ITM POWER PLC — Interim / Quarterly Report 2022

Oct 14, 2021

National Storage Mechanism | Additional information

RNS Number : 1488P

ITM Power PLC

14 October 2021

14 October 2021

ITM Power plc

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

Trading Update

Alongside the proposed placing announced separately today ITM Power, the energy storage and clean fuel company, announces, exceptionally, Q1 trading performance for the three months to 31 July 2021. This information is also included in the offering memorandum published in connection with the proposed placing and should be read alongside the announcement of the proposed placing.

· Revenue of £1.2m (Q1 2021: £0.3m), up 357%

· Loss from operations £6.3m (£5.6m), increased by 12%

· Adjusted EBITDA loss of £5.2m, (£5.1m), increased by 1%

· Cash balance of £170.8m (£33.8m)

· Cash burn* of £5.3m (£8.0m), down 34%

*Cash burn is a non-statutory measure. Please see the note to the cash flow statement (Note 4)

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

ITM Power plc
James Collins, Investor Relations Justin Scarborough, Investor Relations	+44 (0)114 551 1205 +44 (0)114 551 1080
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 / David Cracknell / Tim Pearson

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. ITM Power signed a deal to deploy a 10MW electrolyser at Shell's Rhineland refinery in 2017. In October 2019, the Company announced the completion of a £58.8 million fundraising, including an investment 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 November 2020, ITM Power completed a £172m fundraising, including a £30m investment by Snam, one of the world's leading energy infrastructure operators. ITM Power operates from the world's largest electrolyser factory in Sheffield with a capacity of 1GW (1,000MW) per annum. ITM Power received an order for the world's largest PEM electrolyser of 24MW from Linde in January 2021. Other customers and partners include Sumitomo, Ørsted, Phillips 66, Scottish Power, Siemens Gamesa, Cadent, Northern Gas Networks, Gasunie, RWE, Engie, GNVert, National Express, Toyota, Hyundai and Anglo American among others.

Independent review report to ITM Power Plc

Introduction

We have been engaged by the company to review the financial information in the first quarter financial report for the three months ended 31 July 2021 which comprises the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement and the related explanatory notes. We have read the other information contained in the first quarter financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial information.

Directors' responsibilities

The financial report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the financial information in the first quarter financial report are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.

As disclosed in Note 3, the annual financial statements of the group are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The financial information in the financial report has been prepared in accordance with the basis of preparation in Note 1.

Our responsibility

Our responsibility is to express to the company a conclusion on the financial information in the first quarter financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

The impact of uncertainties arising from the UK exiting the European Union on our review

Our review of the summary accounts in the financial report requires us to obtain an understanding of all relevant uncertainties, including those arising as a consequence of the effects of Brexit. Such reviews assess and challenge the reasonableness of estimates made by the directors and the related disclosures and the appropriateness of the going concern basis of preparation of the financial statements. All of these depend on assessments of the future economic environment and the company's future prospects and performance.

Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty, with the full range of possible outcomes and their impacts unknown. We applied a standardised firm-wide approach in response to these uncertainties when assessing the company's future prospects and performance. However, no review of interim financial information should be expected to predict the unknowable factors or all possible future implications for a company associated with a course of action such as Brexit.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the financial information in the first quarter financial report for the three months ended 31 July 2021 is not prepared, in all material respects, in accordance with the basis of accounting described in Note 1.

Use of our report

This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the company those matters we are required to state to it in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusion we have formed.

Grant Thornton UK LLP

Statutory Auditor, Chartered Accountants

Sheffield

14 October 2021

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Note	Three months to 31 July 2021 (unaudited) £'000	Three months to 31 July 2020 (unaudited) £'000	Year ended 30 April 2021 (audited) £'000
Revenue	2	1,195	261	4,275
Direct costs		(1,665)	(1,260)	(12,145)
Grant income against direct costs		-	168	1,356
Cost of sales		(1,665)	(1,092)	(10,789)
Gross loss		(470)	(831)	(6,514)
Operating costs
Research and development		(1,297)	(1,172)	(3,489)
Production and engineering		(2,063)	(1,477)	(8,839)
Sales and marketing		(386)	(348)	(1,436)
Administration expenses		(2,120)	(1,855)	(7,404)
Expected credit risk		(3)	19	(165)
Other income - government grants		75	65	1,190
Loss from operations		(6,264)	(5,599)	(26,657)
Share of profit / (loss) of associate company		81	(36)	(595)
Finance income		20	42	83
Finance costs		(130)	(115)	(479)
Loss before tax		(6,293)	(5,708)	(27,648)
Tax		(10)	(3)	(49)
Loss for the period		(6,303)	(5,711)	(27,697)
Other total comprehensive income:
Foreign currency translation differences on foreign operations		(51)	(32)	(78)
Net other total comprehensive income		(51)	(32)	(78)
Total comprehensive loss for the period		(6,354)	(5,743)	(27,775)
Loss per share
Basic and diluted		(1.1p)	(1.2p)	(5.5p)
Weighted average number of shares		550,658,155	474,672,370	507,262,743

