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ITM Power: Pioneering a hydrogen-powered future

Publication Date: 12 Feb 2019 - By Kshitija Bhandaru By Kshitija B.

Equity Fundamental Equity Middle East EU Transport Energy Technology


ITM Power (LON:ITM), which is listed on the London Stock Exchange’s Alternative Investment Market (AIM), manufactures integrated hydrogen energy solutions to enhance the utilisation of renewable energy. The company claims to be a “globally recognised expert in hydrogen technologies with applications in clean fuel” and proposes to offer investors an avenue to back alternative fuel technologies. 

The company aims to become a leading technical innovator of fuel cell and electrolyser technologies. Fuel cells, via an electrochemical process, convert hydrogen and oxygen into electricity and water. Electrolysers, through a similar process, convert electricity and water into hydrogen and oxygen.

Government backing

The company received funding of an undisclosed amount from Innovate UK, which is a part of the UK Research and Innovation (UKRI)  ̶  the national funding agency investing in science and research in the UK. The funding was provided to commence a feasibility study to deploy a 100 megawatt power-to-gas (P2G) energy storage project, touted as “Project Centurion” at Runcorn, Cheshire, UK.

Another recent example includes, a £3.1m funding grant from UK’s Office for Low Emission Vehicles (OLEV) to a consortium which ITM is part of, to develop a 0.5 megawatt refueling station and 51 Fuel Cell Electric Vehicles (FCEVs). ITM Power will receive £1.8m for the refuelling station, which is expected to be delivered in the next 12 months.

A look at the financials

Given that fuel cell technology is a niche sector, it’s not surprising that the energy storage and clean fuel company is making a loss. For the six months to October 31, ITM’s pretax loss was £5.3m compared to £2.9m a year ago.

The company noted that the loss was more than expected due to project costs on its ‘first-of-a-kind’ projects and investment in resources and capacity. Revenue dipped from £1.7m in the six months to October 31, 2017, to £1.2m in the six months to October 31, 2018. However, the company noted that its revenue is expected to be weighted towards the second half of the year due to an increased value of contracts expected.

Below is a glimpse of ITM’s key fundamentals for the full year 2018 versus the 5-year averages:
•    Revenue: £3.28m (5Y average: £2.08m)
•    Loss before tax: £6.49m (5Y average: £5.62m)
•    EPS: -2.10p (5Y average: -3.02p)
•    Operating margin: -197.81% (5Y average: -325.72%)
•    ROCE: -26.69% (5Y average: -47.01%)

ITM has a market capitalisation of c £60m, at the time of . On a year-over-year basis, the share price is admittedly down by 35%.

Conclusion: Make it a long term bet

Profitability is one of the important factors to consider while assessing risk. However, oil market volatility and the environmental impact of burning fossil fuels will be a driving force for the company which is aiming to become a leading technical innovator for a “hydrogen economy.”

ITM Power has £23.2m worth of projects under contract in total and a further £12.5m in the final stages of negotiation. It would be safe to assume that in the light of environmental policies and other macro drivers, profitability for the clean-energy solution company could be just a few years away. Hence, even if the company does not look attractive now, it could be a long term bet. 


I have no positions in any of the securities referenced in the contribution

I do not use any non-public, material information in this contribution

To the best of my knowledge, the views expressed in this contribution comply with UK law

I agree with the terms and conditions of ReachX

This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.

Kshitija B.


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