Gaining traction
Our journey to volume
manufacturing and
rapid deployment
ITM Power PLC
Annual Report 2023
We are leaders in green
hydrogen technology.
We design and
manufacture PEM
electrolysers that
enable our customers
to decarbonise.
Green hydrogen is the only true
net zero energy carrier, making it
one of the best solutions to tackle
the carbon crisis and create a clean,
green future.
Dennis Schulz
Chief Executive Officer
“ Our detailed 12-month plan will
make ITM a stronger, more focused
and more capable company.
The large-scale opportunities in
the market are yet to come, and by
putting these foundations in place
ITM will be ready for the significant
market demand ahead of us.”
More detail on
page 10
Strategic Report
Strategic Report | Highlights
Our results
Contents
The financial performance for the year is in line with or ahead of the expectations set at the year
end trading update on 1 June 2023. Our 12-month plan, including stringent cash control in the
second half of the year, led to higher revenue and a stronger balance sheet position compared
to the revised guidance.
Revenue
£m
6
5
.
2
.
5
3
.
4
Adjusted EBITDA* loss
£m
Net cash at year end
£m
)
2
.
4
9
(
.
)
8
9
3
(
.
)
4
1
2
(
6
6
3
3
8
2
6
7
1
£5.2m
-7%
(£94.2m)
+137%
21
22
23
£283m
-23%
21
22
23
21
22
23
*
Adjusted EBITDA is a non-statutory measure. The calculation methodology is set out in Note 6.
Strategic update
Good progress made against our 12-month priorities plan.
@ Product portfolio significantly simplified, concentrating on our core product suite, with mature engineering processes
and robust product validation, preparing for manufacturing at scale.
@ A rigorous approach to capital allocation and cost management, including a significant reduction in headcount enabling
us to reinvest faster to professionalise important areas such as engineering and manufacturing.
@ Debottlenecking fabrication and testing by incremental automation, expansion of our factory in Sheffield, and investment into
ITM Power Germany.
More detail on
page 22
Strategic Report
Highlights
1
ITM Power at a Glance
2
Case Study
4
Investment Case
5
Statement from the Chair of the Board
6
Meet the CEO
8
Chief Executive Officer’s Review
10
13
Chief Financial Officer’s Review
16 Our Markets
20
22 Our Strategy
24 Our Stakeholders and Section 172(1) Statement
29
47
52 Going Concern
Sustainability Report
Principal Risks and Uncertainties
Business Model
Governance
Introduction from the Chair of the Board
53
Summary of Application of the QCA Code
54
Board of Directors
56
59
Corporate Governance Report
65 Nomination Committee Report
Audit Committee Report
67
Remuneration Report
72
84 Directors’ Report
86
Directors’ Responsibilities Statement
Financial Statements
87
Independent Auditor’s Report to the Members
of ITM Power PLC
Consolidated Income Statement
and Other Comprehensive Income
93
94 Consolidated Balance Sheet
95 Consolidated Statement of Changes in Equity
96 Consolidated Cash Flow Statement
97 Notes to the Consolidated Financial Statements
117 Company Statement of Changes in Equity
118 Company Balance Sheet
119 Notes to the Company Financial Statements
Shareholder Information
123 Glossary
124 Officers, Professional Advisors and Useful Contacts
ITM Power PLC | Annual Report 2023
ITM Power PLC | Annual Report 2023
11
Strategic Report | ITM Power at a Glance
What we do
Water
Our 2MW stack
Green hydrogen
Our technology
ITM Power aims to help the world reach net
zero through the power of green hydrogen.
We design and build state-of-the-art
electrolysers which are powered by
renewable energy to split water to create
genuine green hydrogen. It can be stored
and be used in a range of applications
including for the decarbonisation of
‘hard to abate’ industrial processes.
More detail on
page 18
Where we work
Based out of our Sheffield factory,
we are deploying electrolyser
systems to customers in the EU,
Norway, Australia, Israel, Japan
and UK. Our state-of-the-art
MEP30 electrolyser stack is
both CE- and UKCA certified.
Manufactured products
deployed to the GB market after
31 December 2024 must have the
UKCA marking and this important
milestone ensures the ongoing
compliance of our core products.
More detail on
page 18
22
ITM Power PLC | Annual Report 2023
ITM Power PLC | Annual Report 2023
Our electrolysers are based on proton exchange membrane
technology and are a key enabler for the energy transition.
The stack is the core of any electrolyser system.
ITM Power’s PEM stack technology delivers:
@ the highest current
density on the
market, reducing
footprint and cost
@ leading conversion
efficiency, reducing
operational costs
@ the lowest reported
precious metal
loading, relieving
supply chain
constraints
74
separately
granted patents
protecting
our technologies,
materials or
processes
100MW
Our state of the art MEP30 stack
platform is currently being
deployed in 10MW modules
integrated together to effectively
serve 100MW scale projects
Green electricity
UK
EU
Israel
Norway
Australia
Japan
Strategic Report | ITM Power at a Glance continued
How our PEM technology can be scaled
Pioneering turnkey solutions
Innovation at the heart of a plant
Plug & Play System
Our most accessible solution.
Product: Containerised System
Typical scale: 2–10MW ≥ 400–2,000Nm3/h
Our containerised Plug & Play electrolyser systems
include our unique stacks and pre-tested sub-systems.
Features
2MW stack skid
Standardised &
containerised
Scaling in 2MW
increments
Large Scale Modular System
A modular approach.
Product: Modularised Plants
Typical scale: ≥ 10MW ≥ 2,000Nm3/h
Our state-of-the-art PEM electrolyser stack skids form
the heart of repeatable core electrolysis process modules
for larger project deployments.
Features
10/20MW
core modules
Combined to
plant size
Flexible
integration into
balance of plant
ITM Power PLC | Annual Report 2023
ITM Power PLC | Annual Report 2023
33
Strategic Report | Case Study
Two 100MW electrolyser contracts
signed with Linde Engineering
During the year, ITM Power signed two
contracts, each for the sale of 100MW
of PEM electrolysers to Linde Engineering.
Both plants will be installed at a site
operated by RWE in Lingen, Germany,
and will be powered by offshore wind
from the North Sea.
As part of its “Growing Green” strategy,
RWE announced in November 2021 that it
aimed to create electrolyser capacity of
at least 2GW to generate green hydrogen
by 2030. The two 100MW electrolyser
plants at Lingen are part of this ambition.
The plants are the largest PEM electrolysers
under execution worldwide and will be
the first deployment of the Linde
Engineering/ITM Power 10MW standard
module for large-scale installations,
utilising state-of-the-art MEP30 bar
electrolyser stacks. Delivery for these two
projects will represent a key milestone on
ITM Power’s journey towards high-volume
manufacturing of an industrialised product.
Progress has already been made, with the first
skids (housing for the electrolyser stacks) for
the project in build ready for deployment to
Lingen for integration into the balance of plant
during FY24.
4
ITM Power PLC | Annual Report 2023
Strategic Report | Investment Case
Why invest in ITM Power?
An attractive market
@ Green hydrogen is the key to decarbonising sectors
that cannot be directly electrified including industries
such as petrochemicals, iron and steel, or fertilisers
@ Major economies are aligning their climate, energy
security and industrial policies in order to create a
sustainable and reliable low-carbon economy
@ The EU estimates that total investments of
€335bn to €471bn are required in order to achieve
10 million tonnes of domestic green hydrogen
production by 2030
@ In the US, the Inflation Reduction Act earmarked
$370bn for energy-related tax credits to support
the decarbonisation of the US economy
10GW
UK Government’s Hydrogen Strategy
target for clean hydrogen production
by 2030, with at least half of this
being electrolytic green hydrogen
Leading technology
@ Founded in 2000, ITM was the first hydrogen-related
company to be listed on the London Stock Exchange
@ Our core product, the MEP30 stack, is state of the art
and can be deployed in multiple formats into a to a
wide range of applications
@ Our research and development capabilities have
ensured a strong technology roadmap which continues
to drive product improvement
Reference plant
@ In partnership with Shell we piloted Europe’s first
10MW PEM electrolyser in an industrial setting,
Refhyne I, located at Shell’s Rhineland Energy and
Chemicals Park in Wesseling, Germany
@ We are currently deploying two 24MW plants, one
for Linde located at Leuna Chemical Complex in
Germany and the second at Yara’s ammonia plant
in Porsgrunn, Norway
@ The two 100MW plants for RWE in Lingen, Germany,
are by far the largest PEM electrolysers in build in the
world today
23 years
of technology know-how
285MW
of projects in build (as of 30 April 2023)
More detail on
page 18
More detail on
page 3
More detail on
page 18
ITM Power PLC | Annual Report 2023
ITM Power PLC | Annual Report 2023
55
Strategic Report | Statement from the Chair of the Board
Transitioning from
an R&D company to
a professional delivery
organisation
The past year has been one of significant
change for the Company. Our new CEO,
Dennis Schulz, joined us in December 2022,
and he has brought a fresh perspective and a
renewed focus, putting into place a 12-month
plan which is laying strong foundations for
our future growth aspirations.
Dear shareholders
As Chair of the Board, I am presenting the Annual Report and Financial
Statements of ITM Power PLC for the year ended 30 April 2023.
Against a backdrop of an unacceptable operational and financial performance
for the year as a whole, our results are above or in line with the guidance
provided in January 2023 with a net cash position at the year end of £283m
and our balance sheet in a healthy position.
Previously, we raised capital to pursue an expansion strategy and in doing
so underestimated the competencies and capabilities required to scale
up and to transition from an R&D company to a volume manufacturer.
As a consequence, we had set unrealistic targets for project completion.
As a Board, we acted swiftly by appointing Dennis Schulz as our new CEO
and he promptly developed a 12-month plan to address the underlying
challenges of the Group. This included a three-step strategy to simplify
our product portfolio, reduce our expenditure and debottleneck our
manufacturing facilities. As part of this we completed a restructuring
of our organisation including reducing our headcount. The re-sizing of our
business was difficult, but necessary from an operational and financial
perspective and the changes will support the long-term success of our
business. Those colleagues who remain in the business today are extremely
passionate about what they do. By having a clarity of purpose I know that
together we will achieve great things in the future and the Board thanks
our employees for their continued commitment and support.
The macro picture
The world is in a race to net zero emissions by 2050. This means that
we need to reduce our greenhouse gas emissions to zero, or close to zero,
in order to avoid the worst effects of climate change. Whilst the current
global energy crisis poses a threat to near-term economic prospects, it
has strengthened the economic case for accelerating the shift away from
fossil fuels by driving investments in renewables, energy efficiency and
other clean energy technologies.
Sir Roger Bone
Chair of the Board
We have a strong team,
a leading technology,
and a clear vision for
the future.”
66
ITM Power PLC | Annual Report 2023
ITM Power PLC | Annual Report 2023
We remain committed
to delivering value to
our shareholders and
creating a sustainable
future for our Company.”
Strategic Report | Statement from the Chair of the Board continued
One of the key technologies that will help us achieve net zero is green
hydrogen which can replace traditional grey hydrogen in existing industrial
applications in the near term as well as being a substitute for a variety of
fuels and feedstocks in the long run.
Governments around the world are setting ambitious targets for
decarbonisation, and hydrogen is seen as a key part of the solution.
To address this, it is imperative that all of the components of the value chain
are synchronised with the build-up of hydrogen supply and demand. It is clear
that we are entering a period of significant growth for the hydrogen industry
and the emergence of a global hydrogen marketplace is now inevitable.
We are well-positioned to capitalise on this growth opportunity. We have a
strong team, a leading technology, and a clear vision for the future. We are
confident that we can grow our business and make a significant contribution
to the global effort to decarbonise the economy.
Environmental, social and governance (ESG) objectives
We are dedicated to delivering robust ESG performance out of a desire to
uphold ethical standards. The fact that we kept our MSCI “AA” rating for a
third consecutive year shows that the Company’s ESG practices are well
aligned with shareholder interests, and we are proud of this achievement.
It also indicates that we are a business that is setting the standard for how
our sector manages the biggest ESG risks and opportunities.
Board changes
Denise Cockrem was appointed as a Non-Executive Director from July 2022.
Denise is Group Chief Financial Officer of Ecclesiastical Insurance Office plc,
a specialist insurance provider that is part of the Benefact Group – a charity
owned, international family of financial services companies that exist to
donate profits to good causes. She joined Ecclesiastical Insurance Office plc
in August 2018 from Good Energy Group plc, an AIM-listed renewable
electricity company where she was Chief Financial Officer.
Dr Rachel Smith stepped down from the Board on 30 January 2023. With her
knowledge, expertise and passion for the Company, Rachel was pivotal in the
delivery of several key strategic projects for a number of years. On behalf of
the Board, I would like to thank Rachel for her continued commitment to ITM
as she works with the Company in her new role as Special Projects Director.
Katherine Roe has announced her intention not to seek re-election to the
Board at the 2023 AGM. The Board wishes to express enormous gratitude
to Katherine for her contribution over the last three years, particularly with
the development of our ESG strategy and supporting the business during a
period of significant change. Katherine has been a valued member of the
team and the Board wishes her well in her future career. The Board will not
be replacing Katherine at this juncture, thereby reducing the number of
Non-Executive Directors from five to four. This is in line with the change
made to the number of Executive Directors which reduced from four to
three upon Dr Rachel Smith’s departure from the Board in early 2023. The
Board is confident the balance of executives to non-executives therefore
remains appropriate for a company of our size.
Looking ahead
Following the significant changes which we have made to our business, we
are confident that we are well-positioned to capitalise on the significant
opportunities in the green hydrogen economy that lie ahead. We have a
clear plan in place, a renewed focus and a dedicated team that is committed
to delivering results. We will continue to invest in our core technology along
with the automation of our manufacturing processes, which will allow us to
stay ahead of the curve. The investments we are making today will ensure
that we can grow into a profitable business in the future.
In closing, I would like to thank our shareholders, employees, and customers
for their continued support and confidence in our business. We remain
committed to delivering value to our shareholders and creating a sustainable
future for our Company.
Helen Baker stepped down as Company Secretary in September 2022
and we welcomed Vicky Williams into her role in November 2022.
Sir Roger Bone
Chair of the Board
Dr Graham Cooley stepped down from his role as CEO after 13 years in the
post in December 2022. Graham was responsible for leading the Company
through a period of significant development and he remains a sizeable and
very supportive shareholder.
Dennis Schulz joined as CEO in December 2022. He brings a wealth
of experience from Linde Engineering which includes project execution,
strategy and a period as Chief Financial Officer and Managing Director. More
importantly, Dennis knows our senior management and technology very well,
having been directly involved in our strategic relationship with Linde, and
brings deep insight into the green hydrogen market and our customer base.
ITM Power PLC | Annual Report 2023
ITM Power PLC | Annual Report 2023
77
Strategic Report | Meet the CEO
Evolving to become
a mature technology and
manufacturing company
Dennis Schulz took over as ITM
Power’s CEO in December 2022.
In this interview, we learn more
about his views on both the future
of ITM and the green hydrogen
market in general.
Q How do you see the hydrogen market
developing in the near term?
The global green hydrogen market and electrolyser demand will
see strong growth in the coming years, driven by the ambition of societies to
decarbonise their industries and favourable government policies leading to
increasing investments. It is now certain that green hydrogen will play a pivotal
role in the energy transition, and we expect to see strong momentum in this
market in the years to come. ITM will be ready for that.
Q How can you best respond rapidly to the likely
significant rise in demand for green hydrogen?
Would government support help or is the constraint
the rate of testing scale-up innovations?
We need to deliver on our projects, thereby creating important reference
plants. This will enable potential customers to see our state-of-the-art products
in commercial operation and our technology’s performance under real-world
conditions. And we are making great progress – faster than any PEM competitor
in the market today.
We would welcome more government support in the UK though, especially
when compared to the support given to our competitors in other countries.
Q Where is it most attractive to invest in green
At ITM we focus on the immediate market as real projects count
hydrogen today?
more than announcements. Most projects we are building today are being
deployed in Germany, followed by the wider EU plus Norway. Our most exciting
projects to date are certainly the two modular 100MW electrolyser plants which
we are delivering together with Linde Engineering for RWE in Lingen, Germany.
The Inflation Reduction Act (IRA) has certainly propelled the US to the top of
the attractiveness ladder today. However, governments around the world are
reviewing and developing policies at pace so that their region or country does
not get left behind.
Dennis Schulz
Chief Executive Officer
Dennis has brought a wealth of
knowledge and experience of
the entire hydrogen market and,
despite his short tenure thus far,
he has already had a significant and
positive impact on the Company.”
Sir Roger Bone
Chair of the Board
8
ITM Power PLC | Annual Report 2023
Strategic Report | Meet the CEO continued
Q How confident are you that ITM has turned
the corner from prior challenges?
We are now six months into our 12-month transformation plan
We have taken some
painful decisions as part
of the process to re-right
the ship.”
– and have taken some difficult decisions as part of the process to re-right
the ship.
We have significantly narrowed our product portfolio, freeing up time and
resources to be laser-focused on our core products. We have announced a
substantial increase in our power supply as well as additional facilities in Sheffield
and Germany. We have also made good progress on our debottlenecking and
automation roadmap which will get another push once we occupy our expanded
facilities in Sheffield.
With our net cash position at year end being well above guidance range,
it is encouraging to see the steps we have taken so far with regard to capital
discipline and cost reduction taking effect.
Among the most important successes was the first real-world deployment of our
newest state-of-the-art 30bar MEP stack platform to RWE’s pilot plant in Lingen,
Germany, which will allow RWE to gain relevant operating experience with our
technology prior to delivery against their two 100MW plants. In addition, Yara
and Linde Engineering recently witnessed successful factory acceptance testing
for the same stack platform to be deployed into their projects in Germany
and Norway.
We are very fortunate to have a healthy balance sheet which allows us to get our
Bessemer Park factory to a place where it can be used as a blueprint for future
factories in other locations. This and the inherent superiority of our technology
are giving me confidence for a bright future for ITM.
ITM Power PLC | Annual Report 2023
9
In the last six months
more products have left
the ITM factory than in
the previous 22 years of
its history combined.”
Strategic Report | Chief Executive Officer’s Review
ITM will be ready
for the significant
market demand
ahead of us
I have been at ITM for just over half a year and it is encouraging to see the
early progress we have been making against our 12-month priorities plan
laid out in January 2023. The implementation, which is moving at pace, will
strengthen our operational and commercial capabilities. When I chose to
join as CEO, it was because I believe in ITM’s core technology and in the
important role green hydrogen will play in the energy transition. I welcomed
the opportunity to help ITM steer a successful path from the development
of first-of-a-kind technology to becoming a highly efficient and reliable
technology and manufacturing company. I did not underestimate the
challenge to transform ITM into a mature delivery organisation, but the
majority of changes required are about basics such as the organisational
structure, accountability, processes, controls and tools.
Whilst there is still a lot to accomplish at ITM, six months into our 12-month
plan, we should not overlook the significant steps forward we have already
made in such a short period of time. Operational excellence, what we strive
for, is a consistent way of working that delivers on our goals, activating the
entire organisation to continuously get better every day at achieving our
purpose. It is about culture, about behaviours, mindsets, and daily practices
that are intrinsically linked to our purpose and values as a company. By
slowing down and focusing on doing things right the first time, essentially
prioritising quality over quantity, we have already gained traction and speed.
This shift in culture to become a professional and credible organisation ready
for volume manufacturing has started taking effect. The transformation is
evident in our day-to-day behaviours already, and it is imperative that we
maintain this momentum. Whilst some revenues related to product
deployments have yet to be recognised at customer site acceptance testing,
I am very proud that more products have left the ITM factory over the past
six months than in the previous 22 years of its history combined.
Our PEM technology is state of the art and globally leading, more on this
later. We are deploying our electrolysers for some of the largest and most
prominent green hydrogen plants under execution worldwide today such as
for Linde in Leuna (24MW), for Yara in Porsgrunn (24MW), and for RWE in
Lingen (2x 100MW). These projects will act as important reference plants
and play a crucial role in building confidence with customers for even larger
deployments in the future.
Over the past six months, we deliberately took a less active approach to
bidding for new projects as we did not want to overload the Company at the
same time as fixing important fundamentals which were holding us back from
scaling. This has coincided with what we believe is a temporary slowdown of
final investment decisions (FIDs) being taken by customers, which has given
us breathing space to enact our 12-month plan without missing out on the
growing market demand for electrolysers. Given our progress, we have now
started to be more active in the market again, although we will continue to be
selective to ensure that we can deliver a robust and reliable product on time
and on budget, and that projects contribute positively to our margin.
The market for green hydrogen
Climate change, decarbonisation and energy independence imperatives
continue to fuel the projected hydrogen demand. Collectively, societies
worldwide have decided to decarbonise their industries, which, as one
important pillar, requires the synchronised build-up of a hydrogen
economy. This endeavour is underway in three dimensions and at very
ambitious speed:
First, hydrogen production, preferably green based on renewable energy and
electrolysis, or blue as a bridging technology to temporarily lower the carbon
footprint of the installed capacity of fossil-based hydrogen production,
before eventually transitioning to truly clean green hydrogen.
Second, hydrogen transport and storage infrastructure, mainly via pipelines
and caverns, also to unlock the energy grid balancing potential of hydrogen.
Third, applications and use cases around combustion, reconversion to
electricity, e.g. for grid balancing or the electrification of industrial processes,
or onward processing to ammonia or methanol for example. This build-up
requires a vast amount of capital to be deployed, and governments around
the world are trying to create environments which are conducive to
accelerated investment.
The International Energy Agency (IEA) sees an increased focus on renewables,
now being 30% higher than forecasted just a year ago. This follows
governments throwing additional policy weight behind renewables over the
past 12 months. They estimate that renewables are set to account for more
than 90% of global electricity expansion over the next five years.
1010
ITM Power PLC | Annual Report 2023
ITM Power PLC | Annual Report 2023
Strategic Report | Chief Executive Officer’s Review continued
In its latest World Energy Transition Outlook, the International Renewables
Energy Agency (IRENA), stated that clean hydrogen production needs to
rise to 518 million tonnes (mt) per annum by 2050 from the current level
of 0.7mt per annum. To achieve this goal, IRENA estimates that the world
would require 5,722GW of electrolyser capacity which compares to its latest
estimated deployed capacity of just 0.5GW.
The European Green Deal is the EU’s strategy for a climate-neutral, clean
and circular economy by 2050, which recognises the need for transformative
policies. The REPowerEU plan published in May 2022 foresees significant
investment in renewables as well as clean technology manufacturing. The
EU’s ambition is to produce 10mt and to import 10mt of green hydrogen
by 2030. In March 2023, the European Commission proposed the Net-Zero
Industry Act to ramp up manufacturing of clean technologies, including
green hydrogen. At the same time the Commission announced the new
European Hydrogen Bank (EHB), which amongst other things will provide
financing mechanisms to help create the domestic market for green
hydrogen. In total, the EU estimates that investments of €335bn to €471bn
are required to achieve 10mt of green hydrogen production.
In the UK, the Government’s Hydrogen Strategy is aiming for 10GW of clean
hydrogen production by 2030 with at least half of it being green hydrogen.
The hydrogen net zero investment roadmap includes a number of elements,
among them a Net Zero Hydrogen Fund, worth up to £240m to support the
development and deployment of new low carbon hydrogen production,
a Production Business Model to ensure long-term revenue support and
a Low Carbon Hydrogen Standard to enable market access and certainty
for end use.
In the US, the government has enacted two laws, the Infrastructure
Investment Jobs Act (IIJA) of 2021 and the Inflation Reduction Act (IRA) of
2022, to boost infrastructure development. The IIJA has budgeted $1.2trn
for infrastructure spending, of which $550bn are dedicated to creating
new infrastructure, and the IRA has earmarked $370bn for energy-related
spending. The IRA is a game changer aimed to support the decarbonisation
of the US economy and to develop a domestic clean-technology supply chain.
But how do these huge numbers translate into real business scale-up?
Looking at electrolyser manufacturers alone, growing by a factor higher
than 100x in just a few years requires laser-sharp focus and discipline. It also
requires our suppliers to scale with us. Every step of the value chain needs
substantial investments and risk-taking to grow at this pace. Therefore, to
take uncertainty out of the equation as much as possible, we require
commercial projects to scale with as well as continued government support
and funding, all of which are critical enablers, together with stable regulatory
frameworks and quick grant decisions. Ultimately, only building real physical
plants will make the hydrogen economy and energy transition real.
There are, however, a number of obstacles which have delayed customer
projects reaching a Final Investment Decision (FID). These obstacles
comprise current peak electricity prices, with electricity cost being the key
determinator for the production cost of green hydrogen, inflation leading
to rising project and capital cost, and uncertainty regarding regulatory
frameworks which are partly still evolving, as well as delayed funding
decisions by governments due to bureaucratic hurdles. As a result, projects
are “piling up”, as industries continue to face increasing carbon taxation and
ever tighter regulatory limits for carbon emissions. For ITM, this slowdown
of investments, which we believe is temporary, came at the right time to give
us the breathing space required to focus on implementing our 12-month
plan to solidify our foundations as a company, while integrating closer with
and advancing our supply chain – all of which is required for true upscaling
of volumes and global expansion.
In summary, the global green hydrogen market and electrolyser demand are
expected to see strong growth in the coming years, driven by the need to
decarbonise, favourable government policies, increasing investments, and
use cases in a wide range of industries. It is now certain that green hydrogen
will play a significant role in the energy mix of the future, and we expect to
see continued momentum in this market in the years to come.
Update on our 12-month priorities plan
As ITM is transitioning to a volume manufacturer, we are now six months
into our 12-month plan announced in January 2023 to solidify our
foundations and have made substantial progress in our three focus areas:
1.
2.
concentrate on a standardised core product suite for repeatable and
reliable volume manufacturing;
improve capital discipline by a stringent cost reduction programme
in the short-term, and by introducing professional processes for the
future; and
3.
debottleneck and ramp up fabrication and testing, and invest into
incremental automation.
In parallel, we are delivering against our project commitments, thereby
completing important reference plants.
Products
When I joined, ITM had a product portfolio that was too wide and the
services we provided to support older generation technologies were
disruptive to our manufacturing process and became too costly.
We have now rationalised our portfolio so that we can concentrate our
efforts on our core products, namely our state-of-the-art MEP30 stack
platform and our Plug & Play containers. We have discontinued design work
for older product iterations, and limited our activities to fulfilling remaining
contractual commitments and warranty obligations. This takes account of
the fact that we deem our MEP30 stack to be the most advanced PEM
technology on the market today.
Let me pick just three of various features which make our technology
superior. First, our stack is operating at by far the highest current density in
the market, which reduces material use, size and ultimately cost substantially.
ITM has exceeded the EU’s target of 2.5 A/cm2 for 2030 already in 2019.
Second, our technology has market-leading conversion efficiency at levelised
current densities to any competitor, which reduces operational cost for the
end customer. This is because there is an inverse relationship between
current density and conversion efficiency. Third, our technology has the
lowest reported precious metal loading, which reduces cost and relieves
potential future supply chain constraints. Over the last 10 years, ITM have
already been able to reduce precious metal loading by 80%, and we are
continuing to reduce it even further. Since 2019, we have been meeting the
EU’s 2030 target of 0.4mg/W.
Today, once a product design is signed off, there will be no ongoing iterations
to that design and the product will be manufactured to the exact design
specifications, with standardised engineering processes and will be delivered
to our customers as per contractual agreements.
Research and development will continue to play a crucial role in ITM’s future
but any new product generation will only be deployed once it has gone
through strict design, engineering, assembly, testing and validation processes.
ITM Power PLC | Annual Report 2023
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1111
Strategic Report | Chief Executive Officer’s Review continued
Capital discipline and cost reduction
One of the first actions I took after assuming office in December 2022
was to tighten control over ITM’s capital spend. Decisions on the use of
our shareholders’ capital have to align with our strategy and be scrutinised
for appropriateness and effectiveness.
The headcount reduction that we announced in January 2023 was
successfully completed before year end, with the outcome greater than the
25% FTE reduction we had originally planned. This allowed us to reinvest the
incremental cost savings back into the business and to selectively rehire for
qualification and experience. We were able to continue business operations
without disruption whilst also providing adequate care and support for all
employees placed at risk during the restructure process.
One core element of our 12-month priorities plan is a very detailed list of
process, control and tool improvements spanning the entire organisation,
to professionalise our operations and make us a highly focused delivery
company. By implementing these improvements, we will avoid inventory
and project losses as experienced during FY23. Among various improvements,
this includes the following which we have already achieved.
We have effectively professionalised our engineering capabilities and
processes. Following a structured design Failure Mode and Effects Analysis
(FMEA), the engineering is now completed and frozen. Changes are
properly controlled and only released in well-managed versions for
procurement and manufacturing, and only after robust validation. Our
strengthened compliance and validation team plays an important role in
challenging and accompanying this process.
The right selection of reliable and high-quality suppliers, and close integration
with them, are important enablers to scale our operations. Previously,
at times, procured components and parts were not of sufficient quality.
We have therefore been tightening our purchasing specifications, have
strengthened our standard terms and conditions, and are improving
supplier oversight, quality assurance and control.
We have also made good progress on the way we manufacture our products
following the design FMEA, our progress on automation, which I elaborate
more on later, and driven by an unambiguous “quality over quantity” culture.
These improvements have already led to significantly higher pass rates in
factory testing which in turn lowers retesting costs, supports the debottlenecking
of our test facilities, and causes fewer interruptions to serial manufacturing
due to avoided stack re-assembly. Also, consequentially, our production and
project delivery schedules become more predictable.
Sales and project execution governance has been strengthened around the
focus on standard products as opposed to customised solutions, which was
one of the reasons for previous cost and schedule underestimation and
resulting project overruns. We have reviewed and concluded on acceptable
contract terms, liability and warranty profiles.
Furthermore, we are working on improving our cost estimation, scheduling
and risk management processes and capabilities. We are also continuing to
enhance our competencies by hiring senior industry professionals in areas
critical for project delivery.
By having signed the Heads of Terms for the sale of Motive, we aim to
complete the transaction within this calendar year. This will free up £28m
of pre-committed capital investment to be re-purposed to our core business.
Debottlenecking
We have made good progress in this area in a short space of time. In March,
we announced the expansion of our testing capacity at Bessemer Park,
initially by 50% from 5.0 to 7.5 megavolt-amperes (MVA) which is already
available. This will be followed by a further fourfold increase to 30 MVA by
the end of 2024.
In April, we announced the decision to expand our facilities at Bessemer Park
in Sheffield, to make space for R&D and product validation including science
labs and first-of-a-kind product testing facilities, while also allowing us to
optimise our factory layout for stack fabrication from a layout which evolved
over time to one that is geared up for automation and serial production.
It also provides increased fabrication space for higher stack volumes, allowing
ITM to grow output in line with commercial projects. We plan to take over our
new facilities in Q4 2023 for interior fit-out.
We also announced a significant expansion in Germany. ITM Power Germany
will officially open its doors in Linden, north of Frankfurt, in October 2023.
This expansion further strengthens our position as a leading manufacturer
of large-scale electrolysers for projects in Germany and wider Europe. In its
initial fit-out, our facilities will have sizable office space, and a warehouse
with special equipment for storing our stacks in lightweight skids ready for
quick deployment as aftersales spares. This allows us to minimise response
time to customers, in turn maximising value from the use of our products.
It will also house facilities for repair and maintenance, as well as for training
of customers and partners. This expansion will not only support responsive
aftersales in the heart of the EU as our core market today, but will also be
home for various business functions that are enablers for ITM’s accelerated
growth, including our global business development function, our industrial
Internet of Things (IoT) team, various engineering disciplines, aftersales
technicians, field engineers, procurement and other functions. As we are
scaling our operations, this is a major step in gearing up for an increasing
degree of local content creation in the EU.
Manufacturing automation plays an important role in reducing human
error, improving precision, optimising build quality and consistency,
reducing manufacturing costs, accelerating output and reducing delivery
lead times. We have made good progress against our automation roadmap
and are incrementally introducing automation in a controlled way, after
new equipment and new processes have been validated.
Over recent months we have automated or semi-automated a number
of manufacturing processes. Among them a customised press, capable of
operation at 20 tonnes of pressure, with micron-level accuracy. This enables
the thickness of critical components to be measured under compression
and for precision build. Advanced laser scanning now allows us to inspect
every electrode structure for surface conditions at micron level. We
developed a resistance welding machine in-house to assemble stack
components with the highest precision. Our new automated catalyst ink
mixing produces consistent pastes for our catalyst coated membranes,
increasing both quality and volume. Another improvement is our new use of
fully integrated guided stack assembly which supports our technicians to
avoid rework and increase productivity. This advanced sensor, laser-scanning
projection and camera system provides build oversight and documents each
step so that we can quickly identify, diagnose and remediate potential build
errors. Our automation roadmap foresees many further improvements, which
will continue to drive down build time and improve build quality and
consistency. As we continue to implement these advancements, we are
entering a new era of manufacturing at ITM.
Outlook
We are well on track to deliver our 12-month priorities plan which will lay
strong foundations for ITM’s continued growth. The green hydrogen market
is still in its early stage, but evolving rapidly.
With vastly increased confidence with regards to our capability to deliver
products at volume, we are now taking a much more active approach to sales.
For this purpose, we are currently building up a new global business
development function in our new Linden facilities of ITM Power Germany
right in the heart of our core market, the EU.
As ITM is increasingly deploying stacks into the field in commercial projects
today, a rapidly growing amount of real-world performance data will enable
us to drive advancements in the areas of core technology and product
improvements, development of new business models around remote
monitoring/operations and predictive maintenance, as well as commercial
certainty around tightened system performance guarantees. These activities
will be led by our Data and Industrial IoT team which we are now building up.
Whilst we will retain our strong presence in Sheffield, ITM will expand
towards an increasingly global footprint, thereby tapping into important
growth markets and unlocking access to new talent pools.
The big demand for green hydrogen lies yet ahead, and ITM will be ready!
Dennis Schulz
Chief Executive Officer
1212
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ITM Power PLC | Annual Report 2023
Strategic Report | Chief Financial Officer’s Review
Our strong cash position
allows us to strengthen
our foundations for growth
Our near-term focus is on the completion of
our 12-month plan; we expect to create good
sales momentum, with investment into our
people, our processes and our assets.
Andy Allen
Chief Financial Officer
Our overheads have been
right-sized for the business
needs of today, we have
greater clarity regarding our
costs, and our balance sheet
remains strong.”
Introduction
The financial outcome in FY23 was not as we had originally expected.
Following the arrival of Dennis Schulz as our new CEO, a detailed review of
the business was undertaken which resulted in the announcement of our
12-month priorities plan in January. One of the three components of the
plan was the focus around our cost and capital discipline and we announced
our intention to stop the excessive financial outflows through a stringent
short-term cost reduction programme which addressed the key costs,
together with a more rigorous approach to capital investment.
The first step was the headcount reduction which was completed before
the end of the financial year. We have also undertaken a detailed review
of other cost areas which culminated in provisions being taken for inventory
and contract losses, reflecting both actual costs to incur and uncertainty in
project execution. In addition, we undertook a detailed review of our
warranty provision policy on first-of-a-kind (FOAK) technology deployed
in the field.
Today, we are in a much better place. Our overheads have been right-sized
for the business needs of today, we have greater clarity regarding our costs,
and our balance sheet remains strong. However, there remains more to do
in the months ahead.
During the year we introduced a new Enterprise Resource Planning (ERP)
system, which includes the ongoing adoption of Microsoft Dynamics into our
financial processes replacing a number of legacy systems. Having begun to lay
the foundations for growth, we will continue to advance our competencies
and capabilities across the Company and ensure that controls across all areas
of the business continue to be reviewed and improved. This in turn will
further enhance our cost management and capital disciplines.
ITM Power PLC | Annual Report 2023
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1313
Strategic Report | Chief Financial Officer’s Review continued
Key financials
A summary of the Group’s key financials is set out in the table below:
Year to 30 April
Revenue
Gross loss
Pre-tax loss
Adjusted EBITDA1
Property, plant and
equipment plus
intangible assets
Inventory (raw materials)
Inventory Work in
progress (WIP)
Net cash
Net assets
2023
£m
5.2
(79.1)
(101.2)
(94.2)
31.9
18.3
40.5
282.6
295.5
2022
£m
5.6
(23.5)
(46.7)
(39.8)
24.7
24.3
7.9
365.9
395.0
1 Adjusted EBITDA in a non-statutory measure. The calculation method is shown in Note 4.
2021
£m
4.3
(6.5)
(27.6)
(21.4)
16.8
3.9
2.5
176.1
197.4
Gross margin
The gross loss was £79.1m (FY22: £23.5m) reflecting increased losses on
inventory and customer contracts, and an assessment of warranty commitments.
Costs recognised in the period relating to inventory were £22.6m, constituting
a £7.5m write-off, and a provision movement of £15.1m. The losses originate
from continued iterations of product designs during manufacturing, together
with some manufactured products being considered obsolete.
Contract loss provisions relate to a number of factors including acceleration
measures for delayed projects, additional on-site engineering works, increased
energy and labour costs due to under-estimated stack testing times and
future costings updated for inflation. Net contract loss provisions increased
by £30.1m, with £44.8m created and £14.7m utilised in the period. The total
contract loss provision at the period end stood at £42.6m.
The warranty provision increased by a net £0.9m in the period with £3.2m
created during the year, offset by the utilisation of £2.3m. The balance at
period end was £3.9m. This includes all projects delivered at period end but
excludes those not yet delivered. The warranty costs of projects not yet
delivered are presented as contract loss provision.
Non-financial key performance indicators (KPIs)
We also use certain non-financial performance indicators to consider our
performance over time. During the year, MW in WIP increased to 285MW
(FY22: 75MW). Revenue was recognised against 5MW of deliveries (FY22:
11MW). The Board also regularly reviews other non-financial performance
criteria including production throughput, testing and validation performance
and labour utilisation. As the Group matures to a volume manufacturer,
it is likely that we will refresh our non-financial KPIs to reflect the
evolved business.
Financial performance
The principal ways in which we generate revenue and income are
through product sales, consulting contracts (FEED and feasibility studies),
maintenance contracts and grant funding.
Revenue
Revenue for the period was £5.2m (FY22: £5.6m). This consists of a partially
delivered cube project, a Plug & Play project which was accelerated ahead
of guidance, as well as maintenance and consultancy revenue.
Operating costs
Operating costs rose by 20% to £26.2m (FY22: £21.8m). Within this, staff
and employment costs rose from £4.3m to £11.4m, reflecting an increase
in use of contractor resources and a reduction in recovery of labour costs
from inventory. The headcount reduction which was announced in January
2023 was completed by the end of the period, and the benefit of this will be
reflected in the FY24 accounts.
Consultancy and consumable costs fell by 54% to £5.1m (FY22: £11.2m),
whilst depreciation and amortisation was relatively stable at £4.0m
(FY22: £3.2m).
The impairment charge of £4.5m (FY22: £nil) relates to the write off of
discontinued product development (£3.1m) and tangible assets in relation
to discontinued site expansion plans (£1.4m) where activities ceased as part
of the 12-month priorities plan.
Government grants which constitute claims against individual projects
or research and development (R&D) claims totalled £1.6m (FY22: £0.6m),
with £1.4m receivable in relation to R&D tax reclaims (FY22: £0.3m).
Adjusted EBITDA2
The Company posted an adjusted EBITDA loss of £94.2m (FY22: £39.8m)
for the period. Adjusted EBITDA is a non-statutory measure and is detailed
in Note 6. The loss before tax was £101.2m (FY22: £46.7m) and the basic and
diluted loss per share was 16.5p (FY22: 8.1p).
2. Adjusted EBITDA is a primary measure used across the business to provide a consistent measure
of trading performance. The adjustment to EBITDA removes certain non-cash items, such as
share-based payments, to provide a key metric to the users of the financial statements as it
represents a useful milestone that is reflective of the performance of the business resulting
from movements in revenue, gross margin and the cash costs of the business. We have set out
below how we calculate adjusted EBITDA (see also Note 6 for more information).
Loss from operations
Add back:
Depreciation
Impairment
Amortisation
Loss on disposal
Fair value loss on loan notes
Share-based payment charge (Note 26)
Exceptional costs of restructure
Adjusted EBITDA
2023
£000
2022
£000
(103,713)
(44,736)
3,006
4,469
942
64
—
(420)
1,436
(94,216)
2,340
—
849
—
344
1,429
—
(39,774)
Capital expenditure
Capital expenditure totalled £15.1m in the period (FY22: £11.3m), with
£8.6m invested in capital projects (FY22: £4.2m), namely Bessemer Park
improvements and machinery, and £6.5m (FY22: £6.9m in intangible assets
primarily in respect of continued product development.
Working capital
The working capital outflow during the year was £8.9m (FY22: £6.9m
outflow), with inventories increasing by £26.6m and offset by both a
reduction in receivables of £5.9m and an increase in payables of £11.8m.
Cash
Net cash at the year end was £283m (FY22: £366m) benefitting later in the
year from the rigorous approach to costs and capital disciplines which was
announced at the time of our interim results in January.