All results presented above are derived from continuing operations.

The loss per ordinary share and diluted loss per share are equal because share options are only included in the calculation of diluted earnings per share if their issue would decrease the net profit per share. The number of potentially dilutive shares not included in the calculation above due to being anti-dilutive in the years presented were 7,490,129 (Q1 2020: 9,042,055; YE 2021: 50,893,546).

CONSOLIDATED BALANCE SHEET

	As at 31 July 2021 (unaudited) £'000	As at 31 July 2020 (unaudited) £'000	As at 30 April 2021 (audited) £'000
Non-current assets
Investment in associate	326	310	259
Intangible assets	3,352	2,407	3,269
Right of use assets	6,342	6,353	6,399
Property, plant and equipment	13,681	9,932	13,514
Financial asset at amortised cost	150	137	148
Total non-current assets	23,851	19,139	23,589
Current assets
Inventories	8,511	6,347	6,418
Trade and other receivables	23,933	21,229	22,981
Cash and cash equivalents	170,765	33,771	176,078
Total current assets	203,209	61,347	205,477
Current liabilities
Trade and other payables	(18,559)	(14,957)	(12,857)
Provisions	(10,677)	(7,122)	(12,276)
Lease liability	(88)	(119)	(204)
Total current liabilities	(29,324)	(22,198)	(25,337)
Net current assets	173,885	39,149	180,140
Non-current liabilities
Lease liability	(6,468)	(6,393)	(6,282)
Net assets	191,268	51,895	197,447
Equity
Called up share capital	27,533	23,873	27,533
Share premium account	302,248	138,849	302,248
Merger reserve	(1,973)	(1,973)	(1,973)
Foreign exchange reserve	32	129	83
Retained loss	(136,572)	(108,983)	(130,444)
Total Equity	191,268	51,895	197,447

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Called up share capital £'000	Share premium account £'000	Merger reserve £'000	Foreign Exchange reserve £'000	Retained loss £'000	Total Equity £'000
At 1 May 2021	27,533	302,248	(1,973)	83	(130,444)	197,447
Transactions with Owners
Issue of shares	-	-	-	-	-	-
Credit to equity for share based payment	-	-	-	-	175	175
Total Transactions with Owners	-	-	-	-	175	175
Loss for the period	-	-	-	-	(6,303)	(6,303)
Other comprehensive income	-	-	-	(51)	-	(51)
Total comprehensive income	-	-	-	(51)	(6,303)	(6,354)
At 31 July 2021 (unaudited)	27,533	302,248	(1,973)	32	(136,572)	191,268
At 1 May 2020	23,664	137,236	(1,973)	161	(103,342)	55,746
Transactions with Owners
Issue of shares	209	1,613	-	-	-	1,822
Credit to equity for share based payment	-	-	-	-	70	70
Total Transactions with Owners	209	1,613	-	-	70	1,892
Loss for the period	-	-	-	-	(5,711)	(5,711)
Other comprehensive income	-	-	-	(32)	-	(32)
Total comprehensive income	-	-	-	(32)	(5,711)	(5,743)
At 31 July 2020 (unaudited)	23,873	138,849	(1,973)	129	(108,983)	51,895

	Called up share capital £'000	Share premium account £'000	Merger reserve £'000	Foreign exchange reserve £'000	Retained loss £'000	Total equity £'000
At 1 May 2020	23,664	137,236	(1,973)	161	(103,342)	55,746
Transactions with Owners
Issue of shares	3,869	165,012	-	-	-	168,881
Credit to equity for share based payment	-	-	-	-	595	595
Total Transactions with Owners	3,869	165,012	-	-	595	169,476
Loss for the year	-	-	-	-	(27,697)	(27,697)
Other comprehensive income	-	-	-	(78)	-	(78)
Total comprehensive income	-	-	-	(78)	(27,697)	(27,775)
At 30 April 2021 (audited)	27,533	302,248	(1,973)	83	(130,444)	197,447

