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2020
A N N U A L R E P O R T A N D F I N A N C I A L S TAT E M E N T S
SHAPING A
RENEWABLE
HYDROGEN
FUTURE
The world’s largest PEM electrolyser factory
Bessemer Park, Sheffield
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
5
SHAPING A RENEWABLE HYDROGEN FUTURE
In a world in which fossil fuel energy is becoming
ever more scarce and expensive – and countries
are struggling to meet their carbon reduction
and air quality obligations – hydrogen solutions
have finally reached the top of energy agendas.
ITM Power Plc manufactures integrated hydrogen
energy solutions to enhance the utilisation of renewable
energy that would otherwise be wasted. These products
meet the requirements for grid balancing and energy
storage services, and for the production of clean fuel
for transport, renewable heat and chemicals.
Air quality regulations are
stimulating the need for hydrogen
as a clean fuel for clean transport
emissions in city regions around
the world.
Energy storage provision has
started to become a mandatory
requirement in areas of the world
such as California. It is recognised
as an essential prerequisite for
renewable energy deployment.
Grid balancing and rapid
response demand-side
services are crucial for the
integration of high proportions
of renewable energy supply
on the electricity grid.
Energy security and fuel
security has risen to the top
of the geopolitical agenda.
Price volatility of fossil
fuels is driving an industrial
substitution to more sustainable
chemical processes.
Auto OEMs are rolling out Fuel
Cell Electric Vehicles (FCEVs)
that require a high purity hydrogen
fuel. Hyundai and Toyota have
commercial vehicles in production
with Honda being the latest
company to also offer a FCEV.
Global Hydrogen Refuelling
Station infrastructure programmes
are underway with significant
deployment plans in place.
CONTENTS
09
10
25
80
84
90
107
110
120
121
123
124
125
179
180
181
Officers and professional advisors
Highlights
Strategic report
Directors’ report
Corporate governance report
Remuneration committee report
Audit committee report
Independent auditor’s report
Consolidated income statement and other comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated cash flow statement
Notes to the consolidated financial statements
Company statement of changes in equity
Company balance sheet
Notes to the company financial statements
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
9
OFFICERS AND PROFESSIONAL ADVISORS
OFFICERS AND
PROFESSIONAL
ADVISORS
DIRECTORS
Sir R Bone
Dr S Bourne
Dr G Cooley
Dr R Smith
Mr A Allen
Mr M Green (Appointed 16/09/2019)
Mr J Nowicki (Appointed 1/11/2019)
Mrs K Roe (Appointed 6/05/2020)
Lord R Freeman (Resigned 3/10/2019)
Prof R Putnam (Resigned 31/10/2019)
Mr R Pendlebury (Resigned 31/07/2020)
COMPANY SECRETARY
Ms N Ham Edmonds (Appointed
16/09/19)
Mr A Allen (Resigned 16/09/19)
REGISTERED OFFICE
22 Atlas Way, Sheffield,
South Yorkshire, S4 7QQ
REGISTRARS
Link Asset Management
The Registry
34 Beckenham Road
Beckenham, BR3 4TU
NOMINATED ADVISOR
AND BROKER
Investec Bank plc
30 Gresham Street
London, EC2V 7QP
BANKERS
National Westminster Bank plc
1 Cathedral Square
Peterborough
Lincolnshire, PE1 1XH
SOLICITORS
Burges Salmon LLP
One Glass Wharf
Bristol, BS2 0ZX
AUDITOR
Grant Thornton UK LLP
Statutory Auditor
1 Holly Street
Sheffield, S1 2GT
PRESS AND INVESTOR ENQUIRIES
Tavistock Communications Ltd
1 Cornhill,
London, EC3V 3ND
10
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
HIGHLIGHTS
HIGHLIGHTS
DEVELOPMENTS IN THE LAST 12 MONTHS
•
Strategic partnership with Linde 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 (one of the world’s leading energy
infrastructure operators), including a £30m
strategic investment, announced today,
including an initial 100MW preferred supplier
indicative commitment to 2024
•
Equity fund raise of £150m (including the Snam
investment) plus a £7m open offer to accelerate
development also announced today
•
Record current backlog of £118.7m (previous
high £55.0m) and tender opportunity pipeline
of £324.9m (£263m as at June 20)
• Near completion of the worlds’ first Gigafactory
in Bessemer Park, Sheffield, expected to reach
annual production capacity of 1,000MW per
annum by end of 2023
•
EU funding of €150 billion announced for green
hydrogen in the 10 years to 2030
• A total of five European governments have
now stated explicit electrolyser targets for
2030: France 6.5GW, Germany 5GW, Spain 4GW,
Holland 3-4GW and Portugal 2GW
2020 FINANCIAL RESULTS
•
•
Revenues and EBITDA adversely affected by
COVID-19, Brexit and the adoption of IFRS 15
Total Revenue & Project Grant Funding of
£5.4m (2019: £17.5m) down 69%, comprising:
▪
Sales revenue: £3.3m (2019: £4.6m) down
28%
▪ Collaborative grant income recognised:
£2.1m (2019: £12.9m) down 84%
▪
Loss from operations £29.4m (2019: £9.3m)
▪ Adjusted EBITDA loss (see note 6) £18.1m
(2019: loss £7.3m), increased 148%
▪ Available cash balance of £39.9m at year-
end (2019: £5.2m)
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
11
HIGHLIGHTS
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 focussing on large-scale
electrolyser deployments
• Appointment of Martin Green and (post year-
end) Katherine Roe as non-executive directors
• Appointment of Juergen Nowicki as non-
executive director following the investment
received from Linde Engineering
12
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
HIGHLIGHTS
HIGHLIGHTS
UPDATES
Clean Fuel
•
15 wholly owned Hydrogen Refuelling Station
(HRS) assets in ITM Power’s portfolio:
▪ Nine are open to the public; six are in
various stages of construction
• Hydrogen fuel contracts now 36 in total (2019:
33) with fuel sales reduced to 31 tonnes for the
year (2019: 32 tonnes), down 3%
•
Refuelling assets now grouped together under
ITM Motive with Duncan Yellen appointed
as MD to implement a strategy to achieve
profitability by focussing on larger scale
refuelling projects for fleets, buses and trains.
Power-to-Gas
•
ISCF Green Hydrogen for Humberside award
- Hydrogen supply competition, direct coupling
with wind turbine and off-shore locations
Industrial
• Completion of the Gigastack feasibility study
and award of phase 2 funding (£7.5m) for a
Front-End Engineering Design (FEED) study
for a 100MW refinery deployment with Orsted,
Phillips 66 Limited and Element Energy.
•
Shell Refhyne project programme progressing
well with all five 2MW electrolysers built and
phase one of factory acceptance testing
successfully completed
2020 has been a transformational year for ITM Power. We attracted a strategic investor and joint-venture partner
in Linde, one of the world’s leading gas companies, we strengthened our balance sheet so that we can take full
advantage of the mushrooming 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
Dr Graham Cooley
ITM Power Plc, CEO
The world’s largest PEM electrolyser factory
Bessemer Park, Sheffield
14
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
CHAIRMAN’S STATEMENT
CONTENTS
CHAIRMAN’S STATEMENT
2020 is the year in which the market dynamics for large
scale hydrogen has changed, especially with the EU
package detailing a market worth €140bn by 2030,
supported by a commitment to 40GW of electrolysis,
and with individual countries launching large, multi-GW
packages with explicit commitments from Germany,
Spain, Holland and Portugal totalling 15GW.
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 partnership
with global companies very well placed to offer solutions
to the demand seen in the global market.
In closing, I would once again like to thank all
shareholders for their continued support and to give
special recognition to the staff at ITM, for their hard work
and loyalty in 2020.
The year to April 2020 was a year of transition for the
company, as the build of Bessemer Park, our new 1GW
factory continued, and the company developed its
relationship with Linde Engineering after their £38m
investment in October 2019. The partnership with Linde
has enabled ITM to have a solutions-led approach to
many markets, and has seen an improvement in the
way the company develops bids with the associated
engineering discipline required to convert more
opportunities.
At the time of these results, the company is announcing
a £150m fund raise to accelerate the technology offering,
both in terms of performance of the existing products
but also to accelerate the development of the 5MW
Gigastack, in a direct response to market dynamics and
the evidence of market readiness for larger systems.
As part of the fund raise, ITM announces an equity
investment and partnership from SNAM, whereby ITM
and SNAM will work together to develop opportunities in
Italy and around the world, and shall also share expertise
and knowhow in project and business development. The
partnership includes an indicative commitment from
SNAM for 100MW of electrolysis to be ordered before
December 2024.
During the past year the Company made changes to the
board, with Martin Green and Juergen Nowicki having
joined the board, and the resignations of Roger Putnam
and Bob Pendlebury. I took over from Roger Putnam as
Chairman of the Board on 1 November 2019. I welcome
the new non-executive directors to the board, including
Katherine Roe who joined us post year-end, and look
forward to working with them in years to come.
Chairman handover
Sir Roger Bone and Prof Roger Putnam
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
CONTENTS
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
17
CORPORATE UPDATE
CORPORATE UPDATE
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. A contingent liability has been added and
disclosed in note 29 to the accounts around the delays
caused by different national Covid strategies and rules,
and how this may impact our resources across our
ongoing projects.
Management will continue to monitor the effect of
Covid-19 closely to deploy personnel efficiently over
the coming financial year in order not to cause undue
delay to projects. The full impact remains unknown and
as such, we have been undertaking a review of revised
projects timelines.
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 power supply and fitting out the entire premises.
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.
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.
The Group had hoped to transition the majority of its
operations into PLP 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 shortage. The office spaces are
now available and are helping staff who might otherwise
have struggled to maintain social distancing in our other
buildings. Our manufacturing facilities will move into the
new space in November 2020.
20
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
MARKETING UPDATE
MARKETING UPDATE
A new company website was launched December 2019,
which included main sections for investors, press and
media as well as a large market section, highlighting the
main market applications for hydrogen. The website has
been well received and continues to attract a growing
number of new visitors and enquiries per month. A brand
and website were also created for ITM Linde Electrolysis
GmbH in partnership with Linde Engineering, which was
launched in March.
ITM Power has been active in supporting the Gigastack
project and developing communications alongside
BEIS, Orsted and Phillips 66 Limited, resulting in a
ministerial visit of Minster for Business, Energy and
Clean Growth, Kwasi Kwarteng at the opening event in
February. ITM Power also hosted a visit in February from
the Conservative Party Chairman, Amanda Milling, who
met with Dr Graham Cooley, CEO, enjoyed a tour of the
factory and drove and refuelled the fuel cell Toyota Mirai.
The Group continues to send out monthly
communications via a newsletter and we have a growing
number of sign-ups to receive the news each month.
This year saw the cancellation of several exhibitions
including the Hannover Messe, normally a key event in
the ITM Power calendar and the source of much interest
for our technology.
The Group had also planned to exhibit and present
in February for the first time at the FC Expo, Japan,
alongside partners Sumitomo, Dr Simon Bourne, CTO,
had been invited to present in the technical session
and introduce the company’s product range, but due to
Covid-19 risks the company decided not to travel and
attend in person.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
23
PRODUCTS AND TECHNOLOGY
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-generation stack efficiency
through incremental advances within the laboratory.
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.
Despite Covid-19 the REFHYNE project at Shell hosted a visit from the EU
commissioner for Energy, Kadri Simson
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
25
STRATEGIC REPORT
STRATEGIC
REPORT
26
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
STRATEGIC REPORT
STATEMENT
OF SCOPE
The purpose of the Strategic report is to inform the
members as to how the directors have performed in their
duty to promote the success of the Group.
The Strategic Report contains certain forward-looking
statements. These statements are made by the directors
in good faith based on the information available to
them up to the time of their approval of this report and
such statements should be treated with caution due to
the inherent uncertainties, including both economic
and business risk factors, underlying any such forward-
looking information.
This Strategic Report has been prepared for the Group as
a whole and therefore gives greater emphasis to those
matters that are significant to ITM Power Plc and its
subsidiary undertakings when viewed as a whole.
The world’s largest PEM electrolyser factory
Bessemer Park, Sheffield
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
27
STRATEGIC REPORT
BUSINESS
MODEL
Introduction
ITM Power Plc designs and manufactures integrated
hydrogen energy systems based on Proton Exchange
Membrane (PEM) electrolyser technology and has a
product offering that is scalable above 100MW in size. Of
particular importance is the ability to respond rapidly and
to generate hydrogen at a pressure, flow rate and purity
appropriate to its application.
ITM Power Plc is a globally recognised expert in hydrogen
technologies with the overarching principle to take
renewable energy from the power network or other
directly coupled sources, convert it into green, zero-
carbon-footprint hydrogen and use it in one of three
broad applications – Power to Gas, Clean Fuels and
Industrial Hydrogen. We believe that all of these markets
will grow significantly over the next few years based on
the commitment by governments worldwide to mitigate
climate change, the growth of renewables in the energy
mix and the need to decarbonise industrial processes.
We believe that ITM Power Plc remains uniquely well-
placed to capture material shares of each market.
Working with Linde GmbH
Over the course of the last few years, we have 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 50% investment in ITM Linde
Electrolysis GmbH, 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 the new company.
This shift in our business model enables us to concentrate
our efforts on the provision of green electrolysis
equipment.
28
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
STRATEGIC REPORT
BUSINESS
ENVIRONMENT &
ANNUAL REVIEW
OF THE BUSINESS
“Net Zero – the UK’s Contribution to Stopping
Global Warming”
In May 2019, the Committee on Climate Change
published a report, requested by the UK, Scottish
and Welsh Governments in light of the Paris
Agreement and the Intergovernmental Panel
on Climate Change’s Special Report in 2018.
The report stated that the UK could end its
contribution to global warming within 30 years
by setting an ambitious new target to reduce its
greenhouse gas emissions to zero by 2050.
From the very start it highlighted the vital role that
hydrogen could play to achieve such a target and
predicted (depending on load factor) between
6 GW and 17 GW of electrolyser capacity would
be required in the UK by 2050. This implies an
average build rate of up to 567MW of electrolysis
per annum for 30 years.
Low-carbon hydrogen moves from being a useful
option to a key enabler in the quest for a net-
zero emission target, according to the report,
which urged the government to adopt the
recommended target and update policy to reflect
that.
The Report also covered the potential for
hydrogen in reducing emissions in heating and
cooking, the use in industry of green hydrogen,
in fuel cell electric vehicles, in ports and in
agriculture.
ITM Power welcomed the findings of this report,
which highlighted the many benefits that clean
production of hydrogen offers in eliminating
carbon. We have the experience and capability
to help deliver the UK’s carbon reduction targets.
Our products in energy storage, industry and
transportation sectors are already delivering
benefits to forward thinking customers in the UK
and in many other parts of the world.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
29
STRATEGIC REPORT
Alongside the predicted growth trajectory for
electrolysis, the cost outlook for green hydrogen
is also positive. The Hydrogen Council expects
green hydrogen to become cost competitive with
grey hydrogen by 2025 assuming a €50 per ton
CO2 price. An 80GW electrolyser target for Europe
by 2030 has been proposed, where electrolysers
feed into a hydrogen transmission network that
interconnects the renewable energy resources
of the North Sea, Morocco and Ukraine with
the demand centres of Europe. Further afield,
Australia is actively pursuing opportunities to
export green hydrogen and has estimated that 69
per cent of the 2025 global market for hydrogen
will lie in its four target markets of China, Japan,
Korea and Singapore.
The emerging trends in different industrial
sectors, together with increasing acceptance
by governments around the world that green
hydrogen is an essential vector to achieve their
carbon reduction commitments, bode very well
for the electrolysis market.
Governments are increasingly recognising the role
of green hydrogen as a decarbonisation tool. The
U.K. government has introduced an overarching
net zero target and placed an early focus on
decarbonising industrial clusters that will lead to
progressively larger deployments of electrolysers.
The European Commission has recently
established a Clean Hydrogen Alliance to
accelerate the decarbonisation of EU industry.
In addition, it is about to introduce a Renewable
Energy Directive II, which will facilitate green
hydrogen adoption by refineries and introduce
a Smart Sectoral Integration Package which is
widely expected to set targets for hydrogen
admixtures in the gas grid. These emerging policy
frameworks will have a major impact on the scale
of the European electrolysis market. A total of
three European governments have now stated
explicit electrolyser targets for 2030: Germany
5GW, Holland 3-4GW and Portugal 2GW.
POWER-TO-GAS
32
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
POWER-TO-GAS
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. Battery technology cannot achieve this
at the scale required. In the last year, the offshore wind
and gas sectors have started to advocate green hydrogen
as the means for sustaining their long-term business
models.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
33
POWER-TO-GAS
Power-to-Gas can meet the demand for long-term,
large-scale energy storage, converting surplus renewable
energy into hydrogen gas by rapid response electrolysis
and subsequently injecting it into the gas distribution
network. These grid balancing services can be an
important source of revenue for operators and ITM Power
Plc’s rapid response Proton Exchange Membrane (PEM)
technology allows units to be turned on and off in under
one second making them eligible for the UK National
Grid’s Enhanced Frequency Response Payments.
ITM Power Plc 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.
BigHit: Orkney Islands
Part funded by the FCHJU and Innovate UK, an ITM Power
1MW electrolyser on the Orkney Islands is in operation,
producing hydrogen from excess wind. The Big Hit
project will continue for a further two years collecting
data and evaluating performance to reinforce the
business case for island hydrogen systems.
34
34
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2017
POWER-TO-GAS
POWER-TO-GAS
HYDEPLOY:
HYDROGEN IN THE UK
GAS GRID
Funded by Ofgem and led by Cadent and Northern Gas
Networks, HyDeploy is a year-long live energy trial to
establish the potential for blending up to 20% hydrogen
into the normal gas supply to reduce carbon dioxide
emissions. ITM Power’s role was to provide a 0.5MW
electrolyser to inject zero carbon hydrogen into a gas
network to heat homes and businesses. This first UK pilot
project at Keele University delivered the longest period
of continuous blending operation to date in March 2020
supplying gas for domestic heat and cooking.
Two further trials will follow with ITM Power electrolysers
on public gas networks in the north of England. The aim
is to build support for a much wider roll-out. If adopted
across the UK, using hydrogen like this could save the
same amount of carbon as taking 2.5 million cars off the
road.
HyDeploy is a pioneering landmark national
demonstration project, using our campus as a
genuine ‘living laboratory’ for low carbon and
energy efficient technologies. HyDeploy has
the potential to be hugely impactful and lead
to a step change in the reduction of carbon
emissions associated with heat.
Professor Mark Ormerod
Deputy Vice Chancellor
Keele University
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2017
35
POWER-TO-GAS
We know our existing gas networks are in good shape
to help the UK meet its climate change targets. Blending
hydrogen in this way means customers will use gas
tomorrow as they do today, without any disruption or
need to change their pipes or appliances.
Simon Fairman
Director of Safety and Network Strategy
Cadent
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ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
POWER-TO-GAS
BRITISH COLUMBIA
HYDROGEN
FEASIBILITY STUDY
In July 2019, ITM Power announced the completion of a
techno-economic feasibility study funded by the British
Columbian Government, with support from partners
Mitsui & Co., Chiyoda Corporation and BC Hydro.
The study commenced in April 2018 with the aim of
examining the potential for large-scale production of
renewable hydrogen in British Columbia, which could
be used domestically and for export to California and
Japan using ITM Power’s state of the art PEM electrolyser
technology and Chiyoda Corporation’s newly developed
liquid organic hydrogen carrier, SPERA Hydrogen. British
Columbia brings a number of competitive advantages to
the establishment of a first-of-its-kind large renewable
hydrogen industry including the availability of renewable
electricity, the abundance of freshwater and the
proximity of numerous production sites to deep water
harbours for the export of hydrogen to markets in the
United States and Asia.
Government is taking bold action to meet the climate
targets set out in our world-leading CleanBC plan.
Producing and exporting made-in-BC hydrogen power
is an exciting opportunity to reduce greenhouse gas
emissions, boost our economy and create good clean
energy jobs.
Hon. Michelle Mungall
British Columbia Minister for Energy, Mines and
Petroleum Resources
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
37
POWER-TO-GAS
The results of the study will be used by ITM Power,
Mitsui & Co. and Chiyoda Corporation to consider the
installation of a facility in British Columbia that has the
potential to be the world’s largest hydrogen production
facility.
The study analysed potential locations for the practical
installation, operational business cases for up to 300MW
of electrolysis, demand for hydrogen in the domestic
market to help British Columbia meet the goals of a
new zero emission vehicle policy, and international
markets for large scale export. It highlighted a number
of attractive opportunities that provide the basis for
British Columbia to leverage its vast renewable electricity
generation capacity to become a world leader in
the production and export of renewable electrolytic
hydrogen whilst providing socio-economic benefits
including business development and job growth for local
communities including the First Nations people.
King Willem Alexander opens HyStock, where ITM Power Plc supplied the electrolyser to Gasunie
CLEAN FUEL
40
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
CLEAN FUEL
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.
Clean fuels
The transport sector is one of the largest users of fuel in
the world, and currently it is dependent on fossil fuels,
which are highly polluting and are becoming ever scarcer
and more expensive.
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.
Hydrogen is light and can be stored under pressure,
making it suitable for many vehicle types as it does not
add further weight, or use further energy when on board.
An additional benefit of hydrogen is its role in supporting
the drive for cleaner air, especially important in densely
populated cities. When hydrogen fuel cell electric
vehicles are driven, the only emission is water vapour and
each three-minute car refuel provides a range of up to
400 miles.
Gatwick Airport is delighted to host a hydrogen refuelling
station provided by ITM Power, to encourage the further
take-up of clean emission transport for visitors to the
airport and local fleet operators. We recognise the value
of hydrogen as a renewable clean fuel that can contribute
towards our decarbonisation and air quality objectives,
and we look forward to its expanding role in transport
and energy.
Tim Norwood
Corporate Affairs, Planning and Sustainability Director,
Gatwick Airport
Shell has been working with ITM Power over the
last three years to deliver hydrogen refuelling to our
customers in the UK. The successes we have achieved at
Shell Cobham and Shell Beaconsfield are a strong step
toward making Hydrogen a convenient and viable fuel
choice, and we look forward to continuing to expand the
UK’s developing network.
Mike Copson
Shell Hydrogen
42
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
CLEAN FUEL
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 revenue.
Fulfilling our duties during the Covid-19 lockdown does
not mean that we should abandon our commitments to
lowering carbon emissions. We salute all those key workers
who are keeping us all going.
Jiggs Bharij
Head of Fleet Services, Metropolitan Police
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
43
CLEAN FUEL
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
Plc has won contracts to supply on-site hydrogen
generation equipment for refuelling in the UK, France,
the US and Australia. In the current year we have still
been working to deploy bus refuellers in Birmingham
and Pau.
The Birmingham Bus Project was to be ITM Power’s
first project in the hugely promising hydrogen
fuel bus segment and was expected to enhance
our competitive advantage for additional future
opportunities. The 3MW Electrolyser is built and works
have been in progress at Tysley Energy Park, however,
delays in the provision of the buses have resulted in
the bus refueller being put on hold. It is hoped that
ITM Power’s onsite works for the second phase, as it
has now become, can be scheduled shortly after the
opening of the car refueller early in the new financial
year.
44
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
CLEAN FUEL
The ITM Power 0.5MW electrolyser central to the Pau
bus refueler project in France was put into operation
and enabled the launch of Pau City’s Hydrogen Bus
Fleet in December 2019. Since then over nine tonnes
of hydrogen have been produced and used by the
buses in seven days per week refuelling, prior to the
site shutting down in March as a result of Covid-19
restrictions.
The Group announced the formation of the
H2OzBus Project and the signing of a memorandum
of understanding with strategic partners. The
Consortium will undertake a project to deploy an
initial 100 hydrogen fuel cell electric buses in cities
across Australia in Phase 1, with the intention to
use this as a seed for more widespread roll-out. The
H2OzBus Project partners are Ballard Power Systems,
BOC Limited, Transit Systems, Palisade Investment
Partners and ITM Power.
ITM Power has signed a further agreement to supply
an 8MW multi vehicle electrolyser suitable for
refuelling large vehicles in the UK. The agreement,
including associated project costs, has a total value of
£10m and funding will fall across FY2021 to FY2022.
By working with industry leaders ITM Power and BOC
to bring our collective expertise together, we will
maximise the potential of this new technology to
offer fleet operators and industry a packaged solution
that brings all of the pieces of the jigsaw together -
production, distribution, supply. All they have to do
is provide the vehicles. We have a huge opportunity
here to bring net zero ever closer for the benefit of
everyone and support a better future, quicker - and
we will make it happen
Lindsay McQuade
CEO, ScottishPower Renewables
Post year end, A pioneering Strategic partnership
has been established to create new green hydrogen
production facilities with clusters of refuelling
stations across Scotland, supporting the country’s
efforts to achieve net zero by 2045. ‘Green Hydrogen
for Scotland’ - a partnership of ScottishPower
Renewables, BOC (a Linde company) and ITM Power
- brings together industry-leading names in the
renewables and clean fuel industries to offer an end-
to-end market solution for reducing vehicle emissions
through the provision of green hydrogen.
The partnership’s first project, ‘Green Hydrogen for
Glasgow’, is designed to provide carbon-free transport
and clean air for communities across the city, which
wants to become the first net-zero city in the UK.
A proposed green hydrogen production facility
located on the outskirts of the city will be operated
by BOC, using wind and solar power produced by
ScottishPower Renewables to operate a 10MW
electrolyser, delivered by ITM Power. The project aims
to supply hydrogen to the commercial market within
the next two years.
This project also supports the Scottish Government’s
decarbonisation targets and Glasgow City Council’s
commitment to creating a zero emissions vehicle
fleet, using only electric and hydrogen-powered
vehicles by the end of 2029.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
45
CLEAN FUEL
Hydrogen is a key element of the energy supply of
the future. The HyStock hydrogen plant is the first
specific step towards making a real effort to achieve
the required further growth in the use of sustainable
hydrogen throughout the chain, from production to
usage.
Han Fennema
CEO, Gasunie
New use for Hydrogen from the GasUnie Green
Hydrogen Electrolyser Plant in the Netherlands
Gasunie’s Hystock green hydrogen plant in Veendam
near Groningen was opened by King Willem-
Alexander in June 2019. Gasunie manages and
maintains the infrastructure for the large-scale
transport and storage of gas in the Netherlands and
the northern part of Germany.
ITM Power supplied the 1MW PEM electrolyser
system, which will use renewable energy and water
to generate hydrogen. The intention was to use the
hydrogen on-site or to fill tube trailers for deployment
at other plants. In fact, the electrolyser filled tube
trailers during March and April and the hydrogen gas
produced by the ITM Power electrolyser was used
to provide fuel for the first hydrogen train in the
Netherlands, on its maiden voyage.
INDUSTRIAL
48
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
INDUSTRIAL
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,
steal 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 Plc’s PEM
electrolysers could provide an immediate backup solution
to prevent production downtime and preserve security of
hydrogen supply.
Finally, in steel making, iron ore requires chemical reduction
before being used to produce steel; this is currently
achieved through the use of carbon, in the form of coal or
coke. When oxidised, this leads to emissions of about 2.2
tonnes of CO2 for each tonne of liquid steel produced. The
substitution of hydrogen for carbon has the potential to
significantly reduce CO2 emissions, because hydrogen is
an excellent reducing agent and produces only water as a
by-product.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
49
INDUSTRIAL
THE COMPANY’S
FLAGSHIP REFINERY
PROJECT WITH SHELL
IN GERMANY
In June 2019, the Refhyne consortium announced the
commencement of construction of the 10MW hydrogen
electrolysis plant at the Shell Rheinland refinery in
Wessling. Since then, the programme is progressing
well and has provided valuable ‘first of a kind’ lessons.