1414
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ITM Power PLC | Annual Report 2023
Strategic Report | Chief Financial Officer’s Review continued
Financial position: positioned for the future
Current assets decreased to £362.9m (FY22: £423.6m) principally reflecting
a reduction in year-end net cash of £83.3m with year-end cash of £282.6m
(FY22: £365.9m), partly offset by an increase in inventories to £58.8m (FY22:
£32.2m) as the Group stocked up on raw materials to deliver its order pipeline
and saw work-in-progress increase ahead of the delivery of the Leuna, Yara
and other projects.
Trade and other receivables were £19.7m (FY22: £25.5m) reflecting a
£4.1m decrease in prepayments, primarily in relation to prepayments for
inventory on the balance sheet. Trade and other payables increased to
£46.1m (FY22: £34.3m), driven by an increase of £14.1m in deferred sales
income principally in relation to the timings of payments from customers
on projects to be delivered.
Fixed assets increased to £39.5m (FY22: £34.5m) reflecting a £4.9m rise in
property, plant and equipment and £2.4m of additional intangible assets.
Investments in associates and joint ventures reduced to £0.4m (FY22: £1.7m),
reflecting the booking of losses in these associates and joint ventures against
their holding value.
Events after the balance sheet date
At the time of our interim results update, we stated that we were exploring
options for the future of our joint venture Motive Fuels Ltd. We have now
signed Heads of Terms for the sale of the company. The 50/50 JV between
ITM and Vitol was established in March 2022 to develop and roll out
hydrogen refuelling stations in the UK. The vision of the JV partners was one
of building a significant UK refuelling business, with £30m committed by each
party as seed funding. However, one of the three priorities of our 12-month
plan is increased cost and capital discipline. The planned transaction will
allow ITM to redirect £28m of pre-committed cash to our core business, and
to focus on becoming a volume manufacturer of state-of-the-art electrolysers.
Motive Fuels Ltd, via ITM, was the recipient of grant funding to support the
rollout of refuelling stations in the UK. As part of the transaction, a contingent
liability may materialise for ITM in the future against the performance
obligations in the grants.
Outlook and financial guidance for FY24
We start the new financial year in a strong financial position and, whilst
our near-term focus is on the completion of our 12-month plan, we expect
good sales momentum, with investment in our people, our processes and
our assets. The guidance for FY24 is:
Revenue in the range of £10m to £18m
Revenue will be largely impacted by sales of Plug & Play containers which
have a shortened sales and deployment timeline compared to larger plant
projects. Under our revenue recognition policy, there is a dependency on site
readiness for our larger projects as these are recognised on site acceptance
testing (SAT).
Adjusted EBITDA loss of £45m to £55m
We expect to realise the benefits of improved testing times and improved
first time pass through rates during factory acceptance testing. Close and prudent
management of our in-flight projects and control of inventory will be required
to ensure that the unacceptable project and inventory losses experienced
during FY23 are not repeated. Our route to reducing losses further will be
built on profitable sales and volume growth.
Net cash at year end between £175m and £200m
Continued investment in the capability of the organisation will be needed as
we transition into a volume manufacturer. Investments of £24-30m will be
made to expand our facilities in Sheffield as well as the previously announced
upgrade to our power supply to support increased testing capacity.
We will also invest into the development of our technology, supporting
our automation roadmap which will drive efficiencies into our
manufacturing processes.
Andy Allen
Chief Financial Officer
ITM Power PLC | Annual Report 2023
ITM Power PLC | Annual Report 2023
1515
Strategic Report | Our Markets
The market for
green hydrogen will
be vast and diverse,
and we haven’t
even seen its full
potential yet
The world is in a race to net zero
emissions by 2050. This means that
we need to reduce our greenhouse
gas emissions to zero, or close to
zero, in order to avoid the worst
effects of climate change.
While the current global energy crisis slows down short-term economic
prospects, it has further fuelled the need to switch away from fossil fuels by
encouraging investments in renewable energy, energy efficiency and other
clean energy technology. In addition, the crisis in Ukraine has brought into
fresh focus the pressing need for energy stability and independence.
One of the key technologies that will help us decarbonise our industries
is green hydrogen.
Green hydrogen is viewed as a critical component of the decarbonisation
strategies by governments around the world. In order to address this, it is
crucial that all elements of the value chain coordinate with the growth in
green hydrogen supply, demand, storage and transportation. It is clear that
the hydrogen sector is entering a phase of rapid expansion, and the
emergence of a worldwide hydrogen economy is now a certainty.
Our strong team, leading technology and clear vision for the future
will position us to benefit from the imminent market expansion.
We are confident that we can grow our business and make a significant
contribution to the global effort to decarbonise the economy.
1616
ITM Power PLC | Annual Report 2023
ITM Power PLC | Annual Report 2023
Steel
Glass
Ships
Trucks
Synthetic
fuels
Cars
Food
PRODUCTS
Metallurgy
CK FOR
TO
S
D
O
O
F
G
N
TRA
N
SP
O
R
T
PROVISIO
N
O
F
F
U
E
L
F
O
R
Electricity
Peaking
Plants
P
O
W
E
R
I
D
I
V
O
R
P
C
H
E
M
I
C
A
L
S
Fuel refiners
BUILDINGS
PRO V I D I N G H
A T FOR
E
S T R Y
U
D
I N
AI
Aluminium
Steel
Food
Residential &
commercial
Paper
Cement
Our strong team, leading
technology and clear
vision for the future will
position us to benefit
from the imminent
market expansion.”
Strategic Report | Our Markets continued
UK market
By 2030, the UK Government wants to have 10GW of clean hydrogen
production capacity, at least half of which will be electrolytic green hydrogen,
according to the Hydrogen Strategy. A number of components make up the
hydrogen net zero investment roadmap, including:
@ a Net Zero Hydrogen Fund, worth up to £240m, to support the
development and deployment of new low-carbon hydrogen production;
@ a Production Business Model to ensure long-term revenue support; and
@ a Low Carbon Hydrogen Standard to enable market access and provide
certainty for end use.
EU market
The adoption of the EU hydrogen plan in July 2020 was designed to accelerate
the introduction of clean hydrogen. Conceived at the same time, the
European Clean Hydrogen Alliance is a forum that brings together business,
government and civil society to coordinate investment. In March 2022, the
European Union announced its new energy security plan, REPowerEU, which:
@ builds on the 2020 EU Hydrogen Roadmap (2x 40GW plan), as well as the
2021 Fit for 55 decarbonisation plan;
@ increases the target to circa 20 million tonnes per annum by 2030, which
will require nearly 200MW of electrolysis a year; and
@ when coupled with the Delegated Acts, incentivises early deployment and
puts makers of electrolysis equipment at the forefront of Europe’s shift to
a low-carbon economy.
US market
The Infrastructure Investment Jobs Act (IIJA) of 2021 and the Inflation Reduction
Act (IRA) of 2022 are two US laws that promote infrastructure development.
This US legislation, designed to encourage the decarbonisation of the US
economy and create a local supply chain for clean technology, has led to:
@ $1.2trn being allocated by the IIJA for infrastructure investment;
@ $550bn being allocated for building new infrastructure; and
@ $370bn being set aside by the IRA for energy-related spending.
Industry leading technology
The benefits of our PEM electrolysers include:
Technology experience
Our extensive development has
resulted in industry leading tech,
ensuring only the best solutions for
our customers projects.
Standard modules
Repeatable standardised
building blocks for large-scale
electrolyser deployments.
Rapid response
Enables participation in primary and
secondary grid balancing markets
through fast response time.
Minimised downtime
Our stacks can be rapidly exchanged
in the field to keep electrolysers
running efficiently.
Flexible control system
Allows complete control over
customer installations by monitoring
and controlling projects from
anywhere, at any time.
High purity hydrogen
Customers benefit from the highest
quality and purity hydrogen.
ITM Power PLC | Annual Report 2023
ITM Power PLC | Annual Report 2023
1717
Strategic Report | Our Markets continued
Value chain – end uses of green hydrogen
Our electrolyser solutions are scalable and adaptable to meet the demands and
needs of our diverse client base and are suitable for a variety of applications.
Industry and Chemicals
@ Heavy industry is the leading user of hydrogen,
including applications for steel, ammonia, and
methanol.
@ Since almost all hydrogen used today is produced using
fossil fuels (known as grey hydrogen), clean (green)
hydrogen offers a substantial opportunity to reduce
emissions for this sector.
Example customer projects
2x24MW
electrolysers being deployed to Yara to produce
green ammonia at Porsgrunn, Norway, and to
Linde to produce green hydrogen at its Leuna plant
1818
ITM Power PLC | Annual Report 2023
ITM Power PLC | Annual Report 2023
Power
@ Due to their intermittent nature, renewable energy
sources often bring fluctuation and uncertainty into
the power grid and can complicate operational
management and demand balancing.
@ The excess energy produced by renewable energy
sources and converted into hydrogen via electrolysis
can be stored, ensuring that renewable production
is not hindered. It can also be used during times of
low-energy production, or transported to other
regions for use.
@ Developments are being made to “blend” hydrogen
into existing natural gas systems.
Transport
@ Cost-efficient refuelling for long-distance and
commercial travel is likely to become a major future
use of green hydrogen and we have experience
deploying our electrolysers to customers to support
their fleet management.
@ Hydrogen-based fuels can be used to decarbonise
shipping and air travel.
2x100MW
electrolysis plant ordered by RWE will
be the largest in the world and will be
connected to a hydrogen pipeline
once commissioned
2MW
containerised solutions
delivered to GNVert to support
fuel cell bus refuelling
ITM Power PLC | Annual Report 2023
19
Strategic Report | Business Model
A unique proposition for
future value creation
What we have
What we do
Our 12-month priorities
Our strengths
History
Skills and
knowledge
Technology
platform
Scalability
ITM Power PLC was founded in 2000 and admitted
to the AIM market of the London Stock Exchange
in 2004. We have 23 years of experience in
technology development.
We are strengthening capabilities and capacity
to support our future growth. During the year,
we have significantly developed our team
capabilities through the onboarding of multiple
key personnel specialising in areas critical to the
success of our business, including engineering,
validation and procurement.
@ Our latest generation electrolyser platform
operates under higher pressure and at a
higher current density, and is more efficient
than its predecessor.
@ We have a clear technology roadmap to deliver
long-term success.
@ Our technology is modular in design and can be
used in a number of applications for a range of
project sizes.
We are focusing on continuing to strengthen our
foundations to allow us to react and respond to
the market demand we experience today, and the
future growth we expect to see. Initiatives include:
@ increasing our testing and manufacturing
capacity through the expansion in Sheffield; and
@ progressing our automation roadmap to
optimise build quality and further reduce cost.
2020
ITM Power PLC | Annual Report 2023
ITM Power PLC | Annual Report 2023
We make world-class electrolysers in a
range of sizes to suit our customers’ needs
from 2MW to projects in excess of 100MW
Concentrating on a standardised core
product suite for repeatable and
reliable volume manufacturing
We collaborate with our suppliers and strategic
partners to facilitate growth in the size of
projects we can deliver to our customers
Improving capital discipline by a stringent
cost reduction programme in the short-term,
and by introducing professional processes for
the future
We design and innovate electrolyser
technology, which we have developed
over many years and continue to improve
and refine
Debottlenecking and ramping up
fabrication and testing, and investing
into incremental automation
Underpinned by our values
We
collaborate
We care
We
innovate
Strategic Report | Business Model continued
How we generate revenue
Sales
We sell our electrolysers to
customers in energy, industry
and transport
Service
We support our customers
through our responsive after
sales services
Consulting and Grants
We secure local and international
grant and FEED study funding
to help invest in and further
develop our technology
10%
of FY23
revenue
79%
of FY23
revenue
79+
10+
12+
11%
of FY23
revenue
Who we deliver for
Our shareholders
The Group’s financial
resources allow us to
execute our strategy and
invest in the business.
Our customers
Our PEM technology
enables the stacks to
operate under flexible
conditions when coupled
to renewable energy
sources, producing
green hydrogen at
competitive cost.
Our planet
Our electrolysers, when
powered by renewable
energy, produce green
hydrogen – a clean,
zero-emissions fuel.
Our partners
We have long-term
relationships with a variety
of partners, including
suppliers, our banking
partner, governments, and
regulatory agencies. These
ties are crucial to achieving
our strategic goals and
operating strategy.
Our people
A motivated workforce
fosters creativity and
productivity, which are
crucial to the successful
implementation of our
strategy. We place a high
value on creating a happy
working environment
for all of our employees,
as well as providing
challenging career
possibilities that allow
them to grow.
Key numbers
£283m
cash at the year end
100%
of our revenue derived
from clean technology
4th gen
of our MEP30 stack
platform deployed
We are
tenacious
We seek joy
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+
M
88
+
M
90
+
0
+
M
Strategic Report | Our Strategy
Our 12-month strategic priorities
Once achieved, these will solidify the foundations and pivot
the business to longer-term strategic plans.
Portfolio
Cost and capital
Testing and automation
Concentrating our portfolio on
a core product suite
A rigorous approach to capital
allocation and cost management
Plans for future testing capacity
and incremental automation
Progress in 2023
@ We have made good strides in rationalising our product portfolio
@ A narrower portfolio enables us to concentrate all our efforts on
our core products
@ We are experiencing less disruption to our manufacturing process
@ The costs of supporting legacy products have reduced
Focus for the future
@ Our R&D capabilities allow us to continue to be at the forefront of PEM
technological development
@ Our latest state-of-the-art stack platform has been deployed in the field
and will provide invaluable in-field performance data
@ Alongside continuous R&D, these learnings will play an important role
in the development of our next generation stack platform
Progress in 2023
@ Design freezes are now in place enabling procurement and manufacturing
Progress in 2023
@ Announced a significant increase in testing capacity to be followed
to focus on project delivery
@ The organisational structure has been redesigned; the headcount
reduction was completed before the year end. There are clear
accountabilities and productivity improvements
by an even greater increase by the end of 2024
@ Expansion of facilities at Bessemer Park which will enable the
debottlenecking of fabrication, testing and product validation
@ Automation roadmap development and implementation, in a highly
@ We are enhancing our competencies across the organisation to build
controlled way, has begun
capability for future project deliveries
@ We have strengthened our governance functions to focus on cost discipline
and efficiency
Focus for the future
@ Further enhancement to our people competencies and capabilities
@ ERP system currently being rolled out will be increasingly leveraged across
multiple departments enabling better cost and capital allocation decisions
Focus for the future
@ Testing capacity to come on stream, an important contributor to our
scale-up plans
@ New facilities will allow us to optimise our space allocations providing
a pathway for automation, improved cycle times, volume output and
build quality
More detail on
page 11
More detail on
page 12
More detail on
page 12
22
ITM Power PLC | Annual Report 2023
Strategic Report | Our Strategy continued
Building for the future
Bessemer Park expansion
Progress is now firmly underway to
substantially expand our facilities at PLP
Bessemer Park, Sheffield. As previously
announced we have signed an agreement
to lease additional factory and office space.
A key component of our 12-month
priorities plan as set out in January is the
debottlenecking of our fabrication, testing
and product validation. The expansion will
allow us to create a dedicated R&D and
product validation centre which will include
science laboratories and testing facilities for
future technology developments. This will
also enable us to optimise fabrication space
across the two Bessemer Park units more
effectively for higher volume output.
The additional power supply will feed into
the new facility which will enhance and
expand our factory testing capabilities.
ITM personnel operate from a number of
different locations in Sheffield today, and
it is our intention to consolidate all of our
workforce and operations at Bessemer Park,
at both our existing unit and the additional
unit announced today. This will allow us to
work together more effectively.
When the full lease is signed, the initial lease
period will be for 15 years, covering more
than 83,000 sqft. Fitting out of the new
premises will commence towards the end
of 2023 and ITM will occupy the facility
early in 2024.
New German facility
The all-new ITM Power Germany GmbH will
officially open its doors in Linden, north of
Frankfurt, in October 2023. For ITM, this
expansion further strengthens our position
as a leading manufacturer of large-scale
electrolysers for active projects in Germany
and wider Europe today, as well as for future
projects which are now in bidding stage.
As we scale up, it is vital that all elements of
our value chain and associated infrastructure
are aligned so that we can efficiently and
effectively serve and support our growing
customer base.
In its initial fit-out, ITM Power Germany’s new
facilities will have office space for more than
50 employees, and a warehouse with special
equipment for storing our state-of-the-art
stacks in lightweight skids ready for quick
deployment as aftersales spares. This allows
us to minimise response time to customers,
in turn maximising value from the use of our
products. It will also house facilities for repair
and maintenance, as well as for training of
customers and partners.
ITM Power Germany will also be the home of
ITM’s global business development function,
various engineering disciplines, aftersales
technicians, field engineers, procurement
and other functions.
ITM Power PLC | Annual Report 2023
23
Strategic Report | Our Stakeholders and Section 172(1) Statement
Creating value for all our stakeholders
For both executives and the Board, our business model is the pivotal driver which
informs and inspires discussions. It determines the resources and partnerships
required to carry out our growth strategy.
We are motivated by constant progress and innovation. Engaging with and
learning from employee, customer and other stakeholder input is a critical
component of what we do and how we grow the business. We actively seek
input in order to enhance and adjust our goods and operations.
To assist the world in reaching net zero by 2050, we must look beyond our
own supply chain. As a result, we actively participate in industry organisations
that support sustainable energy and drive legislation, as well as engaging with
schools and colleges to educate the future generation about green hydrogen.
Statement from the Board
During the year, the Board acted in good faith to promote the long-term
success of ITM Power.
In accordance with Section 172 of the UK Companies Act 2006 (the Companies
Act), the Board oversees the operation and development of ITM Power in
order to optimise its equity value over the long term, without regard to any
shareholder’s individual interests. Jürgen Nowicki, one of our Non-Executive
Directors, has been appointed by a major shareholder of ITM Power (Linde).
However, each of the Directors recognises his or her responsibilities under
the Companies Act to behave and conduct themselves fairly amongst
Company members. We realise that all of our decisions may have an impact
on ITM Power’s shareholders through their impact on the business’ future
success and confirm our due respect in this regard.
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We acknowledge that in order to deliver our strategy in a sustainable manner,
we must examine our Company’s commercial, social and environmental
implications. We observed, reviewed and promoted ITM Power’s progress
against the yearly business plan and targets throughout the year. Financial
and non-financial criteria, including ESG data, are included in the targets.
When making strategic decisions, we strive to balance the interests of our
stakeholders in ways that are consistent with ITM Power’s long-term,
sustainable growth. The Board obtains stakeholder viewpoints to inform
its decision making through direct involvement where possible, although
due to the quantity and distribution of ITM Power’s stakeholders,
stakeholder interaction frequently occurs at an operational level. In this
example, the Board learns about stakeholder perspectives through
communication with senior management and regular reporting.
The major stakeholder groups that we have identified are those that have
significant interactions with our business model and are influenced by our
business operations. The importance of each stakeholder group varies based
on the choice being made. The Board must balance many, and often conflicting,
perspectives, which means that it is not always possible to satisfy everyone’s
desired outcome or create a favourable end for all stakeholders.
Ensuring that our Company runs responsibly is critical to our long-term
success. The Board of Directors is in charge of overseeing a corporate
governance framework that allows the appropriate people to make the
right decisions at the right time.
On the pages listed in the table below we have provided examples of
how the Board duly considered the impact on stakeholders when making
principal decisions during 2023:
Principal decision
Approval of the
12-month priorities
Page
22
Expansion of Bessemer Park
23
Key stakeholders impacted
@ Investors
@ Workforce
@ Customers and potential customers
@ Investors
@ Customers and potential customers
@ Strategic partners
@ Workforce
Key considerations
The Board believes that by adopting the
12-month priorities the Group will leverage
strong foundations in order to propel it as
a successful volume manufacturer.
The Board recognises the synergies possible
by securing premises proximate to our
existing facility, including the financial and
operational benefits of power sharing of the
upgraded supply.
Strategic Report | Our Stakeholders and Section 172(1) Statement continued
You can read more about key aspects of Section 172 considerations as follows:
Key stakeholders
impacted
The likely consequences
of any decision in the
long term
The interests of the
Company’s employees
The need to foster
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
The need to act fairly
as between members
of the Company
Key considerations
@ Our Strategy and Business Model on pages 20 to 22
@ CEO’s Review and CFO’s Review on pages 10 to 15
@ Stakeholder engagement: Workforce on page 26
@ Sustainable Energy, Engineered Sustainably: Our workforce on page 39
@ Principle 3 at https://itm-power.com/investors/corporate-governance
@ https://itm-power.com/careers
@ Stakeholder engagement: Customers and potential customers on page 27
@ Principle 3 at https://itm-power.com/investors/corporate-governance
@ Business Partner Code of Conduct at https://itm-power.com/sustainability
@ Stakeholder engagement: Local communities on page 28
@ Sustainable Energy, Engineered Sustainably: Climate change on page 33
@ Principle 3 at https://itm-power.com/investors/corporate-governance
@ Sustainable Energy, Engineered Sustainably: Business ethics on page 45
@ Code of Ethics at https://itm-power.com/sustainability
@ Principle 8 at https://itm-power.com/investors/corporate-governance
@ Stakeholder engagement: Investors on this page
@ Principle 2 at https://itm-power.com/investors/corporate-governance
Investors
Investors provide the equity capital for
our business. They hold management
and the Board to account, on operational/
commercial performance, financial
performance and key environmental,
social and governance (ESG) matters.
How we engage:
@ Led by the CEO and supported by the Investor
Relations team – available to meet current and
potential shareholders
@ Board kept apprised of the views of analysts by
the CEO (an update at every regular Board meeting)
and CFO
@ Shareholder communication coordinated by the
Investor Relations team with the Company Secretary,
the Company’s nominated advisor (NOMAD),
Investec, and corporate communications consultants,
Tavistock Communications
@ Regular meetings with and presentations to fund
managers, retail brokers and analysts
@ Price sensitive information shared through London
Stock Exchange’s Regulatory News Service
@ Shareholders can attend our Annual General Meeting
(AGM) and any Extraordinary General Meeting (EGM),
which Board members attend
@ Report to institutional shareholders twice a year
through roadshows aligned with the full and half
year reports and webinars to coincide with the
release of trading updates
Action taken:
@ We conduct both online and in person investor events
to facilitate the broadest possible engagement
@ We have engaged with some of the larger
investors which have dedicated ESG teams to aid
their understanding of us and obtain their views on
our approach to ESG
Further reading:
@ See the Remuneration Report on page 72 for details
of how the Remuneration Committee responded
to feedback about the 2021 Remuneration Report
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Strategic Report | Our Stakeholders and Section 172(1) Statement continued
Workforce
Our workforce makes, sells and supports
our products. It also develops our
products to maintain our market-
leading edge. It includes employees,
contractors and consultants.
How we engage:
@ Workforce informed of matters affecting it directly
and the various factors affecting the performance of
the Group through formal and informal meetings
@ Work with nominated employee representatives to
ensure appropriate consultation and information
flows on proposed changes to terms and conditions
Strategic partners
We have identified a number
of strategic partners to scale
our impact, industrial reach
and market penetration.
Action taken:
@ Active and open discussions during the period of the
organisational restructure to support the wellbeing
of our colleagues
How we engage:
@ Regular meetings with our strategic partners’
Action taken:
@ Review of the Motive joint venture with Vitol
senior managers
@ Formal meetings of joint venture boards: ILE
@ Regular town hall meetings with employees providing
with Linde, and Motive with Vitol
further opportunities for the workforce to ask
questions and to celebrate success
@ Secondments of staff from strategic partners
to ITM Power
@ Jürgen Nowicki in post as the Linde-nominated
Non-Executive Director
@ Open-door leadership culture where Directors
@ Reviewed and benchmarked employee remuneration
and senior managers welcome feedback and the
opportunity to discuss business improvement
to ensure we remain competitive in the market, leading
to the launch of the new ITM benefits portal
@ Specific employee groups set up to address particular
areas, such as the Health and Safety Committee and
Women in ITM Power
@ Conduct engagement and wellbeing surveys, the
results of which are shared with the Board
@ Recognise outstanding contributions through
peer-to-peer nominations and support from the CEO
@ Regular reporting of key workforce performance
indicators to the Board
@ Ran mental health workshops to build awareness in,
and signpost support for, our workforce
@ Embedded our values, which guide how we work and
align with our vision and mission; they underpin our
recruitment processes, shape our leadership and
development programmes and form part of our
performance and development review process
Further reading:
@ See more information about what we do for our
workforce in Sustainable Energy, Engineered
Sustainably on page 39
@ See our values on page 42
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Strategic Report | Our Stakeholders and Section 172(1) Statement continued
Customers and
potential customers
Customers buy our products, directly
or indirectly. Potential customers
offer a pipeline of opportunities to
sell our products.
Suppliers
Suppliers provide us with a wide range
of commodities and services such as
PGMs, components, power supply
units, capital equipment, renewable
energy, buildings, information
technology, telecommunications
and professional advice.
How we engage:
@ Assign a key contact (ongoing support) and a project
Action taken:
@ Customer feedback is built into our lessons learnt
How we engage:
@ Seek to establish and maintain long-term relationships
Action taken:
@ Enhanced supplier categorisation exercise, considering
manager (specific project delivery)
process within our quality system
with our suppliers
Further reading:
@ See our website for information about:
@ Our electrolysers and how they work:
https://itm-power.com/products
@ Markets we serve: https://itm-power.com/markets
@ Email feedback reporting system for customers
@ Support centre in Sheffield
@ Motive customers also benefit from an app providing
locations and availability of refuelling stations
@ Communications about our activities and industry
news issued to a significant database of contacts
@ Information provided via our website
@ Participate in webinars and presentations and in many
industry events every year
@ Our joint ventures, ILE and Motive, also have their own
websites and key account managers assigned to them
@ Updates on customer projects provided to the Board
@ Work closely with our suppliers in the deployment
of all projects and provide them with assistance
to improve their adherence to our standards of
quality and ethics
@ Due diligence, approval and control programme
for suppliers
@ Require suppliers to comply with our Business Partner
Code of Conduct, which covers:
@ Business integrity
@ Health, safety and security
@ Environmental and social performance
@ Human rights and modern slavery
@ Non-discrimination, grievance processes and
freedom of association
@ Bribery, corruption and money laundering
@ International trade law
@ Protecting confidential and personal information
@ Speaking up
@ Committed to sourcing our products and services
locally where possible
aspects such as materiality and risk
@ Enhanced inventory and supply chain reporting
to support active supply chain management
@ Strengthened supplier due diligence processes
@ Assessed critical suppliers against ESG criteria
and developed action plans to address any
improvements identified, and commenced
assessment of non-critical suppliers
@ Commenced creation of supplier performance
procedure and scorecard to monitor, measure
and define actions with suppliers
Further reading:
@ See our Business Partner Code of Conduct on our
website at https://itm-power.com/sustainability
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Strategic Report | Our Stakeholders and Section 172(1) Statement continued
Regulators and
industry bodies
Regulators set standards for our
products and industry. Industry bodies
work to develop our industry’s future.
Provide grants for some projects.
How we engage:
@ Participate widely in industry bodies
@ Work with key committee and standards groups
Local communities
We operate within local communities
and seek to be a positive influence
around environment, education and
health, together with equality,
diversity and inclusion (EDI).
Action taken:
@ Continued discussions and progress reviews with
How we engage:
@ Social engagement programme, ITM Nurture,
Action taken:
@ Developed our ESG strategy: Sustainable Energy,
Engineered Sustainably
@ Recruitment of an Environmental Manager and new
Head of QHSE to support development in this area
Further reading:
@ See page 44 for more information about our
social impact
monitored by the ESG Committee, which also provides
suggestions for and input into its future development
@ Charity Committee, an employee-led forum, gives
our employees the opportunity to have a positive
impact on the community around us in Sheffield
through engagement with local charities
@ ITM Academy responsible for delivering our ITM
Nurture programme commitments around Science,
Technology, Engineering and Maths (STEM) activity,
ensuring we are supporting education in the local area
through promoting STEM careers and sustainability
@ Regular reporting of key ESG initiatives, including
those with our local communities, provided to the
ESG Committee and the Board
our critical funding partners
in the UK, the EU and other countries
@ Engagement at key industry events
@ Contribute to consultations in the UK and EU through
direct responses and contributions to working groups
@ Work with partners through our membership of key
industry associations in a number of territories
@ Work closely with organisations such as the European
Union’s Fuel Cells and Hydrogen Joint Undertaking
(FCH JU), Innovate UK and BEIS as funders of our
grant-funded projects
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Strategic Report | Sustainability Report
Katherine Roe
Chair of the ESG Committee
100 % of our revenue is derived
from clean technology. We are
proud to hold the LSE Green
Economy Mark for listed
companies and funds generating
over 50% of their revenues from
positive environmental solutions.
We have maintained our
MSCI ESG rating of AA for
the third year in a row and
are now ranking in the top
11% of all companies in
our sector.
Introduction from the
Chair of the ESG Committee
Dear shareholder
I am pleased to introduce our FY23 Sustainability Report in order to provide
an update on ITM’s approach to environmental, social and governance (ESG)
issues during the year. At ITM, we recognise the significant impact that ESG
factors have on our business, our stakeholders and the world at large.
We firmly believe that integrating responsible practices into our operations
is not just a moral imperative but also a sound business strategy for long-term
success and sustainable growth.
Environmental sustainability lies at the core of our operations. We are
dedicated to minimising our ecological footprint and actively contribute
to mitigating the challenges of climate change. As part of our commitment,
we have implemented the following measures:
@ Carbon reduction: Our vision is to help the world decarbonise and we
strongly believe that the development and deployment of our electrolyser
solutions are critical to this goal. We are also making progress in the
pursuit of reducing our own carbon footprint. We have completed our
initial assessments of impact and will progress this to deliver tangible
targets and actions in the coming years.
@ Resource conservation: We continuously seek ways to minimise waste
generation and optimise resource consumption. Our recycling and waste
management programmes aim to reduce landfill waste and promote the
circular economy. We collaborate with suppliers which share our
commitment to sustainability.
Read more on pages 33 to 38
We also fully understand the role we play in society. Our commitment
to social responsibility extends to our employees, our customers and the
communities in which we operate. Here are some of our key actions:
@ Employee wellbeing: We prioritise the health, safety and wellbeing
of our employees.
@ We foster an inclusive and diverse workplace culture that promotes
equal opportunities, professional growth and work-life balance.
@ Additionally, we provide comprehensive benefits, wellness programmes,
and ongoing training to support our employees’ personal
and professional development.
Read more on pages 39 to 43
We are committed to strong governance practices which are fundamental
to our Company’s long-term success. We maintain a robust governance
framework that ensures transparency, accountability, and ethical conduct
throughout our operations. Key aspects of our governance approach include:
@ Ethical conduct and compliance: We uphold the highest standards of
business ethics and conduct. Our employees are guided by a comprehensive
code of conduct that promotes integrity, honesty and respect.
@ We maintain stringent compliance measures to ensure adherence to legal
and regulatory requirements in all jurisdictions in which we operate.
Read more on pages 44 to 46
Looking ahead
As we look to the future, we remain committed to advancing our ESG
initiatives and driving positive change. We recognise that ESG issues are
constantly evolving, and we will continue to adapt and enhance our
practices accordingly. We value your input and encourage you to share your
perspectives on ESG matters, as your feedback helps shape our approach.
We firmly believe that by integrating ESG principles into our business strategy,
we can create long-term value for our shareholders while positively contributing
to society and the environment. Together, we can build a sustainable future.
Thank you for your continued support.
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Strategic Report | Sustainability Report continued
Our ESG strategy
Sustainable Energy, Engineered Sustainably
Our ESG framework
Environmental
Managing our
environmental
impacts
Sustainable Energy
Help the world reach
net zero through the power
of green hydrogen
Engineered Sustainably
Protect people and the planet
through how we do business
Social
Creating a
positive social
impact
Governance
Operating a
responsible
business
At ITM Power, we are at the centre of the global energy shift. Our goal is
to use the power of our electrolyser technology to help the world reach
net zero using green hydrogen to decarbonise hard to abate industries.
We will accomplish this through the products we produce and by actively
participating in the development of the hydrogen industry to support
a more sustainable global energy future.
The ITM vision is grounded in a purpose-based philosophy and, in line with
our underlying values, we are committed to delivering positive change in our
business, our industry and broader communities, to deliver a decarbonised
society. Led by this purpose, and with an eye on our impacts, market trends
and growth ambitions, as they align to our broader strategy, in 2021 we
launched a comprehensive ESG strategy. The strategy was built on two core
philosophies: Sustainable Energy, Engineered Sustainably; these continue to
underpin our ESG ambitions.
Sustainable Energy addresses our core business purpose, which is to help the
world reach net zero through the power of green hydrogen.
Engineered Sustainably speaks to our ambition to deliver on this purpose in a
sustainable way that addresses the most material ESG issues for our business.
A key step in determining our objectives was including our stakeholders in a
thorough materiality assessment. The results of that evaluation have guided
our actions to date and will continue to do so. The evaluation will be routinely
updated, to ensure that we continue to represent the shifting needs of
our stakeholders.
To learn more about our materiality
assessment see page 31
In 2020, the Board approved a new ESG and Wellbeing Committee, headed
by Independent Non-Executive Director Katherine Roe, to support our efforts
to fully integrate ESG principles into all operations and ensure that the ESG
strategy remains consistent with the Company’s purpose, culture and values
while supporting long-term sustainable success.
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At ITM Power we are
at the heart of the
energy transition.”
Katherine Roe
Chair of the ESG Committee
Strategic Report | Sustainability Report continued
Our material issues
We conducted our first Group-wide materiality assessment in 2021. We set
out to identify the ESG issues that matter most to our Company’s performance
and those on which we can have the biggest influence. According to the extent,
scope, and irreparable nature of our existing and projected impacts, as defined
by the Global Reporting Initiative, the areas where we have the most impact
are evaluated. In addition to evaluating our performance against similar firms,
we performed surveys and interviews with a variety of internal and external
stakeholders, including non-governmental organisations (NGOs), investors,
partners and employees. Our ESG Committee approved the resulting
materiality matrix in October 2021, and it is displayed below.
Stakeholders acknowledged that as our industry grows and the need for green
hydrogen rises, some issues – such as materials, waste, and water – are going to
become much more material. These have been classified as “emerging issues”,
which means that in order to ensure our readiness for the future, it will be
important to lay strong foundations now and we remain vigilant to this.
ITM Power’s impact on issue
1 Responsible corporate governance
1 Resilience and risk management
2 Renewable energy advocacy
1 Transparency
2 Economic performance
3 Energy and greenhouse gas emissions
4 Employee attraction and development
3 Clean technology
4 Customer safety and satisfaction
4 Equity, diversity and inclusion
4 Occupational health and safety
4 Employee wellbeing, engagement
and labour conditions
1 Responsibility to our suppliers
1 Procurement practices (social)
3 Air quality
3 Materials
1 Procurement practices (environmental)
2 Sustainable and green finance
1 Business ethics and compliance
3 Waste management
3 Water management
2 Tax
3 Biodiversity and ecosystem impacts
Impact of
issue on ITM
Power
1 Cyber security and data responsibility
4 Community impact
We utilise the outcomes of the
materiality assessment to help
inform our actions and areas
of focus.”
Sir Roger Bone
Chair of the Board
Key:
1 Governance
2 Economic
3 Environmental
4 Social
Anticipated movement
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Strategic Report | Sustainability Report continued
UN Sustainable Development
Goals (SDGs)
The 17 UN Sustainable Development Goals (SDGs), and the targets within
each one, offer a blueprint for achieving a more peaceful and prosperous
world by 2030. To deliver these effectively, businesses should focus their
efforts where their actual and potential impact is greatest. In line with this,
we have identified the four SDGs where we can have the greatest effect as
a business, and the specific targets aligned to these goals that are most
relevant to us and our activities.
This report shows our progress towards these goals and what we are doing,
both ourselves and in partnership with others, to achieve them.
We manufacture market leading electrolysers, which help mobility,
industrial chemistry and power-to-gas industries decarbonise by harnessing
the power of green hydrogen. We believe that this is the best way to help the
world decarbonise and achieve net zero, and we are working to expand our
production capacity, strengthen our partnerships and engage with industry
to help accelerate this shift.
@ Our continual progress to develop
@ By helping to decarbonise
@ Green hydrogen, such as that
more reliable, efficient and
cost-effective electrolysis
solutions will support the
widespread adoption of green
hydrogen. This will directly
contribute to ensuring access to
affordable, reliable, sustainable
and modern energy for all,
addressing target 7.2: to
substantially increase the share
of renewable energy in the global
energy mix.
industrial processes through
green hydrogen, our electrolysers
support SDG 9, particularly
target 9.4: to upgrade
infrastructure and retrofit
industries to make them
sustainable, with increased
resource use efficiency,
and greater adoption of clean
and environmentally sound
technologies and industrial
processes.
produced with our electrolyser
systems, can be used as
zero-emissions fuel for mass
transit systems. This contributes
towards target 11.2: by 2030, to
provide access to safe, affordable,
accessible, and sustainable
transport systems for all.
@ By helping to replace hydrogen
produced directly from fossil
fuels with green hydrogen, our
electrolysers support target
12.2: by 2030, to achieve the
sustainable management and
efficient use of natural resources.
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We continue to place special
priority on our ESG strategy
which is a central part of our
vision for the future.”
Sir Roger Bone
Chair of the Board
Strategic Report | Sustainability Report continued
Our environmental impact
Energy and climate impact
Importance to ITM Power
Our goal is to create a net zero society where everyone can breathe pure
air. While our products are made to run on renewable energy, we can also
contribute towards our vision by running our own operations responsibly
and lowering our own carbon footprint, which includes the carbon that is
embedded in our products.
Approach and policies
To better manage our environmental impact, we maintain a
UKAS-accredited environmental management system to the specifications
outlined in the International Standard, ISO 14001:2015. The programmes
used for accreditation included wide staff participation and consultation
with employees, as well as auditing processes in the pursuit of zero harm
to people or products. We ensure the efficacy of the management system
through routine internal audits and monitored Environmental
Improvement Programmes.
Beyond our own operations, all of our business partners are required by
our Business Partner Code of Conduct to use energy and natural resources
responsibly, as well as to continuously seek out methods to reduce waste,
emissions, and discharge from their operations, goods, and services.
Framework and reporting
As we continue to build our climate plan, we realise the significance of good
governance and transparency in our reporting and present on pages 34 to 36
an overview of our current approach in accordance with the Task Force on
Climate-related Financial Disclosures (TCFD) recommendations.
We are committed to
manufacturing practices that
are safe and mitigate, as far
as possible, any harm to the
world around us. During
the year we have made
significant progress on
truly understanding and
documenting our processes
and where we can make
further improvements.”
Tegan Pringle
Environmental Manager
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Strategic Report | Sustainability Report continued
Climate-related financial disclosures
The Task Force on Climate-related Financial Disclosures (TCFD) standardises climate-related disclosure methodology, allowing us to give clear and comparable
data to enable informed capital investment and strategic direction. As an AIM-listed company with fewer than 500 employees, we are exempt from reporting
against TCFD recommendations at this time. We nevertheless continue to voluntarily develop our framework to align to TCFD, allowing us to provide strong
foundations for full compliance with the TCFD’s recommendations as and when they become applicable to ITM below.
Governance
Strategy
Describe the Board’s oversight of
climate-related risks and opportunities.
2
Describe management’s role in assessing
and managing climate-related risks
and opportunities.
2
Describe the climate-related risks and
opportunities the organisation has
identified over the short, medium,
and long term.
2
Disclosure
The Board provides overall leadership and independent oversight. It is primarily responsible for our
strategic plan, risk management, systems of internal control and corporate governance. It retains control
of key decisions. The Board has delegated authority to the ESG Committee for the development of the
Group’s ESG strategy, policies and programmes and associated matters.
Ownership and governance for sustainability-related risks and sustainability commitments are embedded
within our business.
1 Fully aligned and compliant
with TCFD
2 Partially compliant with TCFD
(compliance expected within
24 months)
3 Non-compliant (compliance
timeline 24 months plus)
Risks in the short term:
@ As we scale up our business to respond to the demand for green hydrogen, our impact on the environment
will increase and we may not be able to mitigate this.
Risks in the medium and long term:
@ Increased severity and frequency of extreme weather events such as cyclones and floods may disrupt or limit
our ability to manufacture our products.
@ Changing weather and precipitation patterns may impact the cost and/or availability of materials.
@ Regulation related to greenhouse gas (GHG) emissions may increase costs across our value chain.
@ Regulation related to water stress or water scarcity may disrupt or restrict our production capability.
@ Lack of availability of clean water may restrict the effectiveness of our product.
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Strategic Report | Sustainability Report continued
Strategy continued
Describe the impact of climate-related risks
and opportunities on the organisation’s
businesses, strategy, and financial planning.
2
Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C or
lower scenario.
3
Disclosure
Opportunities in the short, medium and long term:
@ The increased focus on, and adoption of, green hydrogen provides a significant opportunity for our business.
@ PEM electrolysers use less water than steam methane reformers (SMRs), which are currently the main source
of industrial hydrogen.
@ Electrolysis is the only fuel that doesn’t deplete oxygen in producing fuel – green hydrogen is the only oxygen
and water balanced fuel.
@ Reduction, reuse and recycling of components within our electrolysers presents an opportunity to reduce
our impact on the environment.
