Half-year Report

27 January 2022

ITM Power plc

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

Half Year Results for the Six Months to 31 October 2021

ITM Power (AIM: ITM), the energy storage and clean fuel company, announces half year results for the six-month period ended 31 October 2021. Comparable figures, where stated, refer to the corresponding period in 2020 unless otherwise indicated.

Backlog and Pipeline| Reiterated from the Trading Update on 16 December:

·    Backlog of 499 MW as at 27 January

o Contracted: 86 MW compared to 62 MW in December

o In negotiation: 315 MW compared to 339 MW in December

o Preferred supplier: 98 MW unchanged versus December

·    Tender pipeline of 880 MW compared to 331 MW in January 2021

Commercial:

·    Project win for 24 MW in ammonia application, awarded in January 2022

·    Sinewave project grant from German government, awarded in January 2022

·   Refhyne II consortium awarded a grant of €32.4m by CINEA (the European Climate, Infrastructure and Environment Executive Agency) for the development of a 100 MW electrolyser to be sited at Shell's Energy and Chemicals Park, Rhineland - the project will see an engineering design phase which will be followed by a final investment decision (FID) expected in late 2022 with delivery then scheduled for 2024

·    Contract signed for delivery of 12MW of electrolysis equipment to be deployed in 2022, and recognised in the 2022/23 financial year

·    In November, UK Government Investment secured for Phase 1 of ScottishPower's 20 MW Whitelee Windfarm hydrogen production and storage facility

Operational:

·    Appointment of Principal Contractor Glencar Construction for the second UK factory for early design work

·    Refhyne I commissioning ongoing post switch-on and due for completion in Q1 2022

·    Gigastack I Project with BEIS successfully concluded to build prototype short stack Gigastack product

Financial:

·    Revenue of £4.2m (£0.2m), prior year reflecting impact of Covid-19 issues

·    Gross loss £2.6m (£2.8m)

·    Adjusted EBITDA Loss of £12.9m (loss of £10.4m)

·    Cash balance (excluding restricted balances) of £164.2m (£25.9m) at period end

·    Current cash of c.£390m after fund raise net proceeds of £242m received in November

·    Cash burn* of £11.8m (£14.0m)

*Cash burn is a non-statutory measure. Please see Note 5

Outlook:

·   Full year guidance of 33-50 MW products

·   Stacks to be included in standard products in excess of 55 MW

·   Revenue for standard product projects recognised at point-in-time:

o Leuna (24MW) obligations now forecast to conclude in late April.

o Leuna delivery close to year end presenting a timing risk

·    Continued long-term growth in tender pipeline and backlog expected

·    Spades in the ground in H2 calendar year 2022 for 2^nd UK factory

Graham Cooley, CEO, commented: "We are making very solid progress, with a number of projects won which have resulted in a significant increase in our work in progress. The Company is focussed on delivery of products and converting the tender pipeline into contracted projects."

Sir Roger Bone, Chairman, added: "The Company has invested heavily in skills and technology over the last year, and we now have a team of highly experienced professionals driving the business forward. The global market for green hydrogen is a dynamic new industry and ITM Power is very well placed as a global market leader. We look forward to announcing further contract wins in the period ahead."

There will be an analyst call today at 0930h GMT. Those analysts wishing to join the call should register to receive an invitation by contacting [email protected].

There will also be a presentation for investors at 1400h GMT on the Investor Meet Company platform.  Investors can sign up to Investor Meet Company for free and add to meet ITM POWER PLC via: https://www.investormeetcompany.com/itm-power-plc/register-investor 

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

About ITM Power plc

ITM Power 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 £58.8m fundraising, including an investment by Linde of £38m, together with the formation of a joint venture to deliver 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. In January 2021, the Company received an order for the world's then largest PEM electrolyser of 24MW from Linde. In October 2021, the Company, with Linde, announced the deployment of a 100MW electrolyser at Shell's Rhineland refinery, following the start-up of an initial 10MW facility at the site. In November 2021, ITM Power raised £250m to accelerate expansion.

