 2019, the Group announced that it had signed an agreement to lease new 134,000 square foot premises in Sheffield for its global manufacturing headquarters. The manufacturing facility will have an electrolyser manufacturing capacity of up to 1GW (1,000MW) per annum, the largest in the world. The landlord completed the building and handed over the keys in late November 2019, since when we have been adding to the office space, configuring the manufacturing facilities, installing a 5MW supply and fitting out the entire premises

 

The Group had hoped to transition the majority of its operations into Bessemer Park by late Summer 2020, following completion of its own technical and industrial fit out. This was delayed until Autumn 2020 by the Covid-19 lockdown and materials shortages. The office spaces are now available and are helping staff who might otherwise have struggled to maintain social distancing in our legacy buildings.  Our manufacturing facilities will move into the new space during November 2020.

 

The requirement to expand ITM Power's production capacity has been led by the continued growth in the Company's order pipeline. The new headquarters will see the ITM Power workforce co-locate into a single building and gain access to a five-fold increase in production space.

 

ITM Power is also keen to reduce the cost of its product offering through standardisation, process development and production volume. Central to this is the adoption of semi-automated manufacturing equipment for repeat components as part of an integrated manufacturing system. Key to maximising product throughput is the substantial power connection, which will enable parallel testing of larger products prior to dispatch. Bessemer Park will provide the Company with sufficient power capacity to enable it to fully test its larger scale products in greater volume.

 

A video showcasing the new factory was completed in October and has since received over 11,000 views.  The Group felt this was a good way of communicating the facility to stakeholders and investors and feedback has been very positive.

 

PRODUCTS AND TECHNOLOGY

 

As a vertically integrated company, ITM Power continues to place strategic focus on the development of its technology.  The technology roadmap is driven by the business plan and targeted at reducing cost, increasing performance and expanding production capacity. Over the course of the last 12 months, using the Company's extensive testing facilities, ITM Power has completed verification work on a number of machines which will bring semi-automation to stack production.  This has been an important development and is central to achieving a step change in future production capacity while also bringing important cost reductions.

 
ITM Power has achieved further efficiency improvements to both the existing and next-gen stacks through incremental advances achieved within its laboratory facilities.  These improvements are to be integrated into the commercial offering after verification testing.  The knowledge of processes within high performance PEM stacks that ITM Power has developed is deep and extensive and will continue to drive improvements at the stack level.

 

WORKING WITH LINDE

 

Over the course of the last few years, ITM Power has gained significant experience in providing customers with turnkey hydrogen installations, where we have supplied not just the core electrolysers at the heart of the project but also the engineering, procurement and construction (EPC) that goes with them.  Our core strength lay in the capability of our product and the manufacturing processes associated with it, and in order to scale, the Group would require a partner that could offer best-in-class EPC services for large industrial projects. We concluded a strategic investment and Joint Venture agreement in October 2019 with Linde Engineering.

 

The agreement, and our investment in ITM Linde Electrolysis GmbH, our 50:50 JV with Linde allows ITM Power Plc to focus solely on our prime source of competitive advantage - the efficient manufacture and supply of best in class PEM electrolysers. Linde will provide its world leading EPC services for the projects won through this new JV company. This shift in our business model enables us to concentrate our efforts on the provision of green electrolysis equipment.

 

MARKETS

 

Power-to-Gas

Governments around the world and supra-national bodies such as the European Union are increasingly turning their commitments to reduce emissions under the COP21 Paris Agreement on climate change into legislated targets.  This includes the UK with its Net Zero by 2050 legislation.  There has been an increasing realisation that as countries continue to plant up with renewable generation, there is an increasing requirement for energy storage to address the challenge of intermittency.

 

ITM Power enjoys a unique position having supplied the world's first PEM Power-to-Gas electrolyser in 2014, and continues to engage in a number of industry-leading strategic projects.

 

Clean Fuel

ITM Power electrolysers generate hydrogen fuel on-site via ITM Power Plc's rapid response electrolyser system, using renewable electricity and water with a full tank of fuel dispensed within a matter of minutes at the station where it is generated. This means a zero-carbon footprint and no use of further transport infrastructure which is under pressure in the current situation.