While it is difficult to accurately estimate the financial impact of any climate-related disruption to our
manufacturing operations, a short interruption to our production capabilities due to extreme weather events
could have a significant impact on our business in the future. Such weather events could also have a significant
impact on our supply chain, which could result in supply restrictions and/or increased costs.
A scenario analysis to determine resilience of our strategy against different climate-related scenarios has not
yet been completed but will be considered as part of our strategic planning and initiated when appropriate.
1 Fully aligned and compliant
with TCFD
2 Partially compliant with TCFD
(compliance expected within
24 months)
3 Non-compliant (compliance
timeline 24 months plus)
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Climate-related financial disclosures continued
Risk Management
Describe the organisation’s processes
for identifying and assessing
climate-related risks.
2
Our climate-related risks are integrated into our enterprise risk management approach, which is documented
on page 47. Our enterprise risk management process takes into account existing and emerging regulatory
requirements, corporate operations, external and internal strategic threats, operational concerns, and
compliance with laws and reporting duties.
Disclosure
Metrics and targets
Describe the organisation’s processes
for managing climate-related risks.
3
Describe how processes for identifying,
assessing, and managing climate-related
risks are integrated into the organisation’s
overall risk management.
3
Disclose the metrics used by the
organisation to assess climate-related risks
and opportunities in line with its strategy
and risk management process.
3
Disclose scope 1, scope 2, and, if appropriate,
scope 3 greenhouse gas (GHG) emissions,
and the related risks.
2
Describe the targets used by the
organisation to manage climate-related
risks and opportunities and performance
against targets.
3
We have not, to date, completed a specific climate-related risk assessment but it will be taken into account
as part of our risk management processes and will be progressed as appropriate.
Currently, climate-related risks are managed in the same way as our other principal risks, as outlined on page
47. We will review this approach at such time as we complete a standalone climate-related risk assessment.
Our risk management approach, which is described on page 47, is applied in the same manner for all of our
risks in order to assess and identify both existing and emerging risks and opportunities, including those which
are climate related.
The calculation of our carbon footprint follows the methodology set out by the GHG Protocol for corporate
accounting and the output can be found in the table on page 37.
The ITM Power scope 1, scope 2 and scope 3 emissions are shown on page 37.
GHG-related risks will be assessed as part of the climate-related risk assessment when completed.
Specific targets identified to manage climate-related risks and opportunities will be formalised following
the climate-related risk assessment.
For FY24, the Company has once again linked executive pay to deliverables aligned with the ESG strategy –
further details are available within the Remuneration Committee Report on page 79.
1 Fully aligned and compliant
with TCFD
2 Partially compliant with TCFD
(compliance expected within
24 months)
3 Non-compliant (compliance
timeline 24 months plus)
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Strategic Report | Sustainability Report continued
Energy and climate impacts
Streamlined Energy and Carbon Reporting (SECR)
The calculation of our carbon footprint follows the methodology set out by the GHG Protocol for corporate accounting and the output can be found in the table
below and complies with the requirements of Part 7A of Schedule 7 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations
2008 (as amended) regarding disclosure of GHG emissions.
Carbon footprint (tCO2e)
Scope 1
Scope 2 (location-based)
Scope 2 (market-based)
Scope 3
Total (location-based)
Total (market-based)
Total emissions
Intensity ratio
Scope 1 and 2 emissions intensity ratio (tCO2e/employees)
Scope 1, 2 and 3 emissions intensity ratio (tCO2e/employees)
FY22
249
754
203
103,843
104,846
104,295
105,049
—
—
FY23
28
908
156
78,959
79,895
79,115
80,051
2.37
202.26
1. Our footprint was calculated using the methodologies set out in the GHG Protocol Corporate
b. Fuel- and energy-related activities: BEIS 2021 conversion factors were used to calculate
Accounting and Reporting Standard. An “operational control” approach has been used to define
the emissions boundary.
well-to-tank GHG emissions from fuel usage and transmission and distribution losses from
purchased electricity and well-to-tank emissions from fuels.
2. Entities included in the footprint are as follows: ITM Power PLC; ITM Power (Trading) Limited;
c.
ITM Power Inc.; ITM Power GmbH; and ITM Power Pty Ltd. Motive Fuels Limited was previously
included but is now reported as an investment.
Waste: BEIS 2021 conversion factors were used according to mass of waste disposal by
destination. d. Business travel: emissions related to air and rail travel and hotel stays were
obtained from our business travel service providers. BEIS 2021 conversion factors were used
for mileage for personal cars and taxis.
3. In the calculation and preparation of our carbon footprint we have considered a number of
relevant sources, including the 2021 Government GHG Conversion Factors for Company Reporting,
published by BEIS; the Homeworking Emissions Whitepaper 2020 published by EcoAct; and Supply
Chain Greenhouse Gas Emission Factors for US Industries and Commodities, published by the
United States Environmental Protection Agency.
4. Scope 1 emissions are derived from natural gas heating our facilities and fuel consumption within
our vehicle fleet. Where natural gas consumption data was unavailable, estimates were made
based on spend, historical average and average consumption figures based on property size and
use. This led to a large decrease in FY23 when actual data has become available.
5. Scope 2 emissions are derived from electricity consumed by our facilities.
6. Scope 3 categories included in this calculation include purchased goods and services, fuel and
energy-related activities, waste, business travel, employee commuting, upstream leased assets,
use of sold goods and investments. Notes on the calculation methodologies for these categories
are as follows:
a.
Purchased goods and services: a financial allocation model was used using emission factors
provided by the United States Environmental Protection Agency.
d. Employee commuting: data comprising employee home postcode, place of work and share of
days worked in office was collected by employee survey. National travel survey data, together
with BEIS 2021 conversion factors, were used to determine commute emissions intensity.
Homeworking emissions were calculated on the basis of the methodology set out in the
Homeworking Emissions Whitepaper 2020 published by EcoAct.
e. Upstream leased assets: BEIS 2021 conversion factors were used together with the volume
of materials consumed to operate leased assets.
f.
Use of sold goods: sold goods are considered to be those electrolysers that have completed
site acceptance testing during the reporting period. The lifetime energy consumption of these
units, together with the share of green electricity used for their operation and grid emission
factors, was used to calculate lifetime emissions.
g.
Investments: data on electricity and district heating consumed by ITM Linde Electrolysis GmbH
and Motive Fuels Limited was collected and converted to emissions using location-specific
conversion factors.
7.
When choosing our carbon intensity ratio we explored different options such as revenue or floor
space, but felt number of employees was most reflective of business performance.
Energy consumption
Electricity (kWh)
Natural gas (kWh)
Total (kWh)
Diesel (litres)
FY22
3,543,863
831,564
4,375,427
32,235
FY23
4,270,281
97,221
4,367,502
6,085
Notes:
1.
Electricity consumption figures cover our UK offices and factory as well
as our offices in Germany and Australia. It also includes hydrogen refuelling
stations. Where consumption data was unavailable, estimates were made
based on spend, historical consumption and property averages.
2.
3.
Diesel consumption has been estimated based on vehicle mileage.
Our fleet was significantly reduced in the year and no longer includes
the Motive vehicles
Natural gas consumption figures cover our UK offices and factory as
well as our office in Germany. Where consumption data was unavailable,
estimates were made based on spend, historical average and average
consumption figures based on property size and use. Estimates were
used in FY22 whilst FY23 has used extrapolation from actual bills which
evidence our usage is significantly lower than previously estimated.
Proportion of electricity procured from
renewable sources
FY22
81%
FY23
100%
Note:
1. Data covers our UK head offices and our offices in Germany and Australia.
Future plans
In 2023 we will complete our first Energy Saving Opportunity Scheme
(“ESOS”) return which will support us to prioritise those energy saving and
efficiency initiatives with the greatest return, both on capital investment,
and emissions saved.
Further reading
1. Corporate governance section of our website
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Energy and climate impacts continued
Our broader environmental impacts
Materials
Toxic emissions, waste and water
Biodiversity
Importance
to ITM
Our electrolysers require a substantial amount of raw materials
during production. To minimise our influence on the environment
and preserve our Company operations, we must utilise these
resources effectively.
We have a responsibility to consider how our manufacturing processes may
impact the environment in which we operate.
Through the way we do business, we can safeguard natural resources, use less
water, and generate less trash.
We were founded to contribute to the solution
of climate disaster. However, a second significant
threat to our survival is the widespread
extinction of plant and animal species brought
on by human activities. It is crucial to safeguard
the natural ecosystems on which we all depend.
Approach
and policies
We try to use as little virgin material in our manufacturing processes
as we can.
The platinum group metals (PGM), which are crucial to our commercial
operations but also have the potential to have an adverse effect on the
environment and people, are of special concern.
We want to keep using fewer PGMs, so we’re taking a number of steps,
such as recycling.
Over 80% of our PGM usage was reduced between 2011 and 2019.
It’s significant to note that in 2019, we met the EU’s 2030 target of
0.4 mg/W for PGM loading for PEM electrolysers. We’ll keep coming
up with new ideas in an effort to use PGMs even less.
We also salvage and repurpose materials from our electrolysers
(especially PGM) whenever possible. This is made possible in part
by our stack management service, which makes sure that outdated
equipment is returned to ITM Power so that customers can take
advantage of the newest technological advancements.
Toxic waste – Our electrolysers are made in a safe production environment
with minimal acid use. Because there are no material hazardous emissions
produced by our production methods, there is very minimal danger to the
local environment.
We attempt to locate, identify, and protect
larger ecological networks, local wildlife-rich
habitats, and biodiversity gains when creating
new locations.
Before we make any decisions on our product
portfolio and expansion plans, we will seek to
use our current sites as effectively as possible.
Waste – Our waste management procedure was established in 2021, and it
was made available on our internal business management system. For the
management of all on-site waste materials, including general waste, recycling,
and metals, we hired one waste broker, Reconomy. We can more effectively
minimise what we throw away by simplifying these waste streams since we
can produce detailed reports regarding the amount and type of garbage
we produce.
Water – Our factory is not near a water-stressed area. To remove flaws from
our manufacturing systems and make sure our stacks are clean, we use mains
water, which we purify before using. Our products also use water to produce
hydrogen through electrolysis, but when hydrogen is used, the same quantity
of water is released as vapour.
Future plans
We continue to look into various methods for recycling PGM to
increase recovery rates and decrease waste. We are also seeking
ways to reuse specific parts from outdated goods that have a
longer lifespan.
The materiality evaluation carried out in 2021 identified water management
as an emerging problem. Water use will rise along with production at our
Bessemer Park factory. We hired an environmental manager in 2022, and
they will create a water use strategy to lessen our environmental impact.
None at this stage.
Further reading
@ ITM Power’s Business Partner Code of Conduct
@ PGM Supply Chain Policy Statement
@ ITM Power’s Business Partner Code of Conduct
@ Corporate governance section of our website
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Our social impact
Working at ITM Power
It goes without saying that FY23 was a challenging time for a number of our
teams, particularly those impacted by the restructuring programme delivered
in early 2023. The wellbeing and support of teams and employees that were
both directly and indirectly impacted by this was our priority in the year.
Whilst this was a difficult process, we are already seeing positive impacts
from the leaner, flatter organisational structure and we will seek to build
on this going forward into FY24. A positive outcome has been developing a
stronger employee voice and greater opportunities for employees across
the business to engage with business improvements.
We place a premium on providing a work environment where our employees
can thrive, feeling supported and encouraged in their daily work. This helps
us produce better products and fosters a happy and productive workplace.
We provide all of our colleagues with an early introduction to our vision,
mission, values, goals and ways of working. The primary policies and
procedures that all members of our workforce, including employees and
contractors, must be aware of are outlined in our employee handbook.
We adhere to all applicable employment legislation and, in most cases, our
employment practices go above and beyond the statutory requirements.
Although our workplace policies acknowledge unions, there is no formal
policy on unionisation.
We appreciate our employees’ participation greatly and keep them updated
on relevant issues and how we are performing. Meetings, both official and
informal, are used to accomplish this. We have an open-door management
philosophy that allows for regular employee feedback, and we also use
tools like internet surveys to get that feedback. For further participation,
Group-wide emails, a staff newsletter, and suggestion forums are also
used. In order to encourage employees at all organisational levels to
express their opinions on the organisation, we launched our ITM Voices
programme during the year.
We introduced our first biannual ITM Voices employee engagement and
wellbeing survey at the beginning of FY23. The findings from this study
were used to develop action plans and to direct outcomes from the ITM
Voices forum, enabling collaboration with the wider team.
FY23 was a challenging time for a number
of our teams, particularly those impacted
by the restructuring programme delivered
in early 2023. A positive outcome has been
developing a stronger employee voice and
greater opportunities for employees across the
business to engage with business improvements.”
Kath Connell
Head of HR
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Our social impact continued
Employee health, safety and wellbeing
Importance to ITM Power
Our employees’ health is a top priority, and this encompasses both
operational health and safety as well as emotional wellbeing. To manufacture
our electrolysers, our staff must operate powerful and complex machinery,
and proper risk reduction and training are required. We are also aware of the
significance of appropriate mental health and wellbeing support.
Policy and approach
The Board of Directors is in charge of oversight of health and safety, which
establishes our health and safety objectives as well as the framework for
monitoring performance and compliance. The Board evaluates health and
safety performance and receives regular performance updates. We also have
a Health and Safety Committee, which meets periodically and comprises
representatives from departments across the business. This helps to ensure
that issues are reported promptly and that improvement plans are
implemented as soon as possible.
Our Health and Safety Policy is provided to our workforce in the Employee
Handbook. It outlines our commitment to maintaining safe and healthy
working conditions by controlling the health and safety risks associated with
our work activities, providing and maintaining safe plant and equipment,
ensuring the safe handling and use of substances, consulting with our
employees and providing appropriate information, instruction, training, and
supervision, and taking steps to prevent accidents and cases of work-related
illness. To reduce the danger of workplace accidents and injuries at our plant,
we have a safety induction procedure in place and carry out preventative
maintenance on all of our equipment, ensuring that machinery is frequently
serviced to avoid difficulties. We have a safety observation system in place to
record observations and near misses and, as a result, reduce the frequency
of employee injuries. All new employees are provided with our Occupational
Health Policy in addition to our Health and Safety Policy.
On joining the Company, every new employee is requested to complete
an occupational health questionnaire and a baseline occupational health
evaluation to determine whether any reasonable alterations to their work
environment are required. These checks are prioritised based on the nature
of the employee’s role and are repeated on an annual basis, depending on
departmental needs, or whenever an employee’s health changes. To ensure
that our policies are followed, we gather data on near misses, positive
observations, incidents and occurrences of employee illness, which we
report to the Board and discuss at our weekly health and safety meetings.
Furthermore, critical performance indicators for health and safety
performance are assigned to each function.
We strengthened our safety management in FY22 by introducing online tools
for monitoring regulatory changes, controlling our chemical inventory and
tracking safety observations digitally, and we continue to monitor and
improve our systems. Our health and safety management system complies
with ISO 14001:2015 and ISO 45001:2018. The system is audited for
compliance on a regular basis, both internally and by third-party auditors
from a UKAS-accredited audit firm.
Training on health and safety
Training and development are critical components of maintaining health
and safety standards. We have a dedicated safety team that is fully NEBOSH
educated, and we have a three-tiered framework for health and safety
training that encourages staff to examine and improve their competency.
We emphasise completion of high-risk health and safety training within this
structure, followed by medium and low-risk training.
We have 14 trained mental health first aiders within the business who are
responsible for supporting employees’ mental wellbeing. We will be expanding
our mental health first aider reach in 2023 to ensure that we have more first
aiders trained from our production workforce and to represent a diverse
employee base.
We conduct mandatory basic health and safety training for all employees,
as well as tailored training on specific issues. This training is delivered through
a variety of techniques, including toolbox talks, e-learning, classroom sessions,
and webinars.
Employee satisfaction
We recognise the significance of our employees’ emotional and physical
wellness. Our Stress Policy outlines our measures for detecting, addressing,
and mitigating the causes of workplace stress, as well as giving appropriate
assistance and consideration to employees who are stressed. These include
ensuring that risk assessments include or specifically address workplace stress;
maintaining an appraisal process to ensure workload suitability, supported by
a capability procedure; and facilitating requests for flexible working where
reasonably practicable in accordance with our Flexible Working Policy.
We also maintain a Group-wide campaign “Mental Health Matters”, to improve
awareness of mental health, manager duties, and referrals for additional support.
All of our direct suppliers are required by our Business Partner Code of Conduct
to demonstrate a systematic approach to health, safety, and security to ensure
compliance with all applicable health and safety laws and regulations. Direct
suppliers must also strive to continuously improve performance by urging their
workers and any suppliers to immediately report any accident, injury, illness,
or unsafe condition, and to stop any work that could be hazardous so that
appropriate action can be completed.
We launched a Drugs and Alcohol Policy during the year to promote wellbeing
and safety in work. We also completed our biannual ITM Voices Wellbeing
Survey to solicit feedback on employee wellbeing topics such as happiness,
motivation and relationships, and continue developing action plans to
address the results. In addition to these initiatives, we delivered seminars
on heart health, women’s and men’s health, and financial wellbeing, among
others. Employees also have full access to an industry leading employee
assistance programme.
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Strategic Report | Sustainability Report continued
Future plans
During FY24 we will launch medical cash plans and insurance (dependent on
role) to further support our employees to keep safe and well, both at home
and at work.
Further reading
1. Business Partner Code of Conduct
2. Health and safety section of our website
Total number of employees
Total recorded incidents
Total RIDDOR reportable incidents
Total lost time days
Fatality rate
Recordable injury frequency
FY22
424
56
1
126
0
89.1 1
FY23
359
76
2
6
0
75.2 (1)
1. We changed our reporting calculation for recordable injury frequencies during the year to
(No. of accidents x 1000)/No. of employees. The FY22 figure has been updated to align to this
methodology for comparability.
Employee training and development
Importance to ITM Power
One of our most valuable resources is the expertise of our employees.
Maintaining and enhancing their expertise while also assuring high standards
of technical competence aids in our ongoing efforts to increase the creativity
and quality of our work. A great place to work also requires the provision of
opportunities for our people to enhance their careers and develop their talents.
We provide industrial placements and apprenticeships across our business as
part of the ITM Academy initiative. These internships give students the chance
to learn more about a potential career path and give us access to the talent of
future graduates. A total of 15 of these posts, ranging from design engineering
to HSE and legal, were offered in FY23 while 10 were offered in FY22. To
guarantee that we support our apprentices in becoming the best they can be,
we actively collaborate with the Advanced Manufacturing Research Centre at
Sheffield University.
Approach and policies
The ITM Academy serves as the hub for learning and development across
ITM Power since its creation in FY22. ITM Academy operates as the centre
for staff development, offering a structured induction programme along
with technical and leadership training, considerably expanding the growth
options and support for all of our workers. ITM Academy contributes to our
HR performance management system, which is a key component of how it
supports staff development. Since the ITM Academy’s inception, the training it
has provided has emphasised our leadership’s technical proficiency and health
and safety. Participation in training can be assessed using detailed monthly
learning and development reports. We continue to provide opportunities for
professional development through chartered development routes and
specialist training with full or part subsidisation. Employee training needs and
team capability gaps are identified through our employee performance and
competency reviews, which make up our development approach. All employees
are given appropriate access to relevant training to enable them to progress
within the organisation.
Upcoming plans
During FY24, the ITM Academy will be primarily focused on supporting our
business leaders to develop their skills and core competencies in order to drive
future business performance, and to support us on our journey to becoming a
volume manufacturer. There will also be a prime focus on developing stronger
team capabilities.
Further reading
1. Corporate governance section of our website
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Our social impact continued
Our values
We collaborate
We care
We innovate
We are tenacious
We seek joy
We share a common vision and
recognise that we all have a part to
play in the ITM Power journey.
We support each other and work
together for this common purpose.
We trust each other, are open and
honest, and are committed to our
collective success. We celebrate our
achievements with each other.
We work as one team, seeking
opportunities to be collaborative.
We care for each other, our
customers, our suppliers, our
environment and future generations.
We have pride in what we do.
We treat people with dignity
and respect; we are a supportive
team that values others. We do
things safely.
We are curious and bold; we think
big. We seek to constantly improve
in all we do. We develop and evolve.
We have a growth mindset which
encourages learning.
We don’t give up easily. We work to
find solutions to problems or difficult
situations. We support each other,
and work together to overcome
challenges. We are driven and
determined. We make decisions
based on facts and insights, even if
those decisions are tough. We are
not frightened of change. We take
accountability for our actions and
learn from our mistakes.
Joy is a flash of emotion, found in
small gestures and in different ways
for each and every one of us. By
seeking joy, we appreciate those
special moments that contribute
towards our happiness and help
develop friendships with our
colleagues and partners. We
recognise that acts of kindness, fun
or laughter go a long way to help
provide a balance to our busy and
sometimes stressful lives. Whilst we
are serious about our work, we don’t
always have to be serious; we look
for ways to seek joy even when times
are challenging.
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Strategic Report | Sustainability Report continued
Equity, diversity and inclusion (EDI)
Importance to ITM Power
Recruiting, keeping and supporting employees from varied backgrounds allows
our Company to better understand the customers that we serve, as well as the
Sheffield community where our manufacturing activities are located. It lowers
risk, improves employee retention and wellbeing and fosters greater social
equality and mobility.
Approach and policies
Our EDI strategy (2022–2025) and supporting plan outline our commitment
to ensuring ITM Power is an inclusive place to work. We want a working
atmosphere where everyone can use their skills to their full potential, where
there is no discrimination or harassment, and where decisions are made on
merit. We have a number of policies that support our EDI strategy, not least
our Equal Opportunity Policy which contains specific clauses about recruiting
and selection, training and development, possibilities for advancement,
working conditions, and termination of employment, including redundancy.
We have a detailed Anti-Harassment and Bullying Policy that gives examples
of the types of conduct that may constitute harassment or bullying, as well
as our commitment to eliminating such conduct, to promote a safe and
inclusive workplace.
We actively promote applications from suitably qualified and eligible
applicants, regardless of disabilities, in our hiring practices. We have clear
business plans in place to encourage women to pursue Science, Technology,
Engineering and Maths (STEM) careers and to grow and expand the number
of women in senior positions. We work with ITM Academy and our Nurture
programme to achieve this. We work to engage under-represented
populations, such as young people who are not enrolled in school, work
or training, and ethnic minorities. We completed our second staff diversity
survey in FY22, with 65% participation.
FY23 saw the publication of the ITM Power EDI Strategy and Implementation
Plan and we also published our first Gender Pay Gap Report. We also introduced
our mandatory managers’ diversity and inclusion training during the year.
Future plans
Key priorities will be encouraging greater gender diversity within our business
and particularly in STEM-related areas.
Indicators
For Board composition, see page 58 of the Corporate Governance Report.
All employees: breakdown
Category
Gender
Male
Female
Prefer not to say
Age group
<30
30–50
>50
Prefer not to say
Ethnicity breakdown
White ethnic groups
All other ethnic groups combined
Prefer not to say
FY22
FY23
75.69%
24.31%
—
25.81%
56.39%
17.79%
—
85.71%
14.29%
—
75.77%
24.23%
—
26.98%
55.45%
17.57%
—
68.32%
10.27%
21.41%
We want a working
atmosphere where
everyone can use
their skills to their
full potential.”
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Strategic Report | Sustainability Report continued
Our social impact continued
Our customer relationships
Importance to ITM Power
Keeping our clients safe and delighted is crucial to our Company’s success.
Because we manufacture large industrial equipment, there are inherent
hazards involved with the potential failure of our electrolysers. We go to
great lengths to assure the quality of our products and the health of our
customer relationships through constant interaction.
Approach and policies
Quality control is crucial to our product development. In addition to the health
and safety management systems described on page 40, we use ISO 9001:2015
management systems. To assure the safety of everything we make, we conduct
risk assessments for the whole life cycle of all products and use a multi-stage
testing method. At the design stage of our products, we use a stage-gate
approach, with line manager approval necessary at each level to reduce the
possibility of error. All new direct material suppliers must undergo an audit in
accordance with the Verband der Automobilindustrie standard. We do Factory
Acceptance Testing on all equipment before shipment once it has been made.
We then conduct additional Site Acceptance Testing in the field with client
oversight to further limit the chance of any malfunction.
Once our devices are installed, we solicit continued feedback from consumers
via a variety of channels, including an email reporting system, a support facility
in Sheffield and an after-hours service. Customer feedback is incorporated into
our quality system’s “lessons learned” process and utilised to identify areas for
further improvement.
We can also provide service and maintenance agreements to our clients.
These are either integrated into the business contract or made available as
an aftermarket sales opportunity. We provide a wide range of services while
collaborating with our clients and their representatives. Any difficulties that
arise from these site activities are reported locally, as well as through our
health, safety, and environment systems and our Operations Director.
Our Head of Quality and HSE is in charge of working with suppliers to
consistently enhance the quality of our materials and ensuring that our
quality control processes are followed. We collect data on near misses,
positive observations, product leaks and non-conformances to monitor
the application of our procedures. We hold weekly meetings to examine
any near misses, monthly meetings to measure progress against other
indicators and emergency meetings as needed. We have a visitor
management system in place at our Sheffield manufacturing facilities, as
well as visitor induction processes at all of our sites, to ensure customer
safety on site.
Indicators
We are not aware of any incidents of non-compliance with regulations
or voluntary codes concerning the health and safety impacts of our products
and services.
Further reading
1. Corporate governance section of our website
2. Health and safety section of our website
Community engagement
Importance to ITM Power
We want the communities where we are located to thrive, economically and
socially. Through dedicated community engagement we aim to be a positive
force for change within the regions where we operate.
Approach and policies
Our community engagement activities are directed by our ITM Nurture
strategy, which was formally launched in FY22. ITM Nurture sets out three
areas for engagement with the local community in Sheffield. We are also
developing similar programmes for our regional hubs, including in Germany.
Future plans
Our ITM Nurture approach outlines a strategy for increasing engagement
with local schools and charitable donations. Over the coming years, we will
be focusing on putting these objectives into action in order to increase our
beneficial effect on the community.
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Strategic Report | Sustainability Report continued
Our governance
Procurement practices
Importance to ITM Power
The quality of the materials we use is essential to the success of our
electrolysers. Being a sustainable, responsible business means taking all
possible action to mitigate any risks related to the sourcing and disposal of
our materials. It also includes supporting our suppliers to act responsibly
through our purchasing of materials and services, and ensuring we have a
positive impact on the local and national communities in which we operate.
Approach and policies
Our Business Partner Code of Conduct is available to the public on our
website and covers minimum criteria for bribery and corruption,
environmental and social performance, human rights and modern slavery,
non-discrimination and freedom of association and whistleblowing. We
amended our Business Partner Code of Conduct in 2021 to include new
criteria, which were implemented in 2022. All new direct material suppliers
must complete our Supplier Qualification Questionnaire, which was last
updated in FY22, in addition to our Business Partner Code of Conduct.
This includes topics such as health and safety, environmental management
systems, training and development, corruption and human rights. Our health
and safety, quality and procurement teams review replies and approve or
reject suppliers based on their responses. This questionnaire is now part of
our supplier onboarding process for all new vendors. All material contracts
are also evaluated by our legal team before being reviewed and signed by a
member of the ITM Power management team.
We conduct supplier inspections, to review the premises and execute quality
spot checks when direct suppliers provide us with higher-risk products, such
as those that require us to share intellectual property.
Obtaining raw materials
We strive to obtain raw materials in a sustainable manner while adhering to
all applicable rules in our procurement practices. We pay special attention
to Platinum Group Metals (PGMs). While we have no trading operations in
conflict-affected or high-risk areas, the metals we buy may come from these
areas in some cases. Our PGM Supply Chain Policy Statement, released in early
FY23, outlines our strategy to sourcing PGMs from war zones. This includes
zero tolerance for suppliers which allow torture, forced or compulsory labour,
or child labour; provide direct or indirect support to non-state armed groups
or public or private security forces which illegally control mine sites; and enable
the solicitation of bribery and corruption, as well as any form of financial crime,
such as money laundering.
We shall meet these promises by doing due diligence on PGM-containing
supplies delivered to us. We shall examine suppliers’ practices to guarantee
compliance with our policy, and we will keep records of all completed
transactions and due diligence operations. To enhance and track performance,
we will actively interact with suppliers and stakeholders in the jurisdictions in
which we operate. We shall also give regular training to all employees involved
in the trading, sourcing, handling, and transportation of PGM. If we have a
reasonable suspicion that a supplier is not complying with our rules, we will
suspend or discontinue the dubious supply. We retain the right to stop or
terminate any arrangement with a provider which violates these parameters.
So far, no supplier agreements have been cancelled due to non-compliance
with our policies.
We continue to look into ways to improve our audit capabilities, with the
ultimate goal of tracing all PGM back to the mines from which they were
extracted. Human rights protection in our supply chain continues to be a
concern as slavery is more prevalent today than at any other time in history.
Being a responsible business entails making every effort to detect and
eliminate exploitative working practices wherever they occur, with a special
focus on higher-risk products such as PGM. The EU Conflict Minerals
Regulation relates to four high-risk resources for human rights violations:
tin, tantalum, tungsten, and gold. We do not purchase these elements to
produce our electrolysers. Our Business Partner Code of Conduct addresses
human rights and modern slavery directly.
Our direct suppliers must provide salaries and benefits that meet or exceed
national legal standards, follow all applicable rules and regulations regarding
working hours, and provide a safe, secure, and healthy environment.
To mitigate the risk of human rights violations, our Business Partner Code of
Conduct requires direct suppliers to provide their own employees, suppliers
and business partners with a dedicated whistleblowing mechanism through
which they can file a complaint if they witness something unsafe, unethical,
or potentially harmful involving either their or our businesses or activities.
Suppliers must follow all applicable rules and regulations regarding free
association and collective bargaining. To certify compliance with our Business
Partner Code of Conduct, our Supplier Qualification Questionnaire contains
questions on human rights, child labour, forced labour, and employee provision.
Future plans
We are constantly reviewing our supplier base and will be regularly assessing
suppliers’ ESG performance, in addition to reaffirming their alignment to our
Business Partner Code of Conduct.
Further reading
1. Business Partner Code of Conduct
2. Corporate governance section of our website
3. PGM Supply Chain Policy Statement
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Strategic Report | Sustainability Report continued
Our governance continued
Responsible governance
Importance to ITM Power
Good governance is vital for making us a sustainable organisation as we scale
up, reducing risk and adding value to our business. Strong governance is also
essential for delivering on our business values.
Approach and policies
As our Company has evolved, we have continuously reinforced and developed
our corporate governance procedures to guarantee that we are prepared for
the future. More information about our corporate governance strategy and
how we implement our frameworks can be found on page 59.
Business ethics
Importance to ITM Power
It is critical that our interactions and relationships with our stakeholders are
founded on decisions that are transparent, fair, honest and long term. Poor
corporate ethics undermine the rule of law and public trust in government
officials and company leaders. As our Company grows, we will need robust
procedures in place to eliminate these practices and address them wherever
they arise.
Approach and policies
We maintain a suite of responsible business policies for our employees,
contractors and individuals employed by other organisations who work on
ITM Power’s behalf. These are some examples of such policies:
@ Code of Ethics;
@ Anti-Fraud and Bribery;
@ Speak Up (Whistleblowing);
@ Conflict Management; and
@ Hospitality and Gifts.
To defend against unethical business practices, we conduct risk assessments as
appropriate, with follow-up analysis performed if potential substantial concerns
are detected. Actions and additional training are also provided to parts of the
Company that are recognised as being more vulnerable to unethical activities.
Beyond our own operations, we incorporate anti-corruption measures in our
contracts and our Business Partner Code of Conduct. Our Supplier
Requirements Questionnaire for new direct suppliers of materials includes
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questions about whether suppliers have an anti-corruption policy
and/or employee training programme, as well as whether they have been
subject to lawsuits or criminal charges for bribery and corruption.
Tax
Importance to ITM Power
Companies have a responsibility to give back to the communities in which they
operate. We feel that this is an essential component of being a responsible
business that is accountable to itself, society, and future generations.
Approach and policies
We are open and honest about our tax reporting, and we include information
about our tax position in our financial statements. We follow not only the letter
of the law, but also our fundamental need to pay the correct amount of tax on
time in the countries where we operate. To promote successful tax systems,
we will work with authorities in the countries where we operate.
Further reading
1. Financial statements
Data security
Importance to ITM Power
We have a legal and ethical commitment to protect the personal data of our
employees and customers. Furthermore, because the development of our
electrolysers is vital to the success of our Company, maintaining systems to
ensure our intellectual property is safe and secure is critical.
Approach and policies
Our Data Protection Policy outlines our commitment to legally and properly
handling all personal data. Our website outlines our privacy policies for the
usage of third-party data, and our Employee Privacy Notice informs our
employees about our data privacy practices. We inform all employees of our
security practices for reducing the danger of data breaches. We undertake data
protection impact assessments (DPIAs) when needed to ensure that new and
revised data processing methods are carried out proportionally and with
proper safeguards in place. We also have a separate Intellectual Property
Management Policy in place to prevent the risk of unauthorised disclosure
of our trade secrets and proprietary technology. This policy is constantly
communicated to our staff.
We have a Patent Steering Committee (PSC) that is in charge of the
development of our intellectual property. We acknowledge the value of
recognising and capturing innovation in a timely manner, and the PSC
meets on a frequent basis to do so. Research in critical areas of business
is analysed for new inventions (including research scientists as needed)
and these are thoroughly evaluated. Our Social Media Policy also includes
intellectual property clauses, stating that employees should not use social
media to endanger our important trade secrets, other private information,
or intellectual property. As part of our new employee induction plan,
we also provide data protection and cybersecurity training.
Resilience and risk management
Importance to ITM Power
There are various risks and uncertainties that could impair our strategy’s
implementation as well as our short-term performance. Proactively
recognising, managing and minimising risks are critical to our
Company’s success.
Approach and policies
We have a risk management system in place that makes it easier to identify,
evaluate and mitigate risks. The Executive Directors analyse the risks that we
face, including financial risks, and the Board identifies and reports on our key
risks, along with a description of our governance mechanisms for identifying,
assessing, and mitigating these risks, including any recognised ESG concerns.
The Board is in charge of the risk framework and strives to guarantee that the
Group’s ability to fulfil its goals surpasses its risk exposure. Executive Directors
are in charge of recognising, managing and minimising risks. Full details can be
read on page 47.
Proactively recognising, managing
and minimising risks are critical
to our Company’s success.”
Strategic Report | Principal Risks and Uncertainties
Our approach
to risk
The Board is ultimately responsible for ensuring
there is a robust and effective framework in place for
the Group’s risk management activities. Through a
refocused risk management approach, and utilising
the three lines of defence model, our capability to
assess risks is continually improving, such that our
strategic, significant and emerging risks are identified
and managed effectively.
Other significant risks considered:
Risks associated with the environment and climate change
Businesses across all industries and markets are facing increasing scrutiny
relating to their ESG policies. The Board’s ESG Committee has oversight of
the Group’s ESG activities and has engaged external consultants to assist in
the development of our ESG strategy, as well as the measurement of our
own carbon footprint, which supports our drive to reduce our carbon-
intense production areas.
Risks associated with potential regulatory changes
The Group’s strategy has been formulated in light of the current legal
and regulatory environment in which it operates, and considers
anticipated changes to that environment. Unanticipated changes in the
legal and regulatory environment may therefore have a negative impact
on the business. We are proactively engaged with the governments and
regulatory bodies in the United Kingdom, the European Union and others
to this end and maintain active membership and key roles in relevant
committees, trading associations and compliance bodies – in so doing
supporting the development and standardisation of policies, regulations
and codes within the green hydrogen industry.
Our risk framework
The organisational risk management framework comprises the recording and management of “top-down” strategic risks, which are discussed by
the Board and executive leadership team, as well as “bottom-up” risks, which capture potential operational issues. Our risk assessment model considers:
@ the probability of a risk materialising; and
@ the potential impact if the risk did materialise.
Board/Audit Committee
The Board is responsible for monitoring business performance. This includes regularly reviewing risks that could impact achievement of the Group’s
strategic objectives. The Board is supported by an effective corporate governance structure, including the Audit Committee, which has specific delegated
authority to review the effectiveness of the Group’s internal control mechanisms, financial reporting, internal audit and risk management processes.
Executive leadership team
The executive leadership team is responsible for reviewing and managing the strategic risks within the Group and for providing oversight on operational
risks. It provides leadership and direction to employees on risk-taking activity. The executive leadership team also has primary responsibility for driving
the development and enhancement of the risk management processes used within the Group.
Quality, health and safety (QHSE) and Legal teams
The QHSE team, in conjunction with the executive leadership team, is instrumental in setting the tone in relation to safety matters. This includes obtaining
and maintaining the Group’s ISO certifications, which are supported by business assurance reviews. The Legal team supports the executive leadership team
to oversee all aspects of corporate compliance.
Departmental management
The management teams in each department within the Group are responsible for the day-to-day management of risks within their area, ensuring that risks
are appropriately identified, prioritised and mitigated.
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4747
Strategic Report | Principal Risks and Uncertainties continued
Principal risks and uncertainties
The Board has identified those risks which are deemed principal to its business due to their potential severity and link to the Group’s strategy, markets and operations, which are set out below. This is not intended to be an exhaustive list.
Additional risks not presently known to management, or risks currently deemed to be less material/strategically important, may also have the potential to cause an adverse impact on our business.
Risk
1
Market dynamics
Risk impact and description
The macro-economic environment presented several external challenges
during the year, including continued volatility within energy markets, high
inflation and the remaining impact of the COVID-19 pandemic. The ongoing
conflict in Ukraine has placed additional pressure on the global energy
supply chain. Rising energy prices and subsequent cost-of-living increases
remain key challenges. In our industry, it has been apparent that a number
of investment decisions in hydrogen projects have been delayed until
energy prices restabilise and commercial profiles improve. However, the
wholesale costs are starting to stabilise and customers are now re-engaging
on a number of projects. If anything, the delay in these investment decisions
has been positive for the Group as it has afforded us time to resolve our
engineering and production challenges.
The Group currently faces and will continue to face competition from other
developers and manufacturers of electrolyser products and technologies, as
well as developers and manufacturers of existing power technologies and
other alternative power technologies. If we are unable to compete
effectively against our competitors, this will impact our ability to gain
market share or market acceptance for our products.
Mitigation
@ Our vertically integrated technology approach allows product evolution
Change
carry-overs and provides us with the capability to rapidly adapt to
changing market needs.
@ As the market matures and the size of required systems grows larger,
working with our strategic partners provides us with a competitive edge
when tendering for green hydrogen projects.
@ We seek to create partnerships, frameworks and preferred supplier
status with key customers wherever possible, creating additional
channels to market.
@ Our first-mover status on several mid to large scale projects will give ITM
Power a strong advantage over competitors.
2
Managing market growth/scale-up
Since the market for green hydrogen is still evolving, it is difficult to predict
the size and growth rate of the market and future order intake with
certainty.
The Group’s success in scaling its business depends on its ability to
repeatably and accurately deploy engineering designs into serial production
supported by robust supply chains.
The Group currently faces risks associated with its current dependence on a
single manufacturing location. Although we are in the process of expanding
Bessemer Park, the Group will remain dependent on the UK as its
manufacturing location in the near term.
@ We have capacity planning systems in place to support the Group’s
manufacturing management.
@ Our procurement and manufacturing forecasting processes are being
closely aligned to commercial and operational management teams to
ensure project delivery.
@ We have an established supplier onboarding processes and are improving
our supplier management to ensure our partners can scale with us.
@ Senior roles created or expanded to support critical functions including
manufacturing, procurement, project control, and QHSE.
@ Economies of scale planned in line with Bessemer Park expansion.
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Strategic Report | Principal Risks and Uncertainties continued
Risk
3
Input costs, supply chain
and business continuity
Change
Risk impact and description
Our pace of growth poses risks with our supply chain, to supplier capability,
quality, scalability, and working capital management.
We rely on third-party suppliers to provide raw materials and components
for our products, including electrical, stainless steel and some PGMs, that
are critical to our manufacturing process. In some cases, this is through a
single supplier.
There are also specific risks around the price volatility of precious metals
used within the Group’s core technology. This could lead to costs of projects
being underestimated.
A new or existing supplier’s failure to provide materials or components
in a timely manner, or to provide materials and components that meet
the Group’s quality, quantity or cost requirements, may harm the Group’s
ability to manufacture products cost effectively or at all and may damage
our reputation and could also result in penalties for the Group under its
customer contracts.
An IT system failure or non-availability, cyber-attack or breach of system
security could disrupt our operations, cause the loss of, destruction of,
or unauthorised access to sensitive, confidential or personal data or
information or expose us to regulatory investigation, litigation or
contractual penalties.
If any of these events took place, it could have a negative impact on our
business, financial condition, results of operations, prospects and reputation.
The Group continues to monitor proposed changes to the EU’s Reach
legislation, which has the potential to severely limit or prohibit the use of
certain chemicals, including per- and perfluoroalkyl substances (PFAS).
Fluoropolymers (a PFAS subtype) are used in both electrolyser and fuel
cell applications. Given that no adequate substitute material is expected in
the near future, a ban or restriction on the use of these highly specialised
materials would likely have a significant impact on the operation of the
hydrogen value chain and the viability of all electrolyser products.