ITM Power operates from the world's largest electrolyser factory in Sheffield with a capacity of 1GW (1,000MW) per annum, with the announced intention to build a second UK Gigafactory in Sheffield with a capacity of 1.5GW expected to be fully operational by the end of 2023. The Group's first international facility, expected to have a capacity of 2.5GW per annum, is intended to be operational by the end of 2024, bringing total Group capacity to 5GW per annum. 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.

CEO's Review

The global low carbon hydrogen sector continues to grow strongly.  More countries have announced hydrogen strategies and roadmaps - 39 in total by the end of 2021 - and this international interest in green hydrogen has been evident from contacts with and visits to ITM by government officials and ministers. Announced demand for clean hydrogen production capacity increased significantly, reaching 11m tonnes per annum by 2030 according to the mid-year Hydrogen Insights report from the Hydrogen Council.  This growth is forecast to accelerate.

Of some 500 announced clean hydrogen projects by the end of 2021, approximately 75% of production capacity is green hydrogen produced by electrolysis from renewable power with the balance accounted for by hydrocarbon-based production with carbon capture and storage.  Total associated investment in these projects is set to amount to some $500 billion.  In a report published this month, the International Renewable Energy Agency (Irena) stated that the gas supply crisis in Europe could speed up the adoption of green hydrogen which is now growing faster than Irena forecasts.

ITM Power is today very well positioned to capture a material share of the global green hydrogen market.  The period under review and the months to date saw the Company put in place the resources - financial, commercial and human - to take full advantage of the Group's leading position in technology, production capacity and operating experience.

Backlog and pipeline

The Company is pleased to report a total contracts backlog of 499 MW worth some £198m to the Company plus an increased work in progress of 86 MW, representing the near-term production plan. In addition, the tender pipeline now stands at 880 MW, up 145% year-on-year.

New contract highlights during the period included the sale of a 2 MW electrolyser (increased from the original 1.4 MW sale) to Sumitomo to be deployed at Tokyo Gas and receipt of EU funding for Shell's 100 MW Refhyne II project at the Rhineland refinery.  Post period end, the Green Hydrogen for Scotland Consortium, of which ITM Power is a member, received UK Government funding to support investment for the first phase of development for ScottishPower's 20MW Whitelee Windfarm hydrogen production and storage facility.

This week, the Company agreed the sale of a 24 MW electrolyser to Linde Engineering for ammonia production.  The electrolyser equipment is due to be ready for shipment from ITM Power in Q4 2022 with revenue realised in the Company's 2022/2023 financial year.  This is a key first project in the global ammonia market which is the largest existing hydrogen market.  The Company will provide an update on the customer and the site in due course.

Financial results

Revenue for the period was £4.2m (£0.2m).  The 2020 comparative reflected the Covid restrictions then prevailing that prevented access to site and completion of projects.  The Gross loss was £2.6m (£2.8m) and the loss before tax for the half year was £15.3m (£12.0m), reflecting an increase in overhead, predominantly around engineering and manufacturing resource, as the Company prepares for scale.  There was no grant income to offset cost of sales.  Basic and diluted loss per share was 2.8p (2.5p).

Cash and cash equivalents at period end were £164.2m (£25.9m), reflecting the £172m fund raise completed in November 2020 but not including the net £242m raise completed post period end in November 2021.  Cash burn for the period was £11.8m (£14.0m).

Production facilities

Just after the period end, in November, the Company announced plans to acquire a site for a second UK factory in Tinsley, Sheffield, from the University of Sheffield at a cost of £13.4m.  The site is part of the University of Sheffield Innovation District, close to the M1 motorway and public transport links and is approximately two miles from the Group's existing Gigafactory and Technology Centre at Bessemer Park.  The site will be the location for an automated factory of some 260,000 sq. ft with a capacity of 1.5 GW pa.  

One of the key features of the factory will be an enlarged power supply to test multiple modules of the Company's next generation product concurrently.  It will also include office space for manufacturing staff and will be a low environmental impact building, using the best of current low carbon technologies.  The new factory is currently expected to be fully operational by the end of 2023 to complement the existing 1 GW pa capacity at Bessemer Park.