CONSOLIDATED CASH FLOW STATEMENT

	Note	Three months to 31 July 2021 (unaudited) £'000	Three months to 31 July 2020 (unaudited) £'000	Year ended 30 April 2021 (audited) £'000
Net cash used in operating activities	4	(4,275)	(3,836)	(20,141)
Investing activities
Investment in associate		-	-	(535)
Purchases of property, plant and equipment		(680)	(4,002)	(14,422)
Capital Grants received against purchases of non-current assets		25	190	3,992
Proceeds on disposal of plant & equipment		-	1	3
Payments for intangible assets		(271)	(355)	(1,524)
Interest received		17	42	83
Net cash used in investing activities		(909)	(4,124)	(12,403)
Financing activities
Issue of ordinary share capital		-	1,822	173,835
Costs associated with fund raise		-	-	(4,954)
Payment of lease liabilities		(28)	(37)	(156)
Net cash from financing activities		(28)	1,785	168,725
(Decrease)/ increase in cash and cash equivalents		(5,212)	(6,175)	136,181
Cash and cash equivalents at the beginning of period		176,078	39,919	39,919
Effect of foreign exchange rate changes		(101)	27	(22)
Cash and cash equivalents at the end of period		170,765	33,771	176,078

Notes to the summary accounts

1. Basis of preparation of interim figures

These interim summary accounts have been prepared using accounting policies consistent with International Accounting Standards, in conformity with the requirements of the Companies Act 2006. Whilst the financial information has been compiled in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRSs), it does not contain sufficient information to comply with IFRSs. This interim financial information does not constitute statutory financial statements within the meaning of section 435 of the Companies Act 2006.

The financial information has been prepared on the historical cost basis. The principal accounting policies adopted by the Group are as applied in the Group's latest audited financial statements.

The information relating to the year ended 30 April 2021 has been extracted from the Group's published financial statements for that year, which contain an unqualified audit report that does not draw attention to any matters of emphasis, and did not contain statements under section 498(2) and 498(3) of the Companies Act 2006 and which have been filed with the Registrar of Companies.

Going Concern

The directors have prepared a cash flow forecast for the period ending 31 October 2022. This forecast indicates that the Group and parent company would expect to remain cash positive without the requirement for further fund raising based on delivering the existing pipeline, for a period of at least 12 months from the date of approval of these summary accounts.

By the end of the period analysed, the Group will still hold a large proportion of the monies from the fund raise in October 2020. This should give the business sufficient funds to trade for the next three years if the business continued to operate in a similar way beyond the forecast period.

With the uncertainty created for the economy by Covid-19, this cash flow forecast has also been stress tested. As a worst-case scenario, if all payments had to continue as forecast while receipts were not received at all, the business would remain cash positive for the full twelve months from the date of approval of these summary accounts.

The interim summary accounts have therefore been prepared on a going concern basis.

2. Revenue and other operating income

An analysis of the Group's revenue is as follows:	Q1 2021 £'000	Q1 2020 £'000	FY 2021 £'000
Revenue from product sales recognised over time	454	105	1,697
Revenue from product sales recognised at point in time	672	-	-
Consulting contracts recognised over time	28	79	2,108
Maintenance contracts recognised at point in time	-	33	112
Fuel sales	41	45	153
Other	-	-	205
Revenue in the Consolidated Income Statement	1,195	261	4,275
Grant income shown against cost of sales	-	168	1,356
Grant income (claims made for projects)	19	12	761
Other government grants (R&D claims)	56	28	404
Other government grants (Covid-19 furlough scheme)	-	25	25
	75	65	1,190
Grant income in the Consolidated Income Statement	75	245	2,546
	1,270	506	6,821

Revenues from major products and services

The Group's revenues from its major products and services were as follows:

	Q1 2021 £'000	Q1 2020 £'000	FY 2021 £'000
Power-to gas (of which product sales recognised over time £25,000)	27	79	210
Refuelling (of which product sales recognised over time £nil)	709	138	(38)
Chemical Industry (of which product sales recognised over time £429,000)	430	(5)	1,870
Other	29	49	2,233
	1,195	261	4,275