Mitigation
@ Where we rely on a single supplier, we seek to enter into appropriate
contracts with these suppliers or a future strategy to source different
product portfolios with different suppliers where appropriate. For other
materials, we employ a multi-sourcing strategy. The Group continues to
review opportunities to bring processes in house to address potential
intellectual property (IP), quality and security of supply risks.
@ A strategic supplier development and performance management
infrastructure is in construction, to maintain the quality and security
of supply of key raw materials.
@ Timely and accurate forecasting models and approaches have also been
adopted to provide better visibility of volume requirements over time
and to drive action plans ahead of requirement for supply chain readiness.
@ The Group seeks to mitigate exposure to precious metal risk through
operating back-to-back contracts, having continued dialogue with
suppliers and managing larger transactions on a no-risk basis where
possible. The Group will continue to hold a proportion of demand as
metal, either loaned or bought, to manage volatility risk through new
sales contracts.
@ The Group undertakes regular reviews and testing and invests in robust
and effective security policies, controls and technologies to protect
commercial and sensitive data and to ensure the overall system protection
in place remains appropriate and proportionate. This also includes a
continual review of the latest threats and trends in information security
and governance to ensure our protection is always current and effective.
@ We have worked closely with Hydrogen Europe and other industry
leaders, to articulate the risks of the proposed legislative changes to
the hydrogen economy. We note with comfort recent reports that a
threshold limit or permitted exclusion is now considered to be likely,
which would mean the risk to our operations would be largely mitigated.
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Strategic Report | Principal Risks and Uncertainties continued
Principal risks and uncertainties continued
Risk
4
IP protection
Risk impact and description
The Group depends on its IP and failure to protect that IP could reduce its
ability to prevent others from using its technology and therefore adversely
affect our future growth and success.
PEM electrolysis systems as a whole cannot be patented or otherwise legally
protected because some of the technologies underpinning their operation
are based on other proven and mature technologies and are generally
know-how based. Also, while it is the case that various components and
processes developed by the Group have been or are assessed to have the
potential to be patented, we only pursue patents when they are expected
to be of high value, because patent applications include risks stemming from
publication of detailed component and process descriptions.
Change
Mitigation
@ We rely on a combination of patent, trade secret, trademark and
copyright laws to protect our IP and seek legal and other third-party
specialist advice where appropriate.
@ The choice of territories and jurisdictions the Group serves includes
an evaluation of inherent IP risk. Freedom-to-operate (FTO) searches
are also undertaken where it is deemed appropriate.
@ We have an agreed IP management policy and seek to protect our
proprietary IP through contracts including, when possible, confidentiality
agreements and inventors’ rights agreements with our customers,
partners, and employees.
@ Secure file sharing practices are also employed to provide technical
mitigation and we have an ongoing training plan for staff to support
this aim.
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Strategic Report | Principal Risks and Uncertainties continued
Risk
5
Financial risks
Risk impact and description
In addition to the potential financial impact as detailed within the other
principal risks and uncertainties, specific financial risks also exist.
As a result of the cost and time required for our research and development
activities, we have not yet achieved profitability. To increase revenues and
achieve profitability, we must successfully execute our growth strategy,
which includes building capacity ahead of anticipated contracted orders.
We also need to mature our manufacturing and engineering control
processes to prevent a recurrence of the extensive project losses seen
during the year. Accurate cost and scheduling of future projects will be
needed to ensure they contribute positively to our margin and profits.
In addition, the length and variability of the sales cycles for our products
make it difficult to accurately forecast the timing and amount of specific
sales and corresponding revenue recognition. Furthermore, as our products
are developing technologies we need to closely manage our warranty and
liability risks for plant operating in the field.
Our plans include investment in our product development as well as scaling
up our manufacturing capabilities, leading to cash outflows. These are likely
to increase through building core stack products to stock before positive
cash flow is generated from sales. If we fail to generate planned positive
cash flows, we may require further funding.
Finally, the Company has current commitments to customers both being
executed in the factory and in the field. Many of these products to date
have been one-offs, and have been developed with limited validation.
Whilst best estimates have been used in determining the costs in the
accounts, there remains a risk of materially different outflows in the
following areas:
@ in the execution and fulfilment of contracts with warranty provisions,
including plant that has not previously been deployed, where field data
is limited or non-existent;
@ in the case of designs for products which continue to be iterated
through a continuous improvement cycle, rendering inventory held
as obsolete; and
@ in the estimation of contract losses where projects continue to be
executed as first of a kind plant with limited precedents.
Mitigation
@ Through a number of successful shareholder fundraises, ITM Power
Change
has a strong and healthy balance sheet.
@ A comprehensive monthly governance process is in place to monitor
our financial performance and develop actions to effectively manage
that performance, including through our 12-month priorities plan.
@ Standard cost models for our products have been further developed
and are being fully embedded in our sales activity.
@ Revised warranty assessment methodology developed in the year
to support greater visibility of risks related to deployed projects.
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Strategic Report | Going Concern
The Directors have prepared a cash flow forecast for the period from
the balance sheet date until 31 August 2024. This forecast indicates that
the Group would expect to remain cash positive without the requirement
for further fundraising based on delivering the existing pipeline.
By the end of the period analysed, the Group is forecast to hold significant
cash reserves. This should give the business sufficient funds to trade
for the going concern period if the business continues according to its
medium-term business plan.
The business continues in a cash outflow position, using funding
generated from previous fundraises. As such, this cash flow forecast
was stress-tested, both for a worst-case scenario of no receipts and
inflationary pressures on utilities and purchases. In all the scenarios
tested, the business would remain cash positive for the 12 months
from the date of approval of these financial statements.
The accounts have therefore been prepared on a going concern basis.
The Strategic Report set out on pages 1 to 52 was approved by the Board
on 17 August 2023 and signed on its behalf by:
Andy Allen
Chief Financial Officer
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Governance
Governance | Introduction from the Chair of the Board
ITM is committed
to the need to
uphold robust
corporate
governance
standards
We are immensely proud that we
have achieved an AA MSCI ESG
rating for the third consecutive year.
Sir Roger Bone
Chair of the Board
Dear shareholder
On behalf of the Board, I am pleased to introduce our Corporate Governance
Report for this year. In this section of our report, we have set out our approach
to governance and provided further information on how the Board and its
Committees operate.
During the early part of the year, the Board’s primary focus was to support
the resolution of the production and engineering issues and then latterly
this shifted to the oversight, adoption and implementation of the Group’s
12-month priorities plan to support the transition of the Group into a volume
manufacturer. In addition to monitoring the Group’s manufacturing scale-up,
the Board approved two strategic investments to expand our footprint in
Sheffield and to increase the site’s power supply in order to support us
to optimise our space allocations providing a pathway for automation,
improved cycle times, volume output and build quality.
Board composition
During the year, the Board welcomed Dennis Schulz, who was appointed
Chief Executive Officer in December 2022. Dennis has extensive industry
experience and was instrumental in developing and implementing the
Group’s new 12-month plan. In addition, Graham Cooley and Dr Rachel
Smith stepped down from the Board during the period; we thank Graham
and Rachel for their service on the Board. Finally, Katherine Roe has informed
the Board that she will not seek re-election at the AGM 2023 following
completion of her initial term. We thank Katherine for her service during
her time with the Company and wish her well in her future career.
Governance framework
ITM is committed to the need to uphold robust corporate governance
standards. In line with prior years, we continue to adopt the Quoted
Companies Alliance’s Corporate Governance Code (the “QCA Code”) and
I am pleased to confirm that the Board is confident that it has applied the
principles and complied with all the provisions of the QCA Code throughout
FY23. This is set out in our Corporate Governance Report on pages 53 to 64.
Whilst the Company does not currently adopt the UK Corporate Governance
Code (most recently updated in 2018), the Board endeavours to stay up
to date with its requirements and continues to adopt elements of it,
where appropriate.
We are immensely proud that we have achieved an AA MSCI ESG rating for
the third consecutive year. With the retained AA rating, we now rank within
the top 11th percentile of all companies in our sector, indicating our ESG
practices are well aligned with shareholder interests. It also means we are
a company leading its industry in managing the most significant ESG risks
and opportunities.
Board effectiveness
The Board is constantly looking for ways to improve and grow. As a result,
we conducted a full evaluation of the Board’s efficacy in early 2022 and
a further workshop was held in April 2023. This process led to several
recommendations for additional development, which we will implement
ahead of our next formal review, scheduled for late 2023. More information
can be found on page 66 of the Nomination Committee Report.
Finally, I would like to thank our shareholders and wider stakeholders for
their continued support. At our Annual General Meeting, the Board and
I will be ready to meet with shareholders and answer any questions they
may have, and I hope to see you there.
Key governance activities during the year included:
@ approval and oversight of the 12 months priorities plan;
@ approval of the Bessemer Park expansion and power upgrade;
@ the nomination and appointment of Dennis Schulz as Chief Executive
Officer; and
@ oversight of the appointment of Vicky Williams as Company Secretary.
Sir Roger Bone
Chair of the Board
17 August 2023
ITM Power PLC | Annual Report 2023
53
Governance | Summary of Application of the QCA Code
Further reading:
https://itm-power.com/investors/
corporate-governance
and as shown below
@ Our Business Model
and Strategic Priorities
on pages 20 to 22
Principle
1
Establish a
strategy and
business model
which promote
long-term value
for shareholders
Application and key actions during the year
@ During January we outlined our revised 12-month
priorities for the business to support our transition
to scalable manufacturing
@ Our vision, mission, strategy and business model
respond to a growing demand and need for net
zero carbon emissions
@ We have a best-in-class PEM electrolyser product
offering that is scalable
@ We collaborate with partners to increase our
influence, industrial reach and market penetration
2
@ The CEO and CFO brief the Board on the views
@ Stakeholder
of major shareholders
@ We communicate with shareholders through
meetings, presentations, online events,
announcements and general meetings
@ Regular feedback is received from our Nominated
Advisor and Broker and this is reviewed by the Board
@ The ESG Committee supports us in our
responsibility to be a sustainable business
@ We have identified our key stakeholders and ensure
appropriate engagement with them takes place:
workforce, strategic partners, customers and
potential customers, suppliers, regulators and
industry bodies, and local communities
Seek to
understand and
meet shareholder
needs and
expectations
3
Take into account
wider stakeholder
and social
responsibilities
and their
implications for
long-term success
engagement: Investors
on page 25
@ Remuneration Report
on page 72 to 83
@ https://itm-power.com/
investors/shareholder-
documents
@ Stakeholders and
Section 172(1)
Statement from
page 24
@ Sustainable Energy,
Engineered Sustainably
from page 29
@ ESG Report 2022 at
https://itm-power.com/
investors/financial-
reports
Principle
4
Embed effective
risk management,
considering both
opportunities
and threats,
throughout the
organisation
5
Maintain the
Board as a
well-functioning,
balanced team
led by the Chair
6
Ensure that
between them
the directors have
the necessary
up-to-date
experience, skills,
and capabilities
Further reading:
https://itm-power.com/investors/
corporate-governance
and as shown below
@ Principal Risks and
Uncertainties from
page 47
@ Audit Committee
Report from page 67
@ See also principle 8
Application and key actions during the year
@ We maintain a risk register and risk management
is overseen by the Audit Committee
@ We have a framework of internal financial controls,
overseen by the Board, the Audit Committee and
the Executive Committee
@ Our framework of non-financial controls is
overseen by the Board
@ We have quality and HSE management systems
in place which have been further developed during
the year
@ Our Code of Ethics and handbook set out the
ethical and conduct expectations of our workforce
@ All the Board members have the same duties,
@ Roles and
including to act in the best interests of the Company
as a whole, but they have different roles, which
contribute to the effective operation of the Board
@ The Board is supported by a qualified governance
professional in the Company Secretary
responsibilities on
the Board on page 60
@ Nomination
Committee Report
on page 65
@ A Board workshop was last held in April 2023 to
review the function and operation of the Board
@ As part of our succession planning, Dennis Schulz
joined the Board as CEO in December 2022,
strengthening the Board’s strategic and
manufacturing experience.
@ Board members have an appropriate balance of
skills, experience, personal qualities and capabilities
to support our strategy and business model
@ An induction programme is provided for new
Board members
@ The NOMAD (nominated advisor), Company
Secretary, Ernst & Young LLP (remuneration
consultants), Good Business (ESG consultants)
and other advisors are available to the Board
@ Board biographies
on pages 56 to 57
@ Balance on the Board
on page 58
@ Induction and
training on page 60
54
ITM Power PLC | Annual Report 2023
Governance | Summary of Application of the QCA Code continued
Principle
7
Evaluate board
performance
based on clear
and relevant
objectives,
seeking
continuous
improvement
8
Promote a
corporate culture
that is based on
ethical values
and behaviours
Application and key actions during the year
@ We conduct a periodic evaluation (every 18–24
months) of the Board’s performance
@ The outcomes from the evaluation process are
reported in the next Annual Report
@ We conducted an evaluation in early 2022 and the
next formal evaluation is scheduled for late 2023.
@ A Board workshop was held in April 2023 which
produced an action plan to further strengthen
Board performance
@ Our Code of Ethics sets out how we do business
@ We provide mechanisms for our workforce to
speak up
@ Visible leadership is key
@ We are an equal opportunities employer
@ We are clear about our expectations of our workforce
@ During the year, we launched the ITM Voices Forum
to further support an inclusive and collaborative
culture in the organisation
Further reading:
https://itm-power.com/investors/
corporate-governance
and as shown below
@ Board evaluation on
page 53
@ Our values on page 41
@ Sustainable Energy,
Engineered
Sustainably: Business
ethics on page 46
@ ESG Report 2022 at
https://itm-power.
com/investors/
financial-reports
@ Code of Ethics at
https://itm-power.
com/sustainability
Principle
9
Maintain
governance
structures and
processes that are
fit for purpose
and support good
decision-making
by the board
10
Communicate
how the company
is governed and is
performing by
maintaining a
dialogue with
shareholders and
other relevant
stakeholders
Application and key actions during the year
@ The Board retains control of key decisions
@ Certain matters are delegated to Committees
@ The CEO manages the day-to-day business with the
Executive Committee
@ Decisions are made in accordance with
documented delegated authorities which are
updated regularly
Further reading:
https://itm-power.com/investors/
corporate-governance
and as shown below
@ Governance
framework on page
53
@ Roles and
responsibilities of the
Board on page 60
@ We engage with shareholders and stakeholders
regularly via a number of channels including RNS
publications, investor meetings and conferences.
@ We publish the outcome of all general meeting
votes through London Stock Exchange’s Regulatory
News Service
@ Stakeholders and
Section 172(1)
Statement from page
24
@ See also principles 2
and 3
ITM Power PLC | Annual Report 2023
55
Governance | Board of Directors
Our experienced leadership team
Key: l Committee member l Committee Chair I Independent Director
A Audit E ESG N Nomination R Remuneration S Strategic Advisory* T Technology Management
AI
N
N
E
T
Sir Roger Bone
Chair of the Board
Appointed: June 2014
Dennis Schulz
Chief Executive Officer
Appointed: December 2022
Key skills/experience:
@ Senior leadership of international and manufacturing/
industrial organisations
@ Broad range of financial experience
@ Risk management
@ Significant service within UK Government
@ Fellow of the Institution of Engineering Designers
Previous appointments include:
@ Boeing UK – President
@ Honorary Ambassador for British business
@ British Ambassador to Brazil and Sweden
Key external commitments:
@ Chairman of Over-C Limited
@ Joint Chairman of Motive (nominated by ITM Power)
Key skills/experience:
@ Strategy development
@ Project execution
@ Broad experience and deep understanding
of the electrolyser markets
@ Strong financial acumen and CFO experience
Previous appointments include:
@ Linde Engineering – MD
@ Linde Engineering – CFO
Key external commitments:
@ Council Member – UK Hydrogen Delivery Council
Andy Allen
Chief Financial Officer
Appointed: May 2018
Key skills/experience:
@ Chartered accountant
@ Extensive experience auditing
manufacturing companies
@ Understanding of financial markets
Previous appointments include:
@ None
Key external commitments:
@ None
Dr Simon Bourne
Chief Technology Officer
Appointed: November 2009
Key skills/experience:
@ Design and development of electrolysers
@ PhD regarding hydrophilic polymers
Previous appointments include:
@ Sonatest PLC – Project Engineer
@ Ministry of Defence – Researcher
Key external commitments:
@ None
* The Strategic Advisory Committee was disbanded during the year.
56
ITM Power PLC | Annual Report 2023
Board members who stepped down during the year:
@ Graham Cooley resigned effective 1 December 2022
@ Dr Rachel Smith resigned effective 30 January 2023
Governance | Board of Directors continued
Key: l Committee member l Committee Chair I Independent Director
A Audit E ESG N Nomination R Remuneration S Strategic Advisory* T Technology Management
I
A
I
A
R
S
T
S
T
I E
N
R
Denise Cockrem
Non-Executive Director
Appointed: July 2022
Key skills/experience:
@ Chartered accountant
@ Financial planning and analysis
@ Performance reporting and forecasting
@ Financial controls
@ Internal audit and risk management
@ Strategic planning
@ Regulatory compliance
Previous appointments include:
@ Good Energy Group plc – Chief Financial Officer
@ RSA Insurance Group – UK and Western Europe
Finance Director
@ Direct Line – Finance Director of Direct Line
Retail Division
@ Royal Bank of Scotland – Head of Finance, Corporate
Banking and Financial Markets
Key external commitments:
@ Benefact Group and Ecclesiastical Insurance Office plc
– Group Chief Financial Officer
Martin Green
Non-Executive Director
Appointed: September 2019
Jürgen Nowicki
Non-Executive Director
Appointed: November 2019
Katherine Roe
Non-Executive Director
Appointed: May 2020
Key skills/experience:
@ Battery, fuel cell and hydrogen technologies
@ Senior leadership of international and manufacturing/
industrial organisations
@ Broad range of financial experience
@ Risk management
@ Business-to-business customer and supply
chain management
@ Strategy development and implementation
@ Scaling growth businesses
@ Mergers and acquisitions experience
Previous appointments include:
@ Johnson Matthey plc – various positions over 30 years,
latterly as Group Strategy Director
Key external commitments:
@ The Henry Royce Institute for Advanced Materials –
Non-Executive Director
@ LeydenJar Technologies BV – Non-Executive Director
@ Anaphite Limited – Non-Executive Director
Key skills/experience:
@ Engineering sector
@ Accountant
@ Internal audit
@ Understanding of financial markets
@ Risk management
@ Business-to-business customer and supply
chain management
@ Senior leadership of international organisations
@ Strategic planning
Previous appointments include:
@ Linde Gas North America – CFO
@ Linde Group – Head of Finance and Control
@ Linde Engineering – Senior Vice President, Commercial
Key external commitments:
@ Linde plc – Executive Vice President, Managing
Director of Linde Engineering
Key skills/experience:
@ Energy sector
@ Finance
@ Capital markets
@ Risk management
@ Senior leadership of international organisations
@ Remuneration
@ Marketing/PR
@ Corporate development
@ Strategic planning
@ ESG expertise
Previous appointments include:
@ Morgan Stanley – investment banking
@ Panmure Gordon – Director within investment
banking, headed the energy team
@ Wentworth Resources plc – CFO
Key external commitments:
@ Longboard Energy plc – Non-Executive Director
and Audit Committee Chair
ITM Power PLC | Annual Report 2023
57
Governance | Board of Directors continued
Balance on the Board
The Board is satisfied that its members possess an appropriate balance of skills, experience, personal qualities,
and capabilities. It has identified the skills and experience below as being of key importance to support our future
plans. It has also identified supporting skills and experience where it feels it is appropriate to rely on the support
of specialists within senior management and external advisors, including technology/IT, marketing/PR, lobbying/
political/regulatory and legal.
Directors’ skills and experience
Core capability
Supplemental capability
10
9
8
7
6
5
4
3
2
1
0
M anufacturing/industrial
Supplier m anage m ent
Business-to-business custo m ers
O ur m arket/industry
Financial m arkets
Strategy
Audit/finance
Risk
Leadership
ESG
People
Succession planning
Re m uneration
58
ITM Power PLC | Annual Report 2023
Women on the Board
25+
Category
l Women(1)
l Men
Number
2
6
Independent Directors on the Board
(including the Chair of the Board)
50+
Category
l Independent(1)
l Non-independent
Number
4
4
1. 29% of Board excluding Jürgen Nowicki
as a shareholder appointed nominee.
1. 57% of Board excluding Jürgen Nowicki
as a shareholder appointed nominee.
Age profile of the Board
50+
Category
l Up to 40
l 41–50
l 51–60
l Over 65
Number
—
4
3
1
Executive/Non-Executive Directors
on the Board
37+
Category
l Executive
l Non-Executive(1)
l Non-Executive
Number
3
4
(shareholder nominee)
1
1. Including the Chair of the Board.
Tenure profile of the Board(1)
Executive
1
—
1
—
1
Non-
Executive (2)
—
1
3
—
1
<1 year
1–3 years
3–6 years
6–9 years
>9 years
1. As at 17 August 2023.
2. Including the Chair of the Board.
75
+
M
50
+
M
40
+
10
+
M
50
+
13
+
M
Governance | Corporate Governance Report
In this report we provide more
detail regarding how we apply
the principles of the QCA Code.
Governance framework
Our governance framework
is summarised here:
Further reading:
@ Board activities during the year
on page 61
@ Board Committees from page 62
@ Audit Committee Report from
page 67
@ Sustainable Energy, Engineered
Sustainably from page 29
@ Remuneration Report from
page 72
Stakeholders
including our workforce, strategic partners, customers and potential customers, suppliers, regulators and industry bodies, and local communities
Licence to operate
Delegation
Accountability and reporting
Board
Provides overall leadership,
independent oversight of
performance and works to
ensure that ITM Power PLC
and its wider business group
(the “Group”) is managed
for the long-term benefit
of all shareholders.
Primarily responsible for
oversight of our strategic plan,
risk management, systems of
internal control and corporate
governance to ensure the
long-term success of the Group.
Retains control of key decisions,
including: strategically significant
decisions, annual and long-term
business plans, changes to our
principal activities, material
contracts, mergers, acquisitions
and disposals.
s
n
o
i
t
a
d
n
e
m
m
o
c
e
R
&
g
n
i
t
r
o
p
e
R
n
o
i
t
a
g
e
e
D
l
e
c
i
v
d
A
Audit Committee
Primary responsibilities are to: monitor the integrity of the Group’s financial statements and financial announcements; monitor the quality
and effectiveness of internal controls and risk management systems; review arrangements for speaking up, detecting fraud and managing
bribery risks; monitor internal audit or alternative arrangements; and manage the external auditor relationship.
ESG Committee
Leads the development of the Group’s ESG strategy, policies and programmes. Responsible for the Group’s short- and long-term ESG
objectives and reporting of key metrics. Oversees compliance with relevant laws and regulations, including principles of good corporate
governance and ethical behaviour.
Nomination Committee
Leads the process for Board appointments and succession planning, including considering the composition of the Board and
its future requirements.
Remuneration Committee
Determines the remuneration policy for the Chair of the Board and Executive Directors, aiming to support the strategy and long-term success
of the Company. Sets the performance conditions for awards granted under the terms of the ITM Power PLC Long Term Incentive Plan (LTIP).
Approves the remuneration packages of the Executive Directors, including grants of LTIP awards.
Strategic Advisory Committee
This Committee formerly advised the Board on key business development matters. It was disbanded during 2023 and its key activities
reverted to direct Board oversight.
Technology Management Committee
Primary responsibilities are to: review the Group’s product portfolio and development plans; review the suitability of the portfolio,
manufacturing capacity and planned developments to satisfy anticipated market developments; and review requirements to meet the Group’s
technology goal to be best in class.
Values
Strategy
Delegation
Accountability and reporting
Executive Committee
The CEO manages the day-to-day business with the Executive Committee.
The Executive Directors together with other senior management meet regularly to consider business development, technology development, project performance,
the financial performance of the Group and other management issues.
Values
Strategy
Delegation
Accountability and reporting
Our people
ITM Power PLC | Annual Report 2023
59
Governance | Corporate Governance Report continued
Roles and responsibilities on the Board
All the Board members have the same duties, including to act in the best interests of the Company as a whole, but
they have distinct roles:
Role
Responsibilities
Held by
Chair of the Board
Sir Roger Bone
(independent)
CEO
Dennis Schulz
(effective
1 December 2022)
Senior Independent
Non-Executive
Director
Martin Green
(effective
July 2023)
Non-Executive
Directors (NEDs)
Denise Cockrem
(independent)
Jürgen Nowicki
(shareholder
nominee)
Katherine Roe
(independent)
In addition to all other responsibilities of Non-Executive Directors:
@ Effective working of the Board
@ Leads and manages the business of the Board
@ Sets the agenda for Board discussions
@ Promotes effective and constructive debate
@ Supports a sound decision-making process
@ Available to shareholders
@ Executive management of the business day to day, including
leading the Executive Committee
@ Implements the strategy
@ Leads operational matters
@ Performance (financial and non-financial)
@ Available to shareholders
@ Provides a “sounding board” for the Chair
@ Serves as an intermediary for the other Directors when necessary
@ Acts as an alternative point of contact for shareholders where
contact through the normal channels of Chair or other Executive
Directors has failed to resolve any concerns, or for which such
contact is inappropriate
@ Leads the annual assessment of the effectiveness of the Chair
@ Leads the search and appointment process and makes the
recommendation to the Board for a new Chair
@ Provide constructive challenge, strategic guidance, external insight
and specialist advice
@ Hold management to account
@ Available to shareholders
Executive Directors
Andy Allen (CFO)
Company Secretary
Simon Bourne
(Chief Technology
Officer)
Vicky Williams
(effective
24 November 2022)
@ Operational matters, within areas of specific responsibility
@ Performance, within areas of specific responsibility
@ Available to shareholders
@ Assists the Chair and the wider Board to uphold governance standards
@ Responsible for ensuring good information flows to the Board and
its Committees, and between the executive management and the
Non-Executive Directors
@ Advises the Board on all regulatory and corporate governance matters
60
ITM Power PLC | Annual Report 2023
Board operation
Board meetings are scheduled in advance, with ad hoc meetings arranged to suit business needs. Comprehensive
briefing papers are circulated to Directors one week in advance of each scheduled meeting to allow sufficient time
for the consideration of the papers provided. All Directors and senior management can access the advice and services
of the Company Secretary. Furthermore, all Directors have access to the Group’s advisors and are able, if necessary,
to take independent professional advice in the furtherance of their duties at the Group’s expense.
Time commitment
The Chair of the Board commits around five to six days a month to his duties and is paid a fee. The other NEDs are
expected to provide around three days a month of their time and, with the exception of Jürgen Nowicki, receive only
fees. Jürgen receives no remuneration from ITM for his service – he is remunerated by Linde. The Board considers
the other demands on the time of any proposed NED before their appointment and satisfies itself that their other
commitments will not interfere with their ability to perform their duties effectively.
The Executive Directors are full-time employees and officers of the Company. They receive salaries, performance-
related remuneration and benefits. More details can be found in the Remuneration Report.
Directors are subject to election at the first AGM of the Company following their appointment. Thereafter, they
are subject to re-election every three years or, if they have been in office for nine years or more, annually.
Balance and diversity
The Board is comfortable that it is balanced, both numerically and in experience. Nevertheless, it remains aware of
the need to keep this under review. Details of individual Directors’ skills and experience plus an overview of the skills
and experience on the Board are provided on pages 56 to 58.
The Board is also cognisant of the need to ensure appropriate diversity of thought, which aids good decision making.
This is driven by many factors in Directors’ backgrounds.
As reported last year, the Board maintains an overarching ambition to achieve no less than 33% female representation
on the Board and, in the longer term, at least one Director being from a non-white ethnic minority background.
We recognise that periods of change in Board composition and size may result in periods when the desired balance
is not met. In FY22 we were delighted to report we had met our aspirational commitment to achieve 33% female
representation following the appointment of Denise Cockrem. In the year this fell to 25% (28% if the shareholder
nominated representative is excluded) following Dr Rachel Smith stepping down from the Board as Service Director,
a role which will not be replaced. After the balance sheet date, the Board further acknowledges Katherine Roe will
not stand for re-election which reduces the percentage of female representation on the Board to 14%. As it is not
currently anticipated that the size of the Board will be increased, diversity objectives will be next considered as part
of any future Board recruitment processes in line with our Director succession planning as and when a casual vacancy
becomes available.
Induction and training
It is important to ensure all Board members are given the right access to information to enable them to discharge
their duties. The Company Secretary works to ensure the Board and its Committees have full and timely access
to relevant information. This includes provision of an induction programme to new Board members and circulation
of papers in advance of meetings.
The Board induction programme includes a suite of induction materials explaining:
@ their legal duties and responsibilities, including in relation to section 172 of the Companies Act;
@ the calendar of Board and Committee meetings;
@ governance documents, policies, and procedures;
@ committee terms of reference;
Governance | Corporate Governance Report continued
@ our Code of Ethics and share dealing code;
@ background information about ITM Power; and
@ meetings with members of the Board and the Executive Committee and a visit to our factory are also arranged.
To support the Directors in keeping up to date with changes to the regulatory landscape and best practice thinking on
matters of corporate governance, the Company Secretary provides regular updates on these matters as appropriate.
The Board also meets with its nominated advisor on a yearly basis to examine its AIM duties.
Board activities during the year
The key areas of focus for the Board’s activities and topics discussed during the year were as follows:
Strategic/governance pillar
Discussion topics
@ 12-month priorities review overseen and approved
@ Technology, manufacturing and testing plan for our next generation stacks
Strategic: continual
technology development
Strategic: scalable
manufacturing
@ Investment in the expansion of Bessemer Park and the site power supply
@ Performance forecasts and delivery
Strategic: strong partners
and relationships
Strategic: expert
knowledge
Governance: financial
@ Oversight of ITM’s exit from the Motive joint venture
@ Procurement strategy and key procurement contracts
@ Marketing and communications strategy
@ Employee engagement, including the creation and cascade of shared objectives
@ Significant customer projects
@ Recruitment of key personnel including the CEO and Company Secretary
@ Budget approval
@ The Group’s banking facilities
@ Approval of full year results and Annual Report for FY23
@ Approval of half year results for the six months ended 31 October 2023
@ Views of investors and analysts
@ Approval of the Bessemer Park expansion lease terms and power upgrade
@ Approvals of capital spend above the delegated authority limits set by the Board
Governance: operations
@ Workforce performance indicators including senior management and wider
Governance:
compliance and ethics
recruitment, and analysis of workforce composition
@ Health and safety performance
@ Updates on ESG action plan progress
@ Approval of the notice of AGM
@ Training on AIM and Market Abuse Regulation rules and obligations
@ QCA Code compliance
@ Board evaluation
@ Review of the terms of reference of the Nomination Committee
@ Group risks
Scheduled meeting attendance(1)
Audit
Board (6)
Committee (6)
ESG
Committee
Nomination
Committee (6)
Remuneration
Strategic
Technology
Advisory Management
Committee (6)
Committee (7)
Committee (8)
Chair of the Board
Sir Roger Bone
Executive Directors
Dennis Schulz(2)
Andy Allen
Simon Bourne
Rachel Smith(3)
Graham Cooley(4)
Non-Executive Directors
Martin Green
Jürgen Nowicki
Denise Cockrem(5)
Katherine Roe
6 (6)
2 (2)
6 (6)
6 (6)
4 (5)
3 (4)
6 (6)
6 (6)
4 (5)
4 (6)
4 (4)
n/a
1 (1)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
4 (4)
n/a
4 (4)
n/a
n/a
n/a
2 (2)
2 (2)
n/a
n/a
n/a
3 (3)
n/a
n/a
n/a
1 (1)
n/a
n/a
n/a
1 (1)
n/a
n/a
n/a
n/a
2 (2)
n/a
n/a
2 (2)
n/a
n/a
0 (0)
n/a
0 (0)
0 (0)
0 (0)
n/a
n/a
2 (2)
n/a
n/a
1 (2)
2 (2)
n/a
n/a
1. The maximum number of scheduled meetings in the period during which the individual was a Board or Committee member is shown in brackets.
2. Dennis Schulz joined the Board from 1 December 2022.
3. Rachel Smith resigned from the Board on 30 January 2023.
4. Graham Cooley resigned from the Board on 1 December 2022.
5. Denise Cockrem was appointed with effect from 25 July 2022.
6. A number of additional ad hoc meetings were held during the year to consider specific matters as they arose.
7.
The Strategic Advisory Committee did not meet during the year due to Piero Ercoli not being replaced as the Snam representative. The Committee
has now been disbanded and its responsibilities now reside with the Board.
8. Snam has a right to appoint a delegate to the Technology Management Committee. It did not put forward an attendee to replace Marco Chiesa and
therefore did not attend during the period.
ITM Power PLC | Annual Report 2023
61
Board Committees
There were six Committees of the Board during the period although the Strategic Advisory Committee has now
disbanded. The work of the Audit, Remuneration and Nomination Committees is discussed in their respective
Committee reports on pages 65 to 83. The remit of each Committee is summarised below, with some additional
detail provided about areas of focus during the year.
Audit Committee
Key duties and responsibilities
@ Monitors the integrity of the
Group’s financial statements and
financial announcements
@ Monitors the quality and effectiveness
of internal controls and risk
management systems
@ Reviews arrangements for speaking up,
detecting fraud and managing bribery risks
@ Monitors internal audit or alternative
arrangements
@ Manages the external auditor relationship
Members
@ Martin Green (Chair)
@ Sir Roger Bone
@ Denise Cockrem
Areas of focus during the year
@ Full year results and Annual Report for FY22
@ Half year results for the six months ended 31 October 2022
@ External auditor: 2023 audit plan, effectiveness, independence
and reappointment
@ Risk management: risk register review, deep dives on key risks
and creation of risk management function
@ Internal audit: reviews of key controls and monitoring actions
arising therefrom and creation of internal audit function
@ Review of anti-fraud and bribery controls, including speak-up
arrangements and the approach to hospitality, gifts and
potential conflicts
Supported by (by invitation)
@ CEO
@ CFO, Group Financial Controller, and other members of the
Finance team
@ Risk and assurance function – risk management and internal audit
@ Other senior management including the Company Secretary
@ External auditor – Grant Thornton UK LLP
Read more
@ Audit Committee Report from page 67
@ Anti-fraud and bribery policy on our website at https://itm-power.com/sustainability
Governance | Corporate Governance Report continued
Board evaluation
To ensure its continued effectiveness, the Board undertakes a periodic evaluation of its performance and that
of its Committees. It is committed to doing so every 18 to 24 months.
The last evaluation was undertaken in January 2022. The Chair of the Board led the process, with the support of
the Company Secretary. A questionnaire was issued and the Chair of the Board then conducted an interview with
each Board member. A qualitative assessment of key matters was performed, covering Board responsibilities,
composition of the Board, engagement and input, strategy, information flows and meeting administration,
performance monitoring, delegations, stakeholders and risk. The Board considered the outcomes and developed
an action plan to address any improvements identified, which was implemented during FY23. In April 2023,
the Board met to discuss its performance during an informal workshop, facilitated by the Company Secretary.
Findings from this workshop have been recorded and will inform the formal review scheduled for late 2023.
It is expected the Company will conduct an externally facilitated process in due course.
Latest Board evaluation findings and actions
Board composition
Committee remit
Induction
Governance
Technology
Management
Committee could be
refocused to support
future needs better
@ Review the remit
of the Technology
Management
Committee to
ensure it addresses
our future needs
Induction processes
curtailed during the
COVID-19 pandemic
@ Formal induction
programme for
NEDs developed
during 2022 and
deployed for Denise
Cockrem and Dennis
Schulz during 2023
(see Induction and
training on page 60)
Authorities and
delegations are in
place and understood
but are not kept in
a single, easily
referable repository
@ Delegated
authorities matrix
revised during
the year and
updated annually
Findings
Consider future
experience
requirements
on the Board
Actions taken
@ Development
of a skills matrix
recording current
skills and experience
to help identify
potential gaps
@ Recruitment of an
NED with strong
accounting
experience
(Denise Cockrem)
@ Skills matrix and
requirements
fed directly into
the recruitment
parameters for
our new CEO
62
ITM Power PLC | Annual Report 2023
Governance | Corporate Governance Report continued
ESG Committee
Key duties and responsibilities
@ Leads the development of the Group’s
ESG strategy, policies and programmes
@ Responsible for the Group’s short- and
long-term ESG objectives and reporting
of key metrics
@ Oversees compliance with relevant laws
and regulations, including principles of
good governance
Areas of focus during the year
@ ESG strategy, actions, and objectives
@ ESG Report
@ Decision to consolidate ESG Report into the Annual Report
and Accounts to support better readability
Members
@ Katherine Roe (Chair)
@ Andrew Allen (effective 1 December 2022)
@ Rachel Smith (until 30 January 2023)
Supported by (by invitation)
@ Senior management including the Company Secretary,
Head of HR, and Head of Investor Relations
@ Good Business, a consultancy with more than two decades’
sustainability experience
Read more
@ Sustainable Energy, Engineered Sustainably from page 29
@ ESG Report 2022 at https://itm-power.com/investors/financial-reports
Nomination Committee
Key duties and responsibilities
@ Leads the process for Board appointments
Areas of focus during the year
@ Succession planning for members of the Executive Committee
and succession planning, including
considering the composition of the Board
and its future requirements
Members
@ Sir Roger Bone (Chair)
@ Dennis Schulz (effective 1 December 2022)
@ Katherine Roe
@ Dr Graham Cooley (until 1 December 2022)
Read more
@ Nomination Committee Report from page 65
and the Chair of the Board
@ Skills and experience needed on the Board in the future
@ Recruitment of Dennis Schulz as CEO
@ Reviewed its terms of reference and recommended changes
to the Board
@ Framework of Committee activities reviewed
Supported by (by invitation)
@ Russell Reynolds Associates, an executive search and
leadership firm
@ Company Secretary
Remuneration Committee
Key duties and responsibilities
@ Determines the remuneration policy for
the Chair of the Board and Executive
Directors, aiming to support the strategy
and long-term success of the Company
@ Sets the performance conditions for
awards granted under the terms of the LTIP
@ Approves the remuneration packages of
the Executive Directors, including grants
of LTIP awards.
Members
@ Katherine Roe (Chair)
@ Martin Green
Read more
@ Remuneration Report on page 72
Strategic Advisory Committee
Areas of focus during the year
@ Bonus pay outs for the Executive Directors for FY22
@ Benchmarking Executive Directors’ remuneration and salaries
@ Setting performance targets for the annual bonus granted in the year
@ Remuneration Report for FY22
@ Consideration of the appropriateness of LTIP grants to
Executive Directors
Supported by (by invitation)
@ Chair of the Board
@ CEO and CFO
@ Other senior management including the Company Secretary
@ Ernst & Young LLP provides independent advice to the
Remuneration Committee
Key duties and responsibilities
@ Advises the Board on key business
Areas of focus during the year
@ The Committee did not meet in FY23 and has now been disbanded
development matters
by the Board.
Members
@ Martin Green (Chair)
@ Jürgen Nowicki
@ Piero Ercoli (Snam representative)
@ Rachel Smith (until 30 January 2023)
Supported by (by invitation)
@ CEO, CTO and other senior management
@ Linde, ILE and Snam provide market intelligence and competitor
analysis to the Strategic Advisory Committee
@ Company Secretary
Read more
@ Our Strategy and Business Model on pages 20 to 22
@ Our Market on page 18
@ Markets we serve: https://itm-power.com/markets
ITM Power PLC | Annual Report 2023
63
Governance | Corporate Governance Report continued
Board Committees continued
Technology Management Committee
Key duties and responsibilities
@ Reviews the Group’s product portfolio
and development plans
@ Reviews the suitability of the portfolio,
manufacturing capacity and planned
developments to satisfy anticipated
market developments
@ Reviews requirements to meet the Group’s
technology goal to be best in class
Members
@ Jürgen Nowicki (Chair)
@ Simon Bourne
@ Marco Chiesa (Snam representative) until
Snam elected to no longer attend.
Areas of focus during the year
@ Product and innovation roadmap
@ Research and development focus areas
@ Standardisation and homologation requirements
Supported by (by invitation)
@ Senior management representing research and development and
product management teams
@ ILE:
@ Provides information to the Technology Management
Committee about how ITM Power’s technology compares
to competitor technologies
@ Recommends enhancements, product standardisation and
product homologation requirements emerging in the market
@ Company Secretary
Read more
@ Business Model on pages 20 and 21
@ Our electrolysers and how they work: https://itm-power.com/products
Where to find additional disclosures
Disclosure
Location
How we seek to engage shareholders
Stakeholders and Section 172 Statement from page 24
Outcomes of votes at general meetings
Regulatory news announcements on our website:
https://itm-power.com/investors/news
Response to significant proportion of votes
against a resolution at any general meeting
Shareholder documents, under Notices and circulars, on our website:
https://itm-power.com/investors/shareholder-documents
Historical Annual Reports
Notices of general meetings
Articles of Association
Admission documents
Financial and ESG reports on our website:
https://itm-power.com/investors/financial-reports
Shareholder documents, under Notices and circulars, on our website:
https://itm-power.com/investors/shareholder-documents
Shareholder documents, under Articles of Association, on our
website: https://itm-power.com/investors/shareholder-documents
Shareholder documents, under Admission documents, on our
website: https://itm-power.com/investors/shareholder-documents
Information required to comply with
AIM Rule 26
AIM Rule 26 on our website:
https://itm-power.com/investors/aim-rule-26
64
ITM Power PLC | Annual Report 2023
Governance | Nomination Committee Report
Sir Roger Bone
Chair of the Nomination Committee
Planning for
the future
Succession planning has been
the main area of focus for the
Nomination Committee during
the year.