 

Owner-operator of refuelling stations

Back in May 2019, ITM Power was pleased to announce the extension of the UK refuelling collaboration agreement with Shell to run until 2024, and cover the refuelling of all types of hydrogen vehicles; from passenger cars to commercial vehicles, including buses, trucks, trains and ships.

 

In October 2019, the Group opened its eighth UK public access hydrogen refuelling station (HRS), and its second under the H2ME2 project funded by the European Fuel Cell and Hydrogen Joint Undertaking (FCHJU) and the Office of Low Emission Vehicles (OLEV). The new HRS is located at the Shell services, Gatwick Airport on the M23 corridor south of London. The opening was supported by Toyota, Hyundai and Honda. The station uses electricity via a renewable energy contract and water to generate hydrogen on-site with no need for deliveries. It is now open for public and private fleets operating fuel cell electric vehicles. 

 

ITM Power continue to roll out a network of hydrogen refuelling stations in the UK, with a further five in planning or build phases and we were proud to play a part in the support of key workers during the Covid-19 pandemic. In the year, the Group dispensed 31 tonnes of hydrogen from its refuelling stations (2019: 32 tonnes).

 

Post year-end we announced plans to group our refuelling station portfolio into a separate subsidiary, ITM Motive, and we have appointed a Managing Director, Duncan Yellen, to drive the business forward by implementing his strategy to focus on larger scale refuelling for fleets of vehicles while the public stations build their revenues.

 

Larger vehicle refuelling

Within the transport sector, a renewed focus has been placed on the development of zero-emission heavy vehicles, where fleets need to be refuelled with large amounts of hydrogen on a regular basis.  ITM Power has won contracts to supply on-site hydrogen generation equipment for refuelling in the UK, France, the US and Australia.

 

New use for hydrogen from the GasUnie Green Hydrogen Electrolyser Plant in the Netherlands

Gasunie's Hystock green hydrogen plant in Veendam near Groningen was opened by King Willem-Alexander in June 2019.  Gasunie manages and maintains the infrastructure for the large-scale transport and storage of gas in the Netherlands and the northern part of Germany.

 

ITM Power supplied the 1MW PEM electrolyser system, which will use renewable energy and water to generate hydrogen. The intention was to use the hydrogen on-site or to fill tube trailers for deployment at other plants. In fact, the electrolyser filled tube trailers during March and April and the hydrogen gas produced by the ITM Power electrolyser was used to provide fuel for the first hydrogen train in the Netherlands, on its maiden voyage.

 

Industrial

Many industries use hydrogen as part of their production processes. Today, almost all of this hydrogen is made by steam reformation of methane (natural gas), a highly carbon intensive method. Three industries dominate carbon emissions from the use of hydrogen: ammonia production, steel making and the Group's prime target, refineries. Refineries currently use hydrogen to improve the quality of fractional distillation products and most of this hydrogen is produced from steam-reforming but in order to comply with stringent legislation and avoid fines, refineries need a cost-effective green hydrogen solution that reduces carbon emissions while allowing them to maintain output. In addition, natural gas reformers have long start-up times. With their rapid start up times, ITM Power PEM electrolysers could provide an immediate backup solution to prevent production downtime and preserve security of hydrogen supply.

 

Finally, in steel making, iron ore requires chemical reduction before being used to produce steel; this is currently achieved through the use of carbon, in the form of coal or coke.  When oxidised, this leads to emissions of about 2.2 tonnes of CO2 for each tonne of liquid steel produced. The substitution of hydrogen for carbon has the potential to significantly reduce CO2 emissions, because hydrogen is an excellent reducing agent and produces only water as a by-product.

 

PROJECTS

 

REFYHYNE

In June 2019, the REFHYNE consortium announced the commencement of construction of the 10MW hydrogen electrolysis plant at the Shell Rheinland refinery in Wesseling.