ITM Power’s manufacture of the 10MW electrolysis
plant is ongoing, with all five 2MW modules now built
and these have completed the first stage of Factory
Acceptance Testing (up to 85% load). In the meantime,
other parts of the system are being sent ahead to the
refinery and detailed planning around the installation
and commissioning phase is underway in conjunction
with Shell and their sub-contractor partners. Site works
in the Rhineland Refinery are progressing but delays are
now anticipated due to Covid-19 restrictions affecting
suppliers and the testing and build phases. Cost
overruns are anticipated for the project due to higher
than anticipated EPC costs, primarily installation and
commissioning costs for key components. The Company
is working with Shell to seek to minimise anticipated
cost overruns, currently forecast to be £3.5m, in line with
previous guidance.
FCH-JU funded projects like REFHYNE give the
opportunity to the European electrolyser industry to
build equipment that meets the strict standards of the
European refining industry. They will help reduce the
CO2 footprint of large industrial processes through the
production of green hydrogen.
Bart Biebuyck
Executive Director
EU Fuel Cells and Hydrogen Joint Undertaking
50
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
INDUSTRIAL
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
5MW electrolyser ‘stack’. Now a further £7.5m has been
awarded for the next phase, where ITM Power will get the
chance to install and trial a prototype as well as the semi-
automated manufacturing machines required for large-scale
and high-volume manufacture of these next-generation
low-cost stacks. This will help validate a complete
production system capable of delivering hundreds of
megawatts of electrolysers per year.
Led by Ørsted, the consortium will also conduct a Front-End
Engineering Design (‘FEED’) study on a 100MW electrolyser
system using staged installations with a nominal capacity of
20MW. The FEED study will use ITM Power’s new generation
of electrolyser stack technology together with renewable
energy directly from Ørsted’s offshore wind farms, to
supply renewable hydrogen to an industrial off-taker,
in this instance Phillips 66 Limited’s Humber Refinery. A
key objective of the Gigastack project is to identify and
highlight regulatory, commercial and technical challenges
for real applications of industrial-scale renewable hydrogen
systems.
Creating renewable hydrogen with offshore wind really has the potential to decarbonise industrial processes, and what
is needed now is to scale up the electrolyser technology and bring the cost down. We’ve seen this happen in offshore
wind. With industry and government working together, there has been a rapid deployment and a huge cost reduction.
This project aims to do the same with hydrogen. At the right cost, this technology has the potential to play a huge role
in meeting the UK’s decarbonisation targets.
Anders Christian Nordstrøm
Vice President for Hydrogen, Ørsted
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
51
INDUSTRIAL
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.
We aim to demonstrate to the UK Government, our
industrial partners and the rest of the world the potential
benefits of green hydrogen to the reduction of carbon
emissions. This project will help to create a blueprint for
cleaner industry that can be rolled out elsewhere.
Ben Madden
Managing Director, Element Energy
It will lead to the production of renewable hydrogen at the
Gigawatt (GW) scale distributed to industrial energy users
in Immingham. Decarbonisation of this cluster is critical in
reaching the UK’s legally binding 2050 net zero emission
targets. Humberside, the UK’s largest cluster by industrial
emissions, (12.4Mt of CO2 per year), contributes £18bn* to
the national economy each year and has access to a large
renewable resource from offshore wind in the North Sea.
The project will work with customers in the region
to establish the feasibility of switching to renewable
hydrogen and justify a number of 100MW deployments of
electrolysers. The project will cost the supply of hydrogen
to these end users. This includes the electricity supply to
the electrolyser, the hydrogen production facility, hydrogen
distribution across the Humber and conversion of existing
processes to use renewable hydrogen.
* https://www.zerocarbonhumber.co.uk/wp-content/uploads/2019/11/
Capture-for-Growth-Zero-Carbon-Humber-V4.9-Digital.pdf
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
53
REVENUE STREAMS FOR THE GROUP
REVENUE STREAMS FOR THE GROUP
Fuel sales revenue (own and operate model)
The Group has been the beneficiary of funding from
UK and EU bodies, which has helped accelerate
infrastructure development for the provision of hydrogen
to fleets and individuals.
Grant funding for innovation and scale up
The Group utilises funding from grant bodies to
contribute towards research and the technical
advancement of the electrolyser product through
offering greater efficiencies which manifest as cost
reduction of the ITM Power Plc systems.
As well as having potential revenue streams from three
large application markets, there are a variety of ways in
which the Group can generate revenue globally:
Sales of systems
ITM Power Plc positions itself as the provider of PEM
electrolyser systems, selling to a range of customers
and target markets globally. The Group offers standard
containerised and modular large-scale solutions based
around our core technology.
Design and consultancy revenue
Many system contracts that are bespoke are preceded by
a design study or a Front-End Engineering Design (FEED)
contract that defines solutions to customer specifications.
Maintenance revenue
ITM Power Plc offers warranties on systems, which
are valid alongside ITM Power Plc remote support
and maintenance contracts. Thus, the Group expects
to manage a growing income stream as system
deployments continue.
54
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
FINANCIAL PERFORMANCE
FINANCIAL
PERFORMANCE
ITM Power Plc continues to be first and foremost a
manufacturer, with the majority of revenue coming from
construction contracts to build full hydrogen systems.
Sales revenues in the year continued in the main to
be generated across three build projects, providing
electrolysers in each of our target markets. The last of the
adjustments made on transition to IFRS 15 “Revenue from
contracts with Customers” released from deferred income
and recognised as revenue in the year (resulting in an
increase of £10k).
Meanwhile, consultancy income rose from £0.07m in
2019 to £0.5m due to a design and proof of concept
project commissioned by BEIS.
Fuel sales remained consistent at £0.37m (2019: £0.37m),
in part hampered by the Covid-19 lockdown, despite
continuing to provide hydrogen road fuel to emergency
service workers.
New collaborative project funding recognised in the year
was £2.046m. This funded research and data collection
projects or subsidised proof-of-concept sales.
The pre-tax loss for the year under review increased
to £29.52m (2019: £9.32m). This can be attributed to
similar factors as last year; firstly, the ongoing installation
of first-of-a-kind large scale plant in new and varied
situations; secondly, increased costs of recruitment in
the year as the Group continued to grow in preparation
for delivery of ITM Power Plc’s future order book; but
also thirdly the effect of the Covid-19 lockdown on our
ability to complete the handover of sales projects to site
acceptance and recognise their revenue under IFRS 15.
There was also the effect of IFRS 16 Leases as ITM Power
entered into the new lease for Bessemer Park, increasing
the amounts passing through the income statement,
albeit now as depreciation and interest rather than rent
(see note 2).
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
55
FINANCIAL PERFORMANCE
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. [The investment
agreement commits the Group to work exclusively with
ITM Linde Electrolysis GmbH for projects which have
material EPC work included within it, further mitigating
that risk.]
Net cash burn increased to £23.34m before fund raise
(2019: £15.23m). Cash burn is a non-statutory measure
the directors use to monitor the Group, and is calculated
by deducting from annual cash flow (£34.73m) the effects
of any equity fund raise (£58.07m). A key factor in this
movement is that we have continued to invest in our
future, as illustrated by the increase in the investment
activities section of the cashflow statement from £3.5m
in 2019 to £11.1m in the current financial year. Within
this cash burn figure, there are the sums paid to date on
our new building as it is remodelled and fitted out for
operations in the next financial year.
56
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
FINANCIAL POSITION
FINANCIAL POSITION
In the year, the Group capitalised development costs
of £1.60m (2019: £0.38m). This was for developments
in our product technology that will continue to keep
the Group at the forefront of PEM electrolysis, as well
as the continuing design of standard products and
development of internal procedures that will facilitate
our offering to the markets. The directors see continued
product development as key to building commercial
traction.
a trading history can be developed to assist our credit
rating. Prepayments and accrued income totalled £15.6m
(2019: £22.5m), down 31%.
Trade debtors at both year-ends predominantly relate to
grant income debtors (2020: £4.3m and 2019: £6.4m). At
year end, the Group had trade creditors of £2.5m against
a prior year balance of £3.4m. This number has decreased
due to the timing of the Covid-19 lockdown.
Overall, creditors have decreased from £16.9m (2019)
to £14.0m. The figure continues to be dominated by
deferred income (£9.2m in the current year and £11.9m
in 2019), which reflects both money received up front
on contracts and grant income receivable against
payment of pro forma invoices. This latter income is
generated as grant claims are made against defrayed
costs, including any stage payments to suppliers. The
income would normally sit against the costs of the build
to which it relates. However, until the parts arrive and
become incorporated in that build, the grant income sits
unmatched on the balance sheet.
Despite a £5.4m impairment of our refuelling assets
(explained in note 4), there was also an increase in fixed
assets (excluding right of use assets) to £6.5m from
£5.74m in the prior year. The uplift relates predominantly
to the leasehold improvements at our new premises.
At year end, ITM Power Plc had current assets totalling
£67.5m (2019: £38.3m). Funds in the bank totalled
£41.0m (2019: £6.9m), of which amounts on guarantee
totalled £1.1m (2019: £1.7m). The Group has previously
been required to place amounts on guarantee as cash
cover, which limits working capital available to the Group
mid-contract. ITM Power Plc continues to structure
quotes to obtain sufficient monies up front to limit the
adverse impact of increased activity on working capital.
Total receivables excluding restricted cash amounts have
reduced from £29.5m (2019) to £22.1m. However, this
balance is still dominated by pro forma and early stage
payments made to suppliers for stock items required in
the next wave of units through production. As systems
in production become larger and more sophisticated,
the need to find new suppliers who can meet our
requirements for parts means that we are faced with
higher volumes of staged or up-front payments until
58
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
KEY FINANCIALS
KEY FINANCIALS
A summary of the financial KPIs is set out in the table below and discussed in this section. This year’s and last year’s
revenue figures are not comparable with prior years due to the change in accounting standard from IAS11 to IFRS15 in
2019, which did not require 2018 and prior numbers to be restated.
Total Projects income, being sales and grants
receivable (as split below)
Of which: Sales Revenue
Of which: Grant recognised in the income statement
2020
£5.35m
£3.29m
£2.47m
Of which: Grant recognised on the balance sheet*
(£0.42m)
Pre-tax loss
Projects Under Contract or in final stage of
negotiation**
Property, plant and equipment plus intangible assets
Net Assets
£29.52m
£52.4m
£8.66m
£55.75m
*Grant income recognised on the balance sheet includes grant income recognised against the cost of assets acquired and
the movement on grant income receivable for assets paid on pro-forma terms but not yet delivered.
**Contracts can take a period longer than 12 months to unwind through the accounts. In the year ended 30 April 2020,
income recognised was £5.4m (2019: £17.6m) against a pipeline reported at the results announcement 2019 of £33.0m
(2018: £30.6m). Therefore, of the contracted pipeline, the Group delivered on projects equivalent to 16% (2019: 58%).
associated with the projects under contract or in the final stages of negotiation.
Projects under contract and in the final stage of negotiation are a non-statutory measure that the board of directors
use to assess progress and monitor the Group. Items under contract are contract projects that are being progressed.
Projects in negotiation are added once the directors are certain that a contract will get signed, and represents future
revenue. These numbers are reported via the regulatory news service (RNS) with each announcement. The directors
do not make representations as to the timing of the revenue associated with the projects under contract or in the final
stages of negotiation.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
59
KEY FINANCIALS
2019
2018
2017
2016
£17.56m
£14.11m
£9.23m
£8.19m
£4.59m
£3.28m
£2.42m
£1.93m
£7.23m
£4.14m
£4.16m
£3.19m
£5.74m
£6.68m
£2.65m
£3.07m
£9.32m
£6.48m
£3.55m
£4.36m
£33.00m
£30.64m
£35.46m
£16.32m
£6.41m
£4.81m
£4.90m
£3.28m
£26.21m
£35.59m
£13.07m
£11.64m
60
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
NON-FINANCIAL KEY PERFORMANCE INDICATORS
NON-FINANCIAL KEY
PERFORMANCE INDICATORS
FUEL DISPENSED (KG)
FUEL CONTRACTS SIGNED
30,707
31,984
13,036
1,043
36
33
20
14
2020
2019
2018
2017
Given the early stage of the refuelling market, no expectations have been set with regards to KPI but prior years
provide a baseline.
As predicted, the number of new fuel contracts has not continued in the same trajectory and will become a less
important measure of the growth of the market for ITM Power. This is due to an increase in the number of vehicles on
the road but under the umbrella of existing customer contracts and the uptake of private users rather than businesses.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
61
NON-FINANCIAL KEY PERFORMANCE INDICATORS
EVENTS AFTER
THE BALANCE
SHEET DATE
There are no material events that have occurred after the
balance sheet date.
OUTLOOK
Against an encouraging market backdrop ITM Power has
made good progress in the period. The near-term outlook
is well underpinned by the record contract backlog,
which does not yet reflect the benefit of substantial
opportunities being bid through ITM Linde Electrolysis
GmbH, and highly qualified tender opportunity pipeline.
The Group has recognised that its strengths lie within
in the development and manufacturing of electrolysers
and the aim is now to consolidate on this within our
new factory. The formation of the new company with
Linde should allow us to maintain this focus, whilst also
providing a strong outlet for our products and large-
scale project capabilities, which is where ITM Power’s
ambitions lie in the size of the electrolysers it wants to
produce.
The Board looks forward to reporting progress as
contracts are awarded, and to providing an update at the
AGM.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
63
STRATEGY AND OBJECTIVES
STRATEGY AND OBJECTIVES
ITM Power Plc has the following near and mid-term
objective:
− New territories: ITM Power Plc has continued to
expand its activities in Germany and also operates
part of its payroll in France. Meanwhile, our Australian
subsidiary is attracting interest from other territories
in that part of the world, including New Zealand.
− Product scale up and cost optimisation: Our R&D
activities continue to focus on the scale-up of systems
and our ability to do this at lower costs.
− Cash flow: The Board are committed to the Group
becoming cash-generative in the mid-term. In the
short-term there will be a move to the new factory
and as such cash flow is being closely monitored
throughout the build/relocation phases.
− Break-even: The Board have break-even as a key
objective for the Group which will be achieved
through revenue growth, and margin cost control.
Improved IT capacity has allowed budgets to be
tracked more closely during the current financial year
and greater discipline over budget management
and change requests has been established with both
Project Managers and Department Heads.
− Growing pipeline and delivery of contracted orders
annually: The Group need to grow the contracted
pipeline in the near term as it signals the revenue that
the Group will deliver in the forthcoming periods. As
such, pipeline development and then project delivery
remain key objectives for the Board. However, care
has been taken over the past year to ensure that
projects are not undertaken solely for their revenues
but with due consideration to their fit with the other
business objectives.
Strategies for achieving our objectives
The Group has a model of locating agents in key
territories to position ITM Power Plc as a world leading
developer and supplier of electrolyser products. The
Group has subsidiaries in Germany, the US (California),
and Australia, with sales representatives also covering
France and Benelux.
Product development, and in particular upscaling of
product offering, is being achieved through securing
and utilising project funding. This serves the dual
purpose of reducing cash outflow and creating strong
key partnerships within industry.
ITM Power has also been developing a suite of
standard products that can meet many customer
requirements, as well as further developing the
concept of modular systems that can facilitate multi-
MW solutions.
Short-term cash flow is aided but not totally mitigated
by ITM Power Plc quoting for sales with upfront
payments, which reduces reliance on working capital.
In the medium term, the national mobility
programmes, in which ITM Power Plc has positioned
itself as a key partner for refuelling through
electrolysis, will provide opportunities to build larger
refuelling hubs for mixed use to drive hydrogen sales.
ITM Power Plc is currently positioned as a refueller of
hydrogen, and will also be able to gain market share
for hydrogen sales as vehicle adoption accelerates.
The results in the current year show a 3% decrease in
hydrogen sales, to 31 tonnes in the year.
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ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
PRINCIPAL RISKS AND UNCERTAINTIES
PRINCIPAL RISKS AND UNCERTAINTIES
Our approach to risk
Covid-19
The ongoing pandemic, Covid-19, is considered by the
management to heighten some of the short- terms
risks across the business. This includes risks relating to
reliance on key personnel, the increased risk of suppliers
and customers’ default and revenue risk as the Group’s
product requires capital commitments from customers
when many businesses are calling for conservatism.
However, in the mid-term, the possibility of a greener
recovery strategy is very positive for ITM. ITM Power
successfully moved most its operations to work on a
remote basis and has resumed operations which has
mitigated this risk.
There are a number of risks and uncertainties that have
the potential to impact the execution of the Group’s
strategy, as well as its short-term results. The Executive
Directors review the risks facing the Company, and
the Board has identified those that are principal to its
business. These are identified on this and the following
pages.
Risk management process
The Board is responsible for the risk framework and
aims to ensure that the Group’s ability to achieve its
objectives outweighs its risk exposure. However, the
Group’s risk management programme can only provide
reasonable, but not absolute, assurance that principal
risks are managed to an acceptable level. The Executive
Directors are responsible for identifying, managing and
mitigating the risks to the Company. There is a monthly
review process to assess risks at corporate level and
projects specific risks are reviewed at project level. The
Audit Committee reviews the processes and controls
for ensuring material business risks are identified and
managed appropriately.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
65
PRINCIPAL RISKS AND UNCERTAINTIES
Key business risks and mitigations are considered to be related to Covid-19, Brexit, Technology and IP, Markets, Traction
and Growth trajectory, People, Safety, Partnerships, and Legal and statutory risks, and are set out as follows:
Description
Cash Consumption
Covid-19
Impact
The business continues to be in a cash consumption phase, as it seeks to accelerate and build
capacity ahead of anticipated demand.
Assessment of change
in risk year-on-year
Diminishing
Mitigation
The business will continue to develop robust controls and forecasting measures to allow any
mitigation to be planned well in advance of any perceived shortage of liquidity.
Description
Key Man Risk
Impact
The Company has an executive team with many years’ experience within the business. The
impact of a departure of any member of staff could disrupt the operational activities of the
business, as well as de-stabilising the share price.
Assessment of change
in risk year-on-year
Increasing
Mitigation
The Company has implemented strict Covid measures which are in excess of government
guidelines.
Description
Covid-19
Impact
Covid-19 causes the cessation of normal company function and forces staff into lock-down.
This could im-pact our ability to pro-gress contracts, gener-ate revenues, creating higher
potential for losses.
Assessment of change
in risk year-on-year
Increasing
Mitigation
Staff that can work from home should aim to continue with business as usual. A continued
review of what other work can feasibly be undertaken within the imposed restrictions could
help to progress other hands-on aspects of ITM’s operations from a Sheffield or UK base. Staff
may be redeployed from their usual roles to others that can proceed, depending on skill sets.
To mitigate the losses, ITM will seek any available subsidies to off-set overhead costs. Cash flow
will continue to be monitored and debts chased, and future spend critically monitored.
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ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
PRINCIPAL RISKS AND UNCERTAINTIES
Description
Credit risk
Impact
The risk that a counter party will default on its contractual obligations.
Assessment of change
in risk year-on-year
Increasing
Mitigation
Our risk appetite with regards to customer and supplier credit ratings will be tested, with
tighter control of working capital should any concerns be flagged.
Description
Credit risk
Brexit
Impact
The risk that a counter party will default on its contractual obligations.
Assessment of change
in risk year-on-year
Increasing
Mitigation
Our risk appetite with regards to customer and supplier credit ratings will be tested, with
tighter control of working capital should any concerns be flagged.
Description
Brexit
Impact
Unknown post-trading Brexit arrangements may have impact.
Assessment of change
in risk year-on-year
Static
Mitigation
Keep under review, with the Brexit Committee reporting to the management in a timely and
regular manner.
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67
PRINCIPAL RISKS AND UNCERTAINTIES
Description
Loss of EU grant funding due to Brexit
Impact
ITM has previously been well-funded by EU sponsored programmes and the certainty of this
pipeline may be impacted by the UK withdrawal from the EU.
Assessment of change
in risk year-on-year
Diminishing
Mitigation
One option is to utilise the presence of an EU subsidiary company (ITM Power GmbH) or
associate company (ITM Linde Electrolysis Gmbh) to apply for the same funds as before, with
negligible impact to project viability.
There are other precedents in the UK for accessing the same EU funding pot (Horizon 2020),
but also to broaden the scope of projects to ensure this potential risk is resolved. Monitoring
of available UK funds for UK projects to support any national strategy rollout and work with
consultants to be aware of and apply for these funds.
Description
Brexit impact on exporting
Impact
Brexit may pose a risk to ITM as an exporter, and there is currently
limited visibility of the likely trade deal that will emerge from Brexit negotiations.
Assessment of change
in risk year-on-year
Static
Mitigation
ITM is in the process of considering a number of mitigating items for Brexit, not least taking
advice on the likely impact of the ‘greatest change’ scenario. This shall inform as to how future
sales are structured.
Description
Introduction of new suppliers for technology change
Technology and IP
Impact
As the company goes through an acceleration curve in terms of technology and production,
supplier management becomes increasingly important. Whilst significant due diligence is
undertaken on the new suppliers, until we have placed orders/received and tested the goods,
we do not have a 100% guarantee that this will be a success. This could lead to delays on a
project which could result in penalties.
Assessment of change
in risk year-on-year
Diminishing
Mitigation
Increasing the robustness of the tender processes, contractual terms and quality assurance
for new suppliers as they are onboarded. The company incorporates a robust lessons learned
approach to challenges experienced and incorporate that into new RFQs and ITTs. The
company will also appoint relationship managers to work collaboratively with new suppliers
to ensure frequent communication, competitive pricing and terms, and quality is as required.
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PRINCIPAL RISKS AND UNCERTAINTIES
Description
Alternative technologies
Impact
Alternative technologies are adopted in preference to the Group’s technology. The Group
could struggle to gain market share or may find itself operating in a smaller market than is
currently anticipated.
Assessment of change
in risk year-on-year
Static
Mitigation
ITM’s technology is considered to be superior to that currently on the market. Through
continual analysis of the competitive landscape and targeted improvements in technology
development ITM seeks to retain that competitive advantage.
Description
Pace of change and growth
Markets and Traction, Growth trajectory
Impact
The Business has ambitious growth plans, both with partners and independently, as well
as seeking to be well placed for capacity growth in Bessemer Park and beyond. The pace
of growth poses risks to supplier capability, quality, and scalability, and working capital
management.
Assessment of change
in risk year-on-year
Static
Mitigation
Working with Linde, the business has been able to secure better control of existing processes,
and controls for scale ahead of demand. Management will further review the impact of
increased demand on all processes in the business to assess control weaknesses.
Description
Market growth
Impact
The growth plans include offering standard products to more territories. As such, there are
risks of compliance, contract risk, H&S and managing a global operation from the Sheffield HQ.
Assessment of change
in risk year-on-year
Static
Mitigation
The development of a new Strategic business development advisory committee to advise the
board of new applications and territories will be set up to approach the risk more carefully in
line with growth plans.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
69
PRINCIPAL RISKS AND UNCERTAINTIES
Description
Suppliers & Sub-contractors
Impact
As the business increases it’s capacity and delivery of products, it will have a greater reliance
on third parties for installation and maintenance of kit, including a reliance on the expertise of
its partners. Poor selection / management of suppliers & sub-contractors could lead to supply
of sub-standard products or services.
Assessment of change
in risk year-on-year
Static
Mitigation
Having employed a new Heads of Quality and Procurement and enhanced the procurement
team as well as working with Linde, the business has been able to secure better control of
existing contracts, and get support in further tenders to enable better supplier selection.
Increasingly, the Procurement & QHSE departments are incorporating a framework for sub-
suppliers to also adhere to quality and codes of conduct standards.
Description
Key Man Risk
People
Impact
The Company has an executive team with many years’ experience within the business. The
impact of a departure of any member of staff could disrupt the operational activities of the
business, as well as destabilising the share price.
Assessment of change
in risk year-on-year
Static
Mitigation
The Board has formally considered succession planning as part of the board evaluation in 2020
and will keep this under review.
Partnerships
Description
Assets: Loss of intellectual property rights and/or competitive advantage in technology
Impact
Working an increasing range of partners together with additional staff, mean that there is
greater risk of inappropriate information sharing, risking the protection of ITM Power trade
secrets and proprietary technology.
Assessment of change
in risk year-on-year
Increasing
Mitigation
The company has an agreed IP management policy, and will manage this internally, ensuring
the scope of the Technology Strategy Management Committee is consistent with this policy.
The company isshall also rolling out training to staff to support this aim.
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ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
PRINCIPAL RISKS AND UNCERTAINTIES
Description
Over-reliance on single customers
Impact
In setting up a framework agreement with Linde Group companies, the Group has a route to
market for a number of channels, in a truly global market. There is a risk of developing an
over-reliance on one party for the majority of revenues.
Assessment of change
in risk year-on-year
Increasing
Mitigation
Maintain an open approach to further partnerships, and customers, and internally monitor
the level of dependence on single customers. Ensure that terms are set in advance to prevent
contract 'creep' with any increased dependence.
Legal and Statutory
Description
IP Protection
Impact
There is a risk that the company may have a breach of IP.
Assessment of change
in risk year-on-year
Increasing
Mitigation
Description
Impact
The current mitigation plan is to patent the core processes of the company, but also to avoid
markets where reverse engineering seems a likely outcome.
Compliance with regulatory requirements including market abuse regulations, competition
law and other regulatory requirements.
The Company’s increasing size, scale up of operations and increased staff numbers require
continuing development in its compliance programmes to match the pace of change.Working
with Linde in joint venture and increase in scale-up means significant care needs to be taken
to ensure sharing information is conducted in compliance with competition law. In worst case,
fines can be imposed and other remedies, if there is a breach.
Assessment of change
in risk year-on-year
Increasing
Mitigation
The Company takes its compliance responsibilities seriously. There is a top-down commitment
from Board level on compliance. The Company has a compliance programme focussing on key
areas. This includes polices, processes and training.
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71
PRINCIPAL RISKS AND UNCERTAINTIES
Description
Operating in different fiscal territories
Impact
As the Group expands, ITM Power will need to ensure that they conduct their operations in a
way that conforms with statutory requirements of the tax authorities of those countries. Issues
to note involve: proper treatment of transactions for VAT, transfer pricing, head office charges
and group loss treatments. Incorrect treatment in one of those areas could lead to unforeseen
costs together with penalties and could lead to greater scrutiny of all the operations of the
business within that territory over a period of years.
Assessment of change
in risk year-on-year
Increasing
Mitigation
ITM Power have sought professional advice on transfer pricing/ group recharges to date and
will look to formalise their policies ahead of reaching de minimis levels. For VAT treatments,
ITM will need to continue to review its operations in foreign countries and manage the work
performed there. A robust process will be implemented to ensure risks are mitigated early
with new contracts and services offered in new territories.
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ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
CORPORATE SOCIAL RESPONSIBILITY
CORPORATE SOCIAL
RESPONSIBILITY
ITM Power Plc’s products are being continually developed
to meet and maintain our own and our customers high
standards; in providing the global marketplace with a
sustainable alternative energy solution, creating a reduction
in the global carbon footprint and a reduction in global
greenhouse gas emissions.
The continued growth period and more detailed customer
demands has seen the management systems grow and
become structurally sounder this year; we recertified our
accreditation to ISO 14001 2015 and 18001 2007 with our
current accreditation body and continue with the UKAS
accreditation program targeted for Q3 2021, to incorporate
all operations within the Group.
The management systems are being reviewed
throughout the business to ensure that ITM are ready
for the business expansion in the new facility as part of
the accreditation process, identifying both systems and
people development opportunities as we develop lean
processes to exceed customer expectations.
