TIDMITM
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 GBP30m strategic equity investment in the Company,
together with an initial 100MW preferred supplier indicative
commitment to 2024
-- Proposed equity fund raise of GBP150m (including the Snam
investment) plus an up to GBP7m open offer (to existing
shareholders) to accelerate the Company's development also
announced today
-- Record current backlog of GBP118.7m (previous high GBP55.0m)
and tender opportunity pipeline of GBP324.9m (GBP263m 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 EUR150 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 GBP5.4m (2019: GBP17.5m) down 69%, comprising:
o Sales revenue: GBP3.3m (2019: GBP4.6m) down 28%
o Collaborative grant income recognised: GBP2.1m (2019:
GBP12.9m) down 84%
-- Loss from operations GBP29.4m (2019: GBP9.3m),
-- Adjusted EBITDA loss (see note 7) GBP18.1m (2019: loss GBP7.3m), increased 148%
-- Available cash balance of GBP39.9m at year-end (2019: GBP5.2m)
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:
+44 (0)114 244
ITM Power plc 5111
Graham Cooley, CEO / James Collins, IR
+44 (0)20 7597
Investec Bank plc (Nominated Adviser and Broker) 5970
Jeremy Ellis / Chris Sim / Ben Griffiths
+44 (0)20 7920
Tavistock (Financial PR and IR) 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
GBP 58.8 million fundraise, including a subscription by Linde of
GBP38 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 GBP150m, including GBP30m
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:
o 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 (GBP7.5m) 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, t he 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 CO(2) for
each tonne of liquid steel produced. The substitution of hydrogen
for carbon has the potential to significantly reduce CO(2)
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 GBP3.5m, 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 GBP7.5m 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 CO(2) per year), contributes GBP18bn 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 GBP10k).
Meanwhile, consultancy income rose from GBP0.07m in 2019 to
GBP0.5m due to a design and proof of concept project commissioned
by BEIS.
Fuel sales remained consistent at GBP0.37m (2019: GBP0.37m), 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
GBP2.06m. 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
GBP29.52m (2019: GBP9.32m). 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 GBP23.34m before fund raise (2019:
GBP15.23m). Cash burn is a non-statutory measure the directors use
to monitor the Group, and is calculated by deducting from annual
cash flow (GBP34.73m) the effects of any equity fund raise
(GBP58.07m). 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
GBP3.5m in 2019 to GBP11.1m 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 GBP1.60m
(2019: GBP0.38m). 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 GBP5.4m impairment of our refuelling assets, there was
also an increase in fixed assets (excluding right of use assets) to
GBP6.5m from GBP5.74m 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 GBP67.5m
(2019: GBP38.3m). Funds in the bank totalled GBP41.0m (2019:
GBP6.9m), of which there were amounts on guarantee of GBP1.1m
(2019: GBP1.7m). 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 GBP29.5m (2019) to GBP22.1m. 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 GBP15.6m (2019: GBP22.5m), down 31%.
Trade debtors at both year-ends predominantly relate to grant
income debtors (2020: GBP4.3m and 2019: GBP6.4m). At year end, the
Group had trade creditors of GBP2.5m against a prior year balance
of GBP3.4m. This number has decreased due to the timing of the
Covid-19 lockdown.
Overall, creditors have decreased only slightly from GBP16.9m
(2019) to GBP14.0m. The figure continues to be dominated by
deferred income (GBP9.2m in the current year and GBP11.9m 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 2019
GBP'000 GBP'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 2019
RESTATED
GBP'000 GBP'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
Called
up share Share premium Merger Foreign exchange
capital account reserve reserve Retained loss Total equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
2020 2019
Note GBP'000 GBP'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 Motor Vehicles Total
Properties
GBP'000 GBP'000 GBP'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:
What would have
Effect on Profit & Loss under new been presented
IFRS 16 under IAS 17
Depreciation Operating lease
Interest charge charge Total rental charge
GBP000 GBP000 GBP000 GBP000
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 GBP277,000 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 GBP439k.
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 2019
GBP'000 GBP'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 2019
GBP'000 GBP'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 GBP684,000, 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
GBP'000 GBP'000 GBP'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 2019
GBP'000 GBP'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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