 

The programme is progressing well and has provided valuable 'first of a kind' lessons. ITM Power's manufacture of the 10MW electrolysis plant is ongoing, with all five 2MW modules now built and these have completed the first stage of Factory Acceptance Testing (up to 85% load). In the meantime, other parts of the system are being sent ahead to the refinery and detailed planning around the installation and commissioning phase is underway in conjunction with Shell and their sub-contractor partners. Site works in the Rhineland Refinery are progressing but delays are now anticipated due to Covid-19 restrictions affecting suppliers and the testing and build phases. Cost overruns are anticipated for the project due to higher than anticipated EPC costs, primarily installation and commissioning costs for key components. The Company is working with Shell to seek to minimise anticipated cost overruns, currently forecast to be £3.5m, in line with previous guidance.

 

The Gigastack Project -Phase 2

In the initial feasibility phase of the Gigastack project (part of the Department for Business, Energy and Industrial Strategy (BEIS) Hydrogen Supply Competition), which finished in 2019, ITM Power developed designs for a low-cost modular 5 MW electrolyser 'stack'. Now a further £7.5m has been awarded for the next phase, where ITM Power will get the chance to install and trial a prototype as well as the semi-automated manufacturing machines required for large-scale and high-volume manufacture of these next-generation low-cost stacks. This will help validate a complete production system capable of delivering hundreds of megawatts of electrolysers per year.

 

Led by Ørsted, the consortium will also conduct a Front-End Engineering Design ('FEED') study on a 100MW electrolyser system using staged installations with a nominal capacity of 20MW. The FEED study will use ITM Power's new generation of electrolyser stack technology together with renewable energy directly from Ørsted's offshore wind farms, to supply renewable hydrogen to an industrial off-taker, in this instance Phillips 66 Limited's Humber Refinery. A key objective of the Gigastack project is to identify and highlight regulatory, commercial and technical challenges for real applications of industrial-scale renewable hydrogen systems.

 

Green Hydrogen for Humberside Project Deployment Study

This is a first stage deployment project in the UK Government's Industrial Strategy Challenge Fund competition "Decarbonisation of Industrial Clusters" to assess the feasibility and scope of deploying green hydrogen with some major industrial partners in Humberside.

 

It will lead to the production of renewable hydrogen at the Gigawatt (GW) scale distributed to industrial energy users in Immingham. Decarbonisation of this cluster is critical in reaching the UK's legally binding 2050 net zero emission targets. Humberside, the UK's largest cluster by industrial emissions, (12.4Mt of CO2 per year), contributes £18bn to the national economy each year and has access to a large renewable resource from offshore wind in the North Sea.

 

The project will work with customers in the region to establish the feasibility of switching to renewable hydrogen and justify a number of 100MW deployments of electrolysers. The project will cost the supply of hydrogen to these end users. This includes the electricity supply to the electrolyser, the hydrogen production facility, hydrogen distribution across the Humber and conversion of existing processes to use renewable hydrogen.

 

FINANCIAL REVIEW

 

ITM Power continues to be first and foremost a manufacturer, with the majority of revenue coming from construction contracts to build full hydrogen systems. Sales revenues in the year continued in the main to be generated across three build projects, providing electrolysers in each of our target markets. The last of the adjustments made on transition to IFRS 15 "Revenue from contracts with Customers" released from deferred income and recognised as revenue in the year (resulting in an increase of £10k). 

 

Meanwhile, consultancy income rose from £0.07m in 2019 to £0.5m due to a design and proof of concept project commissioned by BEIS.

 

Fuel sales remained consistent at £0.37m (2019: £0.37m), in part hampered by the Covid-19 lockdown, despite continuing to provide hydrogen road fuel to emergency service workers.

 

New collaborative project funding recognised in the year was £2.06m. This has funded research and data collection projects or subsidised proof-of-concept sales.

 

The pre-tax loss for the year under review increased to £29.52m (2019: £9.32m). This can be attributed to similar factors as last year; firstly, the ongoing installation of first-of-a-kind large scale plant in new and varied situations; secondly, increased costs of recruitment in the year as the Group continued to grow in preparation for delivery of ITM Power Plc's future order book; but also thirdly the effect of the Covid-19 lockdown on our ability to complete the handover of sales projects to site acceptance and recognise their revenue under IFRS 15. There was also the effect of IFRS 16 Leases as ITM Power entered into the new lease for Bessemer Park, increasing the amounts passing through the income statement, albeit now as depreciation and interest rather than rent (see note 2).