Disabilities
ITM Power are committed to promoting equality
opportunity for all staff and job applicants. We aim to
create a working environment in which all individuals
are able to make best use of their skills, free from
discrimination or harassment, and in which all decisions
are based on merit. The measures we take to implement
the principle of non-discrimination have been devised on
the basis of advice from the relevant governmental and
professional bodies.
We positively encourage applications from suitably
qualified and eligible candidates regardless of disability,
and we aim to ensure no job applicant receives less
favourable treatment, and individuals are treated on the
basis of their relevant merits and abilities.
In the event an existing employee is or becomes disabled
all efforts would be made by the Group to support
the employee and their continued service. We may
consult with medical advisers, and where possible make
necessary reasonable adjustments.
Our commitment to source our products and services
locally where possible has seen ITM Power Plc develop a
supplier control program that assists and develops our
supply chain with Health, Safety and Environmental goals
and objectives.
The principle of non-discrimination and equality of
opportunity applies equally to the treatment of former
employees, visitors, clients, customers and suppliers by
members of our current workforce.
Our global commitment to supply chain promotes and
develops ITM Power Plc’s ethics towards Health, Safety
and Environmental factors within the global supply chain.
Last year we established a program for full recycling of all
waste materials where possible, controlled with AATF’s
and environmentally aware recycling partners. We will
be working with a charity partner from our local area to
support the furnishing of Bessemer Park. The company
also set up a charity committee to match funds raised by
employees for charitable causes.
Employee consultation
ITM Power are committed to providing information and
instruction on all matters affecting employees, as well as
consulting with them regarding any factors affecting the
performance of the Group. The Group places considerable
value on involvement of its employees and aims to
continually keep them informed on relevant matters, and we
promote a culture of open communications, participation
and encouragement.
Consultation is achieved through formal meetings
where legislation requires. Employee representatives are
utilised to consult on a wide range of matters affecting
current and future employee interests. Informal meetings,
companywide emails, an employee newsletter and
suggestions boxes are also utilised for wider participation.
Employee well being
ITM Power employees will have access to an Employee
Assistance Programme (EAP) run by Health Assured.
The Employee Assistance Programme is a wide range of
services that an ITM Power employee can access without
cost, and totally confidentially.
Health Assured offers:
− Unlimited access to counselling
− Legal information
− Bereavement support
− Medical information
− CBT online
Key employment policies
We have consistently sought to recruit and retain the
best employees in our sector, and this has contributed
to the advancement and successes of the products
we manufacture. We also recognise the importance of
employee retention and offer additional to statutory
employee benefits including a cycle scheme, child care
vouchers, and an employee discounts platform.
All employees are also given appropriate access to
training to enable them to fully and safely perform their
roles, and to progress within the organisation.
All employment policies are accessed via our employee
handbook, and these are consistently reviewed to ensure
compliance and relevance.
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ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
GOING CONCERN
GOING
CONCERN
The directors have prepared a cash flow forecast for the
period ending 30 November 2021. 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
financial statements.
In contracts that include installation and commissioning, the
company will have aligned payment milestones with on-site
completion of certain works. As such, the dynamic nature of
border controls during Covid, as well as quarantining when
travelling will need particular attention to maintain cash
flows
With the uncertainty created for the economy by Covid-19,
this cash flow forecast has also been stress tested in the
following ways: all payments continuing as normal while
receipts are delayed by six months, or receipts are not
received at all. In both scenarios the business remained cash
positive for the full twelve months. It is true that in this last
scenario, careful management of resources will be required
to ensure that the right progress is made on projects in order
to reach payment milestones and receive payment for these
activities.
However, to date the Group has not experienced any
significant difficulties in receiving payments due from
customers so the worst-case scenario looks unlikely to
materialise.
As project timings are stretched due to challenges of on-
site work, it will also be increasingly important to monitor
and control outgoings, especially with the close-out of
legacy projects without further over-runs remaining a high
priority. Notwithstanding the above, the business expects
to continue to be viable through to the start of the 2022
calendar year.
The accounts have therefore been prepared on a going
concern basis.
Approved by the Board and signed on its behalf by:
Andy Allen
ITM Power Plc, Director
Date: 22 October 2020
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ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
S172 STATEMENT
S172
STATEMENT
The Directors are required by the Companies Act 2006 to
act in the way they consider, in good faith, would be most
likely to promote success of the Group for the benefit of its
shareholders as a whole and in doing so are required to have
regard for the following:
•
•
•
•
•
the likely long- term consequences of any decision;
the interests of the Group’s employees;
the need to foster the Group’s business relationships with
suppliers, customers and others;
the impact of the Company’s operations on the
community and the environment;
the desirability of the Company maintaining a reputation
for high standards of business conduct; and the need to
act fairly as between shareholders of the Company.
In September 2018 the Group adopted the Corporate
Governance Code for Small and Mid-Size Quoted Companies
from the Quoted Companies Alliance (the “QCA Code”). The
QCA Code is an appropriate code of conduct for the Group’s
size and stage of development. There is a discussion of how
the Group applies the ten principles of the QCA Code in
support of its growth on the Group’s website, and on page
74 of this report.
The Group’s activities, strategy and future prospects are
discussed in the Strategic Report, beginning on page 25.
The Board considers its major stakeholders to be its
employees, its suppliers, customers, partners, and
shareholders. When making decisions, the interests
of these stakeholders is considered both formally and
informally as part of the Board’s group discussions,
depending on the likely impact of these decisions.
The Board has a good relationship with the Group’s
employees. The Board maintains constructive dialogue with
employees through the Executive Directors, and through
various visits to meet senior management throughout the
year. Appropriate remuneration and incentive schemes
including bonuses and commissions are maintained to align
employees’ objectives with those of the Group. The business
also has an employee newsletter, employee engagement
initiatives, a charity committee and a social committee to
ensure employees feel they are contributing to the progress
of the Group.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
77
S172 STATEMENT
The Executive Directors meet major existing and prospective
customers and encourage a dialogue with them and with
the territory business development team as appropriate.
The Executive Directors maintain a close dialogue with
all partners to the business, such as Linde, Shell, Orsted,
and others and ensure that expectation in ongoing and
prospective projects are being met.
The Board does not believe that the Group has a significant
impact on the communities and environments within which
it operates. The Board recognises that the Group has a
duty to be a good corporate citizen and is conscious that
its business processes minimise harm to the environment,
and that it contributes as far as is practicable to the local
communities in which it operates.
The Board recognizes the importance of maintaining
high standards of business conduct. The Group operates
appropriate policies on business ethics and provides
mechanisms for whistle blowing and complaints, which are
reviewed annually by the audit committee as part of a rolling
programme.
The Board endeavours to maintain good relationships
with its shareholders and treat them equally. It maintains a
number of ways in which shareholders can get in touch with
the company, seeks to send out newsletters monthly to all
stakeholders including shareholders, and the Chief Executive
ensures a consistent dialogue with shareholders through
presentations and webinars.
One major decision taken in the year was the investment
in the company by Linde, and the associated formation
of a Joint Venture. The table below illustrates how the
Board considered different appropriate stakeholders in
recommending the investment.
The Board ensures that the Group endeavours to maintain
good relationships with its suppliers by contracting on
reasonable business terms and paying them promptly
within those agreed terms. We meet with our significant
suppliers regularly and where required audit their activities
to ensure that materials are delivered effectively in a timely
and cost-efficient manner. We aim to offer fair contracts with
longer term visibility to provide stability to their business
in return for competitive pricing. These principles ensure
that the Group’s and our significant suppliers’ interests are
aligned.
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ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
S172 STATEMENT (CONTINUED)
S172
STATEMENT (CONTINUED)
Employees
The Board considered the impact on employees of the JV, and the possibility of career
progression for senior members of staff into the JV
Customers and Partners
The Board considered the Linde investment to put the company on a stronger, longer term
footing to give employees greater knowledge of the future of the company. To this end, the
executive team presented to the workforce on the day of the announcement and held a “town
hall” event to answer questions
In structuring the JV, and the Investment, the Board considered that the business should not
exclude the ability to do business with existing partners, and sought to ensure the deal was
complementary. In this manner, by making the strategic decision to offer EPC services of Linde
through the JV, it ensured a higher level of service and a full turnkey solution could be offered
to customers and partners.
Shareholders
The Board considered the impact of the investment on other shareholders, and aimed to ensure
a fair price was reached so that the recommendation to shareholders was positive. The Board
ensured that major non-institutional shareholders were consulted through the roadshow.
The Board also enlisted a third party to help publicise the decisions being taken at EGM to
ensure a high level of engagement, and after the formal business of the EGM the Chief Executive
presented and the full Board stayed to take questions and discuss with shareholders.
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ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
DIRECTORS’ REPORT
DIRECTORS’
REPORT
The directors present their annual report and audited
financial statements on the affairs of ITM Power Plc (the
“Company”) and its subsidiaries (the “Group”), together
with the financial statements and auditor’s report, for the
year ended 30 April 2020.
The directors believe that the financial statements are fair,
balanced and understandable.
Branches outside the UK
The Group has subsidiary companies, in Germany, the
United States and Australia.
Capital structure
Details of the group’s capital structure are provided in
notes 23 and 33 to the financial statements.
The following disclosures have been made in the
Strategic Report and are cross-referenced here: business
review including KPIs, Principal risks and uncertainties,
and future prospects.
Substantial shareholdings
On 30 April 2020 the Company had been notified, in accordance with chapter 5 of the Disclosure and Transparency
Rules, of the following voting rights as a shareholder of the Company:
Name of holder
Linde AG
JCB Research
Allianz Global Investors
Percentage of voting rights
and issued share capital
20.1%
9.3%
5.0%
No. of
ordinary shares
95,000,000
44,209,780
29,404,525
Dividends
The directors do not recommend a dividend payment for
the year (2019: £nil).
Charitable and political contributions
During the year, the Group made charitable donations
of £371 (2019: £nil). The company made no political
donations in either year.
Research and development
During the year the Group incurred research and
development related costs of £2.30m (2019: £2.33m). A
description of the activities undertaken can be found
under the heading of “Products and Technology” within
the Strategic Report
Supplier payment policy
The Group’s policy is to settle terms of payment with
suppliers when agreeing each transaction, ensuring
that suppliers are made aware of the Group’s terms of
payment and abide by those terms. At 30 April 2020,
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
81
DIRECTORS’ REPORT
the trade creditors balance equated to -217 days
(2019: -262 days), based on daily total costs excluding
payroll, and including the pro forma payments made to
suppliers up front. This is symptomatic of buying larger
components and working with new suppliers, as well as
(in some cases) ITM electing to pay a larger balance up
front in line with grant claim periods.
Financial risk management objectives and policies
The Group’s finance function monitors and manages the
financial risks relating to the operations of the Group. The
Group’s activities expose it primarily to the financial risks
of changes in interest rates.
The Group also receives and spends money in different
currencies. Significantly, contracts are often in the
currency of the customer. As such, the company has
exposure to foreign exchange variation. This is naturally
hedged where possible by paying for supplies in the
currencies in which they are invoiced, but this does
not eliminate exposure. Management may look to use
forward contracts as a means of mitigating exposure to
exchange rate volatility on long-term contracts.
Auditor
Grant Thornton UK LLP have expressed their willingness
to continue in office as auditor. In accordance with
Section 489 (4) of the Companies Act 2006, a resolution
to reappoint Grant Thornton UK LLP will be proposed at
the Annual General Meeting.
Directors
The following Directors served throughout the
year and subsequently, unless stated otherwise:
Sir R Bone
Dr G Cooley
Dr S Bourne
Dr R Smith
Mr A Allen
Mr M Green (appointed 16/09/2019)
Mr J Nowicki (appointed 1/11/2019)
Mrs K Roe (appointed 6/05/2020)
Lord R Freeman (resigned 3/10/2019)
Prof R Putnam (resigned 31/10/2019)
Mr R Pendlebury (resigned 31/07/2020)
The Group seeks to minimise the effects of these risks.
The Group’s policies approved by the board of directors
provide written principles on interest rate risk and the
investment of excess liquidity. Compliance with policies
and exposure limits is reviewed on a continuous basis.
Directors’ indemnities
The Company has made qualifying third-party indemnity
provisions for the benefit of its directors, which were
made during a preceding year and remain in force at the
date of this report.
The treasury activities are reported quarterly to the
Group’s Board.
Future developments and post balance sheet events
There are no material events that have occurred after the
balance sheet date.
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ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
DIRECTORS’ REPORT
DIRECTORS’ RESPONSIBILITIES STATEMENT
The directors are responsible for preparing the Strategic
Report and Directors’ Report, and the financial statements
in accordance with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors have to prepare the financial statements in
accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union,
and have elected to prepare parent company financial
statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable laws), including FRS
101 ‘Reduced Disclosure Framework’. Under company law
the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view
of the state of affairs and profit or loss of the Company
and Group for that period. In preparing these financial
statements, the directors are required to:
− select suitable accounting policies and then apply
them consistently;
− make judgements and accounting estimates that are
reasonable and prudent;
− state whether applicable IFRSs as adopted by the
European Union have been followed, subject to any
material departures disclosed and explained in the
financial statements;
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Company and enable them to ensure that the
financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The directors confirm that:
− so far as each director is aware, there is no relevant
audit information of which the Company’s auditor is
unaware; and
− the directors have taken all the steps that they
ought to have taken as directors in order to make
themselves aware of any relevant audit information
and to establish that the Company’s auditor is aware
of that information.
The directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
− prepare the financial statements on the going
Approved by the Board and signed on its behalf by:
concern basis unless it is inappropriate to presume
that the Company will continue in business.
Andy Allen
ITM Power Plc, Director
Date: 22 October 2020
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ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
CORPORATE GOVERNANCE REPORT
CORPORATE
GOVERNANCE REPORT
Principles of corporate governance
ITM Power PLC (“ITM Power” or the “Company”) is
committed to high standards of corporate governance.
The application of a corporate governance code and
a review of the corporate governance position of the
Company is welcomed by the Board and is noted to be
timely with reference to the position the Company finds
itself in at the current point.
ITM Power has reviewed the ten principles of the QCA
code and has setsets out below how these principles
are applied, providing appropriate disclosures where
necessary, specifically where the Group does not comply
fully with the expectations of the QCA code and setting
out an explanation of the reasons. We will provide
annual updates on our compliance with the QCA Code as
required.
The Board considered that the most appropriate code for
ITM Power to adopt, based on its development, sector
and size, is The Quoted Companies Alliance Corporate
Governance Code 2018 (the “QCA Code”). The QCA Code
provides a flexible, principle based model that will allow
the execution of the Group’s corporate governance
principles to evolve with the business.
Principle
How is the disclosure requirement met?
Principle 1: Establish a strategy and business model
which promotes long term value for shareholders
In the strategic report of the Annual Report and on the
ITM Power website*
Principle 2: Seek to understand and meet
shareholder needs and expectations
On the ITM Power website*
Principle 3: Take into account wider stakeholder and
social responsibilities and their implication for long
term success.
In the section 172 statement of the Annual Report and
on the ITM Power website*
Principle 4: Embed effective risk management,
considering both opportunities and threats,
throughout the organisation
On the ITM power website* and in this corporate
governance report
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85
CORPORATE GOVERNANCE REPORT
Principle
How is the disclosure requirement met?
Principle 5: Maintaining the Board as a well-
functioning, balanced team led by the Chair
On the ITM Power website* and in this corporate
governance report
Principle 6: Ensure that between the Directors have
the necessary up to date experience, skills and
capabilities
Principle 7: Evaluate Board performance based on
clear and relevant objectives, seeking continuous
improvement
The Board is satisfied that the members of the Board
possess an appropriate balance of skills, experience,
personal qualities and capabilities as required by the
QCA Code. The Chair of the Company undertook a formal
Board evaluation in early 2020 which considered the
composition of the Board, including the diversity and
gender balance. Further details are provided on the ITM
Power website*
With the full support of the Board, the Chairman leads
an evaluation of the performance of the Board and its
committees on a yearly basis. The last review concluded
that the Board and its committees are currently
effective and each Director continues to demonstrate
commitment to their role.
As set out above, a formal Board evaluation was
undertaken this year.
Principle 8: Promote a culture that is based on
ethical values and behaviours
On the ITM Power website* and in this corporate
governance report
Principle 9: Maintain governance structures and
processes that are fit for purpose and support good
decision- making by the Board
On the ITM Power website*
Principle 10: Communicate how the Company
is governed and is performing by maintaining a
dialogue with shareholders and other relevant
stakeholders
On the ITM Power website* and in this corporate
governance report
*where the table above refers to the ITM Power website, it refers to the investors section, as follows;
http://www.itm-power.com/corporate-governance
The Company has a dealing policy and dealing code that applies to all employees. This enables the Company
and directors to comply with Rule 21 of the AIM Rules relating to directors’ and appropriate employee dealings as
applicable to AIM companies. All employees are provided with access to the dealing policy and dealing code and have
access to the Company Secretary in the event of any questions.
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CORPORATE GOVERNANCE REPORT
The Board
The Board currently comprises the following members who are also members of the following committees of the
Board:
Director
Role
Remuneration
Committee
Audit Committee
Nominations
Committee
Executive
Committee
Technology
Dr S Bourne
Dr G Cooley
Dr R Smith
Mr A Allen
Sir R Bone
Mr R Pendlebury
Mr J Nowicki
Mr M Green
Mrs K Roe
Chief Technology
Officer
Chief Executive
Officer
Executive
Director
Executive
Director
Non-Executive
Chairman
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
•
•
•
•
•
Balance of the Board
ITM Power Plc has a separate Chairman and Chief
Executive Officer, each having his own distinct
responsibilities. The Chairman is responsible for the
effective working of the Board and the Chief Executive
Officer is responsible for all operational matters and
the financial performance of the Group. The Board is
balanced, both numerically and in experience, with the
intention that no individual or small group of individuals
should be able to dominate decision-making. The Board
has not appointed a Senior Independent Director.
However, any of the Non-Executive Directors are available
on request as a conduit of communication to the Board in
the event that the Chairman and/or the Chief Executive
Officer are not appropriate conduits for shareholder
concerns and issues.
•
•
•
•
•
•
•
•
•
•
•
Board independence
The Board considers all the Non-Executive Directors to
be independent in character and judgement. The Non-
Executive Directors have provided excellent independent
advice and challenge throughout the year. In concluding
that all its Non-Executive Directors are independent
the Company considered, inter-alia, the fact that all
of the Non-Executive Directors are directors of other
corporations and are not reliant on any shares or share
options they hold in, or income they receive from, ITM
Power Plc.
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87
CORPORATE GOVERNANCE REPORT
Matters reserved to the Board’s attention
The Board has a formal schedule of matters reserved for its
decision covering the following areas:
• Management structure and appointments;
•
Strategic/Policy considerations;
• Material transactions;
•
Finance; and
• General governance and capital matters.
Internal control and risk management
The Board is responsible for the Group’s system of
internal control. Such a system can only be designed
to manage rather than eliminate the risk of failure
to achieve business objectives and can provide only
reasonable, and not absolute, assurance against material
misstatement or loss. Given its size, it would not be
practical for the Group to maintain a dedicated Internal
Audit function, but this is being kept under review as the
Group grows in size and complexity. However, the Group
has always maintained an open culture that encourages
staff to consider the processes in which they are involved
and report any control weaknesses directly to senior
management. Segregation of duties is maintained
wherever possible, with reviews performed to identify
any issues and mitigate risk. As the Group grows it is
recognised that more regular review will be necessary,
with line managers and middle managers becoming
established to take on some of this responsibility. The
Group also has in place the appropriate culture to deal
with the identification, assessment and management of
major business risks through regular communications
with senior management.
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ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
CORPORATE GOVERNANCE REPORT
Board meetings
The Board scheduled 5 regular meetings in the year ended 30 April 2020, with additional meetings convened when
required. The table below shows the attendance of Directors at regular Board meetings and at meetings of the
Committees during the year.
The Board is supplied in a timely manner with information in a form and of a quality appropriate to enable it to
discharge its duties.
Board
Meetings
Remuneration
Committee
Audit
Committee
No. of meetings held
Non-Executive Directors
Lord R Freeman
Prof R Putnam (Chairman)
Sir R Bone
Mr R Pendlebury
Mr M Green
Mr J Nowicki
Executive Directors
Dr S Bourne
Dr R Smith
Dr G Cooley
Mr A Allen
Board performance appraisal
With the full support of the Board, the Chairman lead
an evaluation of the performance of the Board in Q1
2020. The last review concluded that the Board and its
Committee are currently effective and each Director
continues to demonstrate commitment to their role.
Further details are provided on the website under the
QCA code disclosures.
5
1
2
5
3
4
3
5
5
5
5
3
-
2
3
-
1
-
-
-
-
-
3
-
-
3
-
3
-
-
-
-
-
Re-election of Directors
New Directors are subject to election at the first Annual
General Meeting of the Company following their
appointment. In addition, all Directors who have been in
office for three years or more since their election or last
re-election are required to submit themselves for re-
election at the Annual General Meeting of the Company.
At each Annual General Meeting of the Company all
those Non-Executive Directors who have been in office
for nine years or more since the date on which they were
originally elected as a Non-Executive Director of the
Company are required to retire from office, but may stand
for re-appointment.
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89
CORPORATE GOVERNANCE REPORT
Relations with shareholders
The Company values the views of shareholders and
recognises their interests in the Group’s strategy and
performance.
Overall responsibility for ensuring that there is effective
communication with investors and that the Board
understands the views of major shareholders rests with
the Chief Executive Officer, who makes himself available
to meet shareholders for this purpose. Press coverage
packs and analyst notes are made available to the Board
at each regular Board meeting. The Chief Executive
Officer is often accompanied at investor presentations by
either the Chairman or the Finance Director. Shareholder
communication is mainly co-ordinated by the Company’s
Corporate Communications Consultants, Tavistock
Communications Limited. ITM Power Plc is committed to
maintaining a good dialogue with shareholders through
proactively organising meetings and presentations with
fund managers, retail brokers and analysts, as well as
responding to a wide range of enquiries. The Company
also recognises the importance of communicating
appropriately any significant company developments,
this is done via the Stock Exchange Regulatory News
Service that can be accessed through the Company’s web
site: www.itm-power.com.
The Company reports to shareholders twice a year. The
report and accounts are available on the Company’s
website. All shareholders are encouraged to attend
the Company’s Annual General Meeting, at which the
Chairman and CEO give an account of the progress
of the business over the year. The Board attends the
meeting and is available to answer questions from any
shareholders present.
In all communications and events, care is taken to
ensure that no price sensitive information is released
and that any price sensitive information is released to all
shareholders at the same time in accordance with AIM
Rules.
Committees
The Board operates through clearly identified Board
committees to which it delegates certain powers. These
are the Remuneration Committee, the Audit Committee,
the Nominations Committee and the Executive
Committee. They are properly authorised under the
constitution of the Company to take decisions and act on
behalf of the Board within the guidelines and delegations
laid down by the Board. The Board is kept fully informed
of the work of these committees and each committee
has access and support from the Company Secretary. Any
issues requiring resolution are referred to the full Board.
A summary of the operations of these Committees is set
out below.
The Remuneration Committee’s role is to determine
and recommend to the Board the terms and conditions
of service, the remuneration and grant of options to
Executive Directors under the EMI scheme adopted by
the Company.
The Audit Committee’s primary responsibilities are to
monitor the quality of internal control, ensuring that
the financial performance of the Company is properly
measured and reported on and for reviewing reports
from the Company’s auditor relating to its accounting
and internal controls in all cases having due regard to the
interests of the shareholders.
The Nominations Committee leads the process for
Board appointments. It vets and presents to the Board
potential new Directors, particularly Non-Executives. All
new appointees undergo a rigorous nomination process
before the Board agrees on their appointment.
The Executive Committee comprises Dr Graham Cooley
(CEO), Dr Rachel Smith, Dr Simon Bourne (CTO) and
Mr Andy Allen (FD). The Committee regularly meets to
consider business development, management issues and
the financial performance of the Company.
The Technology Management Committee comprises
Juergen Nowicki, Robert Pendlebury, and Simon
Bourne, with technical staff from departments
within the company, as well as a nominee from ITM
Linde Electrolysis GmbH in attendance. The primary
responsibilities of the committee are to review the
Company’s product portfolio and development plans and
assess the cost composition of the product portfolio and
the suitability of existing process to satisfy anticipated
market developments.
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ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
REMUNERATION COMMITTEE REPORT
REMUNERATION
COMMITTEE REPORT
Dear Shareholder,
On behalf of the Board, I am pleased to present the Directors’ Remuneration Report for the year-ended 30 April 2020.
This has been a challenging year with the impact of Covid-19. I am proud of the way that the organisation has
responded. This has demonstrated the resilience of ITM Power and its operational flexibility, throughout the workforce
and the management team. Where teams could not undertake normal operational work due to Government
restrictions, they have worked flexibly to ensure development and business continuity. Whilst Covid-19 has had an
impact on the ability of the business to conclude commissioning work with client sites shut and a corresponding
impact on revenue recognition, the business has been able to continue to do substantial work and business
development throughout the period. While a portion of our workforce were furloughed as they could not be re-
deployed in the height of the lockdown period in March to June, ITM Power topped up furlough payments to ensure
that all members of staff received their full salaries. The business has continued to grow despite the challenges and
has now resumed planned recruitment.
The Remuneration Committee’s focus is to ensure that remuneration is fair, appropriately rewards performance and
aligns the interests of the Executive Directors with those of shareholders. It is also paramount that the Remuneration
Committee ensures the Company retains key talent at the executive level.
The Remuneration Committee has undertaken considerable work over the last few years to further the long-term
interests of shareholders. As a result of this review, a number of work streams have taken place including:
•
•
•
•
Undertaking a detailed review of the terms of reference of the Remuneration Committee and changing the
composition to better reflect the requirements of the QCA Code on Remuneration Committees.
Considering the right replacement for the Company’s 2010 Share Incentive Scheme which expired in April.
Increasing the quantitative and therefore objective nature of bonus performance metrics for 2019/2020 and
2020/21 and aligning with the Company’s corporate objectives for 2020/21.
Instructing an independent benchmarking exercise to review all aspects of the remuneration strategy for the
Board of Directors for both Executive Directors and Non-Executive Directors to formulate the remuneration
strategy for 2020/21 onwards.
As a result of this comprehensive review, the Committee is satisfied that the remuneration structure and outcomes in
respect of the incentives and remuneration during the financial year under review are appropriate, fair and adequate
to retain key talent.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
91
REMUNERATION COMMITTEE REPORT
During 2019, the composition of the Board of Directors was subject to considerable change and strengthening. This
year saw the retirement of two Non-Executive Directors, Lord Roger Freeman and Roger Putnam, the previous Chair of
the Board. The Board appointed three new Non-Executive Directors, Martin Green, Juergen Nowicki and Katherine Roe
(the latter arriving post year-end). I was appointed as Chair of the Board in October. In addition, Andy Allen stepped
down from his role as Company Secretary and was replaced by Nicola Ham Edmonds.
These changes also led to changes across the structure of the Board Committees. Martin Green was appointed to
the Remuneration Committee (in addition to his role as Chair of the Audit Committee). Upon her appointment to
the Board, Katherine Roe joined the Remuneration Committee and, with effect from 1 July 2020, took on the Chair
of the Remuneration Committee. From that point, I have been able to step down both as Chair and as a member of
the Remuneration Committee, in order that the Remuneration Committee can be comprised of independent Non-
Executive Directors and without the Chair of the Board in line with the QCA guidance.
The main changes adopted in the financial year to 30 April 2020 related to quantitative targets being set in
determining the bonus performance metrics for the year. The Committee will continue to review the Company’s
remuneration policy and practices to ensure that they remain appropriate for the Company at its given stage of
development.