The overall cost of the new factory is expected to be in the region of £50-55m. In addition to the land cost of £13.4m, the Company is currently allocating up to £16m for the construction of the shell, and a further £20-25m for the fit-out and power supply.  The new factory will provide the template for the Group's first international facility, which is expected to have a capacity of 2.5 GW pa, bringing total Group electrolyser capacity to 5 GW per annum by the end of 2024.

Technology

The ITM Power technology roadmap is focused on reducing cost, increasing efficiency and expanding production capacity of all of the Company's electrolyser products.  Work has included improved membrane materials, ultra-low catalyst loadings, in-house component preparation and adoption of semi-automation.  As a result, the Group has achieved significant performance gains in the stack module and is on track to deliver the new 5 MW Gigastack platform that will form the basis of future large-scale electrolyser deployments.

The Company has now applied these technology improvements to the next generation of 2 MW stack modules.  These will be deployed in the 24 MW electrolyser to be sited at the Leuna Chemical Complex in Germany.  This development represents a step change in performance with a 10% improvement in efficiency and a 50% increase in operating pressure to 30 bar.  This reduces both electrolyser operating cost and energy consumption associated with downstream hydrogen compression.  Production of the electrolyser modules for the Leuna project has commenced and is on track for delivery and commissioning in 2022.

At the heart of the Group's technology roadmap is the development of the 5 MW Gigastack platform.  Development commenced in 2019 with the completion of a feasibility study funded by the BEIS Hydrogen Supply Competition. This was followed by a second phase, also funded by the BEIS Hydrogen Supply Competition and covered two streams: a Front End Engineering Design study for a 100 MW deployment at Philips66 and Orsted and the development and validation of ITM Power's 5 MW stack platform.  This phase concluded recently with visits from project partners Philips66, Orsted and Element Energy, along with the UK Energy Minister and BEIS officials, to Bessemer Park when the Company presented its findings and showcased the first test station and prototype stack.

Taking place in ITM Power's Technology Centre at Bessemer Park, the testing programme for the 5 MW Gigastack platform includes both component level and full-scale evaluation.  Being 2.5 times larger than ITM Power's previous state-of-the-art stack platform, a purpose-built test rig has been developed in a purpose-built environment.  This enables automated long-term testing of short stacks comprising full scale cells.  Stack development and testing will now continue through 2022 within the Company's well-established verification process.  Alongside the continuous development of its technology, the Group has concentrated effort and resource on reducing product cost through value engineering and procurement. 

ITM Power continues to develop its suite of support services to provide best in class ongoing care for plant operation.  Using its state-of-the-art Remote Operating Centre, ITM Power can provide remote services across the globe 24/7.  Through its partnership model, the Company is establishing on-site services in new territories.

People

The Group now has over 350 full-time employees and expects this number to increase to some 450 as the scale of operations increases.  ITM made a number of senior appointments during the period under review as the Group continued to put in place the management resources required to become a multi-site international manufacturing business.

Martin Clay has been appointed Operations Director and joined from Kostal UK Ltd where he was Managing Director.  Nadia Sparrow has joined as Head of Procurement.  She was formerly Head of UK Procurement at Alstom and before that worked in procurement at JCB.  Helen Baker is the new Company Secretary, formerly Head of Secretariat at Coca-Cola Europacific Partners plc.  Chris Yewdall has become Projects Director, having latterly been Head of PMO (Project Management Office) at Rolls Royce plc.

Current trading

ITM Power is executing its strategy to increase production capacity to 5 GW by the end of 2024 to supply a growing base of customers sourced in partnership with Linde with a world leading product range that the Group will continue to develop.  Board, management and staff are working hard to deliver the plans set out at the time of the fundraise in November.

The next 12 to 18 months should see further progress made on the incentives that will be provided by governments to enable industry to transition to net zero.  The Board expects these financial incentives, however they are structured, to give industry and investors the models they need to take final investment decisions on projects that then do not need the support of government grants, creating very large regional markets for green hydrogen.