 

As set out in the Company's announcement for its half-year results, the financial year to 30 April 2020 does not yet reflect any of the benefits of the new arrangements with Linde. The challenges from certain legacy projects, including that of the Shell REFHYNE project, result primarily from the EPC scope of work previously contracted. These challenges were recognised by the Board in 2019 and led to the creation of the investment partnership with Linde GmbH, a global, world-leading EPC partner. This diminishes the Group's exposure to future deployment risk, and allows ITM to focus further on developing its world-leading standard products. ITM Power will be conducting these projects through ITM Linde Electrolysis GmbH and the contracting process already benefits from the estimating, quotation and EPC delivery skills of Linde Engineering.

 

Net cash burn increased to £23.34m before fund raise (2019: £15.23m). Cash burn is a non-statutory measure the directors use to monitor the Group, and is calculated by deducting from annual cash flow (£34.73m) the effects of any equity fund raise (£58.07m). A key factor in this movement is that we have continued to invest in our future, as illustrated by the increase in the investment activities section of the cashflow statement from £3.5m in 2019 to £11.1m in the current financial year. Within this cash burn figure, there are the sums paid to date on our new building as it is remodelled and fitted out for operations in the next financial year.

 

Financial position

In the year, the Group capitalised development costs of £1.60m (2019: £0.38m). This was for developments in our product technology that will continue to keep the Group at the forefront of PEM electrolysis, as well as the continuing design of standard products and development of internal procedures that will facilitate our offering to the markets. The Directors see continued product development as key to building commercial traction.

 

Despite a £5.4m impairment of our refuelling assets, there was also an increase in fixed assets (excluding right of use assets) to £6.5m from £5.74m in the prior year. The uplift relates predominantly to the leasehold improvements at our new premises.

 

At year end, ITM Power had current assets totalling £67.5m (2019: £38.3m). Funds in the bank totalled £41.0m (2019: £6.9m), of which there were amounts on guarantee of £1.1m (2019: £1.7m). The Group has previously been required to place amounts on guarantee as cash cover, which limits working capital available to the Group mid-contract. ITM Power Plc continues to structure quotes to obtain sufficient monies up front to limit the adverse impact of increased activity on working capital.

 

Total receivables excluding restricted cash amounts have reduced from £29.5m (2019) to £22.1m. However, this balance is still dominated by pro forma and early stage payments made to suppliers for stock items required in the next wave of units through production. As systems in production become larger and more sophisticated, the need to find new suppliers who can meet our requirements for parts means that we are faced with higher volumes of staged or up-front payments until a trading history can be developed to assist our credit rating. Prepayments and accrued income totalled £15.6m (2019: £22.5m), down 31%.

 

Trade debtors at both year-ends predominantly relate to grant income debtors (2020: £4.3m and 2019: £6.4m). At year end, the Group had trade creditors of £2.5m against a prior year balance of £3.4m. This number has decreased due to the timing of the Covid-19 lockdown.

 

Overall, creditors have decreased only slightly from £16.9m (2019) to £14.0m. The figure continues to be dominated by deferred income (£9.2m in the current year and £11.9m in 2019), which reflects both money received up front on contracts and grant income receivable against payment of pro forma invoices. This latter income is generated as grant claims are made against defrayed costs, including any stage payments to suppliers. The income would normally sit against the costs of the build to which it relates. However, until the parts arrive and become incorporated in that build, the grant income sits unmatched on the balance sheet.

 

NEW PERFORMANCE INCENTIVE PACKAGE FOR ALL EMPLOYEES

ITM Power has undertaken a review of staff incentives in light of the continuing expansion of the company and the need to retain key staff. The company is therefore delighted to announce a comprehensive package of incentives open to all staff members. Following the expiration of the previous LTIP option scheme, two schemes have been developed in conjunction with EY; a "Buy-as-you-earn" (BAYE) Share Incentive Plan (SIP) scheme and an LTIP Scheme. Annual awards under the LTIP scheme will be outlined when they occur, and will not be expected to exceed 0.5% per annum.