On behalf of the Board, I would like to thank shareholders for their continuing support.
Sir Roger Bone
Chairman, Remuneration Committee
Committee Members
During 2019/20
Post year-end
Sir Roger Bone (Chair)
Roger Putnam (Until October 2019)
Lord Roger Freeman (Until October 2019)
Martin Green (Since December 2019)
Katherine Roe (Since May 2020, Chair
from July 2020 when Roger Bone retired
from the committee)
92
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REMUNERATION COMMITTEE REPORT
Remuneration Policy
The Group’s remuneration policy has been reviewed to
ensure that overall remuneration is set at a competitive
level against the Company’s peer group thus enabling the
Company to attract and retain high-calibre employees
with the requisite skill-sets required to execute the
Company’s strategy. To support the Company’s strategy
and promote long ¬term sustainable success, the
Remuneration Committee takes into account all factors
to:
− ensure executive remuneration is aligned to the
Company’s purpose and values, clearly linked to
the successful delivery of the Company’s long-term
strategy, and that enable the use of discretion to
override formulaic outcomes and to adjust sums or
awards under appropriate specified circumstances;
− attract, retain and motivate the executive
management of the Company without inappropriate
financial burden on the Company; and
− consider the requirements for clarity, transparency,
risk mitigation, predictability, proportionality and
alignment to culture.
Main Roles and Responsibilities of the Committee
− Determine and agree with the Board the framework or
broad policy for the remuneration of the Company’s
Chair and the Executive Directors;
− Ensuring such remuneration supports the Company’s
strategy and promotes long ¬term sustainable
success;
− Approve the design of, and determine targets for, any
performance related pay schemes operated by the
Company and approve the total annual payments
made under such schemes;
− Review the design of all share incentive plans for
approval by the Board and determine each year
whether awards will be made to Executive Directors
and other senior executives and the performance
targets to be used;
− Ensure that contractual terms on termination for the
Executive Directors, and any payments made, are fair
to the individual, and the Company, that failure is not
rewarded and that the duty to mitigate loss is fully
recognised;
− Assess annually the remuneration trends across the
Group; and
− Be responsible for the appointment and selection
for any remuneration consultants who advise the
Committee.
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93
REMUNERATION COMMITTEE REPORT
Executive Director Policy
Base Salary
Purpose and link to strategy
Base salary is based on a number of factors, including market rates,
benchmarking to peers, as well as the individual Director’s experience,
responsibilities and performance. Individual salaries are subject to annual
review.
− Base salary is reviewed annually. In 2019/20, this took place in October,
to consider the Directors’ performance, individual responsibilities and
experience. The salary increases were backdated to 1 July 2019.
Operation
− Salary increases were awarded to reflect changes in role or responsibility
and the standard increase across the employees of the Group.
− Since the end of the financial year, the Committee has undertaken an
exercise to obtain and review independent benchmarking based on
peer group comparators companies’ remuneration.
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REMUNERATION COMMITTEE REPORT
Performance related bonuses
Purpose and link to strategy
The purpose of the annual bonus is to incentivise the Executive Directors,
members of the Executive team and senior management to deliver strategic
and financial success, as well as long-term growth to the benefit of the
Group and its shareholders. Measures and targets for the annual bonus for
the Executive Directors and team are set annually by the Committee.
− In 2019/20, the objectives were set by the Remuneration Committee
focusing on 100% quantitative metrics.
− The review of 2018/9 was postponed until after the successful
completion of the fundraising and shareholder consent in October 2019.
− The performance metrics are aligned to the Group’s strategy and focus
on performance in year in order that over the long term, the Group can
achieve its objectives.
Operation
− At the end of each year the Committee uses its judgement to determine
whether the performance metrics have been achieved.
− The maximum level of performance related bonus for Executive
Directors is capped as set out in the table below.
− The Committee retains discretion, in exceptional circumstances only, to
increase beyond this.
− Payment of bonuses is discretionary and is paid in cash following the
year-end.
Maximum Bonus available %
Graham Cooley
Simon Bourne
Rachel Smith
Andy Allen
2020
100%
60%
40%
40%
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REMUNERATION COMMITTEE REPORT
Pension provision
Purpose and link to strategy
Operation
Benefits
Purpose and link to strategy
The current policy provides a pension contribution to the Executive
Directors in line with all staff in the Group.
− All Executive Directors, along with all employees, are able to take part in
the Group’s pension scheme, where they receive a pension contribution
from the Group of 5% of salary, with the exception of the CEO, who
receives a fixed cash contribution of £28,000 in lieu of a pension
contribution. This is compliant with legal requirements with both
the employee and employer making contributions under automatic
enrolment provisions.
To provide competitive cost-effective benefits to assist in attracting and
retaining the employees across the Group.
Operation
− All employees benefit from life assurance of four times salary.
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REMUNERATION COMMITTEE REPORT
LTIP
Purpose and link to strategy
Operation
To attract and retain the calibre of Executive Directors and senior
management required to implement and realise the Company’s long-term
strategy. The LTIP is intended to align the Executive Directors interests
with the long-term interests of shareholders. The last awards under the
2010 scheme were based on awards at market value, rewarding the
Executive Directors where the share price increased over time, aligning with
shareholder interests.
The Company’s long-term incentive plan (“LTIP”) expired in April 2020 and
a replacement scheme is currently in early stages of development at the
end of the financial year which is to be made available for all staff. This is
expected to move the focus to awards with vesting based on performance
targets linked to long-term shareholder interests.
− The LTIP was approved by the Board in April 2010.
− The Committee has made awards where it has been considered
appropriate. In 2019/20, the Company made awards to the Executive
Directors in October. The awards were at market price on the date of
award.
− The Company’s 2010 LTIP has now expired and no further awards can be
made under it. As at the end of the financial year, an all staff long term
incentive scheme was under initial development which is expected to
include the Executive Directors.
Service Contracts and change of control provisions
Each Executive Director has a signed service contract that
terminates on 12 months’ notice.
The Directors’ service contracts are available to view at
the Company’s registered office and prior to each AGM at
the venue for the meeting.
Termination of employment
Each Executive Director’s service agreement includes
the right of the Company to terminate the agreement
and make a payment of basic salary in lieu of the notice
period.
There are no contractual rights to additional
compensation at termination.
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97
REMUNERATION COMMITTEE REPORT
−
Under the Company’s Articles of Association, the Board can set the level of Non-Executive Directors remuneration. This
is delegated to the Chief Executive Officer and the Chair of the Board. The Chair of the Board’s remuneration is set by
the Remuneration Committee.
Fees
Purpose and link to strategy
Operation
Fees are set at a competitive level to attract and retain high-calibre Non-
Executive Directors who collectively bring the required skill-set to the Board
to support the Executive Directors and guide the Company to achieve its
objectives.
− No director is involved in decisions setting their remuneration.
− Fees for the Chairman are determined by the Remuneration Committee.
− Fees for other Non- Executive Directors are determined by the Chief
Executive and Chair of the Board.
− The Board has regard to the level of fees paid to Non-Executive Directors
of comparator companies similar to the Company and the time
commitment and responsibilities of the role. A benchmarking exercise
has been undertaken since the end of the financial year.
− One of the changes in the period relates to the remuneration of the chair
of the Company. The chairmanship of the Company changed in Autumn
2019. A new fee structure for the role of the Chair was put in place as
part of that change to better align with best practice and ahead of a
formal benchmarking exercise.
− Additional consultancy work was undertaken by Roger Putnam on
behalf of the Company for a short period after his retirement as chair
and non-executive director, for which an additional fee of £73,000 was
paid. This work is now complete .
Performance related bonuses
Pension provision
Non-Executive Directors do not participate in a
bonus scheme.
Non-Executive Directors are not paid a pension
contribution.
LTIP
Non-Executive Directors do not participate in the
LTIP Scheme.
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REMUNERATION COMMITTEE REPORT
− Instructed an independent benchmarking exercise
to review all aspects of the remuneration strategy for
both Executive Directors and Non-Executive Directors
to formulate the remuneration strategy for 2020/21
onwards.
− Revised base salaries and fees as a consequence of
the benchmarking exercise.
Key activities in the financial year 2019/2020
− Undertook a detailed review of the terms of reference
of the Remuneration Committee and changing the
composition to better reflect the requirements of the
QCA Code on Remuneration Committees.
− Started to develop a replacement for the Company’s
2010 LTIP which expired in April 2010.
− Set the bonus metrics for the Executive Directors for
2019/20.
− Agreed the remuneration package for each Executive
Director in October 2019, backdated to 1 July 2019.
− Agreed the bonus payable for the year 2018/9 and in
May, for the year 2019/20.
− Increasing the quantitative nature of bonus
performance metrics for 2019/2020,
The Company Secretary acted as secretary to the Committee. Other directors attended Committee meetings at the
invitation of the Committee and as appropriate.
External Advice
Ernst and Young was appointed to undertake an independent benchmarking exercise at the start of June 2020.
Directors Remuneration during the year ended 30 April 2020
Total Remuneration of Executive Directors
The table below reports a single figure total remuneration for each Executive Director during the year:
2019-20
£’000’s
Executive Directors
Dr S Bourne
Dr G Cooley
Dr R Smith
A Allen
Aggregate emoluments
243
346
154
137
880
For comparatives and more detailed information, please refer to note 8 of the consolidated accounts.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
99
REMUNERATION COMMITTEE REPORT
The Remuneration Committee also considered the
impact of Linde’s £38m investment in ITM Power Plc,
which was completed in October 2019 and was outside
the parameters of the bonus structure as set out in the
previous year. This has had transformational impact
on the Company and the Remuneration Committee
agree with the assessment that our investment in ILE is
expected to increase significantly the opportunities and
markets in which the Company can participate and to
materially increase the Group’s volume of electrolyser
sales.
The Remuneration Committee reflected that since the
fundraising, the share price has improved from the fund
raise of 40p and has fluctuated between 100p and c.160p
in the first few months of 2020, creating significant
shareholder value for holders.
As a result of this exceptional performance, the
Remuneration Committee agreed that each Director
receive a special bonus of 33% of their salary for the
successful fundraising and the formation of ILE.
Annual Bonus of the Executive Directors
The Remuneration Committee awarded a bonus to each
Executive Director in recognition of the achievement of
certain quantitative and qualitative performance metrics.
Details of the current year bonus awards are explained
below.
The following key objectives had been agreed with the
Executive team for the financial year-ending 30 April
2020:
− Financial objectives: quantifiable targets relating to
revenue and other key financial targets which the
Committee considers commercially sensitive
− Operation targets: quantifiable targets relating
including the completion of the Company’s new
facilities at Bessemer Park.
− Business development objectives: quantifiable
targets which the Committee considers commercially
sensitive.
In determining the bonus award, the Remuneration
Committee considered progress on the contracts
pipeline, the effect of the Covid-19 pandemic on the
results for the year just ended, the progress of the new
company, ITM Linde Electrolysis GmbH (“ILE”) and
updates received by the Board on the performance
metrics. Where targets were met, the full percentage was
awarded, where targets were close or impacted in large
because of Covid-19, a proportion has been awarded. For
those targets where targets were missed substantially, no
award was made.
The targets were intended to be binary in their nature
rather than progressive, but Remuneration Committee
wanted to recognise the work of the Executive Team
where the work has been largely completed or, where a
target was revised during the year with Board approval.
The total percentage of the available bonus pool that has
been awarded is 55.5%.
100
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REMUNERATION COMMITTEE REPORT
The awards were made as follows:
Director
Reference salary
Potential
Bonus
2019-20
Performance
targets *
2019-20 Exceptional
bonus**
Graham Cooley
Simon Bourne
Rachel Smith
Andy Allen
239,150
182,825
123,600
115,500
100%
60%
40%
40%
55.5%
55.5%
55.5%
55.5%
33.0%
33.0%
33.0%
35.3%
Total £
211,648
121,213
68,227
66,429
*This award is a percentage based on the total potential bonus pool.
**This award is a percentage of the total salary.
These bonuses have been accrued in the current financial year but will be paid post year-end and therefore do not
form part of the current year directors’ remuneration figures reported earlier in this report.
LTIP Awards granted during the financial year
LTIP awards were granted to the Executive Directors for the financial year ending 30 April 2020 during October 2019 as
set out in the table above. The LTIP awards were made at market price at the time of award.
Director
Date of award
Number of options awarded
Exercise Price
Graham Cooley
24 October 2019
Simon Bourne
Rachel Smith
Andy Allen
24 October 2019
24 October 2019
24 October 2019
307,500
159,750
72,000
47,250
0.48
0.48
0.48
0.48
The key features of the 2019 LTIP awards are as follows:
LTIP awards were granted to the Executive Directors for the financial year ending 30 April 2020 during October 2019 as
set out in the table above. The LTIP awards were made at market price at the time of award.
− These were unapproved options under the 2010 scheme;
− The award is in the form of conditional rights to ordinary shares at market price;
− The options vest in full on the third anniversary of the award;
− The award value was based on a calculation that each Executive Director would receive a target reward if the share
price had increased by 40% over a three-year period. The target reward was gross proceeds based on a percentage
of salary between 7% and 24% of the Executive director’s salary at the time of award.
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REMUNERATION COMMITTEE REPORT
LTIP Options held by directors in financial year
Under the 2010 EMI and Unapproved Share Option Scheme, the exercise price is deemed to be the mid-market price
of shares on the London Stock Exchange AIM market at the close of trading on the day before the grant of the share
options. Share options vest in three equal instalments on the first, second and third anniversaries of the grant and are
exercisable up to the tenth anniversary of the grant.
Details of options held at year-end by directors who served during the year are as follows:
Director
Scheme
Options at 1
May 2020
Grant Date
Last Vesting Date
Expiry Date
Exercise
price (£)
A Allen
A Allen
A Allen
A Allen
A Allen
A Allen
A Allen
EMI
EMI
EMI
16,666
16,666
16,668
23/03/2011
22/03/2012
22/03/2021
£0.5450
23/03/2011
22/03/2013
22/03/2021
£0.54500
23/03/2011
22/03/2014
22/03/2021
£0.5450
Unapproved
333,333
14/08/2018
14/08/2019
13/08/2028
£0.3000
Unapproved
333,333
14/08/2018
14/08/2020
13/08/2028
£0.3000
Unapproved
333,334
14/08/2018
14/08/2021
13/08/2028
£0.3000
Unapproved
47,250
24/10/2019
23/10/2022
23/10/2029
£0.4800
Dr G Cooley
EMI
250,000
19/07/2012
19/07/2012
18/07/2022
£0.5000
Dr G Cooley
Unapproved
800,000
24/01/2011
24/01/2011
23/01/2021
£0.6675
Dr G Cooley
Unapproved
750,000
06/08/2014
06/08/2014
05/08/2024
£0.2650
Dr G Cooley
Unapproved
1,000,000
14/08/2018
14/08/2019
13/08/2028
£0.3000
Dr G Cooley
Unapproved
1,000,000
14/08/2018
14/08/2020
13/08/2028
£0.3000
Dr G Cooley
Unapproved
1,000,000
14/08/2018
14/08/2021
13/08/2028
£0.3000
Dr G Cooley
Unapproved
307,500
24/10/2019
23/10/2022
23/10/2029
£0.4800
Dr R Smith
Unapproved
416,666
14/08/2018
14/08/2019
13/08/2028
£0.3000
Dr R Smith
Unapproved
Dr R Smith
Unapproved
416,667
416,667
14/08/2018
14/08/2020
13/08/2028
£0.3000
14/08/2018
14/08/2021
13/08/2028
£0.3000
Dr R Smith
Unapproved
72,000
24/10/2019
23/10/2022
23/10/2029
£0.4800
Dr S Bourne
Dr S Bourne
EMI
EMI
123,596
24/01/2011
24/01/2011
23/01/2021
£0.6675
100,000
01/08/2012
01/08/2012
31/07/2022
£0.4988
Dr S Bourne
Unapproved
250,000
06/08/2014
06/08/2014
05/08/2024
£0.2650
Dr S Bourne
Unapproved
276,404
24/01/2011
24/01/2011
23/01/2021
£0.6675
Dr S Bourne
Unapproved
583,333
14/08/2018
14/08/2019
13/08/2028
£0.3000
Dr S Bourne
Unapproved
583,333
14/08/2018
14/08/2020
13/08/2028
£0.3000
Dr S Bourne
Unapproved
583,334
14/08/2018
14/08/2021
13/08/2028
£0.3000
Dr S Bourne
Unapproved
159,750
24/10/2019
23/10/2022
23/10/2029
£0.4800
Lord Freeman
Unapproved
50,000
08/08/2011
08/08/2011
08/08/2021
£0.3100
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REMUNERATION COMMITTEE REPORT
Total Remuneration of Non-Executive Directors
The table below reports remuneration for each Non-Executive Director
2019-20
Non-Executive Directors
Prof R Putnam
Lord Freeman
B Pendlebury
M Green
J Nowicki
R Bone
Aggregate emoluments
£’000’s
242
19
-
30
-
58
349
For comparatives and more detailed information, please refer to Note 8 of the consolidated accounts.
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REMUNERATION COMMITTEE REPORT
Implementation of Director Remuneration Policy for 2020/21
Executive Directors
Base Salary
Operation
Annual Bonus
Base salary reviews for the Executive Directors and senior management were
undertaken in June and will be subject to further benchmarking exercises in
2021 and 2022.
The benchmarking exercise was undertaken against comparative peer
companies present in the UK in the industry and against a peer group based
on an average three-month rolling market cap (March to May 2020). At the
point of salary review, the average market cap was significantly lower than
the actual market cap. The comparator group and the data were considered
in depth to be sufficiently robust and appropriate for the Company.
The benchmarking report identified that the current levels of executive
remuneration materially lag those in its comparator group including at its
lowest quartile. The Remuneration Committee is cognizant that shareholders
would expect care and discretion to be used in judging to what extent, and
over what timeframe, adjustments should be made, with longer timeframes
expected for more substantial increases. The Remuneration Committee
is mindful of its strategy set out at the start of this report including the
need to ensure its policy remains competitive and retains key talent. The
Remuneration Committee recognises the performance of the management
team and the transformative year including the successful fund raise,
establishing the investment in ILE and the resultant share price appreciation
and value creation for shareholders.
Consequently, the Remuneration Committee has agreed to increase the
executive remuneration for each Executive Director over a three-year period
in order to more appropriately align with the peer group. Awards were made
this year as part of that stepped approach with effect from 1 July 2020.
The Remuneration Committee will undertake a further benchmarking
exercise in each of the following two years, in June 2021 and June 2022, to
identify what further adjustments are appropriate. Any further adjustments
at that time would be also dependent, as usual, on company and individual
performance.
Performance metrics have been agreed with the Executive Directors for their
2020/21 2020 annual bonus targets under the following classifications:
− Financial including revenue targets which are considered commercially
sensitive by the Committee;
− Operational including targets which are considered commercially
sensitive by the Committee;
− Business development including targets which are considered
commercially sensitive by the Committee;
− Preservation of the Company’s cash position;
− A strategic development target which is considered commercially
sensitive by the Committee.
Total bonus opportunities remain capped as set out above.
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Implementation of Director Remuneration Policy for 2020/21- Continued
LTIP
Once the new all staff LTIP scheme is developed, the Committee intends
to grant further LTIP awards during 2020 to all staff. The Committee will
consider quantum, performance period and performance targets at the time
of award.
Benefits and Pension contribution:
The Executive Directors will receive the range of Company benefits and
pension contribution in line with the Remuneration Policy.
Base salaries for Executive Directors
Name
1 July 2020 onwards
1 July 2019 onwards
Graham Cooley
Simon Bourne
Rachel Smith
Andy Allen
Executive Directors
Fees
Benchmarking – Non-Executive
Directors
Benchmarking – Chairman’s fee
£299,833
£230,360
£155,736
£155,925
£211,150
£182,825
£123,600
£115,500
The 2020 fees for the Non-Executive Directors were reviewed during June
2020 as part of the benchmarking exercise.
Benchmarking was undertaken in relation to the fees for the Non-Executive
Directors. The same comparator group was used as set out above.
In relation to Non-Executive Directors, it was considered that although there
is a lag, it was appropriate to retain the basic non-executive fee to remain
constant for the next year but that an additional fee of £10,000 should be
paid for chairmanship of Audit and Remuneration Committees respectively.
This change was made with effect from 1 July 2020.
The benchmarking report from Ernst and Young also covered chairpersons’
fees. This also identified a lag. The Remuneration Committee agreed it would
be appropriate, and in line with adjustments suggested for the Executive
Directors, for the fee to increase over three instalments to reach the level
paid in the lower quartile of comparable companies. Again, further reviews
will be subject again to benchmarking in 2021 and 2022 and on company
and individual performance. This change was made with effect from 1 July
2020.
Benefits
Non-Executive Directors do not receive any benefits.
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105
REMUNERATION COMMITTEE REPORT
Fees for Non-Executive Directors
Name
From date of appointment
Date of appointment
1 July 2020 onwards
Sir Roger Bone
£70,000 per annum
1 November 2019*
£85,000 per annum
Martin Green
£45,000 per annum
17 September 2019
Katherine Roe
£45,000 per annum
6 May 2020
£45,000 per annum, together with
fee of £10,000 per annum as Chair of
Audit Committee
£45,000 per annum, together with
fee of £10,000 per annum as Chair of
Remuneration Committee
Juergen Nowicki
Robert Pendlebury**
Nil
Nil
-
-
Nil
Nil
*As Chairman of ITM Power.
**Retired on 31 July 2020.
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ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
STATEMENT OF DIRECTORS’ SHAREHOLDINGS
STATEMENT OF DIRECTORS’
SHAREHOLDINGS
The directors who served during the year and their interests in the shares of ITM Power Plc (including those of their
spouse or civil partner and children under the age of 18) were as follows:
Name
Sir R Bone
Dr S Bourne
Dr G Cooley
Lord R Freeman
Mr R Pendlebury
Dr R Smith
Mr A Allen
Mr M Green
Mr J Nowicki
Prof R Putnam
Ordinary shares of 5p each
At 30 April 2020
Number
Ordinary shares of 5p each
At 30 April 2019
Number
258,710
349,462
1,137,726
5,217
112,209
144,965
25,000
40,000
-
-*
67,000
326,830
1,062,726
5,217
112,209
80,886
-
-
-
27,129
Interest in share options is disclosed in Note 8 of the consolidated accounts.
*Not a director at year end
Miscellaneous Disclosures
The Company provides limited Directors’ and Officers’ liability insurance, at a cost of approximately £19,000 exclusive of
VAT for the insurance year which runs until 29 September 2020.
As a company listed on AIM, the Company is not required to comply with Schedule 8 of the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008 as amended in August 2013 (the “Regulations”), nor
is it required to comply with the principles relating to directors’ remuneration in the UK Corporate Governance Code
2019 (the “Code”).
This report has not been audited. It should be read in conjunction with details of Directors’ remuneration in note 8,
which forms part of the audited financial statements.
This report was approved by the Remuneration Committee and authorised for issue on 22 October 2020 and was
signed on its behalf by:
Sir Roger Bone
Chairman, Remuneration Committee
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107
AUDIT COMMITTEE REPORT
AUDIT COMMITTEE
REPORT
The Audit Committee met four times with specific regard
to the Annual Report and Accounts, considered Group
financial disclosures and accounting matters, including
the impact and treatment of standards that came into
effect, and the impact of existing standards on the annual
report of the Group.
With the world currently addressing the economic impact
of the ongoing Covid-19 pandemic, the Audit Committee
dedicated time to assessing the Group’s status as a
Going Concern. The Audit Committee judged that the
business fundamentals remain strong and the Group
has the resources to manage the short-term Covid-19
impact. Accordingly, it takes the view that Covid-19 will
not materially affect the long-term future of the business.
The Audit Committee will, however, continue to monitor
the situation as it progresses and is mindful of the speed
at which circumstances have changed over time for the
Group. Further disclosures on the risks associated with
Covid-19 are made within the Business Risks section of
this report and more details on the assessment of the
uncertainties surrounding the situation can be found in
note 3.
In total, the committee met six times in the year and
a further four times post year end, as well as ‘virtually’
visiting the company to meet staff and assess internal
controls.
Other areas to which the Audit Committee paid specific
regard are noted below:
− Performance of the Finance function
− Appropriateness of setting up an internal audit
function
− Reviewing the Audit Committee Terms of Reference
− Reviewing the Risk Register
− Key contractual legal matters
− Audit planning and process (particularly the Stock
take) under Covid-19
− An initial review of the pension arrangements for the
Group
A summary of the areas in which the Audit Committee
were required to exercise significant judgement is noted
below, all of which are further disclosed within notes 2-4
of the Annual Report and Accounts:
− Going concern
− Impairment of assets
− Recoverability of internally-generated intangible
assets
− IFRS16: Leases
− Grant and revenue recognition
− Embedded leases (sales)
− Onerous leases as the company moves to Bessemer
Park
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AUDIT COMMITTEE REPORT
is minimised. For example, it ensures that any work
undertaken excludes involvement in making any
business judgments that need to be made concerning
the nature of work undertaken to help safeguard the
auditors’ independence. Details of fees paid/payable to
the auditors are set out in note 7.
The Audit Committee has recommended to the Board the
re-appointment of Grant Thornton for the year 2021.
Finally, the Audit Committee gave due consideration
to the adequacy of its whistleblowing procedures and
the ongoing engagement of Grant Thornton, their
independence, associated remuneration and non-audit
fees.
Martin Green
Chairman, Audit Committee
A key role of the Audit Committee is to monitor the
effectiveness of the internal control environment which
includes consideration of the Group’s internal control and
risk management policies and systems, their effectiveness
and the requirements for an internal audit function in the
context of the Group’s overall risk management system.
The Audit Committee is satisfied that the Group controls
are operating such that a separate internal audit function
is not yet required. It will keep that position under review
in light of the continuing expansion of the company
and will continue to carry out additional activities in the
meantime. For example, in lieu of a formal internal audit
function, the committee sought extra levels of assurance
through meeting with Heads of Departments in the
period after year end, and will continue to do so. Informal
audits will be carried out randomly in areas where the
Audit Committee deems there to be an elevated risk
or where it is difficult to fully mitigate an existing risk.
The outcomes of these activities are reviewed and
recommendations made to the management team where
appropriate.
The external audit function plays an important part in
assessing the effectiveness of financial reporting and
internal controls. In turn, the effectiveness and quality
of the external audit is of key importance, including
ensuring that sufficient weight is given to new areas of
compliance, such as International Financial Reporting
Standards (“IFRS”) 9, 15 and 16, and existing areas of
risk as is deemed appropriate for the relative size and
complexity of the Group’s activities. Our Auditors, Grant
Thornton (UK) LLP, have been in place since 2018.
There are no contractual restrictions on the choice of
the external auditor. The Audit Committee reviews
the Auditors’ independence and annual fees to ensure
they are in line with market rates. The Committee
also closely monitors the nature and level of any non-
audit services provided, with a policy that such work
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109
AUDIT COMMITTEE REPORT
The external auditors have unrestricted access to the
Chairman of the Audit Committee. Audit Committee
meetings are also attended by the external Auditor
where appropriate and, by invitation, the Chief Executive
Officer, Finance Director and other members of senior
management.
