Shares in one of AIM’s biggest rising stars, ITM Power (ITM:AIM), dropped 10.6% to 320p despite the firm reporting a record backlog and multiple contract wins.
Sheffield-based ITM makes things called electrolysers, which are a low carbon way to produce hydrogen, making them an attractive option for industries which use hydrogen and are looking to decarbonise the way they do things.
METEORIC RISE
The fledgling company has enjoyed a meteoric rise in recent months and has seen its market cap swell from £140m in October to around £1.5bn now, after a series of deals signed over the past months highlighted the company’s potential and the value of its intellectual property.
The hydrogen market as a whole has also seen rapid development, with three European governments stating explicit electrolyser targets for 2030: Germany 5GW, Holland 3-4GW and Portugal 2GW.
In a trading update for the year to 30 April, the company reported a record order backlog of £52.4m, comprising £21.8m under contract and £30.6m in negotiation, and a higher quality tender opportunity pipeline of £263m.
But its shares were hit after it also said sales were down 30% to £3m with the effect of coronavirus reducing revenues by £1.2m, due to the fact that income is recognised upon completion of on-site work, and certain programmes due to complete in the year suffered Covid-related site closures.
The stock has become particularly sensitive to any bad news, given it now trades on a price to book (P/B) value of 22.7 times according to Stockopedia. Most companies have a P/B ratio between one and three.
ITM expects its income for the year to 30 April to have dropped 60% to £7m, down from £17.6m the previous year, as a result of the coronavirus-related project delays and losses from work on legacy projects.
‘WELL PLACED TO CAPITALISE ON MAJOR OPPORTUNITIES’
But the firm added its results don’t reflect any of the benefits of its previously announced joint venture with gas giant Linde, which is focused on delivering green hydrogen to large scale industrial projects.
ITM Power chief executive Dr Graham Cooley said the JV means the firm is well-placed to capitalise on ‘major opportunities’ going forward.
He said, ‘The emerging trends in different industrial sectors, together with increasing acceptance by governments around the world that green hydrogen is an essential vector to achieve their carbon reduction commitments, bode very well for the electrolysis market.
‘Against this background, ITM Power with partner Linde is very well placed to capitalise on the major opportunities we expect to arise from the continuing drive towards climate change mitigation.’