 

 

CONSOLIDATED INCOME STATEMENT AND OTHER COMPREHENSIVE INCOME

 

Note

 

2020

£'000

 

2019

£'000

Revenue

 

 

3,291

 

4,589

Direct costs

 

 

(10,839)

 

(6,182)

Grant income against direct costs

 

 

1,719

 

427

Gross loss

 

 

(5,829)

 

(1,166)

 

 

 

 

 

 

Operating costs

 

 

 

 

 

Distribution expenses

 

 

 

 

 

-Research and Development

 

(2,298)

 

(2,327)

 

-Prototype production and engineering

 

(13,919)

 

(6,202)

 

-Sales and marketing

 

(1,385)

 

(1,713)

 

 

 

 

(17,603)

 

(10,242)

 

 

 

 

 

 

Administration expenses

 

 

(7,028)

 

(4,661)

IFRS 9 credit risk impairment

 

 

15

 

(77)

Other income - government grants

 

 

1,049

 

6,799

 

 

 

 

 

 

Loss from operations before tax

 

 

(29,396)

 

(9,347)

 

 

 

 

 

 

Share of loss of associate company

 

 

(3)

 

-

Investment income

 

 

90

 

30

Finance costs

 

 

(214)

 

(1)

 

 

 

 

 

 

Loss before tax

 

 

(29,523)

 

(9,318)

 

 

 

 

 

 

Tax

 

 

(38)

 

(133)

 

 

 

 

 

 

Loss for the year

 

 

(29,561)

 

(9,451)

 

 

 

 

 

 

OTHER TOTAL COMPREHENSIVE INCOME:

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

 

Foreign currency translation differences on foreign operations

 

 

50

 

40

 

Net other total comprehensive income

 

 

50

 

40

 

 

 

 

 

 

 

 

Total comprehensive loss for the year

 

 

(29,511)

 

(9,411)

 

 

 

 

 

 

 

 

Basic and diluted loss per share

4

 

(7.4p)

 

(2.9p)

 

 

All results presented above are derived from continuing operations and are attributable to owners of the Company. Prior year comparatives have not been restated upon transition to IFRS16 Leases, affecting comparison of operating costs and interest (see adoption of new standards in note 2).

 

 

CONSOLIDATED BALANCE SHEET

 

Note

2020

 

£'000

2019

RESTATED

£'000

NON-CURRENT ASSETS

 

 

 

Investment in associate

 

346

-

Intangible assets

 

2,154

669

Right of use assets

 

6,520

-

Property, plant and equipment

 

6,501

5,742

Financial Asset at amortised cost

 

137

-

TOTAL NON-CURRENT ASSETS

 

15,658

6,411

 

 

 

 

CURRENT ASSETS

 

 

 

Inventories

 

4,432

1,906

Trade and other receivables

 

23,166

31,219

Cash and cash equivalents

 

39,919

5,173

TOTAL CURRENT ASSETS

 

67,517

38,298

 

 

 

 

CURRENT LIABILITIES

 

 

 

Trade and other payables

 

(14,013)

(16,895)

Provisions

 

(6,890)

(1,605)

Lease liability

 

(211)

-

TOTAL CURRENT LIABILITIES

 

(21,114)

(18,500)

 

 

 

 

NET CURRENT ASSETS

 

46,403

19,798

 

 

 

 

NON-CURRENT LIABILITIES

 

 

 

Lease liability

 

(6,315)

-

 

 

 

 

NET ASSETS

 

55,746

26,209

 

 

 

 

EQUITY

 

 

 

Called up share capital

5

23,664

16,200

Share premium account

 

137,236

86,631

Merger reserve

 

(1,973)

(1,973)

Foreign exchange reserve

 

161

111

Retained loss

 

(103,342)

(74,760)

TOTAL EQUITY

 