Roles and responsibilities of the Committee
@ Regularly review the structure, size and composition
(including the skills, knowledge, experience and diversity)
required of the Board and make recommendations to the
Board with regard to any changes
@ Keep under review the leadership needs of the
organisation, both executive and non-executive, with a
view to ensuring the continued ability of the organisation
to compete effectively in the marketplace
@ Review annually the time required from Non-Executive
Directors. Performance evaluation should be used to assess
whether the Non-Executive Directors are spending enough
time to fulfil their duties
@ Ensure that, on appointment to the Board, Non-Executive
Directors receive a formal letter of appointment setting
out clearly what is expected of them
@ Formulating plans for succession for both Executive and
Non-Executive Directors and in particular for the key roles
of Chair of the Board, CEO and CFO
Introduction from the Chair of the Nomination Committee
Dear shareholder
I am pleased to present the first Nomination Committee Report which covers
the year ended 30 April 2023.
Composition
The Nomination Committee consists of Katherine Roe as Non-Executive Director,
Dennis Schulz, CEO, and me, as Chair of the Committee. The Nomination
Committee met formally once during the year and informally on several
occasions to support the CEO succession planning and transition programme.
Responsibilities
The Nomination Committee has terms of reference in place which have been
formally approved by the Board, are regularly reviewed, and updated, and
are available on the Group’s website. The Committee’s main responsibilities
include developing and maintaining a rigorous and transparent procedure
for making recommendations on Board appointments and ensuring plans are
in place for orderly succession to Board and senior management positions.
The Committee has a key role in ensuring the Board, its Committees and
senior management team have the appropriate balance of skills, experience,
qualities and capabilities they need to be successful and effective now, and
as the Group evolves. The process by which Board appointments are
determined is detailed in the Committee’s terms of reference.
Committee attendance
Name
Meetings attended
Sir Roger Bone
Graham Cooley
Katherine Roe
l
l
l
ITM Power PLC | Annual Report 2023
65
Governance | Nomination Committee Report continued
How the Committee spends its time
30+
Category
l Succession planning
l Skills reviews and composition
l Governance
l Business updates
Percentage
30%
25%
30%
15%
Key areas of focus in the year ended 30 April 2023
Succession planning has been the main area of focus for the Nomination
Committee during the year. Specific activities undertaken include:
@ succession of the Chief Executive Officer;
@ oversight of the appointment of the Company Secretary; and
@ a review of the existing succession plans for the Board including
succession of the Chair.
Engineering, a division of Linde plc (“Linde”), in Dresden, Germany, where
he was Managing Director since 2020. He brings with him over 14 years of
experience working with Linde Engineering across a wide variety of functions
including project execution, Head of Strategy and CFO. He has been closely
involved in ITM Power’s strategic relationship with Linde since its inception.
Independence of the Non-Executive Directors
The composition of the Board is reviewed annually by the Committee to
ensure that there is an effective balance of skills, experience and knowledge
and that the Board comprises an appropriate proportion of Independent
Directors. Jürgen Nowicki is not considered independent by the Board as a
shareholder nominee. Linde, under the 2019 subscription agreement, retains
the right to appoint one nominated NED to the Board. This agreement details
the role of the nominated NED and the expectations of the NED including
requirements relating to confidentiality. The Board currently has four
Independent Directors, namely Sir Roger Bone, Denise Cockrem, Martin Green
and Katherine Roe. The Board undergoes a rigorous assessment annually to
affirm the independent status of its Non-Executive Directors. This assessment
considers a number of areas including tenure, external appointments, conflicts
of interests and related party transactions. The Board recognises Institutional
Shareholder Services voting guidance which provides guidance that a Chair
with tenure exceeding nine years would need to have their independence
critically challenged. As the Chair of the Board has met this tenure threshold
during the year, the Board strenuously assessed if independence of the Chair
had become compromised. Consideration was given to Sir Roger’s conduct
and the level of independence of mind displayed, along with the fact that
only three and a half of his nine years’ service has been as Chair. Following
this assessment the Board strictly reaffirms its view that Sir Roger remains
independent and is committed to keep this under close review.
Recommendation of the appointment of Dennis Schulz
Following the announcement of Graham Cooley stepping down from the
Board, a comprehensive, focused search for a new Chief Executive Officer
was undertaken with the assistance of Russell Reynolds (an independent
executive search firm with no other connection with the Group). Russell
Reynolds Associates provides no other services to ITM Power but had been
retained by Motive to support the search for new members of the senior
management team. It is a founding member of the UK’s Standard Voluntary
Code of Conduct for Executive Search Firms and is one of the firms accredited
under the Enhanced Code for its leading work on promoting board diversity.
In accordance with the QCA Code, the Board and Committee regularly
challenge the Board’s composition and balance of skills. Bolstering the
Board’s skills and capabilities relating to volume manufacturing and product
deployment were key criteria of the CEO search process. Following interviews
of the shortlisted candidates, the Committee recommended Dennis Schulz for
appointment. Dennis will be subject to election by shareholders at the AGM
to be held in September 2023. Dennis moved to ITM Power from Linde
Review of existing succession plans
We believe maintaining a well-balanced Board with the right mix of skills
and experience is important to ensure our future success. This needs regular
review to ensure:
@ the skills and experience on the Board are the right ones to oversee and
guide the delivery of our current and future strategy; and
@ there is a plan to respond to any vacancy that may arise – whether
anticipated or unexpected.
To support this, and as an action from the Board evaluation process, a matrix
was developed to identify the skills and experience needed to support our
future plans. The Nomination Committee reviewed the matrix considering
the skills and experience on the Board, within the Group and available
externally. It concluded that the Board was balanced with a good mix of skills
and experience, with appropriate support from specialists within senior
management and external advisors. It nevertheless identified some areas
66
ITM Power PLC | Annual Report 2023
We believe maintaining a
well-balanced Board with
the right mix of skills and
experience is important to
ensure our future success.”
for consideration in any future recruitment activity. Feedback received
as part of the Board evaluation process was also taken into consideration
in developing the matrix and identifying future requirements. An overview
of the skills and experience identified through this process is provided on
page 58.
A review of the existing succession plans for the Board has been undertaken
during the year, with some of the outcomes of the review being described
above. The results of the appraisals undertaken by the Board, its Committees
and in respect of the Chair have informed the development of the existing
succession plans. During the year, Sir Roger, as Chair of the Board, exceeded
the threshold of nine years’ tenure. Due to this he will now offer himself
up for annual election at the AGM in line with our Articles of Association.
All Board colleagues have independently reviewed and supported Sir Roger’s
willingness to stand for election at the AGM 2023 and will discuss the
longer-term succession plans for the role of Chair of the Board during FY23,
led by Martin Green in his new capacity of Senior Independent Non-Executive
Director and supported by Dennis Schulz as CEO.
Nomination Committee evaluation
The Committee will annually evaluate its performance.
Sir Roger Bone
Chair of the Nomination Committee
17 August 2023
25
+
30
+
15
+
+
M
Governance | Audit Committee Report
Martin Green
Chair of the Audit Committee
Supporting the Board’s approval
of the financial statements,
reviewing and challenging key
accounting judgements and
overseeing the services provided
by the external auditor were our
key focus in the year.
Roles and responsibilities of the Committee
@ Monitor the integrity of the financial statements of the
Company, including its annual and half-yearly reports,
preliminary results announcements and any other formal
announcement relating to its financial performance,
reviewing significant financial reporting issues and
judgements which they contain and any significant
financial returns to regulators
@ Keep under review the effectiveness of the Company’s
internal financial controls and the Company’s internal
controls and risk management systems
@ Review the Company’s arrangements for its employees
and third parties to raise concerns, in confidence, about
possible wrongdoing in financial reporting or other matters
@ Monitor and review the effectiveness of the Company’s
internal audit function in the context of the Company’s
overall risk management system
Introduction from the Chair of the Audit Committee
Dear shareholder
As Chair of the Audit Committee, I am pleased to present the Audit
Committee’s report for FY23. This report is intended to explain how
the Committee has met its responsibilities throughout the year.
Committee members, meetings and support
The Committee is made up of three independent Non-Executive Directors:
Denise Cockrem, Sir Roger Bone, the Chair of the Board, and me, Martin
Green (as Chair). The Board is confident that I have current and appropriate
financial experience to chair the Committee and that the Committee as
a whole has the suitable skills and knowledge to discharge its duties to
the Board. By invitation, the Chief Financial Officer and other Executive
Directors may attend Committee meetings.
The Audit Committee’s full membership and skills are provided on page 69
along with details of those that supported the Audit Committee during the
year. Attendance at scheduled meetings during the year is shown on the right.
Committee attendance
Name
Meetings attended
Martin Green
llll
Denise Cockrem
llll
Sir Roger Bone
llll
ITM Power PLC | Annual Report 2023
67
Governance | Audit Committee Report continued
How the Committee spends its time
35+
Category
l Financial reporting
l Operations
l Internal audit
l External audit
l Governance
Percentage
35%
15%
14%
24%
12%
Our focus during the year was
reviewing and challenging key
accounting judgements.”
Areas of focus during the year
The Audit Committee is in charge of ensuring that the Group’s financial
performance is appropriately recorded and examined. Its responsibilities
include monitoring the financial statements’ integrity (including annual
and interim accounts and results announcements), reviewing internal control
and risk management systems, reviewing any changes to accounting policies,
reviewing and monitoring the extent of non-audit services performed by the
external auditor, and advising on the appointment of the external auditor.
Our focus during the year was on supporting the Board’s approval of
the financial statements, reviewing and challenging key accounting
judgements and overseeing the services provided by the external auditor
in relation to those financial statements. In addition the Committee
supported the Company’s response to the Financial Reporting Council’s
request for information, further details of which can be found on page 69.
Given the increasing scale, diversity and complexity of ITM Power, in 2022
we identified the importance of enhancing the risk management processes
within the organisation. We also agreed with management the time was
right to create an internal audit function. It was agreed a new risk and
assurance function would be created, with responsibility for risk
management and internal audit. This was delivered in the year, but due
to the resignation of the Internal Auditor during the year due to personal
reasons, the planned deployment has been delayed. As Chair of the
Committee, I conducted an exit interview with the Internal Auditor and
had no concerns about the reasons for their departure. Going forward,
I will liaise with relevant control functions to ensure that our systems and
controls remain fit for purpose, whilst the Company reviews its approach
to ensuring the efficacy of internal controls.
Availability to shareholders
I am available to shareholders to answer any questions on the work of
the Audit Committee both during the year and at our September AGM.
Martin Green
Chair of the Audit Committee
17 August 2023
68
ITM Power PLC | Annual Report 2023
15
+
14
+
24
+
12
+
M
Governance | Audit Committee Report continued
Composition of the Audit Committee
In line with best practice, the Board is satisfied that all members of the Audit Committee are independent.
Denise Cockrem has a particular expertise in accounting and finance, as demonstrated through her career. Her current
role as Chief Financial Officer of Ecclesiastical Insurance Office plc and previous finance roles in Good Energy Group
plc, RSA Insurance Group, Direct Line – Retail Division and Royal Bank of Scotland have enabled her to develop skills
and experience encompassing financial planning and analysis, performance reporting and forecasting, financial
controls, internal audit and risk management.
Both Martin Green and Sir Roger Bone are considered to have a broad range of financial experience. Martin
previously had responsibility for the financial performance of a portfolio of Johnson Matthey businesses, while
Sir Roger previously acted as a Non-Executive Director, Senior Independent Director and member of the audit
committee of the F&C Investment Trust, which has a portfolio of over £4bn.
Significant accounting judgements and estimates
The Audit Committee considered the significant accounting judgements and estimates ahead of each market
announcement regarding ITM Power’s results. The areas in which the Audit Committee was required to exercise
significant judgement during the year were:
Accounting area
Key financial impact(s)
Audit Committee considerations
Inventory
obsolescence
The year-end provision for
inventory obsolescence
stands at £17.8m
Forecast
contract
losses
Contract loss provisions
increased to £42.6m during
the year
Warranty
Provisions for warranty
losses increased in year
to £10.2m for projects
not yet complete (included
in the contract provision
noted above) whilst
projects in warranty
increased to £3.9m
(FY22: £3.0m)
The Audit Committee, on recommendation of management, is
comfortable that the judgement being made is a prudent approach to
providing for obsolete inventory, with 100% of the value of obsolete
inventory provided for. All other inventory holdings the business is
forecasting to remain of use and therefore are reflected at the lower
of cost of net recoverable value.
The Audit Committee considered management’s forecasting of costs
to complete projects. It agreed with management’s approach of
basing provisions on the best estimates of management aligned
with information known at the time to ensure the forecast cost to
completion is appropriate. It reviewed and challenged management’s
estimates during the year. Any expected losses are recognised
immediately through profit and loss.
When ITM Power sells products it provides a warranty on those
products as part of either its legal obligations in line with relevant
local consumer legislation or as part of extended warranty
agreements signed between ITM Power and its customers.
The Audit Committee considered management’s analysis under
which the Company has used its best estimate to make an assessment
of the provisions value for warranties at the year end and approved
the methodology proposed on how to calculate this liability. The Audit
Committee approved the methodology, assumptions and sensitivities
in the calculation of the provision.
Annual Report for FY23
The Audit Committee reviewed the Annual Report and provided feedback. It considered whether ITM Power’s
position, strategic approach and performance during the year were portrayed fairly and in a balanced way
throughout the Annual Report and aligned with the financial statements. The Audit Committee had regard to
the findings and judgements of the external auditors.
External audit
The Audit Committee has responsibility and oversight of the Group’s relationship with its external auditor,
Grant Thornton UK LLP, and for assessing the effectiveness of the external audit process. Grant Thornton UK LLP
was appointed as the external auditor in 2017 and the lead audit partner is David White.
The Audit Committee agreed the approach and scope of the audit work to be undertaken by Grant Thornton UK LLP
for the financial year. It also reviewed Grant Thornton UK LLP’s terms of engagement and the fees payable in respect
of audit and non-audit services to ensure they are appropriate and reflect performance. Details of the amounts paid
to the external auditor are provided in Note 7 to the Consolidated Financial Statements.
Grant Thornton UK LLP provided the Audit Committee with regular reports on the status of the audit, its assessment
of the agreed areas of audit focus and findings, and conclusions to date.
The Audit Committee reviewed the experience and expertise of the audit team, the fulfilment of the agreed audit
plan and any variations to it, feedback from ITM Power’s management and the contents of the external audit report.
The Audit Committee confirmed its satisfaction with the effectiveness of the external auditor.
Financial Reporting Council – request for information
During the year, a Financial Reporting Council (FRC) request for information was received by the Audit Committee.
The FRC review was based on our Annual Report and Accounts for FY22 and was conducted by staff of the FRC who
have an understanding of the relevant legal and accounting framework. The review did not seek to provide assurance
that our report and accounts were correct in all material respects; the FRC’s role is not to verify the information
provided but to consider compliance with reporting requirements and the FRC accepts no liability for reliance on
them by the Company or any third party, including but not limited to investors and shareholders.
The FRC asked the Company to explain why the reversal of previously recognised impairment losses in respect of the
parent investment in wholly owned subsidiaries had been treated as a prior year adjustment, rather than recognising
the reversal in the parent company income statement. Following an explanation of our treatment of this matter, and
an agreement to amend the accounting policy for investments in future accounting periods to explain how recoverable
amount is determined for impairment testing purposes, the review was closed with no further action required.
ITM Power PLC | Annual Report 2023
69
Governance | Audit Committee Report continued
External auditor independence
The continued independence of the external auditor is important for an effective audit. The Audit Committee has
a policy regarding the use of the external auditor for non-audit services. The external auditor may only be engaged
for non-audit services exceptionally and only with the approval of the Audit Committee. The external auditor may
not undertake any work that may compromise its independence or is otherwise prohibited by any law or regulation.
The Audit Committee received a statement of independence from Grant Thornton UK LLP in April 2023 confirming
that, in its professional judgement, it is independent and has complied with the relevant ethical requirements
regarding independence in the provision of its services. The report described, to the Committee’s satisfaction,
Grant Thornton UK LLP’s arrangements to identify, manage and safeguard against conflicts of interest.
The Audit Committee reviewed the scope of the non-audit services undertaken by Grant Thornton UK LLP during the
year, to ensure there was no impairment of judgement or objectivity, and monitored the non-audit work performed
to ensure it remained within the agreed policy guidelines. It also considered the extent of non-audit services provided
to ITM Power. Non-audit fees paid to Grant Thornton UK LLP were for interim agreed upon procedures/review work
which it was determined appropriate for the external auditor to undertake given its knowledge of the Group and
the need for independent assurance. They represented 14% (£40k) of the total audit and non-audit fees paid (£280k).
The Audit Committee determined, based on its evaluation, that the external auditor was independent.
Reappointment of the external auditor
The Audit Committee has responsibility for making a recommendation to the Board regarding the reappointment
of the external auditor. As part of its review process, the Audit Committee typically considers auditor rotation at
least every five years, unless the annual performance review identifies a reason to rotate earlier.
Based on its continued satisfaction with the audit work performed to date and Grant Thornton UK LLP’s continued
independence, the Audit Committee has recommended to the Board, and the Board has approved, that Grant
Thornton UK LLP be proposed for reappointment by shareholders as ITM Power’s external auditor at the 2023 AGM.
Internal audit
Following the establishment of a Risk and Assurance team last year, a handover of responsibilities from the Audit
Committee to this team took place during the year.
The Audit Committee’s role was revised to:
@ monitor and review the effectiveness of the internal audit function;
@ approve the appointment and removal of the head of the internal audit function;
@ consider and approve the remit of the internal audit function and ensure it has adequate resources and appropriate
access to information;
@ ensure the internal audit function has adequate standing and is free from management or other restrictions;
@ review and approve the annual internal audit plan;
@ review promptly all reports from the Internal Auditor; and
@ review and monitor management’s responsiveness to the findings and recommendations of the Internal Auditor.
The Company’s first Internal Auditor was appointed during the year and initial internal audit reports were presented
to the committee in late 2022. These were reviewed in detail by the Audit Committee, with constructive challenge
where appropriate. With the resignation of the Internal Auditor for personal reasons, the planned timetable was
interrupted and has been delayed. The Chair of the Audit Committee conducted an exit interview with the leaver
and confirmed that there were no undue causes for concern over their departure. Pending the replacement of the
Internal Auditor role, key controls will be monitored by the QHSE, legal and finance teams, supported by external
resource where deemed appropriate.
Internal controls and risk management
A key role of the Audit Committee is to monitor the effectiveness of the internal financial controls and the Company’s
controls and risk management systems. The Committee undertook assurance activities around critical risks and controls
during the year, with further challenge and in-depth discussions between the Committee Chair and management
outside meetings. The outcomes of these reviews were discussed at Audit Committee and, where appropriate,
recommendations were made to management. Implementation of those recommendations were then monitored.
70
ITM Power PLC | Annual Report 2023
Governance | Audit Committee Report continued
Financial controls
We have an established framework of internal financial controls, the effectiveness of which is periodically reviewed
by each of the Board and the Executive Committee, as well as the Audit Committee. There are procedures in place for
budgeting and forecasting; for monitoring and reporting business performance against those budgets and forecasts;
and for projecting expected performance over the financial year.
Responsibilities are separate and defined:
A handover of responsibilities from the Audit Committee to the risk management function took place during the year.
The Audit Committee’s role is now to:
@ review the effectiveness of the risk management systems;
@ conduct a formal review into risk management; and
@ review and approve the statements included in the Annual Report regarding risk.
@ The Board is responsible for reviewing and approving our overall strategy, corporate objectives, financial strategy,
the annual budget, and capital fundraising. It receives periodic financial reports, tracking budget and forecasts.
@ The Audit Committee reviews key financial controls throughout the year. It has responsibility for monitoring the
integrity of the financial reporting of the Company and for ensuring internal financial controls are sufficiently
robust and appropriate.
@ The Executive Committee retains day-to-day responsibility for financial performance and has internal financial
Speaking up
The Audit Committee is responsible for reviewing arrangements for employees and third parties to raise concerns,
in confidence, about possible wrongdoing in financial reporting or other matters.
There are established ways to raise concerns. These include options to contact a line manager, the Legal Compliance
Manager, the Risk and Assurance team or the Company Secretary. We also offer a service via a third party, Safecall,
through which confidential, anonymous reporting is available.
reporting processes in place.
@ The Group Financial Controller oversees budgeting, cash flow forecasts and financial statements and the operation
of the Group’s financial systems, working with our external auditors. Internal controls and financial systems
transformation are the responsibility of other members of the Finance team.
Non-financial controls
We recognise that maintaining sound controls and discipline is critical to managing the risks to our strategy. The Board
has ultimate responsibility for the Group’s system of internal control and for reviewing its effectiveness.
The CFO has day-to-day responsibility for ensuring internal controls remain appropriate. He reports to the Executive
Committee on operational changes required.
When someone speaks up, an initial assessment is carried out to determine the scope of any investigation.
Where appropriate, a full investigation is instigated. If appropriate, subject matter experts are used to support
the investigation. In particularly serious cases, the matter may be escalated to the Chair of the Audit Committee,
the Chair of the Board or our external auditor.
Anyone who raises an honest concern, even if they turn out to be mistaken, is protected from retaliation and
detrimental treatment.
The Audit Committee receives and considers reports from management and, in future, Safecall regarding concerns
raised and provides the Board with key information for its consideration as appropriate. There were no whistleblowing
matters raised during the year.
Day-to-day activities are closely managed by the Executive Directors. There is detailed monthly reporting of
performance against our corporate objectives, project schedules, budget, risks and expected performance, and
operational needs. These are key to the success of the internal management and control system.
Where to find additional disclosures
Disclosure
Location
We continue to increase our commercial operations, including investing in new manufacturing facilities.
We also continue to make appropriate senior appointments to support our business plan and address the resulting
operational needs and risks.
Risk management
The Audit Committee is also required under its terms of reference to conduct an annual formal review into risk
management and review the effectiveness of risk management systems.
During 2022, the Committee agreed with management that ITM Power had reached a stage of development where
it was appropriate to create a risk management function. A Head of Risk and Assurance was appointed to lead the risk
management and internal audit functions with the first risk plan delivered to the Audit Committee in late 2022.
External auditor’s report
Independent Auditor’s Report to the Members of ITM Power PLC on
pages 87 to 92
Fees paid to the external auditor
Note 7 to the Consolidated Financial Statements
ITM Power PLC | Annual Report 2023
71
Governance | Remuneration Report
Katherine Roe
Chair of the Remuneration Committee
The focus of the Remuneration
Committee during the year was on
setting the appropriate remuneration
levels for the Executive Directors,
balancing the unacceptable financial
delivery with the early successes of
the 12-month priorities plan.
The views of our shareholders will
continue to be an important factor
in informing the decisions of the
Remuneration Committee and the
Remuneration Committee will
balance these views against the
need to retain and motivate the
current executive team.
Roles and responsibilities of the Committee
@ 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, where required, shareholders.
For any such plans determine each year whether awards
will be made and, if so, the overall amount of such
awards, the individual awards to Executive Directors
and, as appropriate, such other members of the senior
management team as it is designated to consider, and
the performance targets to be used
@ Determine the policy for, and scope of, pension
arrangements for each Executive Director and, as
appropriate, such other members of the senior
management team as it is designated to consider
@ Within the terms of the agreed policy, and in consultation
with the Chair of the Board and/or CEO as appropriate,
determine the total individual remuneration package of
the Chair of the Board, each Executive Director, including
bonuses, incentive payments and share options or other
share awards
@ Ensure that contractual terms on termination, 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
Introduction from the Chair of the
Remuneration Committee
Dear shareholder
As Chair of the Remuneration Committee, I am pleased to present the
Remuneration Report for FY23. This report is intended to explain how the
Remuneration Committee has met its responsibilities throughout the year
and to provide information about the remuneration received by Directors.
As a company admitted to trading on AIM, our Directors’ Remuneration
Report does not have to comply with the requirements of Schedule 8 of
The Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (as amended). Nevertheless, we have aligned our
remuneration reporting with these requirements as far as possible, but
we may not provide all the information required under the regulations.
Committee members, meetings, and support
The Remuneration Committee’s full membership is provided in the table
to the right along with details of those that supported the Remuneration
Committee during the year.
Attendance at scheduled meetings during the year is provided on page 61.
Committee attendance
Name
Meetings attended
Katherine Roe
Martin Green
ll
ll
72
ITM Power PLC | Annual Report 2023
Governance | Remuneration Report continued
How the Committee spends its time
60+
Category
l Remuneration policy
l Governance
l Data and benchmark analysis
l Performance evaluation
Percentage
60%
15%
10%
15%
Remuneration principles
The overarching principles we apply in our approach to remuneration are:
@ to ensure overall remuneration is set at a competitive level against our
peer group enabling us to attract and retain high-calibre employees with
the required skills to execute our strategy; and
@ to take into account all factors to:
@ ensure executive remuneration is aligned to the Group’s purpose
and values, clearly linked to the successful delivery of the Group’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 Group
without inappropriate financial burden on the Group; and
@ consider the requirements for clarity, transparency, risk mitigation,
predictability, proportionality and alignment to culture.
Annual bonus outcomes
Executive bonuses are designed to ensure alignment to the successful execution
and delivery of the Company’s annual plan. It is imperative that our bonus
schemes continue to attract and retain key executives as we further build the
management capability of the Company. Executive Directors are eligible for a
maximum cash bonus of 100% of base salary which becomes payable if certain
financial and non-financial targets are met. The Remuneration Committee
also retains its right to provide special discretionary bonuses where deemed
appropriate – though the incidence of these is limited and tightly controlled.
Bonuses quoted in the table on page 79 refer to performance awards based
on the financial year ended 30 April 2023 which were paid in August 2023.
For the financial year ended 30 April 2023 an award of 50% of base salary was
made to the Chief Executive as a result of meeting the personal objectives set
by the Board under a one-off discretionary scheme designed to drive
performance in resetting the Company strategy. The Chief Financial Officer
and Chief Technology Officer received an award of 21% of base salary. More
detail of the Remuneration Committee’s assessment is provided on page 79.
Availability to shareholders
I am available to shareholders to answer any questions on the work of
the Remuneration Committee. On behalf of the Remuneration Committee,
I would like to place on record our appreciation to our shareholders for
their constructive input throughout the year.
Katherine Roe
Chair of the Remuneration Committee
17 August 2023
Performance during the year
The Remuneration Committee’s decisions for the year were made against
the following backdrop:
@ unacceptable financial performance to budget;
@ manufacturing and engineering delays and issues, including increased
warranty provisions; and
@ commencement, and positive initial results from the delivery, of a new
strategic priority plan from January 2023.
Full details are provided in the CFO’s Review on page 13.
Areas of focus during the year
The focus of the Remuneration Committee during the year was on setting
the appropriate remuneration levels for the Executive Directors, balancing
the unacceptable financial delivery with the early successes of the 12-month
priorities plan.
This included reviewing their base salaries as well as setting award levels
and performance targets for the annual bonus and awards granted under
the terms of the LTIP. The CEO and Chair of the Board also reviewed the
fees paid to the Non-Executive Directors.
Following a benchmarking exercise conducted in June 2021, the Remuneration
Committee decided to increase the base salaries of the Executive Directors.
A similar benchmarking exercise was conducted in June 2022, which the
Remuneration Committee fed into its considerations of remuneration
packages for the Executive Directors. Considering the significant increases
to base salary implemented for Executive Directors from 1 July 2021, the
performance of the business and the approach taken to pay rises in the wider
workforce, the Remuneration Committee decided not to increase salaries
further. More information is provided later in the Remuneration Report.
The views of our shareholders will continue to be an important factor in
informing the decisions of the Remuneration Committee and the Remuneration
Committee will balance these views against the need to retain and motivate
the current executive team, which have been instrumental in the Company’s
performance to date.
ITM Power PLC | Annual Report 2023
73
15
+
10
+
15
+
+
M
Governance | Remuneration Report continued
Overview of the Executive Director remuneration policy
Remuneration element
Purpose and link to our strategy
Operation
Maximum opportunity
Performance framework
2022/23
Implementation
2023/24
Fixed pay
Base salary
To ensure we can
recruit and retain
high-calibre executives.
Paid monthly in arrears by bank transfer.
No maximum.
No recovery provisions apply to base salary.
Pension provisions
To attract and retain
talent through the
provision of attractive
retirement benefits.
Monthly payments into a defined contribution or similar pension
scheme or, in agreed circumstances, a cash allowance in lieu of
pension contributions.
No recovery provisions apply to pensions.
A contribution into
the Group’s defined
contribution pension
arrangement no higher
than that offered to
the wider workforce.
No maximum for any
cash allowance.
Several factors are
considered when
setting base salary
levels, including market
rates, benchmarking
to peers, individual
Director’s experience,
responsibilities and
performance.
Not applicable.
Executive Directors
salaries in the year were:
No change.
Dennis Schulz – £450,000
Andy Allen – £300,000
Simon Bourne – £300,000
No change.
Executive Directors –
from 1 July 2022,
contributions to their
pensions equivalent to
7% of base salary (before
any salary exchange).
Benefits
To assist in attracting and
retaining employees in a
cost-effective way.
May include private medical insurance, sick pay, a fully expensed car
(or equivalent cash allowance) and disability and life assurance cover.
Some benefits may be provided in the case of relocation, such as
removal expenses and, in the case of international relocation, might
also include items such as cost of accommodation, children’s
schooling, home leave, tax equalisation and professional advice.
The tax payable (grossed up) on any business expenses captured
as taxable benefits may also be reimbursed.
No recovery provisions apply to benefits.
Not applicable.
Not applicable.
No Executive Directors
received taxable benefits.
During FY24 the
Company is introducing
private medical
insurance for all senior
employees, including
the Executive Directors.
This will be taxed as a
benefit in kind.
74
ITM Power PLC | Annual Report 2023
Governance | Remuneration Report continued
Remuneration element
Purpose and link to our strategy
Operation
Maximum opportunity
Performance framework
2022/23
Implementation
2023/24
Variable pay
Annual bonus
To incentivise
Executive Directors
to deliver strategic
and financial success.
An annual bonus scheme with measures and performance targets
set by the Remuneration Committee.
Paid in cash. Pay out determined after the end of the financial year
following the Remuneration Committee’s assessment of performance
relative to targets and objectives.
Annual bonus payments do not form part of pensionable earnings
and are non-contractual.
The Remuneration Committee retains discretion in exceptional
circumstances to adjust the targets and/or set different measures and
alter weightings if certain events occur that cause it to determine they
are no longer appropriate. The Remuneration Committee will ensure
any revisions to targets are not materially less difficult to satisfy.
All payments are at the ultimate discretion of the Remuneration
Committee and it retains an overriding ability to ensure that overall
bonus payments are appropriate and reflect corporate performance.
Capped at 125% of base
salary for the CEO and
85% of base salary for
other Executive Directors.
Specific annual targets
based on clear and
measurable objectives
that underpin, and are
key to the achievement
of, the Group’s strategy.
Executive Directors
received the following
bonus payments:
Dennis Schulz – £225,000
(50% of base salary)
Andy Allen – £62,100
(21% of base salary)
Simon Bourne – £62,100
(21% of base salary)
Executive Directors have
the following bonus
opportunities, as a
percentage of base salary:
Dennis Schulz – 125%
Andy Allen – 85%
Simon Bourne – 85%
LTIP
To align the long-term
interests of shareholders
and management and
reward achievement
of stretching
long-term targets.
Any awards granted are subject to a three-year vesting period
and stretching performance targets.
All vesting is at the ultimate discretion of the Remuneration
Committee and the Remuneration Committee retains an
overriding ability to ensure that vesting reflects its view of
corporate performance over the set period.
The Remuneration Committee retains discretion in exceptional
circumstances to adjust the targets and/or set different measures and
alter weightings if certain events occur that cause it to determine they
are no longer appropriate. The Remuneration Committee will ensure
any revisions to targets are not materially less difficult to satisfy.
Malus and clawback provisions apply in cases of material financial
misstatement, conduct that results (or is reasonably likely to result)
in significant reputational damage to the Company, negligence or
misconduct, or fraud.
Capped at 100% of base
salary plus an uplift to
cover Employer’s National
Insurance Contributions,
which are passed on
to the participant
as permitted under
UK legislation.
Specific targets based
on clear, stretching and
measurable objectives
that underpin, and are
key to the achievement
of, the Group’s
long-term strategy.
No standard annual
awards were made during
the year due to the poor
financial and operational
performance seen.
A discretionary award
was made to the CEO –
full details can be found
on page 81.
All Executive Directors
are expected to be
granted an award
equivalent to a maximum
of 100% of base salary,
uplifted to reflect the
payment by the recipient
of Employer’s National
Insurance Contributions.
The CEO will receive an
additional award uplift
of 50% of salary.
ITM Power PLC | Annual Report 2023
75
Governance | Remuneration Report continued
Overview of the Executive Director remuneration policy continued
Remuneration element
Purpose and link to our strategy
Operation
Maximum opportunity
Performance framework
2022/23
Implementation
2023/24
Share ownership
All-employee
share plans
To encourage share
ownership across
the organisation.
Executive Directors can participate in the UK Buy As You Earn plan
(BAYE) on the same basis as other employees in the organisation.
Not applicable.
Executive Directors are
subject to the same
maximums as all other
employees who
participate in the BAYE.
Share ownership
guidelines/
requirements
To build and maintain
a shareholding to align
their interests with
those of shareholders.
Not applicable.
Executive Directors are
expected to build and
maintain a minimum
shareholding equivalent
to 100% of base salary.
Levels are set in relation to earnings and according to the post held
in the Group.
It is expected that Executive Directors will build up to the required
level over a period, usually five years, through retaining shares
received under the Group’s incentive arrangements, net of sales
to settle tax and other deductions, and/or shares purchased in their
own right.
Vested but unexercised options are included in the shareholding
total at the date of vesting, adjusted for the exercise price, tax and
any other deductions. When the options are exercised, the vesting
calculation is reversed and the shares retained on exercise are
included instead.
The Company offered the
BAYE throughout the year.
All Executive Directors
participated in the BAYE
at the maximum level
throughout the year
excluding Dennis Schulz
who is not eligible to join
until he has six months
continuous employment
and the year end results
have been released.
All Executive Directors
met the shareholding
guideline excluding
Dennis Schulz who has
three years to build his
holding under the
terms of the Directors
holding policy.
See Directors’ interests
in shares of the Company
on page 83 for details.
The Company intends
to offer the BAYE
throughout the year.
All Executive Directors
are expected to
continue their
participation in the BAYE
at the maximum level
throughout the year.
All Executive Directors
are expected to continue
to meet the shareholding
guideline excluding
Dennis Schulz who has
three years to build his
holding under the
terms of the Directors’
holding policy.
Alignment with the wider workforce
The remuneration policy for the Executive Directors is informed by the structure operated for the broader employee
population. Pay levels and components vary by organisational level but the broad themes and philosophy remain
consistent across the Group.
Salaries are reviewed annually with regard to the same factors as those considered for Executive Directors. Pay rises
for the wider workforce, excluding the Executive Directors, were implemented with effect from 1 July 2023 at a rate
of 5% of base salary.
All staff may participate in the BAYE after completing six months’ qualifying service. This is intended to encourage
share ownership in the Company and align the management team and all staff with the strategic business plan.
Eligibility for and provision of benefits and allowances vary by level and local market practice.
A contribution of 7% of base salary into a Company pension scheme was available to most of the UK workforce.
76
ITM Power PLC | Annual Report 2023
Governance | Remuneration Report continued
Remuneration element
Purpose and link to our strategy
Operation
Maximum opportunity
Performance framework
2021/22
Overview of the Chair of the Board and Non-Executive Director remuneration policy
Implementation
2022/23
Fees
To ensure we can attract
and retain experienced
and skilled Non-Executive
Directors able to advise
and assist with establishing
and monitoring the
strategic objectives.
Paid monthly in arrears by bank transfer.
Fees for the Chair of the Board are determined by the Remuneration
Committee. Fees for other NEDs are determined by the CEO and
Chair of the Board.
Any Director representing a shareholder on the Board is paid by the
shareholder, not the Group.
Fee increases for NEDs
will not normally exceed
average base salary
increases across
the Group.
The Remuneration
Committee considers
several factors,
including market rates,
benchmarking to
peers and the time
commitment expected.
No proposed changes.
Chair of the Board:
£150,000.
NED base fee: £51,000.
Additional fee for
chairing the Audit, ESG,
Remuneration or
Strategic Advisory
Committees: £10,000 per
Committee chaired.
Jürgen Nowicki received
no fees.
Expenses
Not applicable.
Reasonable expenses are reimbursed.
Not applicable.
Not applicable.
Not applicable.
Not applicable.
The tax payable (grossed up) on any business expenses captured
as taxable benefits may also be reimbursed.
Expenses incurred for advice in respect of UK tax returns for
non-UK NEDs may be reimbursed.
NEDs are encouraged to build and maintain a shareholding. See
Directors’ interests in shares of the Company on page 83 for details.
Share ownership
guidelines/
requirements
To build and maintain
a shareholding to align
their interests with
those of shareholders.
Not applicable.
Not applicable.
Not applicable.
Not applicable.
ITM Power PLC | Annual Report 2023
77
Governance | Remuneration Report continued
Annual report on remuneration
Remuneration outcomes for FY23
The following pages set out details of the remuneration received by Directors for FY23. Prior year figures have also been shown. The Remuneration Report has not been audited.
The Directors’ remuneration in the year was awarded in line with the remuneration policy.
Single total figure of cash equivalent remuneration for each Director
Year ended
30 April
Base salary
and fees (£)
Pension-related
benefits (£)
Annual bonus
(£) (6)
Vested Long-term
incentive
awards (£)
Loss of office (£)
Total (£)
Total fixed
remuneration
(£)
Total variable
remuneration
(£)
Executive Directors
Dennis Schulz, CEO(1)
Andy Allen, CFO
Simon Bourne, CTO
Rachel Smith, former Services Director(2)
Graham Cooley, former CEO(3)
Non-Executive Directors
Sir Roger Bone, Chair
Martin Green
Jürgen Nowicki(4)
Denise Cockrem(5)
Katherine Roe
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
211,500
—
282,750
275,988
288,000
288,393
196,320
216,439
721,449 (7)
376,639
150,000
139,167
71,000
68,333
—
—
31,000
—
71,000
68,333
12,375
—
37,250
13,799
32,000
14,420
21,728
10,822
—
28,000
—
—
—
—
—
—
—
—
—
—
1 Dennis Schulz was appointed with effect from 1 December 2022.
2 Rachel Smith resigned from the Board with effect from 30 January 2023.
3 Graham Cooley resigned with effect from 1 December 2022.
4 Shareholder nominated Directors receive no fees from the Company.
5 Denise Cockrem was appointed effective 25 July 2022. Denise’s fee is paid to Ecclesiastical Insurance Office plc, owned by the Benefact Group.
6 Bonus payments for the FY23 performance period were paid in August 2023 after completion of the Audit process.
7
Includes pay in lieu of notice following resignation.
78
ITM Power PLC | Annual Report 2023
448,875
223,875
225,000
225,000
—
62,100
28,800
62,100
28,800
—
—
—
—
1,312,669
—
2,297,169
—
—
—
—
—
—
—
50,000
—
382,100
1,631,256
382,100
2,628,782
268,048
22,080
1,640,839
—
1,890,180
—
—
105,000
67,200
3,938,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
826,449
4,409,839
150,000
139,167
71,000
68,333
—
—
31,000
—
71,000
68,333
—
320,000
289,787
320,000
302,813
218,048
227,261
721,449
404,639
150,000
139,167
71,000
68,333
—
—
31,000
—
71,000
68,333
—
62,100
1,341,469
62,100
2,325,969
50,000
1,662,919
105,000
4,005,200
—
—
—
—
—
—
—
—
—
—
Governance | Remuneration Report continued
Notes to the single figure table for Executive Directors
Base salary
Base salary refers to salary before any salary exchange (for example, for pension contributions or BAYE participation).
A benchmarking exercise was conducted in June 2023. The Remuneration Committee considered the benchmarking
alongside the following factors in considering the remuneration of the Executive Directors:
@ that shareholders would expect care and discretion to be used in judging to what extent, and over what timeframe,
adjustments should be made, recognising that significant increases had been implemented in the prior year;
@ its remuneration principles, including the need to ensure its policy remains competitive and retains key talent;
@ the performance of the Executive Directors; and
@ the approach taken to remuneration for the wider workforce.