Committee members
− Martin Green (appointed 6 November 2019) (Chair)
− Roger Bone
− Roger Freeman (resigned 16 September 2019)
− Roger Putnam (Resigned 31 October 2019)
Responsibilities of the committee
The committee is responsible for the following activities:
− Reviewing the effectiveness of the Group’s financial
reporting, internal control policies and procedures for
the identification, assessment and reporting of risk;
− monitoring the integrity of the Group’s financial
statements;
− monitoring the financial statements of the pension
fund;
− keep under review the effectiveness of the Groups
internal controls and risk management systems;
− Reviewing the Group’s whistleblowing, fraud and
bribery procedures
− agreeing the scope of the auditors’ annual audit
programme and reviewing the output;
− keeping the relationship with the auditors under
review, assessing the effectiveness of the audit
process; and
− developing and implementing policy on the
engagement of the auditors to supply non-audit
services.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ITM POWER PLC
INDEPENDENT AUDITOR’S
REPORT TO THE MEMBERS
OF ITM POWER PLC
− the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are
further described in the ‘Auditor’s responsibilities for the
audit of the financial statements’ section of our report. We
are independent of the group and the parent company
in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied to
listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
opinion.
Opinion
Our opinion on the financial statements
is unmodified
We have audited the financial statements of ITM
Power Plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 30 April 2020, which
comprise the consolidated income statement and
other comprehensive income, the consolidated balance
sheet, the consolidated statement of changes in equity,
the consolidated cash flow statement, the company
statement of changes in equity, the company balance
sheet and notes to the financial statements, including
a summary of significant accounting policies. The
financial reporting framework that has been applied
in the preparation of the group financial statements is
applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
The financial reporting framework that has been applied
in the preparation of the parent company financial
statements is applicable law and United Kingdom
Accounting Standards, including Financial Reporting
Standard 101 ‘Reduced Disclosure Framework’ (United
Kingdom Generally Accepted Accounting Practice).
In our opinion:
− the financial statements give a true and fair view of
the state of the group’s and of the parent company’s
affairs as at 30 April 2020 and of the group’s loss for
the year then ended;
− the group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
− the parent company financial statements have
been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice;
and
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111
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ITM POWER PLC
− the directors have not disclosed in the financial
statements any identified material uncertainties that
may cast significant doubt about the group’s and the
parent company’s ability to continue to adopt the
going concern basis of accounting for a period of at
least twelve months from the date when the financial
statements are authorised for issue.
In our evaluation of the directors’ conclusions, we
considered the risks associated with the group’s and
the parent company’s business model, including effects
arising from macro-economic uncertainties such as
Covid-19 and Brexit, and analysed how those risks might
affect the group’s and the parent company’s financial
resources or ability to continue operations over the
period of at least twelve months from the date when
the financial statements are authorised for issue. In
accordance with the above, we have nothing to report in
these respects.
However, as we cannot predict all future events or
conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that
were reasonable at the time they were made, the absence
of reference to a material uncertainty in this auditor’s
report is not a guarantee that the group or the parent
company will continue in operation.
The impact of macro-economic uncertainties on our
audit
Our audit of the financial statements 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. All audits 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 group’s and the parent company’s
future prospects and performance.
Covid-19 and Brexit are amongst the most significant
economic events currently faced by the UK, and at
the date of this report their 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 group’s and
the parent company’s future prospects and performance.
However, no audit should be expected to predict the
unknowable factors or all possible future implications
for a group or a parent company associated with these
particular events.
Conclusions relating to going concern
We have nothing to report in respect of the following
matters in relation to which the ISAs (UK) require us to
report to you where:
− the directors’ use of the going concern basis of
accounting in the preparation of the financial
statements is not appropriate; or
Overview of our audit approach
• Overall materiality: £330,000, which represents 1.75% of the group’s
loss before tax at the planning stage of the audit;
•
Key audit matters were identified as improper revenue recognition
of revenue from contracts and grant income including accrued
income, and going concern; and
• We performed full-scope audit procedures on the financial
statements of the parent company, ITM Power Plc, and on the
financial information of the UK trading component. We performed
analytical procedures on the financial information of the non-
significant components in Germany, Australia and the United States.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ITM POWER PLC
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those that had the greatest effect on: the
overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Improper revenue recognition of revenue from contracts and
grant income including accrued income
There is a risk that revenue from contracts and grant income
may be misstated due to improper recognition.
The Group has the following revenue streams:
− Product sales, standard and bespoke (construction
contracts) £2,256,000 (2019: £3,746,000)
− Maintenance contracts £48,000 (2019: £66,000)
− Consulting contracts £470,000 (2019: £67,000)
− Fuel sales or sales of spares £517,000 (2019: £710,000)
There is significant judgement in ascertaining the transfer of
risks and rewards in respect of the above revenue streams,
however, due to the relatively low value of maintenance
contracts, consulting contracts and fuel sales or sales of
spares, we do not consider those revenue streams to contain
a significant risk.
In respect of contractual arrangements with customers, there
is a risk that revenue is misstated as each contract’s outcome
and stage of completion requires management judgement.
In respect of grant income of £2,472,000 (2019: £7,226,000),
there is a significant risk that grant income is not recognised
in accordance with the terms of the grant and the accounting
policy of the group. The risk arises from the complexity of the
grant receivable and the long period that the grants operate
over.
There is a further risk that accrued income of £735,000
(2019: £1,471,000) may be incorrectly calculated due to the
complexity of the underlying calculations.
Finally, there is a recoverability risk in respect of accrued
income, and amounts receivable under grant claims of
£4,273,000 (2019: £6,444,000), due to the significant values
involved.
We therefore identified improper revenue recognition of
revenue from contracts and grant income as a significant
risk, which was one of the most significant assessed risks of
material misstatement.
Our audit work included, but was not restricted to:
− Assessing whether the group’s accounting policies for
revenue from construction contracts are in accordance
with the financial reporting framework, including IFRS 15;
− Assessing whether the group’s accounting policies
for grant income are in accordance with International
Accounting Standard (IAS) 20 ‘Accounting for
Government Grants and Disclosure of Government
Assistance’;
− Testing whether revenue from construction contracts and
grant income had been accounted for in accordance with
these policies;
− Testing a sample of construction contracts and grants to
original signed contractual agreements or terms;
− For a sample of construction contracts, recalculating
revenue recognised over time using the output method
of costs incurred to date as a percentage of forecast costs.
We challenged the estimated costs of completion that
management provided to gain assurance that revenue
had been recognised correctly. Also, we further assessed
the robustness of the forecasting with project managers;
− Testing whether costs associated with revenue from
construction contracts recorded to date were accurate
and appropriately allocated to the correct contract;
− Recalculating accrued income in respect of revenue from
construction contracts, based on revenue recognised to
date and progress billings;
− For a sample of grant income, agreeing the funding level
to grant agreements and recalculating the amounts
recognised, deferred, or accrued based on actual
costs incurred to date and, where appropriate, claims
submitted;
− Testing whether costs associated with grant income
recorded to date are accurate and appropriately allocated
to the correct grant project;
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
113
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ITM POWER PLC
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Going concern
As stated in the ‘The impact of macro-economic uncertainties
on our audit’ section of our report, Covid-19 is amongst
the most significant economic events currently faced by
the UK, and at the date of this report its effects are subject
to unprecedented levels of uncertainty. This event could
adversely impact the future trading performance of the
group and the parent company and as such increases the
extent of judgement and estimation uncertainty associated
with management’s decision to adopt the going concern
basis of accounting in the preparation of the financial
statements. We therefore identified going concern as a
significant risk, which was one of the most significant
assessed risks of material misstatement.
− For a sample of amounts receivable under grant claims,
we have agreed the receivable balance to evidence of the
claim submission; and
− In respect of the recoverability of accrued income,
documenting our understanding of the claim submission
process. Cash receipts in respect of a sample of prior year
claims were corroborated to bank statements to ensure
the group was receiving funds following a submission.
The group’s accounting policies on revenue recognition,
including revenue from construction contracts, and grant
income are shown in note 3 to the financial statements and
related disclosures are included in note 5.
Key observations
Based on our audit work addressing the risk of improper
revenue recognition from contracts and grant income, we
found that revenue from contracts and government grants
are being accounted for, and recognition is in accordance
with, the financial reporting framework, including IFRS 15
and IAS 20.
Our audit work included, but was not restricted to:
− Obtaining management’s base case cash flow forecasts
covering the period from August 2020 to August 2022,
assessing how these cash flow forecasts were compiled
and assessing their appropriateness by applying
relevant sensitivities to the underlying assumptions, and
challenging those assumptions;
− Assessing the accuracy of management’s past forecasting
by comparing management’s forecasts for last year to the
actual results for last year and considering the impact on
the base case cash flow forecast;
− Obtaining management’s sensitivity scenarios prepared
to assess the potential impact of Covid-19 on the
business. We evaluated management’s assumptions
regarding the impact of a reduction in receipts from
revenue and an unchanged cost base. We considered
whether the assumptions are consistent with our
understanding of the business derived from other
detailed audit work undertaken;
− Assessing the impact of the mitigating factors available
to management in respect of the ability to restrict cash
impact, including the level of available facilities; and
− Assessing the adequacy of related disclosures within the
annual report.
The group’s accounting policy on going concern is shown in
note 4 to the financial statements and related disclosures are
included in note 3.
Key observations
We have nothing to report in addition to that stated in the
‘Conclusions relating to going concern’ section of our report.
114
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ITM POWER PLC
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in
determining the nature, timing and extent of our audit work and in evaluating the results of that work.
Materiality was determined as follows:
Materiality measure
Group
Parent company
Financial statements as a whole
£330,000, which represents 1.75%
of the group’s loss before tax at
the planning stage of the audit.
We determined that no revision to
materiality was required in the light of
the final results.
£227,000, which represents 2% of
the parent company’s total assets
at the planning stage of the audit.
We determined that no revision to
materiality was required in the light of
the final results.
This benchmark is considered the
most appropriate given the increase
in investments and cash in the year
and that the activities of the parent
company are those of a holding
company, which has no trading
activities, and therefore the total assets
of the parent company reflect the most
appropriate benchmark.
Materiality for the current year is higher
than the level that we determined for
the year ended 30 April 2019, where
materiality was determined based
on 0.75% of the parent company’s
net assets, which was a lower level.
The benchmark and measurement
percentage were changed to better
reflect the relevant importance of the
increased investments and cash in the
parent company.
This benchmark is considered the
most appropriate because due to
recent macro-economic factors such
as government policy for green
energy, along with the increased share
price at the year end, this will drive
shareholders to focus on the results
of the business, and there will be an
expectation that the group becomes
profitable in the very near future. Loss
before tax is also a KPI for the group.
Materiality for the current year
is higher than the level that we
determined for the year ended 30
April 2019, where materiality was
determined based on 3% of the
group’s revenue and other operating
income, which was a lower level.
The benchmark and measurement
percentage were changed as a result
of the matters noted in the paragraph
above, including the expectation of
an increased shareholder focus on the
results of the business, and because
loss before tax is a KPI for the group.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
115
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ITM POWER PLC
Materiality measure
Group
Parent company
Performance materiality used to drive
the extent of our testing
Specific materiality
75% of financial statement materiality.
75% of financial statement materiality.
We determined a lower level of specific
materiality for certain areas such as
directors’ remuneration and all other
related party transactions.
We determined a lower level of specific
materiality for certain areas such as
directors’ remuneration and all other
related party transactions.
Communication of misstatements
to the audit committee
£16,500 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
£11,350 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
116
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ITM POWER PLC
An overview of the scope of our audit
Our audit approach was a risk-based approach founded
on a thorough understanding of the group’s business, its
environment and risk profile and in particular included:
− Documenting the processes and controls covering all
of the significant risks and evaluating the design and
implementation of those controls;
appears to be materially misstated. If we identify
such material inconsistencies or apparent material
misstatements, we are required to determine whether
there is a material misstatement in the financial
statements or a material misstatement of the other
information. If, based on the work we have performed,
we conclude that there is a material misstatement of this
other information, we are required to report that fact.
− Evaluation of identified components to assess the
significance of that component and to determine
the planned audit response based on a measure
of materiality. Significance was determined as a
percentage of the group’s total assets, revenue and
profit before tax;
− We performed a full-scope audit of the financial
statements of the parent company, and of the
financial information of the UK trading component.
The components that were subject to full-scope
audit procedures made up 93 per cent of the group’s
revenue and 82 per cent of the group’s loss before tax;
and
− Analytical procedures were performed on the
financial information of the non-significant group
components in Germany, Australia and the United
States.
Other information
The directors are responsible for the other information.
The other information comprises the information
included in the annual report, other than the financial
statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other
information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements
or our knowledge obtained in the audit or otherwise
We have nothing to report in this regard.
Our opinion on other matters prescribed by the
Companies Act 2006 is unmodified. In our opinion, based
on the work undertaken in the course of the audit:
− the information given in the strategic report and
the Directors’ report for the financial year for which
the financial statements are prepared is consistent
with the financial statements; and
− the strategic report and the Directors’ report have
been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report
under the Companies Act 2006
In the light of the knowledge and understanding of the
group and the parent company and their environment
obtained in the course of the audit, we have not
identified material misstatements in the strategic report
or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
− adequate accounting records have not been kept by
the parent company, or returns adequate for our audit
have not been received from branches not visited by
us; or
− the parent company financial statements are not in
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
117
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ITM POWER PLC
agreement with the accounting records and returns;
or
− certain disclosures of directors’ remuneration
specified by law are not made; or
− we have not received all the information and
explanations we require for our audit.
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities
statement set out on page 82, the directors are
responsible for the preparation of the financial
statements and for being satisfied that they give a
true and fair view, and for such internal control as
the directors determine is necessary to enable the
preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent
company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group
or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in
the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the
basis of these financial statements.
A further description of our responsibilities for the
audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s
members those matters we are required to state to them
in an auditor’s 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
and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Michael Redfern
Senior Statutory Auditor
For and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants,
Sheffield
Date: 22 October 2020
2020
2020 CONSOLIDATED
FINANCIAL
STATEMENTS
Year Ended 30 April 2020
120
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
CONSOLIDATED INCOME STATEMENT AND OTHER COMPREHENSIVE INCOMEYEAR ENDED 30 APRIL 2020
CONSOLIDATED INCOME STATEMENT AND OTHER COMPREHENSIVE INCOME
YEAR ENDED 30 APRIL 2020
Note
2020
2019
Revenue
Direct costs
Grant income against direct costs
Gross loss
Operating costs
Distribution expenses
− Research and development
− Prototype production and engineering
− Sales and marketing
Administration expenses
IFRS 9 credit risk impairment
Other operating income
Government grants
Loss from operations before tax
Share of loss of associate company
Investment income
Finance costs
Loss before tax
Tax
Loss for the year
Other total comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences on foreign operations
Net other total comprehensive income
Total comprehensive loss for the year
Basic and diluted loss per share
£’000s
3,291
(10,839)
1,719
(5,829)
(2,298)
(13,919)
(1,385)
(17,603)
(7,028)
15
1,049
(29,396)
(3)
90
(214)
(29,523)
(38)
(29,561)
50
50
(29,511)
(7.4p)
£’000s
4,589
(6,182)
427
(1,166)
(2,327)
(6,202)
(1,713)
(10,242)
(4,661)
(77)
6,799
(9,347)
-
30
(1)
(9,318)
(133)
(9,451)
40
40
(9,411)
(2.9p)
5
5
5
6
12
9
9
10
11
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).
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
121
CONSOLIDATED BALANCE SHEET AS AT 30 APRIL 2020
CONSOLIDATED BALANCE SHEET
AS AT 30 APRIL 2020
Non-current assets
Investment in associate
Intangible assets
Right of use assets
Property, plant and equipment
Financial asset at amortised cost
Total Non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Provisions
Lease liability
Total current liabilities
Net current assets
Non-current liabilities
Lease liability
Net assets
Equity
Called-up share capital
Share premium account
Merger reserve
Foreign exchange reserve
Retained loss
Total equity
Note
12
13
14
15
30
16
18
19
20
21
22
22
23
23
23
23
23
2020
£’000s
346
2,154
6,520
6,501
137
15,658
4,432
23,166
39,919
67,517
(14,013)
(6,890)
(211)
(21,114)
46,403
Restated
2019
£’000s
-
669
-
5,742
-
6,411
1,906
31,219
5,173
38,298
(16,895)
(1,605)
-
(18,500)
19,798
(6,315)
55,746
55,746
-
26,209
26,209
23,664
137,236
(1,973)
161
(103,342)
55,746
16,200
86,631
(1,973)
111
(74,760)
26,209
122
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
CONSOLIDATED BALANCE SHEET (CONTINUED) AS AT 30 APRIL 2020
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS AT 30 APRIL 2020
The prior year has been restated for presentational reasons (see note 28). However, as this does not affect the balances at 1st
May 2018, a third balance sheet has not been presented.
Prior year comparatives have not been restated upon transition to IFRS16 Leases. This contributes right of use asset and lease
liability lines that did not exist previously (see adoption of new standards in note 2).
The financial statements of ITM Power Plc, registered number 05059407, were approved by the Board of Directors and
authorised for issue on 22 October 2020. Signed on behalf of the Board of Directors:
Andy Allen
Director
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
123
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY YEAR ENDED 30 APRIL 2020
Total
equity
£’000s
35,436
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 30 APRIL 2020
Note
Called
up share
capital
Share
premium
account
Merger
reserve
Foreign
exchange
reserve
Retained
loss
£’000s
£’000s
£’000s
£’000s
£’000s
At 30 April 2018
Loss for the year
Other comprehensive income
Total comprehensive income
Credit to equity for share based
payment
At 30 April 2019
Transactions with Owners
Issue of shares
Total Transactions with Owners
Loss for the year
Other comprehensive income
Total comprehensive income
Credit to equity for share based
payment
23
24
23
23
23
16,200
86,631
(1,973)
-
-
-
-
-
-
-
-
-
-
-
-
71
-
40
40
-
(65,493)
(9,451)
(9,451)
-
40
(9,451)
(9,411)
184
184
16,200
86,631
(1,973)
111
(74,760)
26,209
7,464
7,464
50,605
50,605
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50
50
-
-
-
58,069
58,069
(29,561)
(29,561)
-
50
(29,561)
(29,511)
979
979
At 30 April 2020
23
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).
124
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
CONSOLIDATED CASH FLOW STATEMENT YEAR ENDED 30 APRIL 2020
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 30 APRIL 2020
Net cash used in operating activities
Investing activities
Investment in associate
Purchases of property, plant and equipment
Finance asset (security deposit)
Capital Grants received against purchases of property plant and
equipment
Proceeds on disposal of Property, Plant & Equipment
Payments for intangible assets
Interest received
Net cash used in investing activities
Financing activities
Issue of ordinary share capital
Costs associated with fund raise
Payment of lease liabilities
Net cash from financing activities
Increase/ (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of year
Note
2020
£’000s
25
(12,040)
(349)
(8,986)
(137)
89
1
(1,771)
90
Restated
2019
£’000s
(11,775)
-
(4,125)
-
1,073
-
(436)
30
26
(11,063)
(3,458)
59,299
(1,230)
(236)
57,833
34,730
5,173
16
39,919
-
-
-
-
(15,233)
20,403
3
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).
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
125
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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.
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.
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 on to the
balance sheet at the discounted amount applicable at
the transition date. Prior year financial information has
126
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Total operating lease commitments disclosed at 30 April 2019
Less recognition exemption for leases with less than 12 months remaining
Adjustment for extension/ (contraction) of lease payments recognised
Operating lease liabilities before discounting
Discounted using incremental borrowing rate
Opening lease liabilities
Leasehold
properties
Motor
vehicles
Total
£’000s
£’000s
£’000s
677
(75)
243
845
(45)
800
69
-
(16)
53
(3)
50
746
(75)
227
898
(48)
850
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.
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
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Besides the appearance of right of use assets and lease liabilities on the balance sheet, a comparison of the impact on current
year profit / loss is shown below:
Effect on Profit & Loss under new IFRS 16
Interest charge
Depreciation
charge
Total
What would have
been presented
under IAS 17
Operating lease
rental charge
£’000s
£’000s
£’000s
£’000s
199
3
202
476
38
514
675
41
716
400
39
439
Property leases
Vehicle leases
The above note ignores the effect of impairment but shows an impact of an additional £277,000 charge to the income
statement in the year, increasing the EBIT loss of the Group. However, as the charge now passes into the income statement in
the form of depreciation and interest, EBITDA has improved by £439k.
128
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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);
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.
− 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).
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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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
Going concern
The directors have prepared a cash flow forecast for the
period ending 30 November 2021. 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 financial statements.
With the uncertainty created for the economy by
Covid-19, this cash flow forecast model has also been
tested for sensitivity in the following ways: all payments
continuing as normal while receipts are delayed by
six months, or receipts are not received at all. In both
scenarios the business remained cash positive for the
full twelve months. In this second scenario, careful
management of resources will be required to ensure
that the right progress is made on projects in order to
reach payment milestones and receive payment for these
activities.
To date the Group has not experienced any significant
difficulties in receiving payments due from customers so
the worst-case scenario looks unlikely to materialise.
In contracts that include installation and commissioning,
the company will have aligned payment milestones
with on-site completion of certain works. As such, the
dynamic nature of border controls during the Covid-19
lockdown, as well as quarantining when travelling will
need particular attention to maintain cash inflows
As project timings are stretched due to challenges of on-
site work, it will also be increasingly important to monitor
and control outgoings, especially with the close-out of
legacy projects without further over-runs remaining a
high priority. Notwithstanding the above, the business
expects to continue to be viable. This is underlined by the
equity fundraise announced in October 2020 for a further
£150m.
The accounts have therefore been prepared on a going
concern basis.
Revenue recognition
Product sales
ITM Power Plc undertakes product sales that involve
the manufacture, installation and commissioning of an
electrolyser system over a period of several months. Such
systems are usually quoted to a customer as a single
value but may be split into agreed payment milestones
in order to facilitate cash flow. Any ancillary requests will
be treated as separate performance obligations if costs
can be separately identified and the revenue value is also
quoted separately, but the main objective, to provide a
working system for use in a specific application, is viewed
as a single performance obligation.
Under IFRS15, a performance obligation is satisfied over
time if one of the following criteria is met:
a. the customer simultaneously receives and consumes
the benefits provided by the seller’s performance as
the seller performs;
b. the seller’s performance creates or enhances an asset
that the customer controls as the asset is created or
enhanced; or
c. the seller’s performance does not create an asset
with an alternative use to the seller and the seller has
an enforceable right to payment for performance
completed to date.
Revenue from product sales, which do not meet the
first two criteria, will therefore be treated differently
depending on whether the product is standard or
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131
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
bespoke in reference to point (c) above:
Revenue from standard products will be recognised
only when the performance obligation has been fulfilled
and ownership of the goods has transferred, which is
typically at site acceptance, which is the official handover
of control of the goods to the customer. This is due to the
“transferability” of such products and their components
up until handover, so the asset generated has an
alternative use to the Group up to the point of handover.
− During the product build, revenue will be reflected
in the balance sheet as either accrued or deferred
income depending on progress billings and advances
received from customers.
− Costs incurred on projects to date will not be included
in the statement of comprehensive income but will be
accumulated on the balance sheet as work in progress
(as they are considered recoverable) and transferred
to cost of sales once the revenue applicable to those
costs can be recognised in the accounts. Should
costs exceed anticipated revenues, a provision will
be recognised and the surplus costs expensed with
immediate effect;
Bespoke contracts by their nature do not create an
asset with an alternative use to the Group; some
have traceability requirements attached to them that
would prevent them being diverted during production
whilst others are simply bespoke to the customer’s
requirements and therefore would not meet the needs of,
or be easily converted for use on, another project. There
is also an enforceable right to payment for performance
completed to date if the contract is terminated by the
customer for reasons other than ITM Power’s failure to
perform as promised.
− Revenues for bespoke contracts will therefore be
recognised over time according to how much of the
performance obligation has been satisfied. This is
measured using the input method, comparing the
extent of inputs towards satisfying the performance
obligation with the expected total inputs required.
Any changes in expectation are reflected in the total
inputs figure as they become known. The progress
percentage obtained is then applied to the revenue
associated with that performance obligation.
− Management view this as a much more reliable
measure of progress towards completion of the
performance obligation than the output method as,
despite contracting with milestone payments, these
are not reliable measures of progress or value to the
customer but instead have been designed to aid cash
flow.
ITM Power supply units with a standard 12-month
warranty, which covers the equipment against any
fault due to manufacturing defects. Any repairs made
under this warranty will be completed free of charge.
Where possible, diagnosis will be performed via remote
connection in order to minimise the disruption to
customers. The warranty period starts from the date the
performance obligations under Site Acceptance Testing is
deemed to have been passed.
Unless an extended warranty is specifically purchased
under the sales contract and thus, together with its
maintenance obligations, creates a separate performance
obligation under that contract, warranty provisions will
continue to be treated under IAS 37 as they are by nature
an assurance warranty.
Parts that are replaced due to being at their end of life
are not included. Expected lifetimes of individual parts
will be provided in a detailed maintenance plan during
the design phase of the project. Out-of-warranty repairs
and part replacements will be charged to the customer.
It should be noted that a maintenance contract is
mandatory for the duration of any warranty period and
will form a separate performance obligation. After the
warranty period, it is recommended that a maintenance
package is continued (see maintenance contracts below).
ITM Power’s standard contract wording limits the right
of rejection once a customer has accepted the unit
under either factory acceptance testing (for ex-works) or
site acceptance testing. Up until that time, contractual
obligations would protect our right to recognise
revenues for work performed to date, which include a
reasonably attributable profit margin. Remedies would
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
instead exist in a separate claim for damages.
Maintenance contracts
Maintenance contracts typically involve two scheduled
annual visits. Therefore revenue is recognised in two
instalments against the costs of those visits, i.e. when
each performance obligation is met. However, where
remote support forms part of the contract, revenue for
this performance obligation will be recognised over time
as the customer simultaneously receives and consumes
the benefits of such a service, and criteria (a) under
IFRS15 is met as referred to above.
Consulting contracts
Where the IFRS 15 criteria for recognition over time
are met (in this case that the customer simultaneously
receives and consumes the benefits of the service),
revenue will be recognised over time. For those contracts
where these criteria are not met, revenue will be
recognised on completion of the contract.
Fuel sales or sales of scrap/spares
Sales are recognised immediately upon completion of the
performance obligation, being the transfer of ownership
of the goods.
Grants
Government and other grants are included in other
operating income in the period that the related
expenditure is incurred, unless relating to property, plant
and equipment when they are netted against the cost of
the assets acquired on the balance sheet.
Grants have stage payments, which can include upfront
payments to ITM power. Where pre-finance has been
received at the start of the grant and continues to exceed
expenditure incurred to date, the surplus is shown as
deferred income and is included in the consolidated
balance sheet as a liability. When expenditure incurred to
date exceeds receipts from the grant body, the surplus is
shown as accrued income until such time that it can be
claimed. Such balances are reviewed for recoverability,
ensuring that the costs incurred met the conditions
of the grant for recognition of grant income and such
recognition of income does not exceed the maximum
value of the award. Where a claim has been submitted to
the grant body but not yet paid, the amount of the claim
is included in the consolidated balance sheet under trade
and other receivables.
In specific instances where grant income subsidises a
sale, grant income can be recognised against appropriate
expenditure on agreed projects and shown as receivable
from the time of the expense. This means that grant
income can be recognised against stage payments
made on larger items. Thus, a further category of grant
income receivable against pro forma payments has been
established within deferred income on the balance sheet
to allow for a difference in treatment in grant-subsidised
sales. Once the items have been received, this grant
income will come to be shown as “grant income against
direct costs” in profit and loss.
Foreign currencies
The individual financial statements of each group
company are presented in the currency of the primary
economic environment in which it operates (its
functional currency). For the purpose of the consolidated
financial statements, the results and financial position of
each group company are expressed in pounds sterling,
which is the functional currency of the Group, and the
presentation currency for the consolidated financial
statements. The financial statements are presented in
round thousands.