55,746

26,209

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Note

Called up share capital

£'000

Share premium account

£'000

 

Merger reserve

£'000

Foreign exchange reserve

£'000

 

Retained loss

£'000

 

Total equity

£'000

At 30 April 2018

 

16,200

86,631

(1,973)

71

(65,493)

35,436

 

 

 

 

 

 

 

 

Loss for the year

 

-

-

-

-

(9,451)

(9,451)

Other comprehensive income

 

-

-

-

40

-

40

Total comprehensive income

 

-

-

-

40

(9,451)

(9,411)

 

 

 

 

 

 

 

 

Credit to equity for share based payment

 

-

-

-

-

184

184

At 30 April 2019

 

16,200

86,631

(1,973)

111

(74,760)

26,209

 

 

 

 

 

 

 

 

Transactions with Owners

 

 

 

 

 

 

 

Issue of shares

 

7,464

50,605

-

-

-

58,069

Total Transactions with Owners

 

7,464

50,605

-

-

-

58,069

 

 

 

 

 

 

 

 

Loss for the year

 

-

-

-

-

(29,561)

(29,561)

Other comprehensive income

 

-

-

-

50

-

50

Total comprehensive income

 

-

-

-

50

(29,561)

(29,511)

 

 

 

 

 

 

 

 

Credit to equity for share based payment

 

-

-

-

-

979

979

At 30 April 2020

 

23,664

137,236

(1,973)

161

(103,342)

55,746

 

Prior year comparatives have not been restated upon transition to IFRS16 Leases so there is no restatement of retained earnings (see adoption of new standards in note 2).

 

CONSOLIDATED CASH FLOW STATEMENT

 

 

Note

2020

£'000

2019

£'000

 

 

 

 

Net cash used in operating activities

 

(12,040)

(11,775)

 

 

 

 

Investing activities

 

 

 

Investment in associate

 

(349)

-

Purchases of property, plant and equipment

 

(8,986)

(4,125)

Finance asset (security deposit)

 

(137)

-

Capital Grants received against purchases of property plant and equipment

 

89

1,073

Proceeds on disposal of Property, Plant & Equipment

 

1

-

Payments for intangible assets

 

(1,771)

(436)

Interest received

 

90

30

Net cash used in investing activities

 

(11,063)

(3,458)

 

 

 

 

Financing activities

 

 

 

Issue of ordinary share capital

 

59,299

-

Costs associated with fund raise

 

(1,230)

-

Payment of lease liabilities

2

(236)

-

Net cash from financing activities

 

57,833

-

 

 

 

 

Increase/ (decrease) in cash and cash equivalents

 

34,730

(15,233)

Cash and cash equivalents at the beginning of year

 

5,173

20,403

Effect of foreign exchange rate changes

 

16

3

Cash and cash equivalents at the end of year

 

39,919

5,173

 

 

 

 

 

Prior year comparatives have not been restated upon transition to IFRS16 Leases, affecting net cash used in operating activities, and introducing the new line of "Payment of lease liabilities" within the Financing Activities section (see adoption of new standards in note 2).

 

NOTES

 

1. GENERAL INFORMATION

ITM Power Plc is a Public company incorporated in England and Wales under the Companies Act 2006.  The registered office is at 22 Atlas Way, Sheffield, South Yorkshire S4 7QQ. The entity is a parent and the nature of the Group's operations and its principal activities are disclosed in the Directors' Report.

 

These financial statements are presented in pounds sterling, which is also the functional currency, because that is the currency of the primary economic environment in which the Group operates.

 

The summary accounts set out above do not constitute statutory accounts as defined by Section 434 of the UK Companies Act 2006. The summarised consolidated balance sheet at 30 April 2020, the summarised consolidated income statement and other comprehensive income, the summarised consolidated statement of changes in equity and the summarised consolidated cash flow statement for the year then ended have been extracted from the Group's 2020 statutory financial statements upon which the auditor's opinion is unqualified and did not contain a statement under either sections 498(2) or 498(3) of the Companies Act 2006. The audit report for the year ended 30 April 2019 did not contain statements under sections 498(2) or 498(3) of the Companies Act 2006. The statutory financial statements for the year ended 30 April 2019 have been delivered to the Registrar of Companies. The 30 April 2020 accounts were approved by the directors on 22 October 2020, but have not yet been delivered to the Registrar of Companies.