Base salaries for the Executive Directors will therefore remain unchanged from 1 July 2023:
Name
Dennis Schulz, CEO
Andy Allen, CFO
Simon Bourne, CTO
Base salary from
1 July 2022
Base salary from
1 July 2023
—
£300,000
£300,000
£450,000
£300,000
£300,000
Pension
During the year, the Group paid contributions to the pensions of Dennis Schulz, Andy Allen, Simon Bourne and Rachel
Smith equivalent to 7% of base salary (before any salary exchange) in line with the terms available to the wider work
force. The value stated represents the value of the Group’s contribution and does not reflect any contribution made
by the individual concerned through salary exchange.
Annual bonus
The annual bonus is the cash value of the annual bonus paid in respect of the year. It is based on the annual base
salary (before any salary exchange) as at 1 July in the relevant financial year.
The Remuneration Committee’s assessment of performance in FY23 is set out overleaf.
The Remuneration Committee takes into consideration wider performance before approving the formulaic outcomes
from the incentive plans and applies its judgement by exercising upwards or downwards discretion when appropriate to
do so. To assist it in determining whether adjustments are necessary, the Remuneration Committee applies a framework
which considers performance from multiple perspectives including the underlying strength of results, the execution of
strategic priorities, pay practices and outcomes for the wider workforce, and the returns to investors during the year.
In the year under review, the business had a highly disappointing overall financial performance. However, following
the strategic reset in January 2023, a number of significant areas have made improvements and the engagement and
drive of the Executive were noted. Following a holistic review of performance, noting that the Committee had not
awarded any annual awards under the Company LTIP scheme, and recognising the improvements made by the
executive team since the implementation of the strategic plan, the Committee was satisfied that the bonus outcomes
were appropriate and that no adjustment to the formulaic outcome was necessary.
Annual bonuses payable to the Executive Directors for FY22 were paid fully in cash as follows:
Name
Dennis Schulz, CEO
Andy Allen, CFO
Simon Bourne, CTO
Graham Cooley, former CEO(2)
Rachel Smith, former Services Director(3)
Maximum
potential %
of base salary
100%
60%
60%
100%
60%
% of base
salary achieved
100% (1)
21%
21%
n/a
n/a
Cash payment
£225,000
£62,100
£62,100
n/a
n/a
@ Dennis Schulz was appointed effective 1 December 2022 and therefore his bonus was pro-rated to 50% to reflect his
contribution during the year.
@ Graham Cooley resigned effective 1 December 2022 and lost eligibility to participate in the annual bonus scheme
for Executive Directors.
@ Rachel Smith resigned effective 30 January 2023 and lost eligibility to participate in the annual bonus scheme for
Executive Directors.
The performance target categories for the FY24 annual bonus (and associated weightings) are: financial (50%),
strategic delivery (45%) and ESG (5%). The performance targets are measurable, challenging and subject to rigorous
review by the Remuneration Committee. Subject to commercial sensitivity, we intend to provide an overview of the
Remuneration Committee’s assessment of performance against the underlying targets in next year’s report. In
addition, the Remuneration Committee has determined that it is appropriate to increase the maximum cap that can
be earned under the annual bonus scheme by 25% in order to align with market rates. The additional 25% shall be
delivered as deferred shares to encourage retention and shareholding and will be subject to the same performance
criteria as the cash element of the scheme, and also subject to a two-year holding period.
ITM Power PLC | Annual Report 2023
79
Governance | Remuneration Report continued
Annual report on remuneration continued
Assessment of performance for FY23 bonus
Dennis Schulz’s bonus was linked to individual performance measures that were focused on the development of the revised strategic priorities. This was considered to be crucial by the Remuneration Committee to ensure Dennis was
motivated to review and revise the strategy to support the business to transition fully from an R&D company to a scalable manufacturer. Following assessment of these measures, the Committee was satisfied that these had been met
in full and therefore the maximum potential award was approved.
All other Executive bonuses were assessed based on the following matrix:
Category
Financial
Metric
Revenue
Margin
Overheads
Cash burn
Weighting
12.5%
12.5%
12.5%
12.5%
Target
£30.8m
£(11)m
–£35.2m
–£190.4m
Technology and
operations
Production, supply chain,
product, and markets
20%
See performance
assessment
ESG
ESG, health and safety
10%
See performance
assessment
Business development
Order intake
20%
200MW
Total
Performance assessment
Revenue was £5.2m and so this target was not met.
Margin delivered in year was £(68.5)m, therefore this target was not met.
Overheads net of recoveries were delivered at £(26.9)m. This condition was met
A cash burn target of £190.4m was set at the beginning of the year. On assessment at year end, the
Remuneration Committee revised this target to £115.5m to adjust for the cancellation of planned
expenditure related to Aviation Park. As cash burn was £84m, this target was met.
Targets associated with the following were not met:
@ on time project delivery;
@ further development of our containerised solution;
@ test bay capacity; and
@ broadening the number of territorial compliance standards met by our product suite.
The ESG Committee determined targets that would:
@ drive continual improvement in our ESG deliverables (as measured by MSCI); and
@ strengthen our HSE behaviours and metrics.
This target was partially met.
A target was set to generate orders that would drive revenue by FY25. This target was partially met
through the RWE Lingen 200MW order as not all of the project revenue will be recognised during the set
performance window.
Pay out
0%
0%
12.5%
12.5%
0%
2.5%
7%
34.5%
Long-term incentive awards
ITM Power PLC Share Option Plan: EMI and Unapproved (SOP)
The SOP was introduced in 2010. Options were granted under the SOP as follows:
@ EMI options granted under the SOP vested in three equal instalments on the first, second and third anniversaries
of the date of grant and may be exercised up to the tenth anniversary of the date of grant.
@ Unapproved options granted under the SOP before 2019 vested in three equal instalments on the first, second
and third anniversaries of the date of grant and may be exercised up to the tenth anniversary of the date of grant.
@ Unapproved options granted under the SOP in 2019 vest on the third anniversary of the date of grant and may
be exercised up to the tenth anniversary of the date of grant.
There are no performance conditions for EMI options or unapproved options granted under the SOP.
No consideration is payable for the grant of awards under the SOP. The exercise price is the mid-market price of shares
on AIM at the close of trading on the day before the grant of options.
No further awards will be granted under this plan.
80
ITM Power PLC | Annual Report 2023
Governance | Remuneration Report continued
The long-term incentive award value shown in the single total figure of remuneration for each Director relates to the
value of awards granted under the terms of the SOP that vested during FY22. The stated value is calculated based
on the number of shares that vested multiplied by the mid-market closing price for a share on the date of vesting.
The values in the table for FY22 reflect: (i) the value of one third of the total share award granted in 2018, when our
share price was significantly lower (around 30 pence per share); and (ii) the fact that the options were not subject to
performance conditions.
Details of outstanding options granted under the SOP are provided in the Statement of Directors’ shareholding and
share interests on page 82.
LTIP
The LTIP was introduced in 2020, when use of the SOP was discontinued. Vesting of awards occurs on the third
anniversary of the date of grant, subject to continued employment and satisfaction of performance conditions.
Performance conditions are set by the Remuneration Committee and awards granted to the wider workforce
are subject to the same performance conditions as those applied to the Executive Directors. The performance
conditions set stretching targets to drive future performance, aligned with our long-term strategy.
The Remuneration Committee may, in its discretion, adjust downwards the extent to which an award shall vest
(including to zero) where overall Company performance over the duration of the performance period has not
been deemed to be satisfactory.
Shares granted to Executive Directors under the terms of the LTIP are subject to a two-year holding period from the
vesting date to the fifth anniversary of the date of grant. The holding period does not apply to the wider workforce.
No consideration is payable for the grant of awards under the LTIP, which are structured as nominal cost options
meaning the exercise price is £0.05 per share.
Considering the backdrop of the Company performance, a decision was made by the Remuneration Committee to not
make any standard annual awards under the LTIP to any Executive during the year. It is expected that annual awards
will resume during FY24 and a full review of the scheme design and performance criteria will be completed ahead of
grant to ensure they align with the revised strategic objectives of the Group.
The Remuneration Committee did consider and approve a one-off discretionary award for Dennis Schulz as our new
Chief Executive Officer. Dennis was granted a LTIP equivalent to 50% of base salary during the year plus an uplift to
cover Employer’s National Insurance Contributions, which are passed on to the participant as permitted under UK
legislation. The number of shares awarded was 253,515, calculated using a share price of £1.01, being the volume
weighted average price for the last five days prior to the start of the performance period. The performance condition
applying to this award compares the performance of the Company’s shareholder return with that of the performance
of the AIM 50 Index over the applicable performance period. This discretionary award is subject to a 17-month vesting
period to more closely reflect the performance horizon of the revised 12-month priorities announced in January 2023
and to align with the FY24 year end.
The performance period of the LTIP awards granted in 2020 ended on 31 April 2023. Following this the Remuneration
Committee met to review if the performance condition (which related to total shareholder return when compared to
the AIM 50 Index) had been met.
Following this assessment it was determined that the conditions had not been met. The awards made under the 2020
grant have therefore lapsed without value to participants. Details of outstanding options granted and outstanding
under the LTIP are provided in the Statement of Directors’ shareholding and share interests on page 82.
Notes to the single figure table for Non-Executive Directors
Fees
The fees paid to Non-Executive Directors were reviewed during 2021. Following the review, it was considered
appropriate to increase the base fee to align with the lower quartile of the market. The additional fee paid for chairing
the Board Committees was not adjusted. No changes were made to fees when they were reviewed by the Chair of
the Board and the CEO in the summer of 2023.
Fees paid to the Non-Executive Directors with effect from 1 July 2022 were:
Role
Chair of the Board
Base fee
Independent Non-Executive Director
Shareholder nominated Non-Executive Director
Chair of a Committee
Audit, ESG, Remuneration and Strategic Advisory Committees
Nomination and Technology Management Committees
Current fees
£150,000
£51,000
—
£10,000
—
Payments to past Directors
There were no payments to past Directors during the year.
Payments for loss of office
Dr Graham Cooley stepped down from the Board on 1 December 2022. Under the terms of his contract, he was
contractually entitled to 12 months’ pay in lieu of notice. Graham also received a payment of £120,000 (equivalent
of three months’ pay) which was approved by the Remuneration Committee as part of his financial settlement.
All of Graham’s unvested awards lapsed immediately on termination from employment in line with the scheme rules.
Dr Rachel Smith received a £50,000 loss of office payment on termination from the Board which was approved by
the Remuneration Committee. As Rachel remains employed by the Group her unvested awards were not affected
as there was no break in employment.
ITM Power PLC | Annual Report 2023
81
Governance | Remuneration Report continued
Annual report on remuneration continued
Statement of Directors’ shareholding and share interests
Directors’ share awards and long-term incentive awards
Name
Dennis Schulz(3)
Andy Allen, CFO
Simon Bourne, CTO
Graham Cooley, former CEO(2)
Plan name
LTIP
Total
Award date
13/01/23
Shares under
option at 01/05/22
—
—
Granted
253,515
253,515
SOP (1)
14/08/18
666,667
SOP (1)
LTIP
LTIP
LTIP
Total
SOP (1)
SOP (1)
LTIP
LTIP
LTIP
Total
SOP (1)
SOP (1)
LTIP
LTIP
LTIP
Total
24/10/19
22/10/20
13/11/20
16/12/21
47,250
52,478
45,919
86,650
898,964
14/08/18
1,166,667
24/10/19
22/10/20
13/11/20
16/12/21
159,750
77,530
67,839
86,650
1,558,436
14/08/18
3,000,000
24/10/19
22/10/20
13/11/20
16/12/21
307,500
100,912
88,298
121,310
3,618,020
833,334
72,000
52,415
45,863
66,431
1,070,043
Exercised
Lapsed
Shares under
option at 30/04/23
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,000,000
307,500
—
—
—
3,307,500
—
—
—
—
—
—
—
—
—
—
52,478 (5)
45,919 (5)
—
98,397
—
—
77,530 (5)
67,839 (5)
253,515
253,515
666,667
47,250
—
—
86,650
800,567
1,166,667
159,750
—
—
—
86,650
145,369
1,413,067
—
—
100,912 (2)
88,298 (2)
121,310 (2)
310,520
—
—
52,415
45,863
—
98,278
—
—
—
—
—
—
833,334
72,000
—
—
66,431
971,765
Exercise price
Vesting date
£0.05
30/4/2024
Expiry date
13/01/33
£0.30
£0.48
£0.05
£0.05
£0.05
£0.30
£0.48
£0.05
£0.05
£0.05
£0.30
£0.48
£0.05
£0.05
£0.05
£0.30
£0.48
£0.05
£0.05
£0.05
1/2: 14/08/20
1/2: 14/08/21
24/10/22
22/10/23
13/11/23
16/12/24
1/2: 14/08/20
1/2: 14/08/21
24/10/22
22/10/23
13/11/23
16/12/24
1/3: 14/08/19
1/3: 14/08/20
1/3: 14/08/21
24/10/22
22/10/23
13/11/23
16/12/24
1/2: 14/08/20
1/2: 14/08/21
24/10/22
22/10/23
13/11/23
16/11/24
14/08/28
24/10/29
22/10/30
13/11/30
16/12/31
14/08/28
24/10/29
22/10/30
13/11/30
16/12/31
14/08/28
24/10/29
22/10/30
13/11/30
16/12/31
14/08/28
24/10/29
22/10/30
13/11/30
16/12/31
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Rachel Smith, former Services Director(4)
SOP (1)
14/08/18
SOP (1)
LTIP
LTIP
LTIP
Total
24/10/19
22/10/20
13/11/20
16/12/21
1
2
SOP awards described here are all unapproved options granted under a plan adopted in 2010, when our share price was significantly lower. Unlike awards
granted under the terms of the LTIP, they are not subject to performance conditions.
3
Dennis Schulz was appointed effective 1 December 2022.
4
Rachel Smith resigned effective 30 January 2023.
Graham Cooley stood down from the Board effective 1 December 2022. All shares under option that had not yet vested at the time of his departure
lapsed in line with the scheme rules.
5
The performance conditions of the 2020 LTIP awards were determined to have not been met by the Remuneration Committee. As a result these options
have lapsed for all participants.
82
ITM Power PLC | Annual Report 2023
Governance | Remuneration Report continued
Directors’ interests in shares of the Company
Shares
beneficially owned
at 30 April 2023
Options vested
but not exercised
Shareholding
as a percentage
of base salary (1)
Executive Directors
Dennis Schulz, CEO(4)
Graham Cooley, former CEO(3)
Andy Allen, CFO
Simon Bourne, CTO
Rachel Smith, former Services Director(5)
Non-Executive Directors
Sir Roger Bone, Chair
Martin Green
Jürgen Nowicki
Katherine Roe
45,460
2,155,811 (2)
89,588 (2)
116,978 (2)
466,610 (2)
286,236
64,319
—
12,659
—
—
666,667
1,166,667
833,334
n/a
n/a
n/a
n/a
9.09%
457.73%
291.96%
448.36%
428%
n/a
n/a
n/a
n/a
1 Base salary is as at 30 April 2023. Shares are valued as follows:
@ Shares that are beneficially owned are valued at the price at which they were acquired.
@ Options that have vested but not been exercised are valued at the mid-market closing price of the shares on the date of vesting, less the exercise
price and deductions for tax and social security contributions. Once they are exercised, they are included in the shares beneficially owned and
valued at the share price on the date of exercise.
2
Includes shares held in the BAYE. As at 30 April 2023, each of the directors (excluding Dennis Schulz) held 2,405 shares they had purchased and 2,405
matching shares awarded to them by the Company. Shares acquired through the BAYE are held in a trust until a request is received to withdraw them or
a participant leaves the Group’s employment. Matching shares are forfeited if the participant leaves or withdraws the associated purchased shares from
the trust within three years of the matching shares being acquired, except in specific leaving circumstances. Dennis Schulz intends to join the scheme on
conclusion of the year end results.
3 Graham Cooley resigned effective 1 December 2022.
4 Dennis Schulz was appointed effective 1 December 2022.
5 Rachel Smith resigned effective 30 January 2023 and was no longer subject to the shareholding policy.
Dilution
SOP and LTIP awards can be satisfied using new issue shares, shares held in treasury or market purchase shares.
The Remuneration Committee reviews the dilution position of the Company prior to granting share awards.
In line with best practice, the Remuneration Committee ensures that the number of new ordinary shares issued in
any 10-year period does not exceed 10% of the Company’s issued share capital under all the Company’s share plans
and does not exceed 5% under the SOP and the LTIP in aggregate.
Currently, new issue shares are used to satisfy options granted under the terms of the SOP and the LTIP when they
are exercised.
Executive Directors’ service contracts
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.
The contracts contain restrictive covenants for periods of up to six months post-employment relating to
non-competition and non-solicitation of the Group’s customers, suppliers and employees and indefinitely
with respect to confidential information. In addition, they provide for the Group to own any intellectual
property rights created by the Directors in the course of their employment.
Each Executive Director’s service contract includes a right for the Group to terminate the agreement and make
a payment of base salary in lieu of the notice period. There are no contractual rights to additional compensation
at termination.
Advisors to the Committee
During the year, the Remuneration Committee did not engage the services of any remuneration consultants.
The Remuneration Committee also receives advice from the Company Secretary.
Where to find additional disclosures
Disclosure
Location
Attendance at Remuneration Committee meetings
Detailed assumptions used in calculating the fair value
of options
Meeting attendance table in the Corporate Governance
Report on page 61
Note 25 to the Consolidated Financial Statements
ITM Power PLC | Annual Report 2023
83
Governance | Directors’ Report
The Directors of the Company present their report, together with the audited Consolidated Financial Statements,
for FY22.
This Directors’ Report has been prepared in accordance with the Companies Act. Additional information and
disclosures, as required by the Companies Act, are included elsewhere in this Annual Report and are incorporated
into this Directors’ Report by reference in the following table:
Disclosure
Location
Names of Directors during the year
Board of Directors
Review of likely future developments
CEO’s Review
CFO’s Review
Post-balance sheet events
Workforce engagement
Information on the employment and
training of disabled people
Business relationships with suppliers,
customers, and others
CFO’s Review
Note 34 to the Consolidated Financial Statements
Our Stakeholders and Section 172(1) Statement
Sustainable Energy, Engineered Sustainably
Directors report
Our Stakeholders and Section 172(1) Statement
GHG emissions
Sustainable Energy, Engineered Sustainably
Corporate governance arrangements
Corporate Governance Report
Audit Committee Report
Remuneration Report
Page(s)
56 to 57
10 to 12
13 to 15
15
116
24 to 28
39 to 43
85
44 to 46
37
59 to 64
67 to 71
72 to 83
Financial instruments and financial
risk management
Note 31 to the Consolidated Financial Statements
114 to 115
Related party transactions
Note 32 to the Consolidated Financial Statements
Disclosure of information to the
external auditor
Directors’ Responsibilities Statement
116
86
Dividend
The Directors do not recommend payment of a dividend.
Directors’ indemnity arrangements
Qualifying third-party indemnities were in place throughout FY23, and remain in place as at the date of this Annual
Report. Under these indemnities, the Company has agreed to indemnify the Directors of the Company, to the extent
permitted by law, against losses and liabilities that may be incurred in executing the powers and duties of their office.
Political donations
The Group made no political donations or contributions during the year (2022: nil). It is our policy not to make political
donations or incur political expenditure.
Research and development (R&D)
During the year the Group incurred R&D-related costs of £1.7m (2022: £1.4m). The Group’s R&D is focused on
achieving our main aims: (1) new manufacturing processes for cost cutting and mass production; (2) improving cell
efficiency; (3) improving stack life and reducing degradation; and (4) scale-up and product life cycle.
Domicile
The Company was incorporated in England and Wales under the Companies Act. It is registered at Companies House
under number 5059407.
Shares
Share capital
As at the date of this Annual Report, the Company’s share capital consists of 616,465,655 issued and fully paid
ordinary shares of 5p each. The shares are admitted to trading on AIM. Shares may be held in certificated or
uncertificated form. Further details of the Company’s issued share capital, including changes during the year,
can be found in Note 25 to the Consolidated Financial Statements on page 112.
Rights and obligations attaching to shares
The rights and obligations attaching to the Company’s ordinary shares are contained in the Company’s Articles
of Association and the Companies Act. In summary:
@ The ordinary shares allow holders to receive dividends and to exercise one vote on a poll per ordinary share
for every holder present in person or by proxy at general meetings of the Company.
@ Shares held in treasury are not entitled to vote or receive dividends.
There is no ownership ceiling.
Restrictions on transfer of securities
There are no restrictions on the transfer or sale of ordinary shares and no requirements for prior approval of any
transfers, except:
@ Under the Company’s Articles of Association, the Directors have the power to suspend voting rights and the
right to receive dividends in respect of ordinary shares and to refuse to register a transfer of ordinary shares
in circumstances where the holder of those shares fails to comply with a notice issued under Section 793 of the
Companies Act.
@ The Directors also have the power to refuse to register any transfer of certificated shares that does not satisfy
the conditions set out in the Articles of Association.
The Company is not aware of any agreements between shareholders that might result in the restriction of transfer
or voting rights in relation to the shares held by such shareholders.
Employee share schemes
Shares issued under the Company’s employee share schemes rank pari passu with the existing shares of the Company.
Voting rights attached to shares held on trust on behalf of participants in the BAYE are exercised by the trustee as
directed by the participants.
84
ITM Power PLC | Annual Report 2023
Governance | Directors’ Report continued
Significant shareholdings
Notification has been received of the following interests of significant shareholders that equal or exceed a 3% interest
in the issued share capital of the Company:
Investor
Linde UK Holdings
DWP Bank
Hargreaves Lansdown
JCB Research
Mr Peter Hargreaves
Interactive Investor
Legal & General Investment
ING-DiBa
At 30 April 2023
At 17 August 2023
Number of
ordinary shares
100,000,000
% of issued
share capital
Number of
ordinary shares
16.22
100,000,000
% of issued
share capital
16.22
42,071,797
38,528,628
38,325,115
27,686,070
23,918,432
20,516,120
19,665,581
6.82
6.25
6.22
4.49
3.88
3.33
3.19
42,071,797
38,528,628
36,750,115
27,686,070
23,918,432
20,516,120
19,665,581
6.82
6.25
5.96
4.49
3.88
3.33
3.19
The Directors have been notified that 16.30% of the shares in issue were not in public hands as at 30 April 2023
and 16.30% of the shares in issue are not in public hands as at the date of this Annual Report.
Share buy-backs
The Directors have not sought authority to buy back the Company’s shares and the Company has not purchased
any of its own shares. No shares are held in treasury.
External auditor
Grant Thornton UK LLP has expressed its willingness to continue in office as auditor. The Directors intend to
recommend a resolution to reappoint Grant Thornton UK LLP at the Company’s next Annual General Meeting.
It is the policy of the Company that all employees shall be given equal opportunities in all areas of employment.
Employees with disabilities
Applications for employment by disabled persons are always fully considered, bearing in mind the abilities of the
applicant concerned. In the event of members of staff becoming disabled every effort is made to ensure that their
employment with the Company continues and that appropriate training is arranged. It is the policy of the Company
that the training, career development and promotion of disabled persons should, as far as possible, be identical to
that of other employees.
Financial instruments
Details of the use of financial instruments and financial risk management are included in Note 31 to the financial
statements contained in this Annual Report and Accounts 2023, which are incorporated by reference into this
Directors’ Report.
ITM Power PLC | Annual Report 2023
85
Governance | Directors’ Responsibilities Statement
The Directors are responsible for preparing the Annual 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 prepared the
financial statements in accordance with UK-adopted international
accounting standards and with the requirements of the Companies Act
as applicable to companies reporting under those standards. They have
elected to prepare the parent company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law), including FRS 101
Reduced Disclosure Framework.
Under company law, the Directors must not approve the financial statements
unless they are satisfied they give a true and fair view of the state of affairs
and profit or loss of the Company and the 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 international accounting standards in
conformity with the requirements of the Companies Act have been
followed, subject to any material departures disclosed and explained
in the financial statements; and
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s and the Group’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and enable them to
ensure that the financial statements comply with the Companies Act.
They are also responsible for safeguarding the assets of the Company
and the Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are also responsible for the maintenance and integrity of
the corporate and financial information included on the Group’s website.
Legislation, regulation and practice in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors, whose names and functions are set out on pages 56 to 57,
confirm that:
@ so far as each Director is aware, there is no relevant audit information
of which the Group’s external auditor is unaware; and
@ the Directors have each taken all the steps they ought to have taken as
a Director to make themselves aware of any relevant audit information
and to establish that the Group’s auditor is aware of that information.
Approved by the Board and signed on its behalf by:
@ prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Company and/or Group will
continue in business.
Andy Allen
Chief Financial Officer
17 August 2023
86
ITM Power PLC | Annual Report 2023
Financial Statements
Financial Statements | Independent Auditor’s Report to the Members of ITM Power PLC
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 2023, which comprise the Consolidated Income Statement and Other Comprehensive
Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Cash Flow
Statement, Company Statement of Changes in Equity, 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 UK-adopted international
accounting standards. 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 2023 and of the group’s loss for the year then ended;
@ the group financial statements have been properly prepared in accordance with UK-adopted international
accounting standards;
@ the parent company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
@ 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.
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the group’s and the parent company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the
related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s opinion.
Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or
conditions may cause the group or the parent company to cease to continue as a going concern.
Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the
going concern basis of accounting included obtaining management’s base case and sensitised cashflow forecasts to
31 August 2024, along with challenge and assessment of the inputs into the forecasts.
Management’s going concern assessment is based on the expected costs compared to the cash held. We evaluated
management’s base case scenario and the severe sensitivities that were applied to these. We also applied additional,
severe sensitivities to check the extent of overspend required to eliminate a significant proportion of headroom in the
base case. We inspected capital and lease commitments entered into and costs expected to be incurred to check that
these have been appropriately incorporated into the forecasts and that there was sufficient cash in hand to cover
these costs for the going concern period.
We assessed the projected cash flows in management’s forecasts for the going concern assessment period by
reference to our expectations formed from the audit work performed on contracts and by comparing forecast
cash costs to those incurred in previous years. We have confirmed the cash held by the group at 30 April 2023
and compared this to the cash requirements indicated in management’s forecasts, noting that the balance held
is significantly higher than forecasted costs.
In our evaluation of the directors’ conclusions, we considered the inherent risks associated with the group’s and
the parent company’s business model including effects arising from macro-economic uncertainties such as inflation,
we assessed and challenged the reasonableness of estimates made by the directors and the related disclosures and
analysed how those risks might affect the group’s and the parent company’s financial resources or ability to continue
operations over the going concern period.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the group’s and the parent company’s
ability to continue as a going concern for a period of at least twelve months from when the financial statements
are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Our approach to the audit
Materiality
Key audit
matters
Scoping
Overview of our audit approach
Overall materiality:
Group: £2,800,000, which represents approximately 5% of the group’s
three-year average loss before tax.
Parent company: £2,240,000, which represents approximately 0.5% of the
parent company’s total assets.
Key audit matters were identified as:
@ Accuracy of the contract loss provision and warranty provision
(This has been extended in the current year to include the warranty
provision); and
@ Completeness of the inventory provision (new in the current year).
Our auditor’s report for the year ended 30 April 2022 included one key
audit matter that has not been reported as a key audit matter in our
current year report. This relates to Inappropriate recognition of revenue
which is no longer considered a key audit matter, as the amount of
revenue recognised in the current period has reduced relative to
materiality and our understanding of the point in time recognition of
revenue has increased.
Scoping has been determined to ensure appropriate coverage of the group
significant risks, and key financial statement line items. The coverage of
key financial statement line items in significant components and where
specific audit procedures were performed were:
@ Loss before tax 98% (2022: 93%)
@ Revenue 95% (2022: 95%)
ITM Power PLC | Annual Report 2023
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Financial Statements | Independent Auditor’s Report to the Members of ITM Power PLC continued
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.
Description
Audit response
KAM
Disclosures
Key observations /
Our results
In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.
High
Potential
financial
statement
impact
Low
Low
Existence and accuracy
bank and cash
Accuracy of cost of sales
Existence and accuracy
of inventory
Accuracy of capitalisation
of labour costs
Impairment of
non-current assets
Completeness of
contract liabilities
Valuation of loan notes
Completeness and
accuracy of revenue
Accuracy of the contract
loss provision and
warranty provision
Management override
of controls
Completeness of the
inventory provision
Occurrence of revenue
Extent of management judgement
High
Key audit matter
Significant risk
Other risk
88
ITM Power PLC | Annual Report 2023
Financial Statements | Independent Auditor’s Report to the Members of ITM Power PLC continued
Key audit matters continued
Key Audit Matter – Group
Accuracy of the contract loss provision and warranty provision
We identified the accurate recognition of the contract loss provision and warranty provision as one of the most
significant assessed risks of material misstatement due to error. This is because of the management judgement and
estimation needed to assess the provisions. The contract loss and warranty provisions recorded in the financial
statements is £46.5 million (2022: £15.4 million). Most of the contracts that ITM Power have entered are loss making.
There is a significant level of judgement in calculating future expected costs on the contracts as the contracts have
been bespoke in nature. The impact of incorrect assessment of these costs is the potential for immediate recognition
of future losses. As these are typically multi-year projects, the estimate around forecasting losses is sensitive and has
the potential for material error.
There is a significant level of management judgement and estimation in calculating future expected warranty costs on
the contracts as there is limited data available for the performance of these first-of-kind products. Where the contract is
loss making, the warranty provision is recognised within the contract loss provision. As these contracts can be individually
significant, the estimate around forecasting warranty costs is sensitive and has the potential for material error.
How our scope addressed the matter – Group
In responding to the key audit matter, we performed the following audit procedures:
@ Assessed the design and implementation of the controls over the determination and recording of the contract loss
and warranty provisions;
@ Obtained management’s schedule of contract loss and warranty provisions;
@ Challenged the assumptions relating to the warranty provisions by comparing the data for warranty repairs to the
percentages applied in the provision;
@ Recalculated the warranty provision based on management’s assumptions and re-performed sensitivity analysis;
@ Made enquiries of the specific project managers to obtain an understanding of their process and methods of
estimating costs to complete. We assessed whether there were indicators of management bias in the assumptions
used and corroborated estimates based on prior experience to historic data;
@ Obtained post year end schedules for total expected costs to identify whether the costs used in assessing contract
losses were appropriate. We assessed if forecast costs to complete increased significantly and where they had,
corroborated management’s explanations for the changes;
@ Compared the total expected costs by contract from the year end to the previous year end, obtaining explanations
Warranty provisions are included within the contract loss provision until control of the goods has passed to the customer.
for movements in order to assess the historical accuracy of forecasting;
Relevant disclosures in the Annual Report and Accounts 2023
@ Financial statements: Note 4, Critical accounting judgements and key sources of estimation uncertainty and
Note 23, Provisions
@ Audit committee report: Page 69, Significant accounting judgements and estimates
Completeness of the inventory provision
We identified incomplete recognition of the provision in relation to inventory as one of the most significant assessed
risks of material misstatement due to error. This is because of the judgement needed to assess the inventory provision.
The inventory provision recorded in the financial statements is £17.8 million (2022: £2.7 million).
ITM Power have entered into, and completed, contracts for first-of-kind products which are being discontinued and
future support being withdrawn. As most of the contracts that ITM Power have entered into have been loss making, this
casts doubt over the net realisable value of inventory held.
As the gross value of inventory has significantly increased, the estimate around inventory provisioning is sensitive and
has the potential for material error.
@ Obtained supporting evidence, such as purchase orders and supplier quotations for a sample of forecast costs
to complete;
@ Considered and assessed the allocation between the contract loss and warranty provision;
@ Agreed a sample of inputs to the warranty calculation to supporting evidence; and
@ Assessed the adequacy of the financial statement disclosures.
Our results
Based on our audit work addressing the risk of inaccurate recognition of the contract loss and warranty provisions, we
are satisfied that assumptions made by management in recording the contract loss and warranty provisions are
appropriate, and their recognition is in accordance with the financial reporting framework, including IAS 37
‘Provisions, Contingent Liabilities and Contingent Assets’ and IFRS 15 ‘Revenue from Contracts with Customers’.
In responding to the key audit matter, we performed the following audit procedures:
@ Assessed the design and implementation of the controls over the determination and recording of the
inventory provision
@ Compared the gross inventory balance used to determine the inventory provision to the inventory ledger;
@ Considered the appropriateness of the methodology applied by management to assign items into the active,
development, discontinued and redundant categories and challenged management on the provision percentages
applied to these items;
@ Assessed how management identify slow moving or excess inventory quantities and challenged how the provision
for these items was determined;
@ Recalculated the inventory provision based on management’s assumptions;
@ Assessed management’s ability to forecast accurately through evaluating the appropriateness of the provisioning
methodology by testing inventory utilisation in the year to the brought forward provision;
@ Assessed our enquiries of specific project managers and additional costs incurred to determine the completeness
of the inventory provision. We challenged project managers assertions with this information and where relevant,
we corroborated explanations received to supporting documentation;
@ Assessed management’s consideration of the estimation uncertainty within the inventory obsolescence
provisioning, by reviewing management’s sensitivity; and
@ Assessed the adequacy of the financial statement disclosures.
ITM Power PLC | Annual Report 2023
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Financial Statements | Independent Auditor’s Report to the Members of ITM Power PLC continued
Key audit matters continued
Key Audit Matter – Group
Relevant disclosures in the Annual Report and Accounts 2023
@ Financial statements: Note 4, Critical accounting judgements and key sources of estimation uncertainty
@ Audit committee report: Page 69, Significant accounting judgements and estimates
No additional key audit matters were identified in respect of the parent company.
How our scope addressed the matter – Group
Our results
Based on our audit work addressing the incomplete recognition of the provision in relation to inventory, we are
satisfied that the estimates made by management in recognising the inventory provision were appropriate and in
accordance with the financial reporting framework, including IAS 37, and we did not identify any material
misstatements in the inventory provision recognised.
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the
opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure
Group
Parent company
Materiality for financial statements
as a whole
We define materiality as the magnitude of misstatement in the financial statements that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users
of these financial statements. We use materiality in determining the nature, timing and extent of our audit work.
Materiality threshold
£2,800,000, which represents approximately 5% of the group’s three-year average loss before tax.
£2,240,000, which represents approximately 0.5% of the parent company’s total assets.
Significant judgements made by
auditor in determining materiality
In determining materiality, we made the following significant judgements:
@ The profitability of the group is a key measure in the group’s ability to deliver additional value and is
therefore the most appropriate measure. We have used a three year average due to the fluctuations
in the profitability of the group and the life cycle for contracts; and
In determining materiality, we made the following significant judgement:
@ We determined an asset based measure was most appropriate as the company is a vehicle
to hold investments in the group undertakings, as well as to provide financing to group
undertakings; and
@ 5% has been applied as a reasonable percentage having considered regulator expectations and other
@ 0.5% has been applied as a reasonable percentage having considered regulator expectations
market participants in comparable industries.
and other market participants in comparable industries.
Materiality for the current year is higher than the level that we determined for the year ended
30 April 2022 to reflect the increase in the appropriate benchmark, loss before tax.
Materiality for the current year is higher than the level that we determined for the year ended
30 April 2022 to reflect the increase in the percentage benchmark applied.
Performance materiality used to
drive the extent of our testing
We set performance materiality at an amount less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality for the financial statements as a whole.
Performance materiality threshold
£1,680,000, which is 60% of financial statement materiality.
£1,344,000, which is 60% of financial statement materiality.
Significant judgements made
by auditor in determining
performance materiality
Specific materiality
Specific materiality
Communication of misstatements
to the audit committee
Threshold for communication
In determining performance materiality, we made the following significant judgement:
@ The number and quantum of errors identified in the prior year along with control
In determining performance materiality, we made the following significant judgement:
@ The number and quantum of errors identified in the prior year along with control
deficiencies identified.
deficiencies identified.
We determine specific materiality for one or more particular classes of transactions, account balances or disclosures for which misstatements of lesser amounts than materiality for the financial
statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
We determined a lower level of specific materiality for the following areas:
@ Directors’ remuneration; and
@ Related party transactions.
We determine a threshold for reporting unadjusted differences to the audit committee.
We determined a lower level of specific materiality for the following areas:
@ Directors’ remuneration; and
@ Related party transactions.
£140,000 and misstatements below that threshold that, in our view, warrant reporting on
qualitative grounds.
£112,000 and misstatements below that threshold that, in our view, warrant reporting on
qualitative grounds.
90
ITM Power PLC | Annual Report 2023
Financial Statements | Independent Auditor’s Report to the Members of ITM Power PLC continued
Our application of materiality continued
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for
potential uncorrected misstatements.
Overall materiality – Group
Three year average
Loss before tax
£58,493,000
FSM
£2,800,000
~5%
Overall materiality – Parent company
Total assets
£437,756,000
FSM
£2,240,000
~0.5%
PM
£1,680,000
60%
TFPUM
£1,120,000
40%
PM
£1,344,000
60%
TFPUM
£896,000
40%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential
uncorrected misstatements
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business
and in particular matters related to:
Understanding the group, its components, and their environments, including group-wide controls
@ the engagement team obtained an understanding of the group and its environment, including group-wide controls,
and assessed the risks of material misstatement at the group level;
@ the engagement team obtained an understanding of the group’s organisational structure on the scope of the audit,
for example the level of centralisation of the group control function; and
@ we performed walkthroughs of key areas of focus, including significant risks, in order to confirm our understanding
of the control environment across the group.
Identifying significant components
@ the engagement team evaluated the identified components to assess their significance and determined the
planned audit response based on a measure of materiality. Significance was determined as a percentage of the
group’s loss before tax and qualitative factors, such as the component’s specific nature or circumstances.
Type of work to be performed on financial information of parent and other components
(including how it addressed the key audit matters)
@ audit of the financial information of the component materiality (full-scope audit) procedures were performed
on the financial information of two components. These procedures included a combination of tests of details
and analytical procedures.
@ audit of one or more account balances, classes of transactions or disclosures of the component (specific-scope
audit) procedures were carried out on a further one component using group materiality. These procedures included
a combination of tests of details and analytical procedures and were designed to increase coverage of the group’s
financial statement line items.
@ for the 4 components that were not individually significant to the group, we carried out analytical procedures.
Where there were material balances in these components that affect the group, we performed procedures on
those balances to determine whether there was evidence of material misstatement.
@ All procedures were performed by the group audit team.
Performance of our audit
@ the going concern assessment was tested as part of our work at a group and parent company level.
@ the accuracy of the contract loss provision and warranty provision and the completeness of the inventory provision
key audit matters were addressed with the full-scope and specific-scope audit procedures across the components
per the scope described above.
@ audit procedures across all components were performed by the group engagement team in accordance with the
scope described. There were no component engagement teams engaged to support the group engagement team.
@ As part of our planning procedures, we reviewed the group’s internal control environment including its IT systems
and controls to inform our risk assessment. Our audit testing approach was substantive.
Changes in approach from previous period
@ The full-scope components remain the same as the previous year.
@ One specific scope entity has been removed in the current year as it is no longer a subsidiary of the group following
the sale of half of the share capital to a third party. One component has been included as a specific scope location
in the current year as it has generated revenue and had not done so last year.
Audit approach
Full-scope audit
Specific-scope audit
Analytical procedures
No. of components
Coverage of loss before tax
Coverage of revenue
2
1
4
97%
1%
2%
50%
45%
5%
Other information
The other information comprises the information included in the annual report, other than the financial statements
and our auditor’s report thereon. The directors are responsible for the other information contained within the annual
report. 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.
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 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 themselves. 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.
We have nothing to report in this regard.
ITM Power PLC | Annual Report 2023
91
Financial Statements | Independent Auditor’s Report to the Members of ITM Power PLC continued
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.
Matter 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 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
As explained more fully in the directors’ responsibilities statement set out on page 86, 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below:
@ We identified areas of laws and regulations that could reasonably be expected to have a material effect on the
financial statements from our commercial and sector experience, through discussion with the directors and the
Audit Committee, and from inspection of the group’s board minutes and legal and regulatory correspondence.
We discussed the policies and procedures regarding compliance with laws and regulations across the Group with
the directors and the Audit Committee;
@ We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and
determined that the most significant are those related to the reporting frameworks (UK-adopted international
accounting standards, United Kingdom Generally Accepted Accounting Practice, and the Companies Act 2006),
as well as the relevant tax regulations and data protection laws;
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ITM Power PLC | Annual Report 2023
We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud
might occur, by evaluating management’s incentives and opportunities for manipulation of the financial statements.
This included the evaluation of the risk of management override of controls. We determined that the principal risks
were in relation to:
@ journal entries that increased revenues or that reclassified costs from the income statement to the balance sheet;
@ potential management bias in determining accounting estimates, especially in relation to their assessment of the
valuation of non-current assets and in the case of the parent company, investments in subsidiaries; and
@ transactions with related parties.
@ In assessing the potential risks of material misstatement, we obtained an understanding of:
@ the entity’s operations, including the nature of its revenue sources, products and services and of its objectives
and strategies to understand the classes of transactions, account balances, expected financial statement
disclosures and business risks that may result in risks of material misstatement.
@ the applicable statutory provisions
@ the entity’s control environment, including the relevant legislation, rules and other regulations of the regulator,
the procedures for authorisation of transactions, internal review procedures over the entity’s compliance with
regulatory requirements.
