Hydrogen company ITM Power's turnaround plan starts to deliver

ITM Power (ITM) has revealed half-year figures that suggest its turnaround plan is having the desired effect. Given the bump in revenue and the narrowing loss profile, it would be churlish to suggest otherwise. Yet the company’s shares have almost halved over the past 12 months, and it would be fair to say that providers of alternative energy sources are under more scrutiny than during the pandemic, when shares in the hydrogen electrolyser manufacturer went into orbit.

Investors, however, will note a more disciplined approach to capital management, evidenced by the reduction in product development costs, in favour of spending aimed at upgrading existing factories and machines. Significantly less cash was sucked into investing activities, and the outflow in cash/equivalents was reduced by 40 per cent to £28.8mn. Gross losses fell appreciably, coming in at £8.15mn against £45.6mn in the comparative half-year, partly driven by the closure of legacy projects. Management noted that manufacturing and testing have gradually been “debottlenecked”, while increased automation and standardisation show that volume manufacturing is to become the preferred source of revenue.

ITM’s chief executive, Dennis Schulz, said that the self-help measures “successfully addressed the most pressing issues to right the ship” but recognised that “the electrolyser market is still immature”. This point may well have been lost on an overly excitable market during the dark days of the pandemic.

In keeping with the clean energy zeitgeist, the Yorkshire-based firm is looking across the Atlantic for opportunities in the wake of Joe Biden’s Inflation Reduction Act. However, the role hydrogen-based fuels will play in any future energy mix is still far from certain.

The market reacted positively to the interim figures, but it’s still very much a work in progress as the steep reduction in the premium to net assets demonstrates. Hold.

Last IC view: Hold, 91p, 17 Aug 2023