ITM Power issues profit warning amid delays to new 'stack'

The company had said in its final results that it was making “encouraging technological progress” with the development of the 2MW MEP 2.0 stack, but said on Thursday that due to manufacturing issues including delays in finalising the tooling and testing of the stacks, it now expected that full-year output and revenue was likely to be towards the bottom of the current guidance range.

It said the timing of this revenue will be weighted towards the final quarter of the current financial year, and would be dependent on the success of the current work to resolve the issues.

The previously announced range was for between 48MW and 65MW of delivered product, and revenue of £23m to £28m.

“These production issues have resulted in limited deliveries of new, first of kind product which in turn has meant only limited field data for performance to assess the level of warranty provisions,” the board said in its statement.

“As a consequence of the limited field data, the warranty provision for these next generation contracted products will need to materially increase from the current level of £3m at 2022 year-end, and may result in a revision to EBITDA loss guidance.

“The accuracy of the product warranty provision will improve as more field data is acquired.”

ITM said it was “evolving technology”, and by its nature created “inherent uncertainty”.

“The board is aware of the potential risk associated with the growing and uncertain levels of warranty provisions and is seeking to mitigate this portfolio risk.

“As a result, the company expects there may be delays in finalising contracts in the final stages of negotiation which could place large scale projects at risk of deferred financial close.

“The company remains fully committed to the successful delivery of the order backlog and is working closely with customers to get projects finalised.”

ITM Power said it was benefitting from a “strong” balance sheet, with current cash of about £320m, and had an increased focus on operational cash and cost management.

“Taking into account the committed capital expenditure, a lower level of inventory build, and cost control the year end cash forecast is expected to be £240 to £270m.

“The search for a new chief executive officer is progressing well,” the directors added.

At 1050 BST, shares in ITM Power were down 31.46% at 71.72p.

Reporting by Josh White for Sharecast.com.