@ These audit procedures were designed to provide reasonable assurance that the financial statements were free
from fraud or error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error and detecting irregularities that result from fraud is inherently more difficult
than detecting those that result from error, as fraud may involve collusion, deliberate concealment, forgery or
intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is from events
and transactions reflected in the financial statements, the less likely we would become aware of it;
@ Engagement partner’s assessment of the appropriateness of the collective competence and capabilities of the
engagement team including consideration of the engagement team’s:
@ understanding of, and practical experience with audit engagements of a similar nature and complexity through
appropriate training and participation
@ knowledge of the industry in which the client operates
@ understanding of the legal and regulatory requirements specific to the entity including:
@ the provisions of the applicable legislation
@ the regulators rules and related guidance, including guidance issued by relevant authorities that interprets those rules
@ the applicable statutory provisions
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.
David White
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Sheffield
17 August 2023
Financial Statements | Consolidated Income Statement and Other Comprehensive Income
Revenue
Cost of sales
Gross loss
Administrative expenses
Other income – government grants
Loss from operations
Share of loss of associate companies and joint ventures
Finance income
Finance costs
Loss on deemed disposal of subsidiary
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
2023
Note
£000
5
6
6
5
6
12
9
9
12
10
11
160
£000
5,229
(84,294)
(79,065)
(26,222)
1,574
(103,713)
(1,567)
4,652
(541)
—
(101,169)
(32)
(101,201)
160
(101,041)
(16.5p)
2022
Restated
£000
(71)
Restated
£000
5,627
(29,104)
(23,477)
(21,819)
560
(44,736)
(10)
325
(532)
(1,710)
(46,663)
(31)
(46,694)
(71)
(46,765)
(8.1p)
All results presented above are derived from continuing operations and are attributable to owners of the Company.
In the prior year, Operating costs previously presented as Research and development, Production and engineering, Sales and marketing, Administration expenses and Expected credit loss have been aggregated into Administrative expenses
to present costs by function. A breakdown of costs by nature continues to be disclosed separately in Note 6.
The notes on pages 97 to 116 form part of these financial statements.
ITM Power PLC | Annual Report 2023
93
Financial Statements | Consolidated Balance Sheet
Non-current assets
Investments in associate and joint venture
Loan notes
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
Assets held for sale
Total current assets
Current liabilities
Trade and other payables
Provisions
Lease liability
Total current liabilities
Net current assets
Non-current liabilities
Lease liability
Provisions
Total non-current liabilities
Net assets
Equity
Called up share capital
Share premium account
Merger reserve
Foreign exchange reserve
Retained loss
Total equity
Note
12
13
14
15
16
31
17
19
20
21
22
23
24
24
23
25
25
25
25
25
2023
£000
379
—
11,475
6,934
20,489
174
39,451
58,840
19,657
282,557
361,054
1,814
362,868
(46,081)
(17,893)
(943)
(64,917)
297,951
(6,866)
(35,028)
(41,894)
295,508
30,823
542,593
(1,973)
172
(276,107)
295,508
2022
£000
1,662
1,548
9,081
6,454
15,637
161
34,543
32,198
25,542
365,882
423,622
—
423,622
(34,296)
(15,207)
(626)
(50,129)
373,493
(6,522)
(6,561)
(13,083)
394,953
30,658
542,323
(1,973)
12
(176,067)
394,953
The notes on pages 97 to 116 form part of these financial statements. The financial statements of ITM Power PLC, registered number 05059407, were approved by the Board of Directors and authorised for issue on 17 August 2023.
Signed on behalf of the Board of Directors:
Andy Allen
Director
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ITM Power PLC | Annual Report 2023
Financial Statements | Consolidated Statement of Changes in Equity
At 1 May 2021
Transactions with owners
Issue of shares
Credit to equity for share-based payment
Total Transactions with owners
Loss for the year
Other comprehensive loss
Total comprehensive loss
At 1 May 2022
Transactions with owners
Issue of shares
Credit to equity for share-based payment
Total Transactions with owners
Loss for the year
Other comprehensive income
Total comprehensive loss
At 30 April 2023
The notes on pages 97 to 116 form part of these financial statements.
Called up
share
capital
£000
27,533
3,125
—
3,125
—
—
—
30,658
165
—
165
—
—
—
Share
premium
account
£000
302,248
240,075
—
240,075
—
—
—
Merger
reserve
£000
(1,973)
—
—
—
—
—
—
542,323
(1,973)
270
—
270
—
—
—
—
—
—
—
—
—
30,823
542,593
(1,973)
Foreign
exchange
reserve
£000
83
—
—
—
—
(71)
(71)
12
—
—
—
—
160
160
172
Retained
loss
£000
(130,444)
—
1,071
1,071
(46,694)
(46,694)
(176,067)
—
1,161
1,161
(101,201)
—
(101,201)
(276,107)
Total
equity
£000
197,447
243,200
1,071
244,271
(46,694)
(71)
(46,765)
394,953
435
1,161
1,596
(101,201)
160
(101,041)
295,508
Note
25
25
25
25
25
25
25
ITM Power PLC | Annual Report 2023
95
Financial Statements | Consolidated Cash Flow Statement
Net cash used in operating activities
Investing activities
Investment in joint venture/associate
Cash flows arising from loss of control of subsidiary
Loan notes (loan to joint venture)
Purchases of property, plant and equipment
Capital grants received against purchases of non-current assets
Proceeds on disposal of property, plant and equipment
Payments for intangible assets
Interest received
Net cash used in investing activities
Financing activities
Issue of ordinary share capital
Costs associated with previous equity raise
Payment of lease liabilities
Net cash (used in)/from financing activities
(Decrease)/increase 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
The notes on pages 97 to 116 form part of these financial statements.
96
ITM Power PLC | Annual Report 2023
Note
27
12
13
24
2023
£000
(72,554)
(472)
—
—
(8,553)
124
—
(6,562)
4,562
(10,901)
1,048
(612)
(531)
(95)
(83,550)
365,882
225
282,557
2022
£000
(38,155)
(1,838)
(993)
(1,899)
(4,119)
150
352
(7,036)
304
(15,079)
250,000
(6,800)
(69)
243,131
189,897
176,078
(93)
365,882
Financial Statements | Notes to the Consolidated Financial Statements
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 2 Bessemer Park, Sheffield, South Yorkshire, S9 1DZ. The nature of the operations and principal activities of
the Company and its subsidiaries (together “the Group”) are disclosed in the Strategic Report.
These financial statements are presented in Pounds Sterling, which is the currency of the primary economic
environment in which the Group operates.
2. Adoption of new and revised standards
Amendments to International Financial Reporting Standards (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):
@ IFRS 3 Amendments to References to the Conceptual Framework (effective for periods beginning on or after
1 January 2022);
@ IAS 16 Amendments to Property, Plant and Equipment – Proceeds before Intended Use (effective for periods
beginning on or after 1 January 2022);
@ IAS 37 Amendments to Onerous Contracts – Cost of Fulfilling a Contract (effective for periods beginning on
or after 1 January 2022); and
@ Annual Improvements to IFRS Standards 2018-2020, affecting IFRS 1, IFRS 9, IFRS 16 and IFRS 41 (effective for
periods beginning on or after 1 January 2022).
These standards have not had a material impact on the entity in the current reporting period.
Consolidated Financial Statements is determined on such a basis, except for share-based payment transactions that
are within the scope of IFRS 2 and measurements that have some similarities to fair value but are not fair value, such
as net realisable value in IAS 2 or value in use in IAS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as follows:
@ Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity
can access at the measurement date;
@ Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset
or liability, either directly or indirectly; and
@ Level 3 inputs are unobservable inputs for the asset or liability.
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.
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 2023
reporting periods and have not been early adopted by the Group. These standards are not expected to have a material
impact on the entity in the current or future reporting periods or on foreseeable future transactions:
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:
@ IAS 1 Classification of Liabilities as Current or Non-Current (effective for periods beginning on or after 1 January 2023);
@ IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting Policies from Significant to Material (effective for
periods beginning on or after 1 January 2023); and
@ IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective for periods
beginning on or after 1 January 2023).
3. Significant accounting policies
Basis of accounting
The Consolidated Financial Statements have been prepared in accordance with UK-adopted international
accounting standards and with the requirements of the Companies Act 2006 as applicable to companies reporting
under those standards.
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 at that time.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into
account the characteristics of the asset or liability if market participants would take those characteristics into account
when pricing the asset or liability at the measurement date. Fair value for measurement purposes in these
@ 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.
Total comprehensive income of the subsidiaries is attributed to the owners of the Company.
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 intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between the
members of the Group are eliminated on consolidation.
ITM Power PLC | Annual Report 2023
97
3. Significant accounting policies continued
Going concern
The Directors have prepared a cash flow forecast for the period from the balance sheet date until 31 August 2024.
This forecast indicates that the Group would expect to remain cash positive without the requirement for further
fundraising based on delivering the existing pipeline.
By the end of the period analysed, the Group is forecast to hold significant cash reserves. This should give
the business sufficient funds to trade for the going concern period if the business continues according to its
medium-term business plan.
The business continues in a cash outflow position, using funding generated from previous fundraises. As such, this
cash flow forecast was stress-tested, both for a worst-case scenario of no receipts and inflationary pressures on
utilities and purchases. In all the scenarios tested, the business would remain cash positive for the 12 months from
the date of approval of these financial statements.
The accounts have therefore been prepared on a going concern basis.
Revenue recognition
Product sales
ITM Power undertakes sales of three main products (containerised plug and play systems, electrolyser units or
stack and skid solutions) that involve manufacture followed by varying degrees of integration, installation and
commissioning over a period of several months. Systems are quoted to the customer as a single value or as
individual units, stacks or skids. Both types of sale will be split into agreed payment milestones to facilitate cash
flow. Performance obligations are identified according to the separability of the items being provided. Any
ancillary requests, e.g. for training, will be treated as separate performance obligations if they can be separately
identified and measured and the revenue value is also quoted separately.
Under IFRS 15, a performance obligation is satisfied over time if one of the following criteria is met:
a)
b)
c)
the customer simultaneously receives and consumes the benefits provided by the seller’s performance
as the seller performs;
the seller’s performance creates or enhances an asset that the customer controls as the asset is created
or enhanced; or
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 bespoke in reference to point (c) above:
@ Bespoke contracts by their nature do not create an asset with an alternative use to the seller; 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
views 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. Any differences between the revenues
recognised and the milestone billings will result in contract assets/liabilities (shown as accrued or deferred income
on the balance sheet).
@ Most of our newer projects involve standard products. Revenue from standard products will be recognised at point
in time, only when identified performance obligations for distinct goods or bundles of goods have been fulfilled
and ownership of the goods has transferred, i.e. at the official handover of control of a working machine 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 until that point. Contracts will be reviewed at inception and
with each variation or additional purchase order to ascertain when the performance obligation(s) will be met,
e.g. following factory acceptance testing and notification of readiness for dispatch if the customer is collecting
and installing the goods themselves or, if we are committed to more involvement with the installation on site,
following site acceptance testing. In the meantime, income from progress billings and advances received from
customers will be reflected in the balance sheet as contract liabilities (deferred income). 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 so long as they are considered recoverable and only 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.
ITM Power supplies units with a standard 12-month warranty although some jurisdictions will require this to be
adjusted to 24 months. This 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 to minimise the time and expense associated with travel to the site. The warranty period start date
should be defined in the original contract but will usually reflect the date of official handover to the customer.
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.
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 the 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 aims to limit the right of rejection once a customer has accepted the unit
under either factory acceptance testing (for ex-works or FCA Sheffield) or site acceptance testing. Up until that time,
contractual obligations would protect our right to recognise revenues for work performed to date. Remedy for any
dissatisfaction would 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 IFRS 15
is met as referred to above.
98
ITM Power PLC | Annual Report 2023
Financial Statements | Notes to the Consolidated Financial Statements continued 3. Significant accounting policies continued
Revenue recognition continued
Consulting contracts
Larger systems or those where the system will need to perform to new conditions, are sometimes preceded by a
design study or a front-end engineering design (FEED) contract that defines solutions to customer specifications.
With ITM Power’s equipment being part of the solution, our expertise is often required to feed in to these studies.
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.
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). The presentation currency of the Consolidated Financial
Statements is Pounds Sterling. 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 in terms of
historical cost in a foreign currency are not retranslated.
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 and are 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.
Investment in associates and joint ventures
These are companies where ownership is 50% or less but significant influence is retained. Significant influence is the
power to participate in the financial and operational policy decisions of the investee but is not control over those
policies. Joint ventures will allow for joint control as no one party has overall control, but where there is no control,
the investment is referred to as an associate. Both joint ventures and investments in associates are accounted for
using the equity method.
ITM Power PLC | Annual Report 2023
99
Financial Statements | Notes to the Consolidated Financial Statements continued 3. Significant accounting policies continued
Investment in associates and joint ventures continued
The investment 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 investee entity, adjusted where necessary to ensure consistency with
the accounting policies of the Group. When the Group’s share of losses of an investment exceeds the Group’s interest
in that entity, 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
investment entity. The Group will also discontinue its recognition of losses at the point that it announces its intention
to sell the investment, at which point it would be transferred as held for sale.
As per IAS 28, the investment 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 cash flows 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.
Right of use assets
Right of use assets are recognised at the total value of the 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 Group 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 over the lease term in administrative expenses.
Property, plant and equipment
Leasehold improvements, laboratory and test equipment, production plant and equipment, computer equipment
and office furniture and 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. These assets are not
depreciated but are subject to impairment review. Once completed and ready for their intended use, the assets are
transferred into other asset categories and depreciated accordingly.
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.
Depreciation is charged through administrative expenses on the income statement so as to write off the cost of
assets, other than land and assets under construction, over their estimated useful lives, using the straight-line
method, on the following bases:
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 (in line with
the Group policy for computer equipment), using the straight-line method. This is recognised in administrative
expenses.
Internally generated intangible assets – development costs and know-how
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.
Once completed, development costs transfer into the category of know-how. 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
administrative expenses 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 Group’s
products. If not, an impairment will be recognised. Where no internally generated intangible asset can be recognised,
development expenditure is recognised as an expense in the period in which it is incurred.
Category
Laboratory and test equipment
Production plant and equipment
Computer equipment
Office furniture and fittings
Period
5 to 8 years
5 to 8 years
3 years
10 years
Leasehold improvements
10 years or lease term
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 also recognised in administrative expenses on the income
statement.
Impairment of tangible and intangible assets
Assets under construction and development costs are not yet complete and in use. They are therefore not subject
to depreciation or amortisation. Instead, development costs are tested at least annually for impairment. Also, at each
balance sheet date, the Group reviews the carrying amounts of its other tangible and intangible assets to determine
whether there is any indication of impairment. 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 the higher of fair value less costs to sell and
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
also recognised immediately in administrative expenses.
100 ITM Power PLC | Annual Report 2023
Financial Statements | Notes to the Consolidated Financial Statements continued
3. Significant accounting policies continued
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 standard cost method. Net realisable value represents the estimated
selling price less all estimated costs of completion.
Inventory obsolescence
It is recognised that parts can be held in the business for a number of reasons, not least the contractual requirements
of our warranty and aftersales provisions. Stocked items are therefore classified into four different categories: those
actively in use in our bills of material, those that can be used for product development work, discontinued items that
may not be part of active bills of material but still have demand through maintenance and aftersales work on legacy
equipment, and finally redundant parts. The first three categories still hold value for the business and will be
maintained at cost, whilst redundant inventory will be fully written down. The provision can be further refined, for
example if the discontinued category begins to exceed contractual obligations a provision would be made against
the surplus items.
Financial assets
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 of which the Group holds financial instruments in two:
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.
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 in trade receivables and contract assets (accrued sales income). For trade receivables only, the Group
applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from
initial recognition of the receivables. An analysis of historical default amongst our trade receivables was conducted
and showed that less than 1% of sales over several years have resulted in default. The Group continues to trade with
large entities with good credit scores but trading data is monitored annually to ensure that there are no significant
changes to this percentage.
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.
Assets held for sale
In line with IFRS 5, non-current assets classified as held for sale are presented separately and measured at the lower
of their carrying amounts immediately prior to their classification as held for sale and their fair value less costs to
sell. Financial assets will continue to be measured in accordance with the Group’s relevant accounting policy for
those assets.
During the year, both the investment in Motive and the loan notes associated with that entity were moved to this
category. The carrying amount of the investment reflected its cost less share in the entity’s loss. This had reduced
the asset considerably so the balance was deemed to represent the lower of the two measurements for recognition
of the held for sale asset. Upon announcement, we ceased to recognise any further losses against it. The loan notes
continued to be recognised with the interest they accrued and net of a lifetime expected credit loss amount in line
with IFRS 9.
Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group 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.
Derivative financial instruments
The Group enters into derivative financial instruments to manage its exposure to foreign exchange rate risk.
These are not deemed to be effective hedging instruments to be matched off against a related asset or liability
but rather as stand-alone financial assets or liabilities at fair value through profit and loss. Within the financial
statements, therefore, this portfolio of contracts will be shown as either an asset or liability on the balance sheet,
with a corresponding gain or loss through the income statement, depending on how the contractual rate of
exchange compares with the year-end rate.
Leases
At inception of a contract, the Group assesses whether it conveys the right to control the use of an identified asset
– and obtain substantially all of the economic benefits from use of the asset – for a period of time in exchange for
consideration. In this instance the contract should be accounted as a lease.
The Group recognises a right of use asset and a lease liability at the lease commencement date. The right of use asset
is recognised at cost and is subsequently depreciated using the straight-line method over the lease term.
The lease liability is initially measured at the present value of the lease payments and discounted using the interest
rate implicit in the lease or, if that rate cannot be determined, the Group’s incremental borrowing rate or best
estimate of the same. The lease liability continues to be measured at amortised cost using the effective interest
method. It is remeasured when there is a change in the future lease payments. When the lease liability is remeasured
in this way, a corresponding adjustment is made to the carrying amount of the right of use asset.
The Group has elected not to recognise right of use assets and lease liabilities for leases of less than 12 months and
leases of low-value assets. These largely relate to short-term rentals of equipment to undertake our field activities.
The Group recognises the lease payments associated with these leases, together with any property service charges
and storage fees, as an expense on a straight-line basis over the lease term (see Note 6).
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Financial Statements | Notes to the Consolidated Financial Statements continued 3. Significant accounting policies continued
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.
The Group also recognises a provision for Employer’s National Insurance Contributions (NIC) that becomes payable on
the exercise of share options granted under the Group’s non-tax advantaged share plans, to the extent that the
liability has not been transferred to the employees. Where a liability is due, 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 accrued over the vesting period.
For options granted prior to 2020, the Group has agreed that settlement of 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. For option grants from 2020, the employees have
agreed to pay any Employer’s NIC liability that is due on exercise of their options. As such a separate reimbursement
asset is recognised for this recoverable amount.
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 ongoing 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.
102 ITM Power PLC | Annual Report 2023
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.
Capitalisation and impairment 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 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. There is also judgement to be made as to when costs
should cease to be capitalised and the asset amortised, especially on phased projects of continual improvement to our
core technology. See Note 14.
In the year, the Group also looked to reduce its product lines in order to streamline its operations. Thus, the intangible
assets were reviewed for potential impairment. Assets were identified where the Group would no longer obtain future
benefit from their completion, with the result that £3.1m was impaired.
Key sources of estimation uncertainty
Inventory provisions
In the prior year, the Directors refined their estimation technique for the provision of inventory obsolescence. Stocked
items are classified into four different categories: those actively in use in our bills of material, those that can be used
for product development work, discontinued items that may not be part of active bills of material but still have demand
through maintenance and aftersales work on legacy equipment, and finally redundant parts. The first three categories
still hold value for the business and are maintained at cost, whilst redundant inventory is fully written down. The provision
can be further refined, for example if the discontinued category began to exceed our contractual obligations. Both the
categorisation of inventory and the recognition of excess inventory require management judgement.
A further judgement by management is the assessment of likelihood of obsolescence. The value of inventory held in
development or discontinued categories was £15.7m. Management have reviewed these listings and have assessed
that the inventory held continues to have a use in the business and is therefore not redundant.
In the current year, the inventory provision represents redundant inventory only as no inventory holdings for
aftersales purposes were running at a surplus. See Note 17.
Provisions
Note 23 gives details of the amounts currently recognised under five different categories of provision. Management
has particularly considered the following in relation to key estimates:
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 during the warranty period. These assumptions are built
upon our ongoing assessment of the performance of our products and their components both in the field and in our
testing facilities. They are reviewed and revised as more information becomes available. If it becomes known that
additional work is required, then the provision is extended. Risks around this judgement are high given the limited data
ITM Power has available, and the potentially large values involved in making warranty repairs, particularly if stack
components require replacement. The assumptions made for the warranty provision were based on field data from older
generation stacks, adjusted to take account of product improvements planned or implemented since they were built.
Management believes that these improvements are realistic and deliverable within the timescales projected. However,
should new generation stacks deliver none of these improvements then warranty costs may cost a further £7m for the
projects installed or contracted at year end, which would be charged to the Income statement, and split across
provisions for warranty or contract loss depending on whether the plant had achieved handover to a customer. Other
variables include timing and efficiency of planned process optimisations, recoverability of parts and precious metals,
visits and delivery costs to site, and whether any efficiencies can be found from resolving more than one issue per visit.
Financial Statements | Notes to the Consolidated Financial Statements continued 4. Critical accounting judgements and key sources of estimation uncertainty continued
Key sources of estimation uncertainty continued
Provisions continued
A provision for onerous contracts (contract losses) has been recognised in line with the requirements of IAS 37, given
the expected costs to complete 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 offset the future costs of the project as it nears completion. Furthermore, the Group
uses software to track the risks and opportunities of each project. This gives a potential cost and risk rating for active
risks and has been reviewed by management at year end to determine if any additional contingency should be
recognised on projects. In addition, on certain longer term projects, costings have been made including projected
savings through procurement volumes, manufacturing efficiencies (with semi automation) and technology gains.
In all, expected savings of c.£7m have been assumed on the execution of these projects. All projected savings have
been aligned and tested against the manufacturing and technology roadmaps of the company. A sensitivity analysis
was performed on the current provision and future forecast costs. If forecasted costs were to increase by 10%, the
provision would need to increase by £6.4m (2022: £4.3m).
5. Revenue, operating segments and 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
Consulting contracts recognised over time
Maintenance contracts recognised at a point
in time
Fuel sales
Other (e.g. scrap sales)
Revenue in the Consolidated
Income Statement
Grant income (claims made for projects)
Other government grants (R&D claims)
Other income – government grants
2023
£000
155
1,419
£000
—
4,099
636
250
244
—
5,229
1,574
6,803
2022
£000
271
289
£000
808
1,231
2,948
43
229
368
5,627
560
6,187
At 30 April 2023, the aggregate amount of the transaction price allocated to remaining performance obligations of
continuing build contracts was £87.7m (2022: £42.0m). The Group expects to recognise 32% of this within one year,
with the remaining 68% expected after 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 Group-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, Transport and Industry). Revenue
reporting has begun to look at these three sectors to assess the commerciality of those sales. However, decisions for
resourcing cannot be made by reference to these segments. The Group operates a single factory in the UK 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.
An analysis of the Group’s revenue, by major product (or customer group), is as follows:
Power
Transport
Industry
Other
Revenue in the Consolidated Income Statement
2023
£000
126
2,717
1,750
636
5,229
2022
£000
207
1,704
507
3,209
5,627
The “Other” category contained a large consultancy project in the prior year, involving design and FEED studies for
larger scale product manufacture. This consultancy embarked on a new phase in the current year.
Geographical analysis
The United Kingdom is the Group’s country of domicile but the Group also has subsidiary companies in the United States,
Germany and Australia. All non-current tangible assets were domiciled in the United Kingdom (NBV: £20.5m) or Germany
(NBV: £0.02m). All intangible assets were domiciled in the United Kingdom. Revenues have been generated as follows:
United Kingdom
Germany
Rest of Europe
United States
Australia
2023
£000
699
1,750
188
244
2,348
5,229
Included in revenue are the following amounts, which each accounted for more than 10% of total revenue:
Customer A
Customer B
Customer C
Customer D
Industrial
Other
Refuelling
Refuelling
2023
£000
1,750
636
n/a
2,348
2022
£000
3,359
770
246
22
1,230
5,627
2022
£000
n/a
2,840
673
n/a
Except where extended warranties have been purchased and treated as separate performance obligations for
the purpose of IFRS 15 ‘Revenue from Contracts with Customers’, warranty commitments are disclosed in Note 23.
ITM Power PLC | Annual Report 2023
103
Financial Statements | Notes to the Consolidated Financial Statements continued 6. Loss for the year
Loss for the year has been arrived at after charging/(crediting):
Whilst costs have been shown on the income statement under a single function heading, the following table shows
them split down by nature:
Net foreign exchange (gain)/loss
Fair value loss/(gain) on forward contracts
Fair value loss on loan notes
Share-based payment (credit)/charge (Note 26)
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of intangible assets
Impairment of tangible assets
Impairment of intangible assets
Research and non-capitalised development costs
(Reversal of)/charge for expected credit loss (trade receivables)
Reversal of expected credit loss on prepaid suppliers
Loss on disposal of property, plant and equipment
Loss on disposal of Motive
Rentals under short-term leases:
– Land and buildings
– Other equipment
Staff costs (Note 8)
Cost of inventories recognised as an expense
Movement on obsolete inventory provision
2023
£000
(201)
127
—
(420)
2,273
733
942
1,381
3,088
1,059
(7)
—
64
—
153
1,187
13,504
23,335
16,893
2022
£000
386
(136)
344
1,429
1,628
711
849
—
—
1,383
1
(100)
—
1,710
58
219
14,482
5,690
1,417
Cost of sales
Materials
Labour
Other bought-in items
Contract provisions
Total cost of sales
Administrative expenses
Staff and employment costs
Consultancy and consumables
Building overheads
Depreciation
Amortisation
Loss on disposal of non-current assets
Impairment
Other
2023
£000
26,483
3,887
2,779
51,145
84,294
2023
£000
11,449
5,070
1,283
3,006
942
64
4,469
(61)
2022
£000
3,862
4,303
17,738
3,201
29,104
2022
£000
4,315
11,225
2,564
2,340
849
—
—
525
Total administrative expenses
26,222
21,818
Within direct costs, the prior year figures have been restated to include movement on all provisions within the same
line. Previously, movement on the provision for loss sat within other bought-in items to ensure consistency of
reporting under our old accounting system.
104 ITM Power PLC | Annual Report 2023
Financial Statements | Notes to the Consolidated Financial Statements continued 6. Loss for the year continued
Calculation of Adjusted EBITDA
In reporting EBITDA, Management uses the metric of adjusted EBITDA. This calculation additionally aims to remove
the effect of non-repeating costs that are not directly linked to the ongoing trade of the business in the year under
review and as such helps to provide a more direct comparison with which to measure the performance of our core
business against previous years:
Loss from operations
Add back:
Depreciation
Amortisation
Fair value loss on loan notes
Loss on disposal of non-current assets
Impairment
Non-underlying share-based payment (credit)/charge (Note 26)
Exceptional costs of restructure
2023
£000
2022
£000
(103,713)
(44,736)
3,006
942
—
64
4,469
(420)
1,436
2,340
849
344
—
—
1,429
—
(94,216)
(39,774)
The exceptional costs of restructure refer to redundancy costs that largely sit within the staff costs line in
administrative expenses. Management removed these in the adjusted EBITDA calculation due to their one-off nature
that would otherwise distort the true operational figures.
7. Auditor’s 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)
– Assurance fee on corporate finance transaction
Total non-audit fees
2023
£000
206
41
247
40
—
40
2022
£000
137
33
170
55
125
180
8. Remuneration of Directors and employees
Directors
Fees/ basic salary plus bonuses earned in the year
Pension contributions
Compensation for loss of office
Aggregate emoluments
2023
£000
2,372
103
155
2,630
2022
£000
1,576
71
—
1,647
Salary figures detailed here are after salary exchange for pensions. Consequently, the pension figures are employer
contributions inclusive of those salary exchange amounts.
More detail is provided on Directors’ remuneration and share options within the Remuneration Report.
Gains made by Directors exercising share options in the current year:
Director
G Cooley
G Cooley
Type of share Number of shares
exercised
option
Unapproved
Unapproved
3,000,000
307,500
Exercise
price
Market price at
date of exercise
Gain made
£000
30p
48p
115.54p
113.04p
2,447
200
During the year, five Directors participated in these long-term incentive plans (2022: four). There were no exercises in
the prior year.
Four Directors also participated in the Group BAYE scheme (2022: four) and received matching shares. Four Directors
were members of money purchase pension schemes during the year (2022: three).
Remuneration of the highest paid Director
Salary plus bonuses earned in the year
Compensation for loss of office
Aggregate emoluments
2023
£000
721
105
826
Gains made by the highest paid Director exercising share options in the year were £2.6m (2022: £Nil).
2023
£000
Key management personnel (including Directors)
Short-term employee benefits
Termination benefits
Post-employment benefits
Share based payment expense
Total costs for key management personnel
721
3,666
155
135
(1,219)
2,737
2022
£000
472
—
472
2022
£000
472
1,916
—
77
686
2,679
ITM Power PLC | Annual Report 2023
105
Financial Statements | Notes to the Consolidated Financial Statements continued 8. Remuneration of Directors and employees continued
Monthly average number of persons employed
2023
Number
2022
Number
The charge for the year can be reconciled to the income statement as follows:
– Research and development
– Production and engineering
– Sales and marketing
– Administration
Staff costs during the year (including all key management personnel)
Wages and salaries
Social security costs
Other pension costs
Share-based payment expense
Less: staff costs capitalised
Staff costs expensed in the year
107
224
24
60
415
2023
£000
20,776
2,877
1,950
(1,614)
23,989
(10,485)
13,504
86
184
20
48
338
2022
£000
14,893
1,694
1,259
1,429
19,275
(4,793)
14,482
Loss before tax
Tax on loss at 25% (2022: 19%)
Factors affecting (charge)/credit for the year:
Expenses not deductible for tax purposes
Fixed asset differences
Tax charge on current year RDEC claim
Adjustments in respect of prior years
Unrelieved tax losses carried forward
Tax charge for the year
Factors affecting future tax charges
The Group has tax losses of approximately £210.3m (2022: £99.8m) available to carry forward against future taxable
profits, subject to agreement with HM Revenue & Customs. Deferred tax would have been calculated at a rate of 25%
following substantive enactment in May 2021. However, a deferred tax asset has not been recognised as it is not yet
probable that there will be sufficient future taxable profit to utilise the tax benefit.
2023
£000
(101,169)
(25,292)
(17)
763
26
6
24,546
32
2022
£000
(46,663)
(8,866)
332
445
31
—
8,089
31
As at 30 April 2023 pension contributions of £155,000 (2022: £123,000) 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.
11. Loss per share
The calculation of the basic and diluted earnings per share is based on the following data:
9. Finance income and costs
Finance income
Interest received on cash deposits
Finance cost
Interest paid
Lease liability interest paid
Net finance income/(costs)
10. Tax
Current taxation
Tax charge in the year
Tax charge relating to prior years
2023
£000
£000
2022
£000
(55)
(486)
4,652
(541)
4,111
(41)
(491)
2023
£000
26
6
32
£000
325
(532)
(207)
2022
£000
31
—
31
Corporation tax is calculated at 25% (2022: 19%). Taxation for other jurisdictions is calculated at the rates prevailing in
the respective jurisdictions.
106 ITM Power PLC | Annual Report 2023
Loss for the purposes of basic and diluted loss per share being net loss
attributable to owners of the Company
Number of shares
Weighted average number of ordinary shares for the purposes of basic
and diluted earnings per share
Loss per share
2023
£000
2022
£000
(101,201)
(46,694)
614,683,780
576,699,822
16.5p
8.1p
The loss per ordinary share and diluted loss per share are equal because share options are only included in the
calculation of diluted earnings per share if their issue would decrease the net profit per share. The number of
potentially dilutive shares not included in the calculation above due to being anti-dilutive in the years presented
was 5,999,019 (2022: 45,064,658).
12. Investments in associates and joint ventures
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 associates and joint ventures
ITM Linde Electrolysis GmbH (associate)
Motive Fuels Limited (joint venture)
2023
£000
379
—
379
2022
£000
60
1,602
1,662
Financial Statements | Notes to the Consolidated Financial Statements continued 12. Investments in associates and joint ventures continued
Below we provide information regarding the performance of the investment in associate within the year:
ITM Linde Electrolysis GmbH
Cost brought forward
Additions
Foreign exchange
50% share of loss recognised in the year
2023
£000
60
439
33
(153)
379
2022
£000
259
—
(21)
(178)
60
The above amounts relate to ITM Linde Electrolysis GmbH (“ILE”) which is incorporated in Germany, with registered
office Bodenbacher Str. 80, 01277 Dresden, Germany. Interest in ILE is split 50:50 with Linde Engineering GmbH,
although control is deemed to lie with Linde for the purposes of consolidation as it appoints the Managing Director.
ITM Power has significant influence in ILE due to its representation on the company’s board of directors.
The investment is therefore an equity-accounted investment in associate but will be subject to impairment review.
In the current year, there were no triggers to warrant an impairment review.
Motive Fuels Limited (“Motive”) is incorporated in the UK, with registered office AMP Technology Centre, Brunel Way,
Catcliffe, Rotherham, S60 5WG. Motive became a joint venture in March 2022 when Vitol Holding SARL matched our
shareholding in the entity. Interest in Motive is split 50:50, with no single party having control. ITM Power has
significant influence and joint control in Motive due to its equal representation on the company’s board of directors
and rights to the net assets.
The investment was therefore treated as a joint venture that is equity-accounted and subject to impairment review.
In the current year, losses have been capped at the value of the investment.
ITM Power (Trading) Limited continues to pay for and recharge some of the overheads of Motive. This has resulted
in charges of £367,000 in the year (2022: £183,000 in the period), of which £190,000 (2022: £183,000) remained
outstanding at the year end. It has also received payments from Motive’s customers (total £33,000) and paid them
over during the year.
However, during the year ITM Power announced its intention to sell its investment. At that point we ceased to recognise
any further losses and removed the asset from investments to be shown instead as held for sale (see Note 21).
Key financial data of Motive (N.B. prior year income statement figures shown are for the period since the transaction
with Vitol when Motive was trading as a joint venture, while current year figures show the full financial year):
Key financial data of ILE:
ITM Linde Electrolysis GmbH
Non-current assets
Current assets
Current liabilities
Revenue
Loss from continuing operations
30 April 2023
£000
30 April 2022
£000
7
8,314
(7,689)
1,356
(308)
11
6,553
(6,425)
2,397
(355)
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Revenue
(Loss)/profit from operations
Balance sheet figures were translated from Euros using the year-end exchange rate of 1.14 (2022: 1.18). Revenue and
loss figures were translated using an average exchange rate of 1.15 (2022: 1.18).
During the year, ITM Power continued to pay for the hosting of ILE’s website. Invoices for progress billings of £0.9m
were raised to ILE with £0.9m outstanding at year end. Further cash injections are planned to the end of the calendar
year, equating to €500,000 by each party.
Also included within investments at the start of the year:
Loan notes
13. Loan notes
ITM Power PLC and Vitol also each granted loan notes to Motive Fuels Limited. These are accruing interest at 1.5%
above SONIA. Loans are granted for a period of 10 years without expectation of repayment for at least three full
financial years.
30 April 2023
£000
30 April 2022
£000
1,560
3,516
(941)
(3,637)
826
(3,751)
1,112
7,864
(862)
(3,410)
22
334
2023
£000
—
2022
£000
1,548
Motive Fuels Limited
Cost brought forward
Additions
50% share of (loss)/profit recognised in the period
Transferred to assets held for sale
2023
£000
1,602
—
(1,414)
(188)
—
2022
£000
—
1,434
168
—
1,602
The loan notes are held at amortised cost and after provision for expected credit loss under IFRS 9 of £15,000, which
remained unchanged from the prior year. There were no new loans issued in the financial year and no further loan
notes are now planned. The loan notes have been moved to assets held for sale in the current year (see Note 21).
ITM Power PLC | Annual Report 2023
107
Financial Statements | Notes to the Consolidated Financial Statements continued 14. Intangible assets
Cost at 1 May 2021
Transfers
Additions
Grant received
Transferred to Motive
Cost at 1 May 2022
Transfers
Additions
Disposals
Grant received
Cost at 30 April 2023
Amortisation at 1 May 2021
Charge for the year
Transferred to Motive
Amortisation at 1 May 2022
Charge for the year
Impairment
Disposals
Amortisation at 30 April 2023
Carrying amount at 30 April 2023
Carrying amount at 30 April 2022
Software
£000
Know-how
£000
Development
costs
£000
Total
£000
15. Right of use assets
Leasehold
property
£000
Leased
vehicles
£000
Office
equipment
£000
140
—
282
—
(55)
367
—
—
(16)
—
351
88
89
(10)
167
80
—
(2)
245
106
200
2,795
542
—
—
(231)
3,106
2,132
—
—
—
5,238
629
760
(51)
1,338
862
—
—
2,200
3,038
1,768
1,051
(542)
6,754
(150)
—
7,113
(2,132)
6,562
—
(124)
11,419
—
—
—
—
—
3,088
—
3,088
8,331
7,113
3,986
Cost at 1 May 2021
—
Additions
7,036
Transferred to Motive
(150)
(286)
10,586
—
6,562
(16)
(124)
17,008
717
849
Disposals
Cost at 1 May 2022
Additions
Adjustments
Disposals
Cost at 30 April 2023
Depreciation at 1 May 2021
Foreign exchange
Charge for the year
Transferred to Motive
(61)
Disposals
1,505
942
3,088
(2)
5,533
11,475
9,081
Depreciation at 1 May 2022
Charge for the year
Disposals
Depreciation at 30 April 2023
Net book value at 30 April 2023
Net book value at 30 April 2022
7,437
896
(292)
(214)
7,827
1,286
(96)
—
9,017
1,147
—
637
(24)
(214)
1,546
653
—
2,199
6,818
6,281
144
122
—
(24)
242
1
—
(37)
206
81
(8)
65
—
(24)
114
60
(35)
139
67
128
48
8
—
—
56
24
—
—
80
2
—
9
—
—
11
20
—
31
49
45
Total
£000
7,629
1,026
(292)
(238)
8,125
1,311
(96)
(37)
9,303
1,230
(8)
711
(24)
(238)
1,671
733
(35)
2,369
6,934
6,454
The Group currently holds right of use assets in both the UK (four properties, seventeen vehicles and office equipment
at two sites) and Germany (one property and three vehicles).
Right of use assets are depreciated over their lease term.
Before year end the Group signed an agreement to lease Unit 3 Bessemer Park. The lease itself has not yet been
signed and the building is still under construction; hence no corresponding asset is yet available to be recognised
under IFRS 16. Instead, see Note 29 – Capital commitments.
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.
During the year we continued the development of our 3MEP 30bar designs (£3.0m capitalised, resulting in a total of
£6.2m in the year-end balance) as well as analysis of the associated materials and development of the processes that
would enhance the efficiency of their production.
Impairment considerations
During the year, Management reconsidered the focus of our development work and the recoverability of its internally
generated intangible assets. This led to the impairment of projects that would no longer benefit the Group’s new
direction for product sales.
For the remaining assets, Management considered fair value less costs to sell based on an adjusted market
capitalisation of the Group. Given that the assets held make up the intellectual property that is key to potential future
revenue generation of the Group and are thus intrinsic to its valuation, no further impairment was deemed necessary.
108 ITM Power PLC | Annual Report 2023
Financial Statements | Notes to the Consolidated Financial Statements continued 17. Inventories
Raw materials
Work in progress
2023
£000
18,308
40,532
58,840
2022
£000
24,311
7,887
32,198
Inventories have been stated after a provision for impairment of obsolete inventory of £17.8m (2022: £2.7m).
Included in work in progress is inventory that has yet to be assigned to a specific contract. At the point that the work
in progress is assigned to a contract, and it is loss-making, the work in progress will be reduced to recoverable value,
which will be offset by an equal and opposite reduction in the contract loss provision. Inventory has increased as we
have continued to scale up production towards contract fulfilment.
18. Contract balances and performance obligations
Contract revenue recognised through release from deferred income was £3.6m (2022: £3.2m).