 

2. adoption of new and revised standards

 

Amendments to IFRSs that are mandatorily effective for the current year

In the current year, the Group has applied the following amendments to IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2019.

 

IFRS 16 Leases

The new accounting standard is effective for years commencing on or after 1 January 2019. Under the new standard, the distinction between operating and finance leases is removed and most leases will be reflected in the statement of financial position, as both a right-of-use asset and a corresponding lease liability.

 

The Group has used the modified retrospective transitional approach, meaning that the lease liability and equivalent right of use asset are brought onto the balance sheet at the discounted amount applicable at the transition date. Prior year financial information has not been restated, resulting in no impact on retained earnings on transition. The Group has also made use of the practical expedient not to reassess whether contracts are or contain a lease. As such we have adopted the "portfolio approach" beginning by using our existing lease portfolio (reported under the old IAS 17 operating lease note) and subsequently assessed any changes or new contracts as they have arisen.

 

 

Leasehold Properties

Motor Vehicles

Total

 

£'000

£'000

£'000

Total operating lease commitments disclosed at 30 April 2019

677

69

746

Less recognition exemption for leases with less than 12 months remaining

(75)

-

(75)

Adjustment for extension/ (contraction) of lease payments recognised

243

(16)

227

Operating lease liabilities before discounting

845

53

898

Discounted using incremental borrowing rate

(45)

(3)

(48)

Opening lease liabilities

800

50

850

 

The right to control the use of an asset over a period of time applies when the lessee has the right to obtain substantially all the economic benefits from the use of the asset and the right to direct the use of the asset. If the lessor has the substantive right to substitute the asset during this period, then it would not meet this condition. Two potential exemptions can also be applied - for leases of less than 12 months duration or of low value. For these reasons, we have not included temporary equipment hire for projects nor the rent-a-room office and storage facilities contracted by the Group.

 

A key judgement associated with the adoption of this standard is the identification of the discount rate to be used to calculate the present value of the future lease payments on which the reported lease liability and right-of-use asset are based. With no clearly defined interest rates for existing leases and no incremental borrowing rate known for the Group, ITM Power has selected discount rates of 2.5% (properties) and 5% (non-property) for our existing leases based on similar companies and leases. For the new lease at Bessemer Park, as it is of much longer duration (15 years), an interest rate of 7.5% has been applied.

 

A right-of-use asset is depreciated in accordance with IAS 16 "Property, Plant and Equipment" and in line with the Group's existing policies (straight-line over the lease term), whilst the liability is increased for the accumulation of interest and reduced by lease payments. This will result in higher expenses recorded in the earlier phases of any lease, when interest is calculated on a larger liability balance. There is no impact on cash flow overall. Classifications within the statement of cash flows will change to reflect the interest element of each lease payment. This reclassification also impacts EBITDA.

 

Besides the appearance of right of use assets and lease liabilities on the balance sheet, a comparison of the impact on current year profit / loss is shown below:

 

 

Effect on Profit & Loss under new IFRS 16

What would have been presented under IAS 17

 

Interest charge

Depreciation charge

Total

Operating lease rental charge

 

£000

£000

£000

£000

 

 

 

 

 

Property leases

199

476

675

400

Vehicle leases

3

38

41

39

 

202

514

716

439

 

The above note ignores the effect of impairment but shows an impact of an additional £277,000 charge to the income statement in the year, increasing the EBIT loss of the Group. However, as the charge now passes into the income statement in the form of depreciation and interest, EBITDA has improved by £439k.