GEOGRAPHIC ANALYSIS OF REVENUE

A geographical analysis of the Group's revenue is set out below:

	Q1 2021 £'000	Q1 2020 £'000	FY 2021 £'000
United Kingdom (of which product sales recognised over time £nil)	69	125	2,505
Rest of Europe (of which product sales recognised over time £454,000)	454	136	1,770
Australia (of which product sales recognised over time £nil)	672	-	-
	1,195	261	4,275

The following accounted for more than 10% of total revenue:

	Q1 2021		Q1 2020		FY 2021
	£'000		£'000		£'000
Customer A	430		<10%		1,870
Customer B	676		-		-
Customer C	<10%		92		<10%
Customer D	<10%		49		2,027
Customer E	-		30		<10%

1. 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:

	Three months ended 31 July 2021 £'000	Three months ended 31 July 2020 £'000	Year ended 30 April 2021 £'000
Loss from operations	(6,264)	(5,599)	(26,657)
Add back:
Depreciation	668	561	2,321
Impairment	-	-	1,713
Amortisation	163	57	274
(Gain)/ loss on disposal	-	(1)	173
Share based payment charge / (credit)	233	(166)	799
	(5,200)	(5,148)	(21,377)

1. Notes to the Cashflow Statement

	Three months to 31 July 2021 (unaudited) £'000	Three months to 31 July 2020 (unaudited) £'000	Year ended 30 April 2021 (audited) £'000
Loss from operations	(6,264)	(5,599)	(26,657)
Adjustments:
Depreciation of property, plant and equipment	668	561	2,321
(Gain)/ loss on disposal	-	(1)	173
Impairment	-	-	1,712
Amortisation	163	57	274
Share based payment (as seen through equity)	175	70	595
Operating cash flows before movements in working capital	(5,258)	(4,912)	(21,582)
Increase in inventories	(2,093)	(1,915)	(1,987)
Decrease in receivables	(898)	4,760	185
Decrease in payables	5,703	(1,886)	(1,156)
Increase in provisions	(1,599)	232	4,857
Cash used in operations	(4,145)	(3,721)	(19,683)
Interest paid	(130)	(115)	(479)
Income taxes received	-	-	21
Net cash used in operating activities	(4,275)	(3,836)	(20,141)

Cash Burn

Cash burn is a measure used by key management personnel to monitor the performance of the business.

	Three months to 31 July 2021 (unaudited) £'000	Three months to 31 July 2020 (unaudited) £'000	Year ended 30 April 2021 (audited) £'000
(Decrease)/ increase in Cash and Cash equivalents per the cash flow statement	(5,212)	(6,175)	136,181
Effect of foreign exchange rates	(101)	27	(22)
Less share issue proceeds (net)	-	(1,822)	(168,881)
Cash Burn	(5,313)	(7,970)	(32,722)

5. Related Parties

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. All related party transactions which were not intra group have been conducted at arms' length.

In the period, sales of hydrogen fuel to JCB Research (a corporate shareholder, represented on the Board by T Rae) totalled £nil (Q1 2020: £39; YE 2021: £141). The balance outstanding at the period-end was £260 (Q1 2020: £678; YE 2021: £260), which is deemed as being fully recoverable.

During the period purchases from Linde/BOC Group, represented on the Board by J Nowicki, totalled £0.2m (Q1 2020: £0.2m; YE 2021: £3.5m) with £nil outstanding for payment at period-end (Q1 2020: £nil; YE 2021 £0.3m). Furthermore, an amount of £0.6m brought forward from the year-end relates to stage payments made for goods not yet received (Q1 2020: £4.0m). Sales to Linde/BOC group in the period were £nil (Q1 2020: £0.3m; YE 2021: £0.4m) with £nil outstanding (Q1 2020: £nil; YE 2021: £13,684).

There were also stage payments of £3.8m (Q1 2020: £nil; YE 2021: £2.1m), which remained outstanding from ITM Linde Electrolysis GmbH at period end (amounts listed in comparative periods were also received post period ends). These were the only sales / purchase transactions made with that entity in the period. During the 2021 financial year, ITM Power engaged ILE for consultancy work equating to £0.8m, of which £0.2m remained unpaid at year-end. No such services were purchased from them in either Q1 period and nothing remained outstanding at the end of those periods.

6.  Post Balance Sheet Events

There are no significant changes post balance sheet.

-ends-

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