Contracts with customers in progress at the balance sheet date
13,785
4,871
32,174
Amounts due from contract customers included in trade and other receivables
2,855
(1,089)
5,266
16,828
(1,675)
(3,506)
Contract assets (accrued income)
Contract liabilities (deferred income)
—
1,628
Balance sheet position of sales contracts
2023
£000
2,195
839
(31,365)
(28,331)
2022
£000
2,897
1,189
(17,258)
(13,172)
16. Property, plant and equipment
Production
plant and
equipment
£000
Laboratory
and test
equipment
£000
Office
Computer furniture and
fittings
equipment
£000
£000
Cost at 1 May 2021
Additions
Transferred to Motive
Disposals
Foreign exchange
Cost at 1 May 2022
Additions
Transfers
Disposals
Foreign exchange
Cost at 30 April 2023
Depreciation at 1 May 2021
Disposals
Charge for the year
Transferred to Motive
Foreign exchange
Depreciation at 1 May 2022
Disposals
Charge for the year
Impairment
Foreign exchange
Depreciation at
30 April 2023
Net book value at
30 April 2023
Net book value at 30 April 2022
7,579
452
(3,311)
(393)
(1)
4,326
2,441
1,913
—
1
8,681
5,894
(393)
277
(3,311)
1
2,468
—
680
—
—
2,257
1,283
423
—
(27)
—
2,653
99
—
—
—
2,752
1,821
(27)
120
—
—
1,914
—
174
—
—
500
(35)
(322)
(1)
1,425
131
1
(26)
1
1,532
882
(322)
283
(4)
1
840
(10)
332
—
(1)
3,148
2,088
1,161
5,533
1,858
664
739
371
585
322
217
(23)
—
—
516
38
—
(1)
—
553
110
—
35
—
—
145
—
49
—
—
194
359
371
Leasehold
Assets in the
course of
improvements construction
£000
£000
13,514
692
—
(1,089)
(1)
13,116
239
467
(38)
1
5,387
1,956
(4,021)
(1,675)
—
1,647
5,605
(2,381)
—
—
Total
£000
30,342
4,240
(7,390)
(3,506)
(3)
23,683
8,553
—
(65)
3
913
—
—
2,679
(4)
1,038
—
—
(3,591)
(6,906)
—
—
—
—
1,381
—
2
8,046
(14)
2,273
1,381
(1)
3,713
1,381
11,685
10,072
10,437
3,490
20,489
1,647
15,637
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
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 – whether at
factory or at site – for all standard products) will cause increasing values to remain in deferred income for longer.
19. Trade and other receivables
Trade receivables
Impairment for credit risk
Total trade receivables
Restricted cash balances
Other receivables
Forward contracts
R&D relief claims receivable
Prepayments
Amounts recoverable from employees
Accrued sales income
Accrued grant income
2023
£000
2,591
(52)
£000
2,539
774
3,091
—
1,813
7,879
20
839
2,702
19,657
2022
£000
3,535
(60)
£000
3,475
297
2,459
127
426
11,972
2,186
1,189
3,411
25,542
ITM Power PLC | Annual Report 2023
109
Financial Statements | Notes to the Consolidated Financial Statements continued 19. Trade and other receivables continued
Prepayments include £7.3m (2022: £10.7m) paid upfront by way of pro forma and stage payments to suppliers
for the long lead time items required on our build projects.
Amounts recoverable from employees relates to the Employer’s NIC on share options where, under the terms
of the offer, staff will cover this cost upon exercise.
Other receivables represent indirect taxes reclaimable by the Group.
Restricted cash balances previously referred to monies received from customers that were sat on bank guarantee
until specific performance milestones were met on product sales contracts. In the current year, however, the amount
refers to cash cover for a bank guarantee relating to a refund of Italian VAT.
Trade receivables are measured at amortised cost. Their ageing is analysed as follows:
Less than 30 days
31–60 days
61–90 days
Greater than 91 days
2023
£000
390
1,318
—
883
2,591
2022
£000
2,066
243
—
1,226
3,535
With reference to the highest trade receivable balance at the year end, the Group had a debtor concentration of 29%
(2022: 29%).
Movement in expected credit loss
Brought forward balance at 1 May
Impairment losses recognised
Movement on credit risk provision
Balance at 30 April
2023
£000
60
19
(27)
52
2022
£000
59
17
(16)
60
20. Cash and cash equivalents
Cash and cash equivalents
2023
£000
2022
£000
282,557
365,882
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.
21. Assets held for sale
On 30 January 2023, ITM Power announced its intention to sell its investment in Motive Fuels Limited. As such,
recognition of losses ceased and both the investment in joint venture and the loan notes have been removed to
a separate category of assets held for sale on the balance sheet:
Assets held for sale
Investment
£000
188
Loan notes
£000
1,626
Total
£000
1,814
The loan notes are shown at their fair value plus interest and after provision for expected credit loss under IFRS 9 of
£15,000, which remained unadjusted from the prior year. There were no new loans issued in the financial year and no
further loan notes are now planned.
22. Trade payables
Trade payables
Other taxation and social security
Accruals
Deferred sales income
Deferred grant income
Grant income received against pro forma
2023
£000
4,450
921
3,049
31,365
6,296
—
46,081
2022
£000
8,716
726
3,323
17,258
3,752
521
34,296
Our payment terms with customers are generally 30 to 60 days so items falling beyond those terms are chased up
and monitored for potential default. A specific bad expected credit loss may arise.
The movement on the expected credit loss provision in the year recognises a potential loss of 1% on the Group’s trade
receivable and accrued sales income balances.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
As discussed in Note 18, the increase in deferred sales income is due to the move away from bespoke projects where
revenue was recognised over time, to standard products with revenue recognition at point in time.
110 ITM Power PLC | Annual Report 2023
Financial Statements | Notes to the Consolidated Financial Statements continued 23. Provisions
Balance at 1 May 2021
Provision created in the year
Use of the provision
Release in the year
Balance at 1 May 2022
Provision created in the year
Use of the provision
Release in the year
Balance at 30 April 2023
In the balance sheet:
Leasehold
property
provision Warranty
£000
£000
Provision
for contract
losses
£000
Other
provisions
£000
Employer’s
NIC
provision
£000
Total
provisions
£000
(1,024)
(797)
(4,820)
(677)
(4,958)
(12,276)
(2,163)
(15,052)
(1,330)
(36)
206
—
(854)
(42)
—
—
7,379
—
(12,493)
(44,810)
14,673
18
4
(2,938)
(3,219)
2,303
—
509
168
—
—
805
(18,581)
8,112
977
(1,330)
(4,059)
(4,153)
(21,768)
— (52,130)
—
63
1,615
2,323
18,591
2,386
is allocated against 13 projects. This provision will be used to offset the costs of the project as it reaches completion
in future periods. Contract loss provisions are recognised as greater than one year based on the expected completion
of the contract. Work in progress is only assigned to a contract at the point of delivery as products are generally
fungible until that point.
Provision is also made at the point when project forecasts suggest that the contractual clauses for liquidated damages
might be triggered. The other provisions category relates to potential liquidated damages for overruns on contracts
with customers. It also includes amounts payable to contracted parties for potential non-performance on contracts.
There is a provision for Employer’s NIC due on share options as they exercise (see Note 26 – Share-based payment).
24. 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:
(896)
(3,854)
(42,630)
(5,326)
(215)
(52,921)
2023
Brought forward at 1 May 2022
Expected within 12 months (current)
—
(676)
(12,437)
(4,565)
(215)
(17,893)
Expected after 12 months (non-current)
(896)
(3,178)
(30,193)
(761)
—
(35,028)
The leasehold property provision represents management’s best estimate for the dilapidations work that may be
required to return our leased buildings to the landlords at the end of the lease term. In a prior year we recognised
a dilapidations provision for the present value of the cost of works quoted by our Employer’s Agent for stripping
Bessemer Park back to the original condition at handover from the landlords. The discounting will continue to
amortise over the remaining 12 years of the lease.
The warranty provision represents management’s best estimate of the Group’s liability under warranties granted
on products, based on knowledge of the products and their components gained both through internal testing and
monitoring of equipment in the field. 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. They also maintain risk
registers that highlight the impact of delays and circumstances on the potential cost of a project. 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. The effects of discounting on non-current balances were not deemed to be
material. The increase on the provision in the current year is due to a number of factors including changes of scope
to projects, additional on-site engineering works, increased energy and labour costs due to extended stack testing
times and updating costs for the effects of inflation since the original quote to the customer. The increase in the year
Adjustments
Additions
Interest applied
Payments made
At 30 April 2023
Split:
Within 1 year
2-5 years (inclusive)
Over 5 years
Less:
Future finance charges
Present value of lease obligations
In the balance sheet:
Due within 12 months (current)
Due after 12 months (non-current)
Leasehold
property
£000
Office
equipment
£000
Motor
vehicles
£000
7,006
(88)
1,256
480
(942)
7,712
1,407
3,923
5,688
(3,306)
7,712
890
6,822
44
—
24
4
(20)
52
18
40
—
(6)
52
15
37
98
—
—
3
(56)
45
39
8
—
(2)
45
38
7
Total
£000
7,148
(88)
1,280
487
(1,018)
7,809
1,464
3,971
5,688
(3,314)
7,809
943
6,866
The leasehold property addition shown in the table refers to the new property in the German subsidiary. The UK
subsidiary had not yet signed the lease and taken possession of its new building (see Note 29).
ITM Power PLC | Annual Report 2023
111
Financial Statements | Notes to the Consolidated Financial Statements continued 24. Lease liabilities continued
2022
Brought forward at 1 May 2021
Adjustments
Additions
Transferred to Motive
Interest applied
Payments made
At 30 April 2022
Split:
Within 1 year
2-5 years (inclusive)
Over 5 years
Less:
Future finance charges
Present value of lease obligations
In the balance sheet:
Due within 12 months (current)
Due after 12 months (non-current)
Leasehold
property
£000
6,388
303
597
(298)
483
(467)
7,006
911
3,660
5,913
(3,478)
7,006
564
6,442
Office
equipment
£000
Motor
vehicles
£000
44
—
8
—
3
(11)
44
12
38
—
(6)
44
10
34
54
(2)
123
—
5
(82)
98
56
47
—
(5)
98
52
46
Total
£000
6,486
301
728
(298)
491
(560)
7,148
979
3,745
5,913
(3,489)
7,148
626
6,522
Adjustments refers to foreign exchange movements and contracts that have changed their length of duration or their
value during the year, e.g. following a rent review or a change in decision regarding potential break clauses. In the
prior year, the latter situation arose at one of the properties where we had previously intended it to be a stop-gap
measure so had only recognised up to the break clause but have since decided to continue in residence.
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 15). The two amounts together replace the previous accounting
treatment of expensing rental payments.
Total lease payments for capitalised leases and short-term leases was £2.4m (2022: £0.8m).
25. Called up share capital and reserves
Called up, allotted and fully paid (ordinary shares of 5p each)
At 1 May 2022
Share options exercised
At 30 April 2023
Number
of shares
613,158,155
3,307,500
616,465,655
£000
30,658
165
30,823
Holders of ordinary shares have voting rights at General Meetings in proportion with their shareholding.
The share premium account 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) Limited 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.
26. Share-based payments
The Group operates a number of share 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:
@ an all-employee Share Incentive Plan (referred to as the Buy As You Earn or “BAYE” scheme);
@ an Enterprise Management Incentive (EMI) and Unapproved Share Option Plan, under which Group employees
can be granted share options; and
@ a Long Term Incentive Plan (LTIP) under which Group employees can be granted share options or conditional
share awards.
Share Incentive Plan
In FY21, the Company implemented a new Share Incentive Plan (the BAYE scheme), which is available to all eligible
UK Group employees. Employees can contribute up to £150 per month to acquire partnership shares, which are
purchased or allotted monthly. The Group currently matches employee contributions, awarding matching shares
on a one-for-one basis.
At 30 April 2023 the trustees of the SIP held 368,460 ordinary shares (2022: 102,139) in ITM Power PLC, of which
365,790 (2022: 99,122) have been conditionally awarded to employees and 2,670 (2022: 3,017) remain unallocated.
The Group recognised a charge of £178,000 in relation to this scheme in 2023 (2022: £161,000).
EMI and Unapproved Share Option Plan and LTIP
In 2010 the Company introduced an EMI and Unapproved Share Option Plan to be applied to 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 over a period of three to five years and are exercisable up to the tenth anniversary of the grant. The last
of the EMI share options were exercised in the prior financial year. As a general rule, unexercised awards granted to
participants who leave employment, both pre- and post-vesting, will be forfeited. In the event a participant leaves as
a result of a qualifying reason, they retain vested but unexercised share options but forfeit unvested share options.
The EMI and Unapproved Share Option Plan was replaced by a Long Term Incentive Plan in 2020. The exercise price for
awards granted to date has been set at the nominal value for shares. Share options vest, subject to the achievement
of performance conditions set at grant, over a period of three years and are exercisable up to the tenth anniversary
of the grant. As a general rule, awards granted to participants who leave employment prior to vesting will be forfeited.
In the event a participant leaves as a result of a qualifying reason, they receive a pro rata entitlement.
A more comprehensive description of the different schemes can be found within the Remuneration Report.
112
ITM Power PLC | Annual Report 2023
Financial Statements | Notes to the Consolidated Financial Statements continued 26. Share-based payments continued
EMI and Unapproved Share Option Plan and LTIP continued
Movements within the year on the share option plans (including the EMI, unapproved and LTIP options) were as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Lapsed during the year
Outstanding at the end of the year
Exercisable at the end of the year
2023
2022
Weighted
average
exercise price
24p
5p
32p
5p
20p
32p
Number
8,610,120
253,515
(3,322,023)
(412,247)
5,129,365
2,945,667
Weighted
average
exercise price
27p
5p
—
5p
24p
30p
Number
7,501,854
1,431,837
—
(323,571)
8,610,120
5,666,667
The options outstanding at 30 April 2023 had an exercise price in the range of 5p to 48p and a weighted average
remaining contractual life of four years.
The fair value of options issued in the current year was measured using the Monte Carlo options pricing model
as options were subject solely to a TSR performance condition. Awards in the prior year were measured using a
combination of the Monte Carlo options pricing model and the Black Scholes model as options were split 60%
based on total shareholder return (TSR) performance conditions and 40% based on non-market performance
conditions and prior to that options had been measured using the Black Scholes model. Wherever share options
include a TSR performance condition, IFRS 2 requires the use of a model that can take into account the likelihood
of the performance condition being achieved (hence the use of the Monte Carlo model) but for non-market-based
performance conditions, the Black Scholes model suffices.
The weighted average fair value of those options granted during the year was calculated as 54p.
The assumptions used in the models are as follows:
Weighted averages
Share price
Exercise price
Expected volatility
Expected life
Risk-free rate
2023
103.9p
5p
84.8%
1.2 years
3.9%
2022
385.4p
89.5%
3 years
0.5%
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. Expected volatility was determined by
calculating the historical volatility of the Company’s shares over a period in line with the expected term of the
options. The expected dividend impact used is 0% as participants are entitled to dividend equivalents in respect
of any dividends paid over the vesting period.
The Group has recognised a share-based payment expense in the income statement for the year, made up of
three elements:
Share-based payment expense (as seen through equity)
Purchase of partnership shares under the BAYE scheme
LTIP exercise with treasury shares
Movement on provision for Employer’s NIC on potential gain
2023
£000
1,161
171
27
(1,779)
(420)
2022
£000
1,071
161
—
200
1,432
For options granted prior to 2020, the Group has elected to pay Employer’s NIC 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
NIC would be recovered from the exercising party. For options granted from 2020, the Group has agreed to transfer
the full Employer’s NIC liability to the employee share option holders. The full share-based payment charge is shown
within staff costs on the income statement.
27. Notes to the cash flow statement
Loss from operations
Adjustments:
Depreciation
Share-based payment
Foreign exchange on intercompany transactions
Fair value adjustment and expected credit loss on loan notes
Loss on disposal
Impairment
Amortisation
Operating cash flows before movements in working capital
5p
Increase in inventories
Decrease/(increase) in receivables
Increase in payables
Increase in provisions
Cash used in operations
Interest paid
Income taxes paid
2023
£000
2022
£000
(103,713)
(44,736)
3,006
1,161
(137)
—
64
4,469
942
(94,208)
(26,642)
5,852
11,787
31,152
(72,059)
(495)
—
2,340
1,071
(43)
359
—
—
849
(40,160)
(25,780)
(2,550)
21,437
9,492
(37,561)
(532)
(62)
Net cash used in operating activities
(72,554)
(38,155)
ITM Power PLC | Annual Report 2023
113
Financial Statements | Notes to the Consolidated Financial Statements continued 28. Net cash reconciliation
Net (debt)/cash as at 1 May 2021
Adjusted
Cash flows
Acquisition – leases
Other changes – interest expense
Net (debt)/cash as at 1 May 2022
Adjusted
Cash flows
Acquisition – leases
Other changes – Interest expense
Net (debt)/cash as at 30 April 2023
Lease liabilities
£000
Cash
£000
(6,486)
176,078
(302)
552
(436)
(476)
(7,148)
88
1,018
(1,280)
(487)
(7,809)
—
189,897
—
(93)
365,882
—
(83,097)
—
(54)
282,731
Total
£000
169,592
(302)
190,449
(436)
(569)
358,734
88
(82,079)
(1,280)
(541)
274,922
29. Capital commitments
The Group had capital commitments of £7.0m at the balance sheet date (2022: £0.6m). This included the power
upgrade to Bessemer park of £5m.
We have signed an agreement to lease Unit 3 Bessemer Park, which would result in a lease liability and corresponding
asset of approximately £4.7m once the full lease is signed. Fit-out costs of £16.4m are also expected to be incurred but
are not yet officially committed.
30. 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.
Externally imposed capital requirement
During the year the Group was not required to comply with any externally imposed capital requirements.
Categories of financial instruments
Financial assets – amortised cost
Financial asset at amortised cost
Long-term loan notes (held for sale in FY23)
Cash and cash equivalents
Trade receivables (excluding IFRS 9 impairment)
Restricted cash balances
Other receivables
2023
£000
174
1,626
282,557
2,591
774
3,091
2022
£000
161
1,548
365,882
3,534
297
2,459
290,813
373,881
Both the loan notes and the financial asset at amortised cost sit under non-current assets in the balance sheet. The
latter relates to the security deposit on our leasehold property at Bessemer Park. The rest of the Group’s financial
assets consist of cash or cash equivalents and receivables that are largely due from 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 does not consider there to be undue risk associated with receivables.
Financial liabilities – amortised cost
Trade payables
Accruals
Lease liabilities
2023
£000
4,450
3,049
7,809
2022
£000
8,716
3,322
7,148
15,308
19,186
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities with
agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial
liabilities based on the earliest date on which the Group can be required to pay.
Management does 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 its knowledge,
claims are made for expenditure agreed ahead of any project undertaking and in accordance with grant procedure.
2023
Trade and other payables
Lease liabilities
31. 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 Australian and US Dollars, Euros and Pound Sterling. The Group keeps under
review the need for hedging opportunities with regards to capital risk management.
The capital risk management landscape has not materially changed in the last year for the Group. Large cash reserves
gained through past fundraises have led management to put some of the funds on fixed-term deposit and in a money
market account where they can generate interest. The funds have also been split between different banking institutions.
Given the increasing volumes of raw materials and inventory required to fulfil our contracts, more frequent credit checks
have been performed and bank guarantees sought from some suppliers where upfront payments were made.
114
ITM Power PLC | Annual Report 2023
2022
Trade and other payables
Lease liabilities
Within 1 year
£000
4,450
1,464
5,914
Within 1 year
£000
12,038
979
13,017
2-5 years
(inclusive)
£000
—
3,971
3,971
2-5 years
(inclusive)
£000
—
3,745
3,745
Over 5 years Total net payable
£000
£000
—
5,688
5,688
4,450
11,123
15,573
Over 5 years
£000
Total net payable
£000
—
5,913
5,913
12,038
10,637
22,675
Financial Statements | Notes to the Consolidated Financial Statements continued 31. Financial instruments continued
Fair value through profit and loss
In the prior year, the Group held foreign currency forward contracts that were measured at fair value through profit
or loss. The figure shown in Notes 19 represent the difference between their contract value and the exchange rates
at the balance sheet date. These financial instruments would sit within Level 2 of a fair value hierarchy, being derived
from other inputs – other than quoted prices in active markets – that are observable. However, as they are the only
financial instruments measured at fair value, no fair value hierarchy table has been presented.
Foreign currency risk management
At year end, the Group did not hedge its exposure of foreign investments held in foreign currencies.
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 trade (transactions with both suppliers and customers)
in a variety of locations and denominated in currencies other than the functional currency of the operating unit
excluding intercompany balances.
The carrying value of all other financial instruments at 30 April 2023 and 30 April 2022 approximated to their fair value.
These exposures were as follows:
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. As such, the Group has exposure to foreign
exchange variation. Management looks to use bulk purchases and forward contracts as a means of mitigating
exposure to exchange rate volatility on long-term purchase contracts. The intention is to try to “lock in” a budget
rate that will help to ensure more reliable forecasting of costs and therefore a more controlled return on 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 counterparty 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 to 60 days under our usual contractual terms. At the year end, there were receivables
totalling £0.9m (2022: £1.0m) that were overdue but considered fully recoverable. Most of our sales income is
subject to contractual terms and therefore largely protected from default.
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.
EUR
USD
SEK
AUD
(i)
(ii)
(iii)
(iv)
Liabilities
Assets
2023
£000
849
61
13
17
940
2022
£000
46
268
33
—
347
2023
£000
2,144
90
—
136
2,370
2022
£000
1,961
8
—
307
2,276
(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 Krona 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.
Foreign currency sensitivity analysis
The table below assumes an increase/decrease of 10% in the Euro to Pound Sterling exchange rate, 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.
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, continuously monitoring forecast and actual
cash flows, and matching the maturity profiles of financial assets and liabilities.
Profit or loss
EUR impact
USD impact
AUD impact
2023
£000
259
2022
£000
78
2023
£000
62
2022
£000
42
2023
£000
3
2022
£000
62
If rates had been 1% higher/lower and all other variables had remained constant, loss for the year would have
decreased/increased by £323,000 (2022: £181,000).
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 three months.
Fair value of financial instruments
The carrying amounts of financial instruments are a reasonable approximation of the fair values of those instruments.
ITM Power PLC | Annual Report 2023
115
Financial Statements | Notes to the Consolidated Financial Statements continued 32. 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 arm’s length.
During the year, purchases from Linde/BOC Group, represented on the Board by J Nowicki, totalled £0.8m
(2022: £0.5m) with £94,000 outstanding for payment at year end (2022: £114,000). There were also milestone
billings on sales contracts of £15.3m (2022: £7.0m) with £0.9m remaining outstanding at year end (2022: £1.7m).
Transactions with Ecclesiastical Insurance Office PLC for the services D Cockrem, as Non-Executive Director on
our Board, amounted to £31,000 (2022: £Nil) with £Nil remaining outstanding at year end (2022: £Nil).
34. Events after the balance sheet date
At the time of our interim results update, we stated that we were exploring options for the future of our joint venture
Motive Fuels Ltd. We have now signed Heads of Terms for the sale of the company. The 50/50 JV between ITM and
Vitol was established in March 2022 to develop and roll out hydrogen refuelling stations in the UK. The vision of the
JV partners was one of building a significant UK refuelling business, with £30m committed by each party as seed
funding. However, one of the three priorities of our 12-month plan is increased cost and capital discipline. The planned
transaction will allow ITM to redirect £28m of pre-committed cash to our core business, and to focus on becoming a
volume manufacturer of state-of-the-art electrolysers. Motive Fuels Ltd, via ITM, was the recipient of grant funding to
support the rollout of refuelling stations in the UK. As part of the transaction, a contingent liability may materialise for
ITM in the future against the performance obligations in the grants.
Balances and transactions with ILE and Motive are discussed in Note 12 – Investments.
The remuneration of the Directors and key management personnel of the Group is shown in Note 8.
33. 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.
116
ITM Power PLC | Annual Report 2023
Financial Statements | Notes to the Consolidated Financial Statements continued Financial Statements | Company Statement of Changes in Equity
At 1 May 2021
Transactions with owners
Issue of shares
Credit to equity for share-based payment
Total transactions with owners
Loss for the year and comprehensive loss
Total comprehensive loss
At 1 May 2022
Transactions with owners
Issue of shares
Credit to equity for share-based payment
Total transactions with owners
Loss for the year and comprehensive loss
Total comprehensive loss
At 30 April 2023
The notes on pages 119 to 122 form part of these financial statements.
Called up
share capital
£000
27,533
3,125
—
3,125
—
—
30,658
165
—
165
—
—
Share
premium account
£000
302,248
240,075
—
240,075
—
—
542,323
270
—
270
—
—
30,823
542,593
Retained loss
£000
(66,370)
Total equity
£000
263,411
—
1,070
1,070
(5,621)
(5,621)
(70,921)
—
1,161
1,161
(66,877)
(66,877)
(136,637)
243,200
1,070
244,270
(5,621)
(5,621)
502,060
435
1,161
1,596
(66,877)
(66,877)
436,779
ITM Power PLC | Annual Report 2023
117
Financial Statements | Company Balance Sheet
Fixed assets
Tangible assets
Intangible assets
Investments
Loan notes
Current assets
Debtors
Cash at bank and in hand
Assets held for sale
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
Retained loss
Shareholders’ funds
The Company reported a loss for the financial year ended 30 April 2023 of £66.9m (2022: a loss of £5.6m).
The notes on pages 119 to 122 form part of these financial statements.
The financial statements of ITM Power PLC, registered number 05059407, were approved by the Board of Directors and authorised for issue 17 August 2023.
Signed on behalf of the Board of Directors:
Andy Allen
Director
118
ITM Power PLC | Annual Report 2023
Note
4
5
6
6
7
8
9
10
11
11
11
2023
£000
3
—
182,161
—
182,164
266
253,110
253,376
2,216
255,592
(921)
(56)
(977)
254,615
436,779
30,823
542,593
(136,637)
436,779
2022
£000
21
12
162,563
1,548
164,144
1,479
340,409
341,888
—
341,888
(1,704)
(2,268)
(3,972)
337,916
502,060
30,658
542,323
(70,921)
502,060
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.
The Company meets the definition of a qualifying entity under Financial Reporting Standard 100 (FRS 100) issued by
the Financial Reporting Council. Accordingly, financial statements have been prepared in accordance with Financial
Reporting Standard 101 (FRS 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 non-current 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 remeasurement 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 an estimated useful life of three years, using the straight-line
method. 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.
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 using the
straight-line method and is recognised in income.
Investments
Balances are stated at cost less a provision for any impairment in value.
Investments are considered for any potential impairment under IAS 36 Impairment of Assets. Given that the
subsidiaries are in the early stages of commercial trade and that the Company continues to support its subsidiaries
as they build up trade, there are indicators of impairment. For each subsidiary we determined the recoverable
amount, this being the higher of each subsidiary’s value in use and the fair value less cost to sell. The higher of
these was determined to be fair value less costs to sell (see Note 6).
The Company holds 50% of the share capital of ILE, although control is deemed to lie with Linde for the purposes
of consolidation as it also appoints the Managing Director, who has the casting vote at meetings of the ILE board
of directors. ITM Power has significant influence due its representation on the board. As such, ITM Power accounts
for this investment in associate using the equity method. This means that the investment is originally recognised
at cost, with subsequent movements to reflect ITM Power’s share of the profit or loss after the date of acquisition.
This share of the profit or loss is recognised in ITM Power’s profit or loss. Should any adjustments be necessary for
changes in proportionate interest arising from changes in ILE’s other comprehensive income, ITM Power’s share
of those changes would be recognised in other comprehensive income. Any distributions received will reduce the
carrying amount of the investment.
The Company holds 50% of the share capital of Motive since a partnership deal was signed with Vitol last year.
There is no outright control by either party but ITM Power still has significant influence due to its representation
on the Board. As such, ITM Power accounts for this joint venture using the equity method. This means that the
investment is originally recognised at cost, with subsequent movements to reflect ITM Power’s share of the profit or
loss after the date of acquisition. This share of the profit or loss is recognised in ITM Power’s profit or loss. Should any
adjustments be necessary for changes in proportionate interest arising from changes in Motive’s other comprehensive
income, ITM Power’s share of those changes would be recognised in other comprehensive income. Any distributions
received will reduce the carrying amount of the investment.
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 instruments
Financial assets are recognised in the Company’s balance sheet when the Company becomes party to the contractual
provisions of the instrument. They are initially measured at fair value plus, in the case of financial assets 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 of which the Group holds financial
instruments in two:
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.
Impairment
The Company 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 in loan balances, both to its subsidiaries and its joint venture. IFRS 9 requires us to use all reasonable and
supportable information available without undue cost or effort including internal/external information, past events
and current/forecast future economic conditions in order to recognise a lifetime expected credit loss. At the very
least, this requires consideration of whether the entity with the payable could actually repay the carrying value
immediately from highly liquid assets or else in a fire sale (realising their net assets). Impairment of the debt is
calculated and applied accordingly.
Assets held for sale
In line with IFRS 5, non-current assets classified as held for sale are presented separately and measured at the
lower of their carrying amounts immediately prior to their classification as held for sale and their fair value less
costs to sell. Financial assets will continue to be measured in accordance with the Group’s relevant accounting
policy for those assets.
During the year, both the investment in Motive and the loan notes associated with that entity were moved to this
category. The investment continued to be recognised at cost but, upon announcement, we ceased to recognise
any other losses against it. The loan notes continued to be recognised with the interest they accrued and net of a
lifetime expected credit loss amount in line with IFRS 9.
ITM Power PLC | Annual Report 2023
119
1. Significant accounting policies continued
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 26 of the Group financial statements.
3. Staff numbers and costs
Monthly average number of persons employed
Staff costs during the year (including Directors)
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 (other than
for market-based performance conditions). 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.
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 judgements 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 ongoing 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.
Key sources of estimation uncertainty
Recoverability of investments
The Company tests the net recoverable amounts of assets annually for impairment, or more frequently if there are
indicators of impairment. During the year, Management considered the recoverability of its investment in subsidiary
companies, which is 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’, the intercompany loans have been
impaired to £Nil.
The investment in ITM Power GmbH was already written down in a prior year and there were no triggers noted for
a reversal of that impairment.
ITM Power (Trading) Limited is responsible for well over 90% of Group activities, along with the future revenue
opportunities (being the only centre for R&D and the sole manufacturing entity). As such, this single cash generating
unit contributes significantly to the market capitalisation of the Group (and parent company, listed on AIM). Therefore,
the market capitalisation, with some adjustments to make it appropriate for the Trading entity, is an important proxy
in the fair value less costs to sell assessment of the Trading subsidiary. In comparing the cost of the total investment
with this fair value proxy there was an impairment of £62m to recognise in the current year.
Both the associate investment in ILE and the joint venture with Motive have not been impaired. The latter is now
shown as held for sale along with the loan notes provided to the same entity.
120 ITM Power PLC | Annual Report 2023
2023
Number
5
2023
£000
1,955
705
56
2,716
2023
£000
826
2022
Number
6
2022
£000
1,504
235
35
1,774
2022
£000
653
Wages and salaries
Social security costs
Other pension costs
Remuneration of the highest paid Director
Aggregate emoluments
As at 30 April 2023 pension contributions of £8,000 (2022: £2,000) 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.
4. Tangible fixed assets
Cost
At 1 May 2022
Disposals
At 30 April 2023
Depreciation
At 1 May 2022
Charge for the year
Disposals
At 30 April 2023
Net book value
At 30 April 2023
At 30 April 2022
Computer
equipment
£000
101
(24)
77
80
4
(10)
(74)
3
21
Financial Statements | Notes to the Company Financial Statements continued
The amortisation period for externally purchased software has been set at three years (in line with our policy for
computer equipment).
Germany
5. Intangible assets
Cost
At 1 May 2022
Disposals
At 30 April 2023
Amortisation
At 1 May 2022
Charge for the year
Disposals
At 30 April 2023
Carrying amount
At 30 April 2023
At 30 April 2022
6. Investments
Cost
At 1 May 2022
Additions
Foreign exchange
Share options granted to subsidiary employees
50% share of loss
Transferred to assets held for sale
At 30 April 2023
Provisions for impairment
At 1 May 2022
Foreign exchange
Movement in year
At 30 April 2023
Net book value
At 30 April 2023
At 30 April 2022
Software
£000
Interest is charged annually upon intercompany loan balances at a rate of 1% over the Bank of England base rate.
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 repay their debt to the parent company in the near term.
A further impairment assessment of the investments has also been undertaken in line with IAS 36 Impairment of
Assets. The recoverable amount was estimated based on fair value less costs to sell and based on the Group’s market
capitalisation less relevant adjustments to reflect that ITM Power (Trading) Limited is a private company. The net book
value remaining on investment in subsidiary undertakings, both in this financial year and the previous financial year,
relates solely to ITM Power (Trading) Limited.
A full list of the Company’s subsidiaries, associates and joint ventures as at 30 April 2023 comprises:
Place of
incorporation
% equity
interest
Status during
the year
Registered address/principal office
England and Wales
100
Dormant
2 Bessemer Park, Sheffield, S9 1DZ
England and Wales
100
Dormant
2 Bessemer Park, Sheffield, S9 1DZ
England and Wales
100
Active
2 Bessemer Park, Sheffield, S9 1DZ
36
(14)
22
24
1
(3)
22
—
12
Name
ITM Power (Research)
Limited
ITM Power (Shelfco)
Limited
ITM Power (Trading)
Limited
ITM Power Germany
GmbH
ITM Power, Inc.
California, USA
ITM Power Pty Ltd
Australia
100
100
100
Active
Active
Active
Orkney Hydrogen
Trading Limited
Scotland
100
Dormant
ITM Linde
Electrolysis GmbH
Germany
Motive Fuels Limited
England and Wales
50
50
Active
Active
Am Muehlgraben 6, 35410 Hungen,
Germany
2 Bessemer Park, Sheffield, S9 1DZ
Unit 2 Level 1, 32 Main Street,
Samford Village, Queensland,
Australia 4520
Suite 2, Ground Floor, Orchard Brae
House, 30 Queensferry Road,
Edinburgh, EH4 2HS
Bodenbacher Str. 80, 01277 Dresden,
Germany
Advanced Manufacturing Technology
Centre, Brunel Way, Catcliffe,
Rotherham, S60 5WG
Loans to
subsidiary
undertakings
£000
Investment in
subsidiary
undertakings
£000
Investments in
associates and
joint ventures
£000
8,239
87,055
198,370
—
—
—
—
—
152
787
—
—
2,065
471
—
—
(1,567)
(590)
Total
£000
208,674
87,526
152
787
(1,567)
(590)
95,294
199,309
379
294,982
The investments in ITM Linde Electrolysis GmbH and in Motive Fuels Limited are discussed in more detail in Note 12 to
the Consolidated Financial Statements.
8,239
—
4,558
37,872
152
62,000
12,797
100,024
—
—
—
—
82,497
—
99,285
160,498
379
2,065
46,111
152
66,558
112,821
182,161
162,563
ITM Power PLC | Annual Report 2023
121
Financial Statements | Notes to the Company Financial Statements continued
Balance at 1 May 2022
Provision created in the year
Use of the provision
Release in the year
Balance at 30 April 2023
Employer’s NIC
on share options
£000
(2,268)
—
1,615
597
(56)
11. Share capital and reserves
The movements on share capital and share premium accounts are disclosed in Note 25 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.
12. Related party transactions
The Company has taken advantage of the exemption included in FRS 101 ‘Related Party Disclosures’ for wholly-owned
subsidiaries not to disclose transactions with entities that are part of the Group qualifying as related parties.
The balances with both ILE and Motive are shown under Investments in associate and joint ventures in Note 6 and
the transactions with those entities are described more fully in Note 12 to the Consolidated Financial Statements.
These were the only transactions made with those entities in the year.
7. Debtors: amounts falling due within one year
10. Provisions
Prepayments
Amounts recoverable from employees
Other debtors
2023
£000
183
8
75
266
2022
£000
389
1,002
88
1,479
The amounts recoverable from employees relate to the extent that Employer’s NIC can be recovered when share
options are exercised and will offset the provision in Note 10.
8. Assets held for sale
During the year, ITM Power PLC announced its intention to sell its investment in Motive Fuels Limited. As such, we
ceased to recognise any further share of loss on the investment and moved both that and the loan notes to assets
held for sale:
Assets held for sale
9. Trade and other payables
Trade creditors
Payroll creditors
Amounts due to subsidiary undertakings
Accruals and deferred income
Investment
£000
590
Loan notes
£000
1,626
2023
£000
17
45
—
859
921
Total
£000
2,216
2022
£000
3
47
1,253
401
1,704
122
ITM Power PLC | Annual Report 2023
Financial Statements | Notes to the Company Financial Statements continued Shareholder Information
Shareholder Information | Glossary
Term
AIM
AQRT
BAYE
BEIS
blue hydrogen
Meaning
the Alternative Investment Market operated by the
London Stock Exchange
the Audit Quality Review Team from the UK Financial
Reporting Council
ITM Power PLC Buy As You Earn Plan (a SIP)
UK Department for Business, Energy & Industrial
Strategy
hydrogen derived from natural gas through the
process of steam methane reforming – however,
this produces CO2 which must then be captured
and safely stored
BMBF
German Federal Ministry of Education and Research
Board (the)
the board of directors of ITM Power PLC
CCS
CEO
CfD
CFO
CO2
carbon capture and storage
Chief Executive Officer
Contract for Difference
Chief Financial Officer
carbon dioxide
Companies Act
UK Companies Act 2006
Company (the)
ITM Power PLC, registered in England and Wales,
number 5059407
COP26
COP27
26th session of the UN Climate Change Conference
of the Parties that took place from 31 October to
13 November 2021 in Glasgow, Scotland
27th session of the UN Climate Change Conference of
the Parties that took place from 7 to 18 November 2022
in Egypt
COVID-19
the coronavirus disease
CTO
EBITDA
EDI
EMI
Chief Technology Officer
earnings before interest, tax, depreciation and
amortisation
equity, diversity and inclusion
enterprise management incentive
Term
EPC
ESG
EU
FCH JU
FEED
FID
FIFO
FTO
Meaning
engineering, procurement and construction
environmental, social and governance
European Union
EU Fuel Cells and Hydrogen Joint Undertaking
front-end engineering design
final investment decision
first in, first out
freedom to operate
FVOCI
fair value through other comprehensive income
FY21
FY22
FY23
GEP
GHG
the financial year ended 30 April 2021
the financial year ended 30 April 2022
the financial year ending 30 April 2023
current generation 2.5MW stack platform
greenhouse gas(es)
green hydrogen
hydrogen created solely from renewable energy and
water through the process of electrolysis; this results
in a clean, zero-emission fuel
grey hydrogen
the most common form of hydrogen, produced
by reforming natural gas (methane); this results
in substantial carbon emissions
Group (the)
the group of companies headed by ITM Power PLC
GW
HSE
IEA
IEEFA
ILE
IP
IPCEI
LTIP
gigawatt (one billion watts, 109 watts)
health, safety and environment
International Energy Agency
Institute for Energy Economics and Financial Analysis
ITM Linde Electrolysis GmbH, our joint venture
with Linde
intellectual property
EU “important project of common European interest”
ITM Power PLC Long Term Incentive Plan
Term
MEP
Motive
MW
NED
NIC
Meaning
current generation 0.7MW stack platform
Motive Fuels Limited (formerly ITM Motive Limited,
our joint venture with Vitol), registered in England
and Wales number 13290733
megawatt (one million watts, 106 watts)
Non-Executive Director
National Insurance Contributions
NOMAD
nominated advisor
PEM
PGM
proton exchange membrane
platinum group metal(s)
QCA Code (the)
The Quoted Companies Alliance Corporate Governance
Code 2018
R&D
RIDDOR
SDGs
SIP
SMR
SONIA
SOP
stack
STEM
TCFD
TSR
UK
UN
US IRA
WIP
research and development
UK Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations 2013
UN Sustainable Development Goals
share incentive plan, a type of tax-advantaged all-employee
share plan offered to eligible UK employees
steam methane reformer
Sterling Overnight Index Average
ITM Power PLC Share Option Plan: EMI and Unapproved
a stack of cells that perform electrolysis
science, technology, engineering and maths
Task Force on Climate-related Financial Disclosures
total shareholder return
United Kingdom
United Nations
US Inflation Reduction Act of 2022
work in progress
ITM Power PLC | Annual Report 2023
123
Shareholder Information | Officers, Professional Advisors and Useful Contacts
Useful contacts
Registered office:
2 Bessemer Park
Sheffield
S9 1DZ
Registrar:
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Telephone: +44 (0)371 664 0300(1)
Email: shareholderenquiries@linkgroup.co.uk
1. Calls are charged at the standard geographic rate and will vary
by provider. Calls outside the UK are charged at the applicable
international rate. Lines are open between 09:00 and 17:30 Monday
to Friday, excluding public holidays in England and Wales.
Officers
Directors:
See biographies from page 56 and 57
Company Secretary:
Vicky Williams
Executive Committee:
Dennis Schulz, CEO
Andy Allen, CFO
Dr Simon Bourne, CTO
Tim Calver, Commercial Director
Martin Clay, Operations Director
Investor Relations:
James Collins, Justin Scarborough
Marketing and Press:
Sharon Poulter
Advisors
Nominated advisor and broker:
Investec Bank plc
30 Gresham Street
London
EC2V 7QP
External auditor:
Grant Thornton UK LLP
1 Holly Street
Sheffield
S1 2GT
124
ITM Power PLC | Annual Report 2023
CBP019960
ITM Power PLC’s commitment to environmental issues is reflected in this Annual Report,
which has been printed on Amadeus Silk, an FSC® certified material. This document was
printed by Pureprint Group using its environmental print technology, with 99% of dry
waste diverted from landfill, minimising the impact of printing on the environment.
The printer is a CarbonNeutral® company.
Both the printer and the paper mill are registered to ISO 14001.
ITM Power PLC
2 Bessemer Park
Sheffield
S9 1DZ