In preparing the financial statements of the individual
companies, transactions in currencies other than the
entity’s functional currency (foreign currencies) are
recognised at the rates of exchange prevailing on the
dates of the transactions. At each balance sheet date,
monetary assets and liabilities that are denominated in
foreign currencies are retranslated at the rates prevailing
at that date.
Non-monetary items carried at fair value that are
denominated in foreign currencies are translated at
the rates prevailing at the date when the fair value was
determined. Non-monetary items that are measured
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133
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Exchange differences are recognised in profit or loss
in the period in which they arise except exchange
differences on monetary items receivable from or payable
to a foreign operation for which settlement is neither
planned nor likely to occur (therefore forming part of
the net investment in the foreign operation), which are
recognised initially in other comprehensive income and
reclassified from equity to profit or loss on disposal or
partial disposal of the net investment.
For the purpose of presenting consolidated financial
statements, the assets and liabilities of the Group’s
foreign operations are translated at exchange rates
prevailing on the balance sheet date. Income and
expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate
significantly during that period, in which case the
exchange rates at the date of transactions are used.
Exchange differences arising, if any, are recognised in
other comprehensive income and accumulated in equity
(attributed to non-controlling interests as appropriate).
Taxation
The tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit for
the year. Taxable profit differs from net profit as reported
in the income statement because it excludes items of
income or expense that are taxable or deductible in
other years and it further excludes items that are never
taxable or deductible. The Group’s liability for current
tax is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date. The
resulting tax charge, where applicable, is shown within
the tax line of the income statement.
Research and development tax credits are recognised
on an accruals basis, and are reported in the income
statement. By their nature, they are similar to grant
funding so will be presented amongst other income.
Deferred tax is the tax expected to be payable or
recoverable on differences between the carrying
amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the
computation of taxable profit, and is accounted for using
the balance sheet liability method. Deferred tax liabilities
are generally recognised for all taxable temporary
differences and deferred tax assets are recognised
to the extent that it is probable that taxable profits
will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are
not recognised if the temporary difference arises from
goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in
a transaction that affects neither the tax profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable
temporary differences arising on investments in
subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the
reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at
each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are
expected to apply in the period when the liability is
settled or the asset is realised. Deferred tax is charged or
credited in the income statement, except when it relates
to items charged or credited directly to equity, in which
case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to set off current tax assets
against current tax liabilities, and when they relate to
income taxes levied by the same taxation authority, and
the Group intends to settle its current tax assets and
liabilities on a net basis.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
in terms of historical cost in a foreign currency are not
retranslated.
(in-line with the Group policy for computer equipment),
using the straight-line method. This is recognised in
Administrative costs.
Investment in associates
An associate is an entity over which the Group has
significant influence but that is neither a subsidiary nor
an interest in a joint venture. Significant influence is the
power to participate in the financial and operational
policy decisions of the investee but is not control or joint
control over those policies. Investments in associates are
accounted for using the equity method.
An investment in associate is initially recognised at
cost and adjusted thereafter to recognise the Group’s
share of the profit or loss and other comprehensive
income of the associate, adjusted where necessary to
ensure consistency with the accounting policies of the
Group. When the Group’s share of losses of an associate
exceeds the Group’s interest in that associate, the
Group discontinues recognition of its share of further
losses. Additional losses are then recognised only to the
extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the associate.
As per IAS 28, the investment in an associate will be
subject to impairment review only with objective
evidence of impairment from observable data as a result
of one or more events adversely impacting the expected
future cashflows and where such impact can be reliably
estimated. Any such impairment will reduce the carrying
value of the investment and be recognised immediately
in profit or loss to the extent that it relates to the
investment by the Group.
Internally-generated intangible assets - research
and development expenditure
Expenditure on research activities is recognised as an
expense in the period in which it is incurred, except
where the costs of activities are considered development
for the purposes of capitalising development costs.
An internally generated intangible asset arising from the
Group’s product development is recognised only if all of
the following conditions can be demonstrated:
− the technical feasibility of completing the intangible
asset so that it can be made available for use or sale;
− the intention to complete the intangible asset to use
or sell it;
− the availability of adequate technical, financial and
other resources to complete the development and to
use or sell the intangible asset
− an asset is created that can be separately identified for
use or sale;
− it is probable that the asset created will generate
future economic benefits; and
− the development cost of the asset can be measured
reliably.
Unrealised gains and losses on transactions between the
Group and its associates and joint ventures are eliminated
to the extent of the Group’s interest in those entities.
Where unrealised losses are eliminated, the underlying
asset is also tested for impairment.
Intangible assets – software
Software purchased from external companies has been
recognised at cost under the heading of intangible
assets. Amortisation is charged so as to write off the
cost of assets over an estimated useful life of three years
As these assets form the basis of the Group’s product
range (being the development of new processes,
standard products or new product features that
improve the capacity or efficiency of the electrolysers)
amortisation is recognised on a straight-line basis in
Distribution costs over their useful lives, considered to
be four years, in line with expected product life cycles.
Each asset is assessed on an annual basis to ensure
that it still meets the criteria and will still contribute to
the Company’s products. If not, an impairment will be
recognised. Where no internally generated intangible
asset can be recognised, development expenditure is
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135
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Right of Use Assets
Right of use assets are recognised at the total value of the minimum lease payments (i.e. initial measurement of
the lease liability) plus any deposit or lease payments made at or before the commencement date, less any lease
incentives. The asset may also include any initial direct costs incurred in establishing the lease. The company creates
a separate asset under leasehold improvements for any dilapidations costs to restore a property to the condition
required by the landlord at the end of the lease.
Depreciation of right of use assets will be recognised in distribution costs (or in administration cost if more suited
to the asset) over the lease term. Where a deposit is not taken in lieu of rent, but rather to act as security that can be
refunded, this will be treated as the expected residual value of the asset and will not be subject to depreciation.
Property, plant and equipment
Leasehold improvements, laboratory & test equipment, production plant & equipment, computer equipment and
office furniture & fittings are stated at cost less accumulated depreciation and any recognised impairment loss.
Assets in the course of construction are carried at cost, less any recognised impairment loss. Depreciation of these
assets, on the same basis as other property assets, commences when the assets are complete and ready for their
intended use.
Depreciation is charged so as to write off the cost of assets, other than land and properties under construction, over
their estimated useful lives, using the straight-line method, on the following bases:
Category
Laboratory and test equipment
Production plant and equipment
Computer equipment
Office furniture and fittings
Period
Recognition in profit and loss
4 years
4 years
3 years
4 years
Distribution costs
Distribution costs
Administration costs
Administration costs
Leasehold improvements
4 years or the remainder of the lease term
Administration costs
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in income.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Impairment of tangible and intangible assets
Financial assets
At each balance sheet date, the Group reviews the
carrying amounts of its tangible and intangible assets
to determine whether there is any indication that those
assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of each asset
(or cash-generating unit) is estimated to determine the
extent of the impairment loss.
The recoverable amounts of non-current assets are
derived from value-in-use calculations. In assessing value
in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of
money and the risks specific to the group of units.
If the recoverable amount of an asset is estimated to
be less than its carrying amount, the carrying amount
is reduced to its recoverable amount. An impairment
loss is recognised immediately in profit and loss. Where
an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate
of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount
that would have been determined had no impairment
loss been recognised in prior years. A reversal of an
impairment loss is recognised immediately in profit
or loss. The value of any impairment (or its reversal)
is recognised within the same cost line that the
depreciation or amortisation would normally appear in.
Inventories
Inventories are stated at the lower of cost and net
realisable value. Cost comprises direct materials
and, where applicable, direct labour costs and those
overheads that have been incurred in bringing the
inventories to their present location and condition. Cost
is calculated using the “first in first out” (FIFO) method.
Net realisable value represents the estimated selling price
less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution.
At initial recognition, the Group measures a financial
asset at its fair value plus, in the case of a financial asset
not at fair value through profit or loss, transaction costs
that are directly attributable to the acquisition of the
financial asset. Transaction costs of financial assets carried
at fair value through profit or loss are expensed in profit
or loss. Subsequent measurement of financial assets
depends on the Group’s business model for managing
the asset and the cash flow characteristics of the asset.
There are three measurement categories into which the
Group classifies its financial instruments:
Amortised cost
Assets that are held for collection of contractual cash
flows where those cash flows represent solely payments
of principal and interest are measured at amortised cost.
A gain or loss on a debt investment that is subsequently
measured at amortised cost and is not part of a hedging
relationship is recognised in profit or loss when the asset
is derecognised or impaired. Interest income from these
financial assets is included in finance income using the
effective interest rate method.
Fair value through profit or loss
Assets that do not meet the criteria for amortised cost
or Fair Value through Other Comprehensive Income
(FVOCI) are measured at fair value through profit or loss.
A gain or loss on a debt investment that is subsequently
measured at fair value through profit or loss and is not
part of a hedging relationship is recognised in profit or
loss and presented net in the profit or loss statement
within other gains/(losses) in the period in which it arises.
Interest received from these financial assets is included in
investment income.
Equity instruments
The Group subsequently measures all equity investments
at fair value. Where the Group’s management has
elected to present fair value gains and losses on equity
investments in other comprehensive income, there is
no subsequent reclassification of fair value gains and
losses to profit or loss. Dividends from such investments
continue to be recognised in profit or loss as other
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137
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
income when the Group’s right to receive payments is
established. Changes in the fair value of financial assets
at fair value through profit or loss are recognised in
other gain/(losses) in the statement of profit or loss as
applicable.
will be recognised on the balance sheet. Rental amounts
will not be expensed but instead will reduce the liability,
while interest on this liability and depreciation of the
asset will pass through to the income statement.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past
event, and it is probable that the Group will be required
to settle that obligation, and that a reliable estimate can
be made of the amount of that obligation. Provisions
are measured at the directors’ best estimate of the
expenditure required to settle the obligation at the
balance sheet date, and are discounted to present value
where the effect is material.
Warranties
Provisions for the expected cost of warranty obligations
under local sale of goods legislation are recognised at the
date of sale of the relevant products, at the directors’ best
estimate of the expenditure required to settle the Group’s
obligation.
Equity instruments
An equity instrument is any contract that evidences
a residual interest in the assets of the Group after
deducting all of its liabilities. Equity instruments issued
by the Group are recorded at the proceeds received, net
of direct issue costs.
Share-based payments
The Group issues equity-settled share-based payments to
certain employees. Equity-settled share-based payments
are measured at fair value at the date of grant. The fair
value determined at the grant date of the equity-settled
share-based payments is expensed in profit or loss on a
straight-line basis over the vesting period, based on the
Group’s estimate of shares that will eventually vest.
Impairment
The Group assesses on a forward-looking basis the
expected credit losses associated with its assets carried
at amortised cost. The impairment methodology applied
depends on whether there has been a significant increase
in credit risk. For trade receivables only, the company
applies the simplified approach permitted by IFRS 9,
which requires expected lifetime losses to be recognised
from initial recognition of the receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and
on demand deposits, and other short-term highly liquid
investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of
change in value.
Financial liabilities
Financial liabilities are obligations to pay cash or other
financial assets and are recognised when the company
becomes a party to the contractual provisions of the
instrument. Financial liabilities are recorded initially at
fair value, net of direct issue costs, and are subsequently
recorded at amortised cost using the effective interest
method, with interest-related charges recognised as
an expense in finance cost in the income statement.
Finance charges are charged to the income statement
on an accruals basis using the effective interest method
and are added to the carrying amount of the instrument
to the extent that they are not settled in the period in
which they arise. A financial liability is derecognised only
when the obligation is extinguished, that is, when the
obligation is discharged or cancelled or expires.
Leases
Where there is control over a leased asset, granted by a
lease of more than 12 months duration at inception, both
the lease liability and a corresponding right of use asset
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
affects both current and future periods.
Critical judgements in applying the Group’s
accounting policies
The following are the critical judgements, apart from
those involving estimations (which are dealt with
separately below), that the directors have made in the
process of applying the Group’s accounting policies and
that have the most significant effect on the amounts
recognised in the financial statements.
Revenue Recognition Over Time
Management have assessed sales contracts in accordance
with the 5-step principle laid out by IFRS 15 and have
concluded that certain contracts can be recognised over
time due to their status as first-time or custom builds.
In accounting for their revenue under this method,
management must take a view of the total costs required
for each performance obligation together with the actual
spend already recognised in cost of sales to be able to
recognise an equivalent proportion of the revenue for
that performance obligation. As this relates to expense
not yet incurred, the projections are largely based on
budgeted costs or quotes for costs and anticipated labour
hours to complete a task.
Some contracts that are recognised over time may
contain separate performance obligations that would
take place at a point in time e.g. training of customer
operatives in the use of the equipment. Management
must decide, therefore, how the contracts break down
in terms of performance obligations and the manner in
which their associated revenue is accounted.
HMRC Unapproved Share Option Schemes. For share
options that have vested and are exercisable at the year-
end, the provision has been calculated using the intrinsic
value of the share option which is the difference between
the Group’s share price at the balance sheet date and
the exercise price. The actual amount of Employer’s NIC
that will be payable will be determined on the difference
between the exercise price and Group’s share price at the
date of exercise. For share options that have not vested,
the provision for Employer’s NIC is calculated on the same
basis and is accreted over the vesting period.
The Group has agreed to settle the Employer’s NIC liability
arising on gains made on the exercise of unapproved
share options be capped at the exercise price of the
options. Any excess liability for Employer’s NIC would be
recovered from the option holder.
Pension costs
The Group operates a defined contribution pension
scheme. The amount charged to the income statement
in respect of pension costs is the contributions
actually payable in the year. Differences between the
contributions actually payable and those paid are shown
as accruals or prepayments in the consolidated balance
sheet.
4. CRITICAL ACCOUNTING
JUDGEMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies,
which are described in note 3, the directors are required
to make judgements, estimates and assumptions about
the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates
and associated assumptions are based on historical
experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed
on an on-going basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the
period of the revision and future periods if the revision
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
139
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Going concern
Impairment of assets
The directors are required to assess whether it is
appropriate to prepare the financial statements on a
going concern basis. This is particularly important given
the ongoing Covid-19 pandemic and as a result required
additional sensitivity testing in the current year. The
assessment of going concern is set out in note 3.
Investment in ITM Linde Electrolysis
The investment was made on a 50:50 basis but with Linde
deemed to have control for the purposes of consolidation
as they appoint the Managing Director. ITM retains a
significant influence however, by virtue of the even voting
rights for all other matters and having representation
on the Board of Directors. As such management have
deemed the investment to be that of an associate for
accounting purposes, subject to equity accounting and
potential for impairment.
Capitalisation of Development Costs
The Group undertakes a number of internal projects for
the advancement of our core technology, the design of
our standard products and improved efficiencies around
our business. Whilst these will be timebound and involve
specific groups of staff, time and costs can easily be
tracked through our reporting and accounting systems.
Management must decide at what point such efforts
become development work that will result in future
economic benefits to the Group and thus, at which point
they meet the criteria for capitalisation.
Recoverability of internally-generated
intangible asset
During the year, management reconsidered the
recoverability of its internally-generated intangible asset
which is included in its balance sheet at £2.1m (2019:
£616,000). The development projects currently capitalised
here, and being amortised, relate to technologies being
used in our current sales and so remain relevant. Further
capitalisations during the year relate to advancements
in those technologies and efficiencies that should allow
the Group to improve its offering and gain interest in
new markets. The Group has also been developing its
internal systems to support the delivery of its larger scale
activities.
In the case of there being a trigger for a review of
impairment, the Group performs a review on the
carrying amounts of its tangible and intangible assets to
determine whether there is any indication of impairment
at the Balance Sheet date. The Group particularly tests the
net recoverable amounts of its internally-generated assets
held (or previously held) in assets under construction
to ensure that the costs of their production have not
over-run their operational or commercial value. Typically,
assets under construction are grouped under the same
cash generating unit (CGU) where they are funded by
the same grant, but once deployed and opened to the
public, each hydrogen refuelling station is considered as a
separate CGU.
One such trigger for impairment review, which has
occurred in the current year, is that the Group was loss
making and another was the impact of the Covid-19
lockdown on the number of vehicles on the roads
requiring refuelling for an (as yet) undetermined period of
time. This is the fourth year that a review of the refuelling
assets of the company has been undertaken, with the
financial year ended April 2017 being the first year of
deployment.
As part of a strategic review ongoing at the year-end, in
June 2020 a Managing Director was appointed to the
Motive division to establish a strategy for refuelling in
the UK. As such, it was deemed that a critical volume of
hydrogen output was needed for the stations to be cash
generative. The first-generation stations deployed by ITM
do not meet these minimum volume requirements. As
such the Group has impaired fully the remaining value of
the assets.
However, as the majority of the stations are sited in
strategic locations with important partners, and an
obligation exists within funding arrangements to
continue to operate for a period of time, the fleet of
refuelling stations will continue to offer hydrogen before
upgrades can be planned in the future. The stations
continued to operate during Covid-19 having gained
essential services status through supporting the Met
police and key workers with Green Tomato Cars.
140
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at the balance sheet date, an impairment review
was undertaken and an impairment of £5,393,000 was
provided.
Recoverability of debtors and debtor
impairment
In applying the revised IFRS 9 standard, Management
have applied a 1% provision against trade receivables
and accrued sales income based on historical and future
trends. We have not noticed any change in recovery
profiles during the Covid-19 lock down and continue to
engage with large credit-worthy businesses for the sale
of our products. Grant debtors and accrued grant income
balances have been disregarded in the application of
this percentage provision as, so long as spend continues
within the parameters of the grants, the value of the grant
award is unchanged. In the case of grants awarded by
the EU, Brexit uncertainty may impact the timing of those
receipts; all grants that are contracted are considered
recoverable.
Key sources of estimation uncertainty
Useful lives of property, plant and equipment
As described above, the Group reviews the estimated
useful lives of property, plant and equipment at the end
of each reporting period. During the current year, the
directors have reaffirmed their belief in the useful lives
of the asset categories. However, the accounting lives of
certain assets more directly connected with the current
leasehold properties have been reduced based on the
expected dates for vacating those properties.
Discount rates on lease liabilities recognised under
IFRS 16
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 our existing leases and no incremental
borrowing rate known for the group, we have selected
discount rates of 2.5% (properties) and 5% (non-property)
for the existing leases based on similar companies and
leases. For the longer Bessemer lease a rate of 7.5% has
been used and the impact of using this rate is material
given the length of the lease. Details of the sensitivities to
different estimates that could have been used are given in
note 22.
Leasehold property provision
A provision was recognised in prior years for dilapidations
work in relation to our current premises for handover to
the landlords, given our intention to move to Bessemer
Park. The amount was calculated by a value per square
metre, which was adjusted last year based on assessment
of the first premises that we are due to leave. These
provisions have since been viewed as best practice and
other similar provisions will be put in place for other new
property leases.
Warranty provisions
Warranty provisions are based on Management’s
current best estimate of the potential costs involved in
diagnosing and correcting faults and the likelihood of
such faults occurring within the first year of operation of
a unit. These assumptions are built upon historical data of
units in the field so are likely to be reviewed and revised
as more information becomes available with a higher
quantity of machines in operation. If it becomes known
that additional work is required, then the provision is
extended.
Provision for contract losses
The Group has recognised a provision for onerous
contracts in line with the requirements of IAS 37, given
the expected costs to complete legacy projects exceeding
the headroom in contracted sales values. Cost forecasts
produced by Project Managers are monitored on a
monthly basis to ensure that such potential losses are
recognised immediately in the accounts. As quotes are
finalised with suppliers these estimates may fluctuate but
the provision will be adjusted accordingly and ultimately
used to off-set the future costs of the project as it nears
completion.
Iheld (or previously held) in assets under construction
to ensure that the costs of their production have not
over-run their operational or commercial value. Typically,
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
141
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. REVENUE, OPERATING SEGMENTS & INCOME FROM GOVERNMENT
GRANTS
All revenues are derived from continuing operations. An analysis of the Group’s revenue is as follows:
Revenue from product sales recognised over time
Revenue from product sales recognised at a point in time
Total product sales
Consulting contracts
Maintenance contracts
Fuel Sales
Other (e.g. scrap sales)
Revenue in the Consolidated Income Statement
Grant income shown against cost of sales
Grant income (claims made for projects)
Other government grants (R&D claims)
Other government grants (Covid-19 furlough scheme)
2020
£’000s
2,256
-
2,256
470
48
367
150
3,291
1,719
753
252
44
6,059
2019
£’000s
2,920
826
3,746
67
66
373
337
4,589
427
6,799
-
-
11,815
At 30 April 2020, the aggregate amount of the transaction price allocated to remaining performance obligations
of continuing build contracts was £3.8m (2019: £5.9m). The Group expects to recognise 94% of the remaining
performance obligations within one year.
Segment information
ITM Power Plc is organised internally to report to the
Group’s Chief Operating Decision Maker, the Chief
Executive Officer, on the financial and operational
performance of the Group as a whole. The Group’s Chief
Operating Decision Maker is ultimately responsible for
entity-wide resource allocation decisions, evaluating
performance on a group-wide basis and any elements
within it on a combination of information from the
executives in charge of the Group and Group financial
information.
Management has previously identified three target
markets for our products (Power-to-Gas, Refuelling, and
Industrial). Revenue reporting has begun to look at these
three sectors to assess the commerciality of those sales.
However, decisions for resourcing etc. cannot be made
by reference to these segments. The Group operates a
single factory that builds units for use across all sectors.
It would be hard to assign overhead costs to particular
product segments as builds all occur in that one facility
and can run concurrently. Similarly, fixed assets and
suppliers’ balances cannot be assigned to the production
of one specific segment. For overhead costs and net asset
resources, therefore, decisions are taken on a group basis.
142
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
An analysis of the Group’s revenue, by major product (or customer group), is as follows:
Power-to-Gas
(of which product sales recognised over time £260,000)
Refuelling
(of which product sales recognised over time £854,000)
Industrial
(of which product sales recognised over time £1,140,000)
Other
Revenue in the consolidated income statement
2020
£’000s
332
1,247
1,147
565
3,291
2019
£’000s
1,084
2,365
1,052
88
4,589
Geographical analysis
The United Kingdom is the Group’s country of domicile but the Group also has subsidiary trading companies in
the United States, Germany and Australia. All non-current assets were domiciled in the United Kingdom, with the
exception of one hydrogen refuelling station in California (net book value £Nil, 2019: £69,000) and assets relating to
our German office (net book value £31,000, 2019: £Nil). Revenues have been generated as follows:
United Kingdom
Germany
(of which product sales recognised over time £1,140,000)
France
(of which product sales recognised over time £854,000)
Netherlands
(of which product sales recognised over time £261,000)
United States
2020
£’000s
828
1,167
857
261
178
3,291
Included in revenue are the following amounts, which each accounted for more than 10% of total revenue:
Customer A – Industrial
Customer B – Power-to-Gas
Customer C – Power-to-Gas
Customer D – Other
Customer E – Industrial
Customer F– Refuelling
2020
£’000s
1,140
<10%
<10%
410
<10%
854
2019
£’000s
1,338
391
1,739
891
230
4,589
2019
£’000s
<10%
<10%
891
Nil
635
1,696
Except where extended warranties have been purchased and treated as separate performance obligations for the
purpose of IFRS 15 Revenue from Customers, warranty commitments are covered under IAS 37 Provisions and are
therefore accounted under note 21.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
143
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. LOSS FOR THE YEAR
Loss for the year has been arrived at after charging/ (crediting):
Net foreign exchange (gains)/losses
Shared based payment charge (Note 24)
Depreciation of property, plant and equipment
Reversal of impairment of assets
Impairment of non-current assets
Amortisation of intangibles
Research and non-capitalised Development costs
Impairment against prepayments
Bad and doubtful debt (credit) / expense
Loss on disposal of property, plant and equipment
Rentals under short-term leases:
− Land and buildings
− Other equipment
Government grants receivable
Staff costs (note 8)
Cost of inventories recognised as an expense
Movement on aged stock provision
2020
£’000s
(184)
2,625
2,440
-
5,588
197
2,298
-
(15)
473
83
413
(2,768)
8,642
4,326
108
2019
£’000s
148
184
1,773
(24)
-
122
2,327
591
424
-
227
292
(7,226)
6,825
4,175
341
Prior year comparatives have not been restated upon transition to IFRS 16 Leases, affecting comparison of depreciation
and operating lease rentals (see adoption of new standards in note 2).
Operating lease rentals for the current year, refer only to those rentals that meet the criteria for exemption under IFRS
16 Leases i.e. those of short duration or that do not grant control of an asset for a determined period of time. These
are largely short-term rentals of equipment to undertake our field activities on projects whilst building rentals refer to
property service charges.
144
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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;
Loss before interest and tax
Add back:
Depreciation
Impairment
Amortisation
Loss on disposal
Share based payment charge
2020
£’000s
(29,396)
2,440
5,588
197
473
2,625
(18,073)
7. AUDITORS REMUNERATION
The following amounts were payable to the Group’s auditor and have been charged within the loss before tax:
Fees payable to the Company’s auditor for
- The audit of the Company’s annual accounts
- The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Other services pursuant to legislation
- Interim agreed upon procedures/review work (audit related services)
Total non-audit fees
2020
£’000s
60
30
90
13
13
2019
£’000s
(9,347)
1,773
(24)
122
-
184
(7,292)
2019
£’000s
40
15
55
13
13
In addition to last year’s reported audit figures an amount was agreed and paid to cover over-runs of £35,000, making
the total payable £90,000.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
145
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. INFORMATION REGARDING DIRECTORS AND EMPLOYEES
2019/20
Fees/Basic
salary
Benefits
in kind
Annual
bonuses
Total
excluding
pension
Pension
contributions
2020
Total
£’000s
£’000s
£’000s
£’000s
£’000s
£’000s
Name of Director
Executive
Dr S Bourne
Dr G Cooley
Dr R Smith
A Allen
Non-Executive
Prof R Putnam
Lord Freeman
B Pendlebury
R Bone
M Green
J Novicki
Aggregate emoluments
Employers NI
Share based payment expense in
respect of directors
178
214
118
102
192
19
-
58
30
-
911
-
-
-
-
-
-
-
-
-
-
-
56
109
25
17
-
-
-
-
-
-
234
323
143
119
192
19
-
58
30
-
9
23
11
18
-
-
-
-
-
-
207
1,118
61
243
346
154
137
192
19
-
58
30
-
1,179
167
2,611
3,957
Total costs for Directors and key management personnel
The amount shown for M Green has been accrued at the year-end and will be paid in the next financial year.
146
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2018/19
Name of Director
Executive
Dr S Bourne
Dr G Cooley
Dr R Smith
A Allen
Non-Executive
Prof R Putnam
Lord Freeman
B Pendlebury
R Bone
Aggregate
emoluments
Employers NI
Fees/Basic
salary
£’000s
Benefits
in kind
£’000s
Annual
bonuses
£’000s
Total
excluding
pension
Pension
contributions
2019
Total
£’000s
£’000s
£’000s
170
203
113
94
160
38
-
38
816
-
-
-
-
-
-
-
-
-
85
167
26
-
-
-
-
-
255
370
139
94
160
38
-
38
14
28
10
13
-
-
-
-
269
398
149
107
160
38
-
38
278
1,094
65
1,159
Share based payment
expense in respect of
directors
Total costs for Directors and Key Management Personnel
143
184
1,486
Four directors were members of money purchase schemes during the year (2019: four).