In the shorter term, the Company expects to meet its production expectations of 33-50MW of finished product and a total stack production in excess of 55MW. Revenue recognition for the Company's standard products is based on a point in time, where all commitments in a contract are fulfilled. As such, whilst the Company expects to have built all of the product for the £11m Leuna 24MW project, revenue recognition will be dependent on having passed Factory Acceptance Testing (FAT) on all 12 modules, currently expected to conclude in late April.

ITM Power and its partners confidently expect to announce additional projects as global green hydrogen markets continue to grow during the remainder of the year.

Dr Graham Cooley

Chief Executive Officer

26 January 2022

Independent review report to ITM Power plc

Introduction

We have been engaged by the company to review the financial information in the half-yearly financial report for the six months ended 30 October 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 half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial information.

Directors' responsibilities

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

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 half-yearly 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 half-yearly 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 macro-uncertainties on our review

Our review of the summary accounts in the half-yearly financial report requires us to obtain an understanding of all relevant uncertainties, including those arising as a consequence of the effects of macro-economic uncertainties such as Covid-19 and 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.

Covid-19 and Brexit are amongst 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 Covid-19 and Brexit.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the financial information in the half-yearly financial report for the six months ended 31 October 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

26 January 2022

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Results for the six months ended 31 October 2021

All results presented above are derived from continuing operations.

The loss per ordinary share and diluted loss per share are equal because share options are only included in the calculation of diluted earnings per share if their issue would decrease the net profit per share. The number of potentially dilutive shares not included in the calculation above due to being anti-dilutive at 31 October 2021 were 7,460,734 (31 Oct 2020: 8,896,298; 30 April 2021: 50,893,546).

CONSOLIDATED BALANCE SHEET

As at 31 October 2021

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Results for the six months ended 31 October 2021

CONSOLIDATED CASH FLOW STATEMENT

Results for the six months ended 31 October 2021

The interim summary accounts were approved by the board of Directors on 26 January 2022.

Notes to the interim summary accounts

1. Basis of preparation of interim figures

These interim summary accounts have been prepared using accounting policies consistent with 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 January 2023. 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 raises in both October 2020 and November 2021. 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. Change in Accounting Estimate

The directors have reconsidered the useful lives of the Group's fixed asset categories in order to reflect a change in the Group's purchasing habits over recent months. As plant and lab equipment is now being bought brand new, rather than second hand, this has resulted in a change to the expected useful lives of some categories of plant and equipment as follows:

The change has been treated prospectively and has impacted profit and loss in the current period to reduce losses by £232,000.

3. Revenue and other operating income

An analysis of the Group's revenue is as follows:

Revenues from major products and services

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

GEOGRAPHIC ANALYSIS OF REVENUE

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

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

4. 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:

5. Notes to the Cashflow Statement

Cash Burn

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

6. 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 (H1 2020: £76; YE 2021: £141). The balance outstanding at the period-end was £260 (H1 2020: £723; 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 £0.4m (H1 2020: £3.5m; YE 2021: £3.5m) with £0.1m outstanding for payment at period-end (H1 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 (H1 2020 & YE 2021: £0.6m). Sales to Linde/BOC group in the period were £nil (H1 2020: £nil; YE 2021: £0.4m) with £nil outstanding (H1 2020: £nil; YE 2021: £13,684).

There were also stage payments of £4.1m (H1 2020: £nil; YE 2021: £2.1m), of which £0.2m 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 transactions made with that entity in the period. ITM Power engaged ILE for consultancy work equating to £0.2m which was paid within the period (YE 2021: £0.8m, of which £0.2m remained unpaid at year-end). No such services were purchased from them in H1 2020 and nothing remained outstanding.

7. Subsequent events

In the period after the balance sheet date, the business successfully completed a £242m net fundraise to support manufacturing expansion both within the UK and to develop the first 2.5 GW international factory.

The business also agreed Heads of Terms for a land purchase, subject to planning permission, within Sheffield to site the next UK factory, with an expected production output of 1.5 GW per annum of product, to be completed in 2023.

-ends-