 

New and revised IFRSs in issue but not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for 30 April 2020 reporting periods and have not been early adopted by the Group. These standards are neither expected to have a material impact on the entity in the current or future reporting periods nor on foreseeable future transactions:

 

·   IFRS 3 Amendments to the definition of a business (effective for periods beginning on or after 1 January 2020);

·   IAS 1 and IAS 8 Amendments to the definition of material to align with the Revised Conceptual Framework (effective for periods beginning on or after 1 January 2020);

·   IFRS 9, IAS 39 and IFRS 7 amendments in Interest Rate Benchmark Reform when accounting for hedging (effective for periods beginning on or after 1 January 2020).

 

Other Changes in Accounting Policy

The Group makes R&D claims as part of its annual submissions to the tax authorities and has recently started to make RDEC claims to benefit from enhanced relief or tax credits (as appropriate). As the nature of these is similar to grant funding, the Group will present them within other income. This will leave the tax line of the accounts solely for the purposes of reporting corporation tax. This change will be reflected in a revised accounting policy. Retrospective application would be immaterial to the accounts so the change will be treated prospectively, without restatement of prior periods.

 

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of accounting

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs), as adopted by the European Union.

 

The financial statements have been prepared under the assumption that the Group operates on a going concern basis and on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

 

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 April each year. Control is achieved when the Company:

·   has power over the investee;

·   is exposed, or has rights, to variable return from its involvement with the investee; and

·   has the ability to use its power to affect its returns.

 

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

 

When the Company has less than a majority of the voting rights of an investee, it considers that it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights in an investee are sufficient to give it power, including:

·   the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

·   potential voting rights held by the Company, other vote holders or other parties;

·   rights arising from other contractual arrangements; and

·   any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings.

 

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company ceases to have control of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the date the Company gains control until the date when the Company ceases to control the subsidiary.

 

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of the subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

 

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the Group's accounting policies.

 

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are eliminated on consolidation.

 

4. LOSS PER SHARE

The calculation of the basic earnings per share is based on the following data:

 

2020

£'000

2019

£'000

Loss for the purposes of basic and diluted loss per share being net loss attributable to owners of the Company

(29,561)

(9,451)

Number of shares

 

 

Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share

398,184,707

324,009,397

Loss per share

7.4p

2.9p

 

5. CALLED UP SHARE CAPITAL AND RESERVES

 

 

2020

£'000

2019

£'000

Called up, allotted and fully paid:

 

 

473,277,926 (2019: 324,009,397) ordinary shares of 5p each

23,664

16,200

 

 

 

Authorised Share capital:

 

 

473,277,926 (2019: 324,009,397) ordinary shares of 5p each

23,664

16,200

 

Holders of ordinary shares have voting rights at Annual General Meetings and Extraordinary General Meetings in proportion with their shareholding.

 

The share premium account can move when shares are sold and represents the amount paid in excess of the nominal value when shares are issued.

 

The merger reserve arose on the acquisition of ITM Power (Research) Ltd in 2004.

 

The foreign exchange reserve arises upon consolidation of the foreign subsidiaries in the Group, and accounts for the difference created by translation of the income statement at average rate compared with the year-end rate used on the balance sheet.

 

The Group's other reserve is retained earnings which represents cumulative profits or losses, net of any dividends paid and other adjustments.

 

6. PRIOR PERIOD ADJUSTMENT

A restatement of the prior period has been undertaken to correct a presentation error, matching a Trade Receivable balance with a related balance being held in Deferred Grant Income. This was for an amount of £684,000, which formed part of a grant claim invoice raised in November 2018. The amount had already been covered by pre-finance so was not still owed to ITM Power, therefore both Trade Receivables and Deferred Grant Income were overstated:

 

 

Original 2019

Adjustment

2019 Restated

 

£'000

£'000

£'000

BALANCE SHEET

 

 

 

Trade & other receivables (Trade debtors)

31,903

(684)

31,219

Trade & other payables (Deferred Grant income)

(17,579)

684

(16,895)

 

7. 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;

 

2020

£'000

2019

£'000

Loss before interest and tax

(29,396)

(9,347)

Add back:

 

 

Depreciation

2,440

1,773

Impairment

5,588

(24)

Amortisation

197

122

Loss on disposal

473

-

Share based payment charge

2,625

184

 

(18,073)

(7,292)

 

-ends-

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