Share Options Scheme
On 29 January 2010 the Group introduced a new EMI and Unapproved Share Option Scheme to be applied to all
subsequent issues of share options. Under the scheme rules the exercise price is deemed to be the mid-market price
of shares on the London Stock Exchange AIM market at the close of trading on the day before the grant of the share
options. Share options vest in three equal instalments on the first, second and third anniversaries of the grant and are
exercisable up to the tenth anniversary of the grant.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
147
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Details of options for Directors who served during the year are as follows:
Name of
Director
Dr S Bourne
Dr S Bourne
Scheme
1 May 2019
Number
Grant
date
30 April 2020
Number
Exercise
price £’000
Date
from which
exercisable
Expiry date
EMI
EMI
200,000
02/02/2010
-
18p
02/02/2014
02/02/2020
123,596
24/01/2011
123,596
67p
24/01/2011
23/01/2021
Dr S Bourne
Unapproved
276,404
24/01/2011
276,404
67p
24/01/2011
23/01/2021
Dr S Bourne
EMI
100,000
01/08/2012
100,000
50p
06/08/2015
31/07/2022
Dr S Bourne
Unapproved
250,000
06/08/2014
250,000
27p
01/08/2012
05/08/2024
Dr S Bourne
Unapproved
583,333
14/08/2018
583,333
30p
14/08/2019
13/08/2028
Dr S Bourne
Unapproved
583,333
14/08/2018
583,333
30p
14/08/2020
13/08/2028
Dr S Bourne
Unapproved
583,334
14/08/2018
583,334
30p
14/08/2021
13/08/2028
Dr G Cooley
Unapproved
200,000
29/06/2009
Dr G Cooley
Unapproved
360,000
02/02/2010
Dr G Cooley
EMI
640,000
02/02/2010
-
-
-
18p
29/06/2012
29/06/2019
18p
02/02/2014
02/02/2020
18p
02/02/2014
02/02/2020
Dr G Cooley
Unapproved
800,000
24/01/2011
800,000
67p
24/01/2011
23/01/2021
Dr G Cooley
EMI
250,000
19/07/2012
250,000
50p
19/07/2012
18/07/2022
Dr G Cooley
Unapproved
750,000
06/08/2014
750,000
27p
06/08/2015
05/08/2024
Dr G Cooley
Unapproved
1,000,000
14/08/2018
1,000,000
30p
14/08/2019
13/08/2028
148
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Details of options for Directors who served during the year are as follows (continued):
Name of
Director
Scheme
1 May 2019
Number
Grant
date
30 April 2020
Number
Exercise
price £’000s
Date
from which
exercisable
Expiry date
Dr G Cooley
Unapproved
1,000,000
14/08/2018
1,000,000
30p
14/08/2020
13/08/2028
Dr G Cooley
Unapproved
1,000,000
14/08/2018
1,000,000
30p
14/08/2021
13/08/2028
Prof R
Putnam
Prof R
Putnam
Lord R
Freeman
Unapproved
50,000
23/11/2009
Unapproved
100,000
24/01/2011
-
-
20p
23/11/2010
23/11/2019
67p
24/01/2011
23/01/2021
Unapproved
50,000
08/08/2011
50,000
31p
08/08/2012
08/08/2021
Dr R Smith
EMI
100,000
29/04/2010
-
24p
29/04/2013
29/04/2020
Dr R Smith
Unapproved
416,666
14/08/2018
416,666
30p
14/08/2019
13/08/2028
Dr R Smith
Unapproved
416,667
14/08/2018
416,667
30p
14/08/2020
13/08/2028
Dr R Smith
Unapproved
416,667
14/08/2018
416,667
30p
14/08/2021
13/08/2028
A Allen
A Allen
A Allen
EMI
EMI
EMI
16,666
23/03/2011
16,666
55p
22/03/2012
22/03/2021
16,666
23/03/2011
16,666
55p
22/03/2013
22/03/2021
16,668
23/03/2011
16,668
55p
22/03/2014
22/03/2021
A Allen
Unapproved
333,333
14/08/2018
333,333
30p
14/08/2019
13/08/2028
A Allen
Unapproved
333,333
14/08/2018
333,333
30p
14/08/2020
13/08/2028
A Allen
Unapproved
333,334
14/08/2018
333,334
30p
14/08/2021
13/08/2028
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
149
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following LTIP awards were granted in the year for directors:
Name of Director
Scheme
Options at 30
April 2020
Grant
date
Last Vesting
Date
Expiry Date
Exercise
price
A Allen
Unapproved
47,250
24/10/2019
23/10/2022
23/10/2029
Dr G Cooley
Unapproved
307,500
24/10/2019
23/10/2022
23/10/2029
Dr R Smith
Unapproved
72,000
24/10/2019
23/10/2022
23/10/2029
Dr S Bourne
Unapproved
159,750
24/10/2019
23/10/2022
23/10/2029
48p
48p
48p
48p
Gains made by directors exercising share options in the year:
Director
R Putnam
G Cooley
G Cooley
S Bourne
R Smith
R Putnam
Type of share
option
Number
of shares
exercised
Share option
value
Exercise
price
Gain made
£’000s
Unapproved
100,000
20.5p
70.37p
49.9
EMI
640,000
18.75p
61.78p
275.4
Unapproved
360,000
18.75p
61.78p
154.9
EMI
EMI
200,000
18.75p
61.78p
100,000
24.25p
24.25p
86
-
Unapproved
50,000
66.75p
160.06p
46.6
150
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Remuneration of the highest paid Director
Aggregate emoluments
Money purchase pension contributions
2020
£’000s
323
23
346
2019
£’000s
370
28
398
Gains made by the highest paid director exercising share options in the year were £430 (2019: £nil).
Monthly average number of persons employed
Number
Number
Research and development
Production and engineering
Sales and marketing
Administration
Staff costs during the year (including Directors)
Wages and salaries
Social security costs
Other pension costs
Share based payment expense
Less: staff costs capitalised in development costs
Staff costs expensed in the year
28
116
12
22
178
£’000s
7,208
821
613
2,625
11,267
1,690
9,577
24
86
12
17
139
£’000s
5,822
537
466
184
7,009
383
6,626
As at 30 April 2020 pension contributions of £52,000 (2019: £44,000) due in respect of the current year had not been
paid over to the scheme. These were paid over in the following month and within statutory deadlines.
Due to Covid-19 lockdown in the latter months of the financial year, a furlough claim was made to the government to
support the wages of those staff who were unable to continue their work from home. As such, a credit of £44,000 has
been recognised in other income in anticipation of this receipt. The figures shown above are shown gross and do not
include the impact of the furlough scheme income.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
151
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. INTEREST
Interest is received on the Group’s cash balances and paid largely on its lease liabilities:
Investment interest
Interest received on cash deposits
Finance cost
Interest paid
Lease liability interest paid
2020
£’000s
90
(11)
(203)
(124)
2019
£’000s
30
(1)
-
29
Prior year comparatives have not been restated upon transition to IFRS16 Leases, affecting interest paid (see adoption
of new standards in note 2).
152
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. TAX
Current taxation
Tax (charge)/ credit in the year
Tax charge relating to prior years
2020
£’000s
(12)
(26)
(38)
2019
£’000s
59
(192)
(133)
Corporation tax is calculated at 19% (2019: 19%). Taxation for other jurisdictions is calculated at the rates prevailing
in the respective jurisdictions.
The charge for the year can be reconciled to the income statement as follows:
Loss before tax
Loss before tax
Tax on loss at 19% (2019: 19%)
Factors affecting (charge)/credit for the year:
Expenses not deductible for tax purposes
Fixed asset differences
Research and development enhanced relief
Tax charge on current year RDEC claim
Adjustments in respect of prior years
Unrelieved tax losses carried forward
Tax (charge) / credit for the year
2020
£’000s
(29,523)
5,609
(542)
(1,649)
-
(12)
(26)
(3,418)
(38)
2019
£’000s
(9,318)
1,770
(50)
(342)
59
-
(192)
(1,378)
(133)
Factors affecting future tax charges
The Group has tax losses of approximately £47.8m (2019: £30.1m) available to carry forward against future taxable
profits, subject to agreement with HM Revenue & Customs. A deferred tax asset has not been recognised.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. LOSS PER SHARE
The calculation of the basic and diluted earnings per share is based on the following data:
2020
£’000s
2019
£’000s
Loss
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
Loss per Share
398,184,707
324,009,397
7.4p
2.9p
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.
12. INVESTMENTS
A list of investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest
is given in note 6 to the Company’s separate financial statements.
Investment in associate
Foreign exchange adjustment
50% share of loss recognised in the year
2020
£’000s
344
5
(3)
346
2019
£’000s
-
-
-
-
154
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The amount shown in the Consolidated Balance Sheet relates to the establishment and incorporation in the year of
ITM Linde Engineering GmbH (incorporated in Germany, with registered office: Bodenbacher Str. 80, 01277 Dresden,
Germany). Interest in the new company is split 50:50 with Linde Engineering GmbH, although control is deemed to
lie with Linde for the purposes of consolidation as they appoint the Managing Director. ITM Power has significant
influence in the company due to its representation on the Board.
The investment is therefore an equity-accounted investment in associate but will be subject to impairment review. In
the current year, no such impairment was deemed necessary.
No sales were made by the entity in the current reporting year and only start-up costs have been incurred. The majority
of the investment remains in cash funds held by ITM Linde Engineering GmbH at the year-end.
Key financial data of ITM Linde Electrolysis:
Cash
Share capital
Share premium
Loss for the year
Total Equity
30 April 2020
€’000s
717
(24)
(700)
7
(717)
During the year, besides the transfer of 50% of the share capital and cash into the associate and the legal fees relating
to its establishment, ITM Power paid for the development of its website and hosting. Further cash injections are
planned over the next few months, equating to €625,000 by each party.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
155
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. INTANGIBLE ASSETS
Software
Know-how
Development
costs
£’000s
£’000s
£’000s
Cost
At 1 May 2018
Transfers
Additions
At 30 April 2019
Transfers
Additions
Grant received
At 30 April 2020
Amortisation
At 1 May 2018
Charge for the year
At 30 April 2019
Charge for the year
At 30 April 2020
Carrying amount
At 30 April 2020
At 30 April 2019
6
-
53
59
-
81
-
140
1
5
6
36
42
98
53
404
155
-
559
66
-
-
625
123
117
240
161
401
224
319
Total
£’000s
479
-
436
915
-
1,771
(89)
2,597
124
122
246
197
443
69
(155)
383
297
(66)
1,690
(89)
1,832
-
-
-
-
-
1,832
297
2,154
669
The amortisation period for externally purchased software has been set at three years (in line with our policy for
computer equipment).
Development costs are generated internally by development of our stack technology, unit designs and processes.
They are built up over a period of time but capitalisation ceases once the asset comes into use and is transferred to the
Know-how category, where they will amortise over four years.
Within the development costs category, and therefore incomplete in its value to date, is the design of our 10MW
standard product. This currently has a value of £1.1m but combines not only the design of our first modular system but
also the working-practice templates for larger system development and deployment in locations under stricter HSEQ/
regulatory controls, such as refineries.
156
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. RIGHT OF USE ASSETS
Cost
Cost at 1 May 2019 (on transition to IFRS 16)
Additions
At 30 April 2020
Depreciation
At 1 May 2019
Charge for the year
Impairment
At 30 April 2020
Net book value
At 30 April 2020
At 30 April 2019
Leasehold
property
£’000s
Leased
Vehicles
£’000s
1,014
6,058
7,072
-
475
133
608
6,464
-
72
22
94
-
38
-
38
56
-
Total
£’000s
1,086
6,080
7,166
-
513
133
646
6,520
-
The Right of Use asset category was created upon transition to IFRS 16. Prior periods have not been restated. The
Group currently holds right of use assets in both the UK (5 properties and 9 vehicles) and Germany (1 property and 2
vehicles).
Right of Use assets are depreciated over their lease term. An impairment has been recognised in the current year, in
accordance with IAS 36 Impairment of Assets, for the remaining leases on buildings that we are preparing to quit when
we move to Bessemer Park. This involves three separate properties that currently house our UK workforce and reduces
their carrying value so as not to be depreciating them beyond March 2021.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
157
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. PROPERTY, PLANT AND EQUIPMENT
Production
plant and
equipment
Laboratory and
test equipment
Computer
equipment
Office furniture
and fittings
Leasehold
improvements
Assets in the
course of
construction
Total
£’000s
£’000s
£’000s
£’000s
£’000s
£’000s
£’000s
4,649
4
-
120
-
26
4,799
178
950
(484)
23
1,734
169
-
-
-
-
1,903
156
-
(66)
-
5,466
1,993
701
90
-
-
-
(2)
789
129
-
(1)
(1)
916
206
13
-
-
(12)
-
207
6
-
-
-
3,429
160
-
-
(10)
-
3,579
4,006
-
-
-
561
11,280
3,665
4,101
(1,073)
(1,073)
(120)
-
-
-
(22)
24
3,033
14,310
4,103
(950)
(383)
8,578
-
(934)
42
64
213
7,585
5,845
22,018
Cost
At 1 May
2018
Additions
Grant
received
Transfers
Disposals
Foreign
Exchange
At 1 May
2019
Additions
Transfers
Disposals
Foreign
exchange
At 30
April 2020
158
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Production
plant and
equipment
Laboratory
and test
equipment
Computer
equipment
Office
furniture
and fittings
Leasehold
improvements
Assets in the
course of
construction
Total
£’000s
£’000s
£’000s
£’000s
£’000s
£’000s
£’000s
2,470
1,357
558
-
993
-
15
3,478
(400)
989
910
20
-
195
-
-
1,552
(53)
175
-
-
91
-
-
649
(1)
99
-
-
199
(12)
4
-
-
2,242
(10)
490
(24)
-
191
2,698
-
6
-
-
-
658
151
-
-
-
-
-
-
-
-
-
6,826
(22)
1,773
(24)
15
8,568
(454)
1,927
4,394
5,455
-
20
4,997
1,674
747
197
3,507
4,394
15,516
469
1,321
319
351
169
140
16
16
4,078
1,450
6,501
881
3,033
5,742
Depreciation
At 1 May
2018
Disposals
Charge for
the year
Impairment
reversal
Foreign
exchange
At 30 April
2019
Disposals
Charge for
the year
Impairment
Foreign
exchange
At 30
April 2020
Net book value
At 30
April 2020
At 30
April 2019
The impairment, reported across three categories of asset above, relates to the impairment of our refuelling assets
described in note 4 as well as a £62,000 impairment for leasehold improvements relating to our properties that we are
preparing to leave (see also Right of Use Assets note 14).
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
159
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. INVENTORIES
Raw materials
Work in progress
2020
£’000s
3,277
1,155
4,432
Inventories have been stated after a provision for impairment of aged-stock £449,000 (2019: £341,000).
17. CONTRACT BALANCES AND PERFORMANCE OBLIGATIONS
Contract revenue recognised through release from deferred income
Release from transitional adjustment
2020
£’000s
484
10
494
2019
£’000s
1,796
110
1,906
2019
£’000s
540
638
1,178
In the prior year ITM Power elected to transition to the new standard IFRS 15 Revenue from Customers using the
modified retrospective method. This meant that retained earnings were adjusted by an amount that would have
increased deferred income brought forward. In the current financial year we have completed the last of those projects
and thus the remaining adjustment has been released. This release of deferred income in the year has been shown
separately.
160
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Contracts with customers in progress at the balance sheet date:
Amounts due from contract customers included
in trade and other receivables
Contract assets (accrued income)
Contract liabilities (deferred income)
Balance sheet position of sales contracts
Contract liabilities (deferred income)
2020
£’000s
1,067
735
(3,050)
(1,248)
2019
£’000s
35
1,471
(2,457)
(951)
The contract position will change according to the number or size of contracts in progress at the year-end as well as
the status of payment milestones towards those contracts. The Group will continue to structure payment milestones in
order to cover the up-front costs of materials for cash flow purposes. The variance between these and the performance
obligations for revenue recognition under IFRS 15 (typically acceptance of the product by the customer for all standard
products), will cause increasing values to remain in deferred income for longer. The contract asset has reduced from
the prior year as the contract invoices have been raised.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
161
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. TRADE AND OTHER RECEIVABLES
Amount receivable for the sale of goods
Amounts due from construction contract customers
(note 17)
Amounts receivable under grant claims
Impairment for credit risk
Total trade receivables
Restricted cash balances
Other receivables
Corporation tax (R&D credits)
Prepayments
Accrued Sales income
Accrued Grant income
2020
£’000s
45
1,067
4,273
(62)
2020
£’000s
2019
(Restated)
2019
(Restated)
£’000s
£’000s
136
35
6,444
(77)
6,538
1,692
366
154
14,937
1,471
6,061
31,219
5,323
1,083
869
317
13,289
735
1,550
23,166
The prior year has been restated for presentational reasons (see note 28). Prepayments include amounts paid up-front
by way of pro forma and stage payments to suppliers for the long-lead time items required on our build projects.
Restricted cash balances refer to monies received from customers that are currently sat on bank guarantee until
specific performance milestones are met on product sales contracts.
Trade receivables are measured at amortised cost.
162
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Their ageing is analysed as follows:
Less than 30 days
31-60 days
61-90 days
Greater than 91 days
Movement in the allowance for doubtful debts
Balance at 1 May 2019
Impairment losses recognised
Movement on IFRS 9 credit risk provision
Amounts written off during the year as uncollectible
Balance at 30 April 2020
2020
£’000s
3,713
95
777
800
5,385
2020
£’000s
77
-
(15)
-
62
2019
(Restated)
£’000s
2,319
2,940
1
1,355
6,615
2019
£’000s
-
(347)
77
347
77
The movement on the doubtful debts provision in the year related the IFRS 9 credit risk provision that recognises a
potential loss on 1% of the company’s trade debtor and accrued sales income balances.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
163
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. CASH AND CASH EQUIVALENTS
Cash and cash equivalents
2020
£’000s
39,919
2019
£’000s
5,173
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or
less. The directors consider that the carrying amount of these assets approximates to their fair value.
20. TRADE AND OTHER PAYABLES
Trade payables
Other taxation and social security
Other creditors
Accruals
Deferred sales income
Deferred grant income
Grant income received against pro-formas
2020
£’000s
2,507
272
33
1,957
3,050
305
5,889
14,013
2019
(Restated)
£’000s
3,440
240
21
2,011
2,457
2,333
6,393
16,895
The directors consider that the carrying amount of trade and other payables approximates to their fair value. The prior
year has been restated for presentational reasons (see note 28).
164
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21. PROVISIONS
Balance at 1 May 2018
Provision created in the year
Use of the provision
Release in the year
Balance at 30 April 2019
Provision created in the year
Use of the provision
Release in the year
Balance at 30 April 2020
Leasehold property
provision
Warranty
Provision for
contract losses
Other
provisions
£’000s
£’000s
£’000s
£’000s
(594)
(283)
-
127
(750)
-
-
-
(750)
(254)
(879)
255
23
(855)
(873)
870
10
(848)
-
-
-
-
-
-
-
-
-
-
(3,645)
(1,647)
-
-
-
-
(3,645)
(1,647)
(6,890)
Total
£’000s
(848)
(1,162)
255
150
(1,605)
(6,165)
870
10
The leasehold property provision represents management’s best estimate for the dilapidations work that may be
required to return our old factory, office and laboratory buildings to the landlords at the end of their lease term. The
existing provision is due to unwind over the next two financial years as our buildings are prepared for handover back
to the respective landlords. Although the Group has taken possession of the property at Bessemer Park during the
current financial year, the premises are still in the process of being adapted and fitted out. A similar property provision
will be made once a suitable valuation can be undertaken and the building comes into use by the business.
The warranty provision represents management’s best estimate of the Group’s liability under warranties granted on
products, based on historical knowledge of the products and their components. As with any product warranty, there
is an inherent uncertainty around the likelihood and timing of a fault occurring that would trigger further work or part
replacement. Warranties are usually granted for a period of one year, although two-year warranties are the standard
within some jurisdictions.
The provision for contract losses is created when it becomes known that a commercial contract has become onerous.
Project Managers provide rolling spend forecasts, updating these as quotes are obtained. The provision is therefore
based on best estimates and information known at the time to ensure the expected losses are recognised immediately
through profit and loss. This provision will be used to off-set the costs of the project as it reaches completion in future
periods. In the current year, the provision has arisen across our legacy projects but predominantly reflects the loss
expected on the Shell project. This is expected to unwind within the next financial year.
The other provisions category relates to a provision for employer’s national insurance due on share options as they
exercise (see share based payment note 24).
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
165
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22. LEASE LIABILITIES
The following table describes the types of right of use asset owned by the Group and shows the movements on lease
liabilities within the year:
Existing contracts at 1 May 2019
Adjustments
Additions
Interest Applied
Payments made
At 30 April 2020
Leasehold
Property
£’000s
800
117
5,776
199
(400)
6,492
Motor
Vehicles
£’000s
50
-
19
4
(39)
34
Total
£’000s
850
117
5,795
203
(439)
6,526
Adjustments refers to contracts that have changed their length of duration or their value during the year. The interest
charge appears with other interest at the bottom of the income statement and is the only value described above that
affects profit or loss. Each liability is matched by a corresponding right of use asset, upon which depreciation is also
charged to the income statement (see note 14). The two amounts together replace the previous accounting treatment
of expensing rentals payments.
Within 1 year
2-5 years (inclusive)
Over 5 years
Less:
Future finance charges
Present value of lease obligations
Split:
Due within 12 months (current)
Due after 12 months (non-current)
Leasehold
Property
£’000s
564
2,747
7,557
(4,376)
6,492
184
6,308
Motor
Vehicles
£’000s
27
9
-
(2)
34
27
7
Total
£’000s
591
2,756
7,557
(4,378)
6,526
211
6,315
166
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The estimation of the company’s incremental borrowing rate (IBR) for use on the largest lease, being the Bessemer
Park lease, is based on an estimate calculated by Deloitte. The assessment made assumes a CCC credit rating for the
company and uses a wide range of possible outcomes between 3% and 11%. The use of 7.5% is management’s best
estimate of a reasonable rate to use against a secured asset. However, using a different rate within the range would
give a materially different accounting outcome. To illustrate the impact this could have, the Directors have estimated
the impact that using a rate of +/- 2% would have on the right-of-use asset, the lease liability and the income
statement.
Balances as at 30 April 2020
Effect on profit / loss in the year
Right of Use Asset
Lease
Liability
Depreciation
Interest
Total effect
Incremental borrowing rate
£’000s
£’000s
£’000s
£’000s
5.5%
9.5%
6,961
5,309
6,709
5,103
193
147
153
199
£’000s
346
346
The determination of the carrying amount will not change in future years as lease liabilities are carried at amortised
cost, and are not affected by future rates.
23. CALLED UP SHARE CAPITAL AND RESERVES
Called up, allotted and fully paid:
473,277,926 (2019: 324,009,397) ordinary shares of 5p each
Authorised Share capital:
473,277,926 (2019: 324,009,397) ordinary shares of 5p each
2020
£’000s
23,664
23,664
2019
£’000s
16,200
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 as well as the effect of the change in exchange rates on opening and closing balances.
The Group’s other reserve is retained earnings which represents cumulative profits or losses, net of any dividends paid
and other adjustments.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
167
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24. SHARED-BASED PAYMENTS
Equity-settled share option scheme
The Group operates a number of share option schemes to provide employees and third parties with the opportunity to
acquire a proprietary interest in the Group as an incentive to attract and retain their services as follows:
− Enterprise Management Incentive (EMI) options;
− Non EMI or “unapproved” options in lieu of payment for services; and
− Options under HM Revenue & Customs approved Save As You Earn scheme.
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
2020
Number
Weighted
average
exercise price
2019
Number
Weighted
average
exercise price
12,316,745
586,500
(2,213,338)
(203,407)
10,486,500
5,233,332
33p
48p
23p
18p
36p
41p
5,406,745
7,000,000
-
(90,000)
12,316,745
5,390,339
31p
29p
-
24p
31p
31p
All of the Company’s share option plans were issued after 7 November 2002. In accordance with IFRS 2, only those
options that had not fully vested by 1 May 2006, being the Group’s date of transition to IFRS, were included in the
calculations.
The options outstanding at 30 April 2020 had a weighted average exercise price of 36p and a weighted average
remaining contractual life of 5 years.
168
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fair value is measured by use of the Black-Scholes option pricing model. The expected life used in the model has
been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and
behavioural considerations. The assumptions for the Black-Scholes model are as follows:
Weighted averages
Share price
Exercise price
Expected volatility
Expected life
Risk-free rate
2020
£’000s
41p
41p
81.9%
5 years
2.18%
2019
£’000s
31p
31p
25%
2 years
4.5%
Expected volatility is a measure of the amount by which share price returns are expected to fluctuate in a period as at
the date of grant. The expected volatility is an important factor in determining the value of a share option because the
more volatile a share price, the greater the potential gain to the employee at the end of the period. The application
guidance for IFRS 2 does not set out a prescribed method for estimating expected volatility. However, it suggests that
the following factors should be considered:
− implied volatility of traded options;
− historical volatility of the share price over a period commensurate with the expected term of the share awards;
− the length of time an entity’s shares have been publicly traded and that a newly listed entity might have a high
historical share price volatility compared with similar entities that have been listed longer;
− the tendency of share price volatility to revert to its long-term average level; and
− appropriate and regular intervals for share price observations.
For listed companies, the normal approach is that historical share price volatility should be used as a guide to expected
volatility over a commensurate period to the expected term of awards. The expected life used in the model has
been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
169
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
An analysis of options issued is shown below:
Year Issued
Last vesting date
Exercise price
2011
2011
2011
2011
2011
2012
2012
2013
2013
2013
2014
2018
2018
2018
2019
2011
2011
2012
2013
2014
2012
2012
2014
2015
2016
2014
2019
2020
2021
2022
£0.3100
£0.6675
£0.5450
£0.5450
£0.5450
£0.5000
£0.4988
£0.4062
£0.4062
£0.4062
£0.2650
£0.3000
£0.3000
£0.3000
£0.4800
Total shares
50,000
1,400,000
16,666
16,666
16,668
250,000
100,000
16,666
16,666
16,668
1,000,000
2,333,332
2,333,333
2,333,335
586,500
The Group has recognised a share-based payment expense in the income statement for the year, made up of two
elements:
Share based payment expense
Provision for employers’ national insurance on potential gain
2020
£’000s
978
1,647
2,625
2019
£’000s
184
-
184
The Group have elected to pay employer’s National Insurance on gains made on unapproved share options exercise
to be capped at the proceeds the Group would receive from the exercise. Any further Employer’s National Insurance
would be recovered from the exercising party.
170
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. NOTES TO THE CASH FLOW STATEMENT
Loss from operations
IFRS 15 adjustment
Adjustments for property, plant and equipment:
Depreciation
Share based payment
Loss on disposal
Impairment
Impairment reversal
Amortisation
Operating cash flows before movements in working capital
(Increase) in inventories
Decrease/ (Increase) in receivables
(Decrease)/ Increase in payables
Increase in provisions
Cash used in operations
Interest paid
Income taxes received
Net cash used in operating activities
The prior year has been restated for presentational reasons (see note 28).
2020
£’000s
(29,396)
-
2,440
978
473
5,588
-
197
(19,720)
(2,525)
7,964
(2,882)
5,285
(11,878)
(214)
52
(12,040)
2019
(Restated)
£’000s
(9,347)
(145)
1,773
184
-
-
(24)
122
(7,437)
(1,251)
(12,887)
8,967
757
(11,851)
(1)
77
(11,775)
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
171
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26. NET DEBT RECONCILIATION
Net debt as at 1 May 2018
Cashflows
Foreign exchange adjustments
Net debt as at 30 April 2019
Recognised on adoption of IFRS 16
Adjustments
Cashflows
Acquisition -leases
Other changes -interest expense
Foreign exchange adjustments
Net debt as at 30 April 2020
Lease
Liabilities
£’000s
-
-
-
-
(850)
(117)
439
(5,795)
(203)
Cash
£’000s
20,403
(15,233)
3
5,173
-
-
34,730
-
-
16
(6,526)
39,919
Total
£’000s
20,403
(15,233)
3
5,173
(850)
(117)
35,169
(5,795)
(203)
16
33,393
27. CAPITAL COMMITMENTS
The Group had capital commitments of £7.9m at the Balance Sheet date (2019: £1.2m). The current year total can be
split into £3.2m of commitments comparable with the prior year and £4.7m for work on the Bessemer Park HQ.
