ITM Power will cut its headcount by a quarter in a drive to slash costs and improve performance, after a string of profit warnings at the UK hydrogen equipment manufacturer.
The Sheffield-based producer of electrolysers, which separate the zero-carbon fuel from water, said on Tuesday that the lay-offs of more than 100 staff would help cut its annual wage bill by 30 per cent or £9mn a year, after pre-tax losses more than trebled to £57mn in the six months to October.
The start-up, which is backed by industrial gas group Linde and Italian gas infrastructure group Snam, has been facing difficulties in scaling up its electrolyser technology.
The company has faced delays to its flagship Leuna project in Germany, written down inventory because of design changes, and been hit by warranty provisions for earlier products. That has led the company to issue three profit warnings in the eight months to January.
The setbacks for ITM Power have raised further questions about the UK’s ability to capitalise on a solid base of scientific research and scale up competitive clean energy manufacturers, following the collapse of battery start-up Britishvolt.
The UK government has earmarked hydrogen, which does not produce CO₂ when it is burnt, as a key means to decarbonise energy-intensive industries and heavy transport.
Following a difficult year, Dennis Schulz, former managing director of Linde Engineering, took over as chief executive in December and on Tuesday laid out his strategy to cut costs and change engineering processes at the group.
“We need to transform ITM from an R&D culture company to a professional and credible delivery organisation ready for volume manufacturing,” he said. “This requires scrutinising every aspect of the business for cost-saving potential, and it will make difficult decisions necessary.”
Sir Roger Bone, chair of ITM Power, said it had “underestimated the competencies and capabilities required to scale up and to transition from an R&D company to a volume manufacturer”.
As part of the cost-cutting drive, ITM Power has agreed with partner Vitol, a commodity trading house, to review strategic options including a sale for their joint venture Motive Fuels, which aimed to create a hydrogen refuelling business across the UK.
The company will also narrow its focus to two core products and will no longer develop next-generation products before completing and deploying current ones for actual use.
ITM Power issued full-year guidance of an earnings before interest, tax, depreciation and amortisation loss of £85mn to £95mn on revenues that would not grow at all in the final six months of its financial year. Net cash is expected to fall from £317mn to a range of £245mn to £270mn.
Shares in ITM Power regained 6 per cent on Tuesday, but they have slumped to less than a quarter of their level last March.
Lacie Midgley, an analyst at Panmure Gordon, said the revenue guidance was worse than expected, but it was not a bad thing for the new chief executive to reset expectations at a low level.
“There’s a lot of work to be done here as the cash burn is hefty,” she said. “He is saying the right things but he has a big challenge ahead of him.”
In brighter news for the company, it secured contracts to sell two 100MW electrolysers to Linde Engineering to be installed at RWE sites in north-eastern Germany that will be powered by offshore wind from the North Sea.