172
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28. PRIOR PERIOD ADJUSTMENT
A restatement of the prior period has been undertaken to correct a presentation error, matching a Trade Receivable
balance with a related balance being held in Deferred Grant Income. This was for an amount of £684,000, which
formed part of a grant claim invoice raised in November 2018. The amount had already been covered by pre-finance so
was not still owed to ITM Power, therefore both Trade Receivables and Deferred Grant Income were overstated:
Balance sheet
Trade & other receivables (Trade debtors)
Trade & other payables (Deferred Grant
income)
2019
(Original)
£’000s
31,903
(17,579)
Adjustment
£’000s
(684)
684
2019
(Restated)
£’000s
31,219
(16,895)
29. CONTINGENT LIABILITY
Receipt of government grants
The Group participates in a number of grant funded projects. Income is recognised in the accounts as receivable based
on the grant contract and the levels of expenditure incurred on the project. It is claimed periodically according to a
timetable laid down by each coordinator. The claims are audited before any money is awarded. However, grants are
ultimately funded by government or EU institutions and can be subject to further scrutiny at later dates. This leaves
grant income in the accounts subject to potential recall.
Management do not know which grants will be subject to such audit nor the time that they are likely to arise and as
such would be unable to quantify the potential financial impact of any subsequent recall of funds. To the best of their
knowledge, claims are made for expenditure agreed ahead of any project undertaking and in accordance with grant
procedure.
Covid-19 effect on projects
The Group has been in regular contact with customers regarding the Force Majeure situation arising as a result of the
pandemic and national lockdowns. However, given the unknown timings surrounding the lifting of travel bans and the
different quarantine arrangements that each country might impose, it is still not clear how long some of our projects
may be affected and whether late penalties within contracts will be enforced given the circumstances. At the current
time, no such penalties have been raised for discussion and thus no provision has been made in the accounts.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
173
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Dilapidations provision for new leasehold property
ITM Power have entered a lease at Bessemer Park and have begun to occupy the building, intending to be fully
occupied before the new year, as we undertake adaptive fitout works agreed with the landlord. Once these are
completed and the workforce moves fully into the building the Group will build up a provision for the purpose of
restoring the building to the landlord at the end of the lease.
Given that this is fifteen years away and it has yet to be understood in what condition the landlord would expect to
have the building returned (with or without the current adaptations), nothing has been recognised in the accounts.
Previous dilapidations provisions for other buildings were recognised as the Group began to consider a move. The
value of such a provision will need to be considered carefully and in light of the costs of restoration of these other
buildings.
30. FINANCIAL INSTRUMENTS
Capital risk management
The current capital risk management objective is to ensure that the existing pipeline continues to be delivered in line
with cash management expectations.
The Group manages cash balances in dollars, euros and pound sterling, with natural hedges occurring for most
transactions. The Group keeps under review the need for other hedging opportunities with regards to Capital Risk
Management.
The capital risk management landscape has not materially changed in the last year for the Group. Larger cash reserves
gained through the fund raise have led management to put some of the funds on fixed-term deposit to generate
interest. Given the Covid-19 situation, more frequent credit checks have been performed and bank guarantees sought
from some suppliers where up-front payments were made.
Externally imposed capital requirement
The Group also have bank guarantees that can require cash cover, which it considers to be an externally imposed
capital requirement.
During the year the Group was not required to comply with any externally imposed capital requirements, with the
exception of placing on guarantee contract amounts for projects as bank guarantees.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in note 3 to the financial statements.
174
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Categories of financial instruments:
Financial assets - amortised cost
Financial asset at amortised cost
Cash and cash equivalents
Trade debtors (excluding IFRS 9 impairment)
Restricted cash balances
Other receivables
Accrued Sales income
Accrued Grant income
2020
£’000s
137
39,919
5,385
1,083
869
735
1,550
49,678
2019
(Restated)
£’000s
-
5,173
6,615
1,692
366
1,471
6,061
21,378
The Prior year has been restated for presentational reasons (see note 28).
The financial asset at amortised cost sits under non-current assets in the balance sheet and relates to the security
deposit on our new leasehold property. The rest of the Group’s financial assets consist of cash and receivables. The
latter are largely due from grant bodies and large organisations with a strong credit history. Accrued income amounts
are included as financial assets as they relate to contractual agreements that will result in future cash inflows. ITM
Power Plc do not consider there to be undue risk associated with receivables.
Financial liabilities - amortised cost
Trade payables
Other creditors
Accruals
Lease liabilities
2020
£’000s
2,507
33
1,957
6,526
11,023
2019
£’000s
3,440
21
2,011
-
5,472
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
175
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
year-end and a further £0.11m related to temporary
contractual retentions. Most of our sales income is
subject to contractual terms and therefore largely
protected from default. Other less material sales are
followed up monthly and only written off once all internal
efforts have been exhausted for their recovery.
The process and judgements made in the application of
the IFRS 9 provision for future credit losses are described
in note 4.
The credit risk of liquid funds (cash, cash equivalents
and short-term deposits) is limited because the
counterparties are banks with high credit-ratings
assigned by international credit-rating agencies.
Liquidity and interest risk management
The Group is exposed to the interest rate risks associated
with its holdings of cash and cash equivalents and short-
term deposits.
Ultimate responsibility for liquidity risk management
rests with the Board of Directors, which regularly
monitors the Group’s short, medium and long-term
funding, and liquidity management requirements. The
Group manages liquidity risk by maintaining adequate
reserves and banking facilities, by continuously
monitoring forecast and actual cash flows and matching
the maturity profiles of financial assets and liabilities.
Fair value through profit and loss
As at 30 April 2020, the Group had no financial
instruments that were measured at fair value through
profit or loss (2019: none). The carrying value of all
financial instruments at 30 April 2020 and 30 April 2019
approximated to their fair value. Accordingly, no fair
value hierarchy table has been presented.
Financial risk management objectives and policies
The Group’s finance function monitors and manages the
financial risks relating to the operations of the Group. The
Group’s activities expose it primarily to the financial risks
of changes in interest rates.
The Group also receives and spends money in different
currencies. Significantly, contracts are often in the
currency of the customer. As such, the company has
exposure to foreign exchange variation. This is naturally
hedged where possible by paying for supplies in the
currencies in which they are invoiced, but this does
not eliminate exposure. Management may look to use
forward contracts as a means of mitigating exposure to
exchange rate volatility on long-term contracts.
The Group seeks to minimise the effects of these risks.
The Group’s policies approved by the board of directors
provide written principles on interest rate risk and the
investment of excess liquidity. Compliance with policies
and exposure limits is reviewed on a continuous basis.
The treasury activities are reported to the Group’s Board
as required.
Credit risk management
Credit risk refers to the risk that a counter party will
default on its contractual obligations resulting in financial
loss to the Group. The Group has adopted a policy of
only dealing with creditworthy counterparties. Sales
invoices are expected to be paid within 30 – 60 days
under our usual contractual terms. At the year-end there
were receivables totalling £1.6m (2019: £1.4m) that were
overdue but considered fully recoverable. Of this, £1.03m
relates to grant claims, £0.45m has been recovered post
176
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Foreign currency risk management
At year end, the Group did not hedge its exposure of foreign investments held in foreign currencies. The monetary
assets and liabilities of the Group are only held in the functional currencies of the Group.
The table below shows the Group’s currency exposure at year end. Such exposure comprises the monetary assets and
monetary liabilities that are not denominated in the functional currency of the operating unit involved. The Group’s
exposure to currency risk predominately arises on borrowings denominated in currencies other than the functional
currency of the operating unit excluding intercompany balances.
These exposures were as follows:
EUR (i)
USD (ii)
SEK (iii)
AUD (iv)
Liabilities
Assets
2020
£’000s
91
100
-
-
191
2019
£’000s
97
5
-
-
2020
£’000s
12,754
1,016
68
1
2019
£’000s
7,413
977
300
-
102
13,839
8,690
(i) This is mainly attributable to the exposure to outstanding Euro to Pound Sterling receivables and payables in the
Group at the balance sheet date.
(ii) This is mainly attributable to the exposure to outstanding US Dollar to Pound Sterling receivables and payables at
the balance sheet date.
(iii) This is mainly attributable to the exposure to outstanding Swedish Kroner to Pound Sterling receivables and
payables at the balance sheet date.
(iv) This is mainly attributable to the exposure to outstanding Australian Dollar to Pound Sterling receivables and
payables at the balance sheet date.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
177
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Foreign currency sensitivity analysis
The table below assumes an increase/decrease of 10% change of the Euro to Pound Sterling exchange, the US Dollar to
Pound Sterling exchange rate and the Australian Dollar to Pound Sterling exchange rate.
The sensitivity analysis is based on the subsidiaries’ profit or loss for the year and the net assets or net liabilities held at
the balance sheet date, excluding intercompany balances and intangible assets held at the date of acquisition of the
group by ITM Power Plc.
EURO impact
USD impact
AUD impact
2020
£’000s
93
2019
£’000s
82
2020
£’000s
34
2019
£’000s
63
2020
£’000s
46
2019
£’000s
15
Profit or loss
If interest rates had been 1% higher/lower and all other variables had remained constant, loss for the year would have
decreased/increased by £173,000 (2019: £160,000).
The Group’s financial liabilities consist of trade and other payables as shown on the balance sheet. No interest is paid
on these balances and all amounts are due within 3 months.
Fair value of financial instruments
Carrying amounts of financial instruments are a reasonable approximation of the fair values of those instruments.
31. TRANSACTIONS
WITH 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 year, sales of hydrogen fuel to JCB Research (a
corporate shareholder, represented on the Board by
R Pendlebury) totalled £631 (2019: £253). The balance
outstanding at the year-end was £631 (2019: £59), which
is deemed as being fully recoverable.
During the year purchases from Linde/BOC Group,
represented on the Board by J Nowicki, totalled
£1,332,449 (2019: £370,406) with only £2,427 outstanding
for payment at year-end (2019: £55,725). Furthermore,
an amount of £4,095,622 is recognised in prepaid
suppliers, relating to stage payments made for goods.
There was also a sale of £2,997, the balance of which was
outstanding at the year-end.
Balances with ITM Linde Electrolysis GmbH are shown
in note 12 Investments. These were also the only
transactions made with that entity in the year.
The remuneration of the directors, who are the key
management personnel of the Group, is shown in note 8.
178
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32. CONTROLLING PARTY
As at the date of these accounts neither the directors
together, nor any individual shareholder, owned more
than 50% of the issued share capital of the Company
and hence, in the opinion of the directors, there is no
controlling party at this date.
33. EVENTS AFTER THE BALANCE
SHEET DATE
There are no material events that have occurred after the
balance sheet date.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
179
COMPANY STATEMENT OF CHANGES IN EQUITY YEAR ENDED 30 APRIL 2020
COMPANY STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 30 APRIL 2020
At 1 May 2018
Credit to equity for share based payment
Loss for the year & comprehensive loss
At 1 May 2019
Issue of shares
Credit to equity for share based payment
Loss for the year & comprehensive loss
Called up share
capital
Share premium
account
£’000s
16,200
-
-
16,200
7,464
-
-
£’000s
86,631
-
-
86,631
50,605
-
-
At 30 April 2020
23,664
137,236
Retained
loss
£’000s
(79,618)
105
(21,383)
(100,896)
-
1,058
(24,943)
(124,781)
Total
equity
£’000s
23,213
105
(21,383)
1,935
58,069
1,058
(24,943)
36,119
180
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
COMPANY BALANCE SHEET AS AT 30 APRIL 2020
COMPANY BALANCE SHEET
AS AT 30 APRIL 2020
Fixed assets
Tangible assets
Intangible assets
Investments
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Trade and other payables
Provisions
Net current assets
Net assets
Capital and reserves
Called-up share capital
Share premium account
Profit and loss reserve
Shareholders’ funds
Note
4
5
6
7
8
9
10
10
10
2020
£’000s
5
15
28,674
28,694
375
8,641
9,016
(597)
(994)
(1,591)
7,425
36,119
2019
£’000s
6
2
-
8
288
2,217
2,505
(578)
-
(578)
1,927
1,935
23,664
137,236
16,201
86,631
(124,781)
(100,897)
36,119
1,935
The Company reported a loss for the financial year ended 30 April 2020 of £24.9m (2019: £21.4m).
The financial statements of ITM Power Plc, registered number 05059407, were approved by the Board of Directors and
authorised for issue on 22 October 2020.
Signed on behalf of the Board of Directors
Andy Allen
ITM Power Plc, Director
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
181
NOTES TO THE COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The separate financial statements of the company are
presented as required by the Companies Act 2006.
their estimated useful lives, using the straight-line
method, on the following basis:
The company meets the definition of a qualifying entity
under FRS 100 (Financial Reporting Standard 100) issued
by the Financial Reporting Council. Accordingly, financial
statements have been prepared in accordance with
FRS 101 (Financial Reporting Standard 101) ‘Reduced
Disclosure Framework’ as issued by the Financial
Reporting Council.
As permitted by FRS 101, the company has taken
advantage of the disclosure exemptions available under
that standard in relation to share-based payments,
financial instruments, capital management, presentation
of comparative information in respect of certain assets,
presentation of a cash-flow statement and certain related
party transactions.
Where required, equivalent disclosures are given in the
consolidated financial statements.
In accordance with S408 of the Companies Act 2006, the
company has taken the exemption from presenting the
parent company’s individual profit and loss account.
The financial statements have been prepared on the
historical cost basis except for the re-measurement of
certain financial instruments to fair value. The principal
accounting policies adopted are the same as those set
out in note 3 to the consolidated financial statements
except as noted below.
Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated
depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost, over
Computer equipment 3 years
The gain or loss arising on the disposal or retirement of
an asset is determined as the difference between the
sales proceeds and the carrying amount of the asset and
is recognised in income.
Impairment of tangible and intangible assets
At each balance sheet date, the Company reviews the
carrying amounts of its tangible assets to determine
whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are
independent from other assets, the Company estimates
the recoverable amount of the cash-generating unit to
which the asset belongs.
Recoverable amount is the higher of fair value less costs
to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects
current market assessments of the time value of money
and the risks specific to the asset for which the estimates
of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating
unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (cash-generating unit)
is reduced to its recoverable amount. An impairment
loss is recognised as an expense immediately, unless the
relevant asset is carried at a revalued amount, in which
case the impairment loss is treated as a revaluation
decrease.
182
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE COMPANY FINANCIAL STATEMENTS
Where an impairment loss subsequently reverses, the
carrying amount of the asset (cash-generating unit)
is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been
determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A
reversal of an impairment loss is recognised as income
immediately, unless the relevant asset is carried at a
revalued amount, in which case the reversal of the
impairment loss is treated as a revaluation increase.
The fair value determined at the grant date of the equity-
settled share-based payments is expensed on a straight-
line basis over the vesting period, based on the Group’s
estimate of equity instruments that will eventually vest.
At each balance sheet date, the Group revises its estimate
of the number of equity instruments expected to vest
as a result of the effect of non-market-based vesting
conditions. The impact of the revision of the original
estimates, if any, is recognised in profit or loss such that
the cumulative expense reflects the revised estimate,
with a corresponding adjustment to equity reserves.
Investments
Balances are stated at cost less a provision for any
permanent impairment in value.
Investments considered for any potential credit losses
under the IAS 36 Impairment of Assets. Given that
the Group is in the early stages of commercial trade
and that the parent company continues to support its
subsidiaries as they build up trade, all investments have
been compared with their net asset value and where that
does not provide any immediate prospect of repayment,
especially if assets are not sufficiently liquid, investment
values are impaired down to nil value.
During the year, the Company also invested in a Joint
venture with Linde Engineering to form ITM Linde
Engineering GmbH. This new company is owned
equally by both investors (50% shares), although
control is deemed to lie with Linde for the purposes of
consolidation as they appoint the Managing Director. ITM
Power has significant influence due to its representation
on the Board. As such, ITM Power will equity account for
this investment in associate and show it as a single line
on the balance sheet, subject to recognition of its share
of the profit and loss made by the entity and impairment
as laid out in IAS 28.”
Share option charges
Equity-settled share-based payments to employees and
others providing similar services are measured at the fair
value of the equity instruments at the grant date. The fair
value excludes the effect of non-market-based vesting
conditions. Details regarding the determination of the
fair value of equity-settled share-based transactions are
set out in note 24 of the financial statements.
Pension costs
The Company operates a defined contribution pension
scheme. The amount charged to the profit and loss
account in respect of pension costs is the contributions
actually payable in the year. Differences between
contributions payable and contributions actually paid are
shown as either accruals or prepayments in the balance
sheet.
2. CRITICAL ACCOUNTING JUDGE-
MENTS AND KEY SOURCES OF
ESTIMATION UNCERTAINTY
The directors are required to make judgements, estimates
and assumptions about the carrying amounts of assets
and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are
based on historical experience and other factors that are
considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed
on an on-going basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the
period of the revision and future periods if the revision
affects both current and future periods. There were no
critical judgements that the directors have made in the
process of applying the Company’s accounting policies.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
183
NOTES TO THE COMPANY FINANCIAL STATEMENTS
Key sources of estimation uncertainty – Recoverability of investment
The Group tests the net recoverable amounts of assets annually for impairment, or more frequently if there are
indications that goodwill might be impaired. During the year, management considered the recoverability of its
investment in subsidiary companies, which are disclosed in note 6. The subsidiaries continue to trade, but currently
are trading at a loss, which is seen as temporary by management. Under IFRS 9 Financial Instruments, most of the
company loans or subsidiary investments have been impaired to nil. With a net asset positions at the year-end, largely
held in cash, the investment in ITM Power (Trading) Limited was partially impaired, and the new investment in ITM
Linde Engineering GmbH was left un-impaired.
3. STAFF NUMBERS AND COSTS
Monthly average number of persons employed
Staff costs during the year (including Directors)
Wages and salaries
Social security costs
Other pension costs
Remuneration of the highest paid director
Aggregate emoluments
Money purchase pension contributions
2020
Number
5
2020
£’000s
828
128
47
1,003
2020
£’000s
323
23
346
2019
Number
5
2019
£’000s
704
90
41
835
2019
£’000s
370
28
398
As at 30 April 2020 pension contributions of £2,000 (2019: £1,000) due in respect of the current year had not been paid
over to the scheme. These were paid over in the following month and within statutory deadlines.
184
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE COMPANY FINANCIAL STATEMENTS
4. TANGIBLE FIXED ASSETS
5. INTANGIBLE ASSETS
Cost
At 1 May 2019
Additions
At 30 April 2020
Depreciation
At 1 May 2019
Charge for the year
At 30 April 2020
Net book value
At 30 April 2020
At 30 April 2019
Computer
equipment
£’000
195
2
197
189
3
192
5
6
Cost
At 1 May 2019
Additions
At 30 April 2020
Amortisation
At 1 May 2019
Charge for the year
At 30 April 2020
Carrying amount
At 30 April 2020
At 30 April 2019
Software
£’000
2
20
22
-
7
7
15
2
The amortisation period for externally purchased
software has been set at three years (in line with
our policy for computer equipment).
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
185
NOTES TO THE COMPANY FINANCIAL STATEMENTS
6. INVESTMENTS
Loans to subsidiary
undertakings
Cost
At 1 May 2019
Additions
Foreign exchange
Share options granted to
subsidiary employees
50% share of profit or loss
Transfers
At 30 April 2020
Provisions for impairment
At 1 May 2019
Movement in year
Transfers
At 30 April 2020
Net book value
At 30 April 2020
At 30 April 2019
£’000s
85,120
50,307
-
-
-
(108,604)
26,823
85,120
14,129
(72,426)
26,823
-
-
Investment
in subsidiary
undertakings
Investment in
Associate
£’000s
£’000s
3,594
-
-
497
-
108,604
112,695
3,594
8,347
72,426
84,367
28,328
-
-
344
5
-
(3)
-
346
-
-
-
-
346
-
Total
£’000s
88,714
50,651
5
497
(3)
-
139,864
88,714
22,476
-
111,190
28,674
-
Interest is charged annually upon intercompany loan balances at a rate of 1% over the Bank of England base rate.
During the year, previous intercompany debt has been converted into equity. In the following amounts:
Subsidiary Company
ITM Power Research Limited
ITM Power (Trading) Limited
Amount converted
£’000s
30,481
78,123
108,604
186
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE COMPANY FINANCIAL STATEMENTS
As in previous years, a provision for credit losses (IFRS 9)
has been made in recognition that the subsidiaries are
loss-making and therefore unlikely to be able to pay their
debt to the parent company in the near-term.
California and its principal activity is that of the sale of
electrolysis equipment and hydrogen storage solutions.
Registered office: Bessemer Park, Shepcote Lane,
Sheffield, S9 1DZ.
The Company holds 100% of the ordinary share capital of
ITM Power Pty Limited, a company which is incorporated
in Australia and its principal activity is that of the sale of
electrolysis equipment and hydrogen storage solutions.
Registered office: Unit 2 Level 1, 32 Main Street, Samford
Village, Queensland, Australia 4520.
The Company holds 100% of the ordinary share capital
of Orkney Hydrogen Trading Limited, a company which
is incorporated in Scotland and its principal activity is
that of the sale of hydrogen. The company was dormant
during the year. Registered office: 5th Floor 125 Princes
Street, Edinburgh, Scotland, EH2 4AD.
The investment in associate is discussed in more detail
in note 12 to the consolidated financial statements but
relates to the investment in ITM Linde Electrolysis GmbH.
The Company holds 50% of the ordinary share capital
of ITM Linde Engineering GmbH, a company which is
incorporated in Germany and its principal activity is that
of the sale of large-scale electrolyser solutions. This was
a new investment in the year with Linde Engineering
GmbH. Both parties have an equal share of the company,
although control is deemed to lie with Linde for the
purposes of consolidation as they appoint the Managing
Director. ITM Power does have significant influence
however, with representation on the Board of Directors,
and as such it is being equity accounted as an investment
in associate in these statements. Registered office:
Bodenbacher Str. 80, 01277 Dresden, Germany.
A further impairment of the investments has also been
undertaken in line with IAS 36 Impairment of Assets.
The book value remaining on investment in subsidiary
undertakings reflects the net assets available within ITM
Power (Trading) Limited at the year-end, as these were
largely made up of cash deposits and therefore highly
liquid.
The Company holds 100% of the ordinary share capital
of ITM Power (Trading) Limited, a company which is
incorporated in England and Wales and its principal
activity is the development and manufacturing of
prototype products.
The Company holds 100% of the ordinary share capital
of ITM Power (Research) Limited, a company which is
incorporated in England and Wales and its principal
activity is the research and development of scientific and
engineering projects. The company was dormant during
the year.
ITM Power (Trading) Limited holds 100% of the ordinary
share capital of ITM Motive, a company which is
incorporated in England and its principal activity is that
of the production of drivetrains for use with Hydrogen.
The company was dormant during the year.
All of the above are registered at 22 Atlas Way, Sheffield,
South Yorkshire, S4 7QQ.
The Company holds 100% of the ordinary share capital
of ITM Power GmbH, a company which is incorporated
in Germany and its principal activity is that of the sale of
electrolysis equipment and hydrogen storage solutions.
Registered office: Am Muehlgraben 6, 35410 Hungen,
Germany.
The Company holds 100% of the ordinary share capital
of ITM Power Inc, a company which is incorporated in
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
187
NOTES TO THE COMPANY FINANCIAL STATEMENTS
7. DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Prepayments
Other debtors
8. TRADE AND OTHER PAYABLES
Trade creditors
Payroll creditors
Accruals and deferred income
9. PROVISIONS
Balance at 30 April 2019
Provision created in the year
Use of the provision
Release in the year
Balance at 30 April 2020
2020
£’000s
314
61
375
2020
£’000s
228
21
348
597
2019
£’000s
256
32
288
2019
£’000s
236
18
324
578
Employer’s National
Insurance on Share
Options
£’000s
-
(994)
-
-
(994)
188
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
NOTES TO THE COMPANY FINANCIAL STATEMENTS
10. SHARE CAPITAL AND RESERVES
The movements on share capital and share premium accounts are disclosed in note 23 to the consolidated financial
statements.
The company’s other reserve is the profit and loss reserve which represents cumulative profits or losses, net of
dividends paid and other adjustments.
11. RELATED PARTY TRANSACTIONS
The company has taken advantage of the exemption included in FRS101 “Related Party Disclosures” for wholly owned
subsidiaries not to disclose transactions with entities that are part of the Group qualifying as related parties.
The balance with ITM Linde Electrolysis GmbH is shown under Investment in associate in note 6 and the transactions
making up that amount are described more fully in note 12 to the consolidated financial statements. These were the
only transactions made with that entity in the year.
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
189
2019/20 REGULATORY NEWS ANNOUNCEMENTS
2019/20 REGULATORY NEWS ANNOUNCEMENTS
2019
RNS-R
US Collaboration Agreement with Iwatani
RNS
Result of AGM
RNS-R
Opening of HRS at Gatwick Airport
RNS
RNS
RNS
RNS
RNS
Result of General Meeting and Open Offer
Final Results
Strategic Investment, Joint Venture and Fundraise
Board Changes and Notice of Final Results
Gigastack Feasibility Study with Orsted
RNS-R
Equipment Sale to BOC Project in Australia
RNS
New Factory Update
RNS-R
British Columbia Hydrogen Feasibility Study
RNS-R
Gasunie Plant Opening
RNS-R
Shell Rheinland Refinery Update
RNS
RNS
Trading and Pipeline Update
Shell Collaboration Agreement
RNS-R
Committee on Climate Change Report
19 Nov 2019
31 Oct 2019
25 Oct 2019
22 Oct 2019
03 Oct 2019
03 Oct 2019
16 Sep 2019
29 Aug 2019
23 Aug 2019
22 Jul 2019
02 Jul 2019
27 Jun 2019
25 Jun 2019
30 May 2019
07 May 2019
03 May 2019
RNS
RNS Reach
190
ITM POWER PLC | ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
2019/20 REGULATORY NEWS ANNOUNCEMENTS
2020
RNS
RNS
Strategic Partnership and 10MW Electrolyser
Retirement of Non-Executive Director
RNS-R
EC Hydrogen Strategy Launched
RNS
Trading Update
RNS-R
H2OzBus Project in Australia
RNS
RNS
RNS
Formation of ITM Motive & Appointment of MD
Appointment of Non-executive Director
Funding Award to Supply an 8MW Electrolyser
RNS-R
Green Hydrogen for Humberside
RNS
RNS
RNS
RNS
Gigastack Phase 2 Funding
Half-year Report
ITM Linde Electrolysis GmbH & Appointment of MD
Notice of Half Year Results
RNS-R
HyDeploy in Full Operation
16 Sept 2020
13 Jul 2020
08 Jul 2020
08 Jun 2020
22 May 2020
15 May 2020
06 May 2020
30 Apr 2020
16 Apr 2020
18 Feb 2020
27 Jan 2020
23 Jan 2020
15 Jan 2020
02 Jan 2020
RNS
RNS Reach
II
PP
EE
TT
OO
RR
MM
WW
2020
+44 (0) 114 244 5111 www.itm-power.com
ITM Power Plc | 22 Atlas Way | Sheffield | S4 7QQ