Two AIM listed Stocks In Focus: ITM Power Plc & PCF Group Plc

ITM Power Plc

ITM Power Plc (ITM) is a renewable energy company which is engaged in manufacturing hydrogen energy solutions, storage and utilization systems. Key technologies of its specialization are water electrolysis and Fuel Cells. The Company till date has opened four hydrogen stations, which convert excess electricity available during non-peak hours to Hydrogen, to be re-converted into electricity during peak demand hours. The stations are located at the Advanced Manufacturing Park in Rotherham, National Physical Laboratory at bushy Park in Teddington London, centre for engineering and manufacturing Excellence at Rainham in the London Borough of Harving and at Cobham Services Motorway service area. The station at Cobham Services Motorway service has been built in partnership with Shell Oil Corporation.

The Company has its shares listed in AIM on the London stock exchange, and they trade there under the ticker name ITM.

Recent news update

The Company announced on 22 July 2019 that it has taken on lease a new manufacturing unit to be located in Sheffield in the United Kingdom in order to build its global manufacturing hub. The Company has seen a spike in orders for its specialist equipment, and its existing manufacturing facilities are not able to meet the increased production demand. The new facility leased will be 134,000 square foot in area, which will able to make electrolysis equipment with electricity generation capacity of 10,000 Megawatt per year. The facility to be built by PLP will be in close proximity of ITM’s existing manufacturing facility, whereby less cost would be incurred due to shared logistics.

Financial Update for H1 FY2019 ending October 2018 (£’000s)

Source – Company result report publication for H1 FY2019 ended 31 October 2018

The Company for the half-year ended 31 October 2018 reported revenue of £1.187 million compared to revenue of £1.739 million for the half-year period ended 31 October 2017. Gross loss for the half-year ended 31 October 2018 was £640,000 whereas it was a gross profit of £159,000 for the period ended 31 October 2017. The operating loss for the half-year ended 31 October 2018 was £5.288 million, whereas it was an operating loss of £2.877 million for the period ended 31 October 2017. The net loss for the half-year ended 31 October 2018 was £5.193 million, as compared to a net loss of £2.529 million for the half-year ended 31 October 2017. The higher loss for the half-year was on account of higher research and development costs and higher prototype production and engineering costs. The loss per share (diluted) of 1.8 pence was for the half-year period ended 31 October 2018, whereas for the half-year period ended 31 October 2017 it was a loss of 1.0 pence per share. The Company has not declared any dividend during this period (half-year ended 31 October 2018).

Share price performance

Daily Chart of ITM Power Plc, as on 13 August 2019, before the market close (Source: Thomson Reuters)

On 13 August 2019, at the time of writing the report (before the market close, GMT 02.02 PM), ITM shares were trading on the London Stock Exchange at GBX 38.2, down by 3.9 per cent over the previous day’s closing price of GBX 39.75. The stock has a 52- week High of GBX 41.9, and a 52-week low of GBX 18.5. The total market capitalization of the Company was around £128.38 million.

Outlook

The Company is a pioneer in the field of cutting-edge renewable energy technology. It can enable electricity storage in case of abundant availability and least requirement and supply it back to the grid when demand is high, outstripping real-time available production. The concept of hydrogen economy first proposed by J.B.S Haldane has been gaining worldwide attention as the country prepares itself for a fossil-fuel-free economy. The fluctuation of crude oil and natural gas prices and associated geopolitical squabbles have provided enough motivation for countries to start investing heavily into alternative energy technologies and associated resources.

Hydrogen as a gaseous element can be used in multiple ways in aiding renewable energy production efforts. It can be used to make synthetic natural gas, synthetic petrol and can also be used directly to run Otto-cycle internal combustion engines. The gas can also be used as an energy storage medium to store electricity in huge quantities by conversion and re-conversion of Hydrogen to electricity and back, much more than any other known battery device can provide.

The Company has also been associating with various organizations and governmental efforts to promote hydrogen economy; EcoIsland Partnership CIC and the New Energy Project initiated by the UK Department of energy and climate change are two of them. These efforts bring different renewable energy players together to consolidate their efforts towards achieving a common goal. The Company has been benefiting greatly from these efforts.

PCF Group Plc

PCF Group Plc (PCF) is the United Kingdom domiciled retail banking company. It provides retail banking services to depositors and channelizes the funds to its two-lending arms viz; Consumer finance and business finance. The consumer finance division lends money to finance motor vehicle purchase and the business finance division aids purchase of vehicles, machinery and equipment by small and medium business owners.

The Company, founded in 1994, was listed on AIM on 2 September 1998, on the London Stock Exchange and its shares trade with the ticker name PCF.

Recent news update

The Company on 5 June 2019 came out with its half-yearly results for the period ended 31 March 2019. During this period, the company’s operating profit rose by 51 per cent and earnings per share increased by 50 per cent. During this period the bank acquired Azule Limited, a broadcast and media industry finance provider and also started its bridging property finance business; both of these units are performing satisfactorily. The total customer base has increased to 19,000, whereas it was 15,000 in 2018.

During the first six-month period of the Financial year 2019, the bank was awarded the Top New Challenger award at the leasing world industry awards and received a nomination for 2019 best notice and best fixed-account provider by Money Facts.

Financial Update for H1 FY2019 ending 31 March 2019 (£’000s)

Source – Company result report publication for H1 FY2019 (period ending 31 March 2019)

The Company for the half-year ended 31 March 2019 reported net interest income of £10.018 million compared to net interest income of £6.820 million for the half-year period ended 31 March 2018. The operating income for the half-year ended 31 March 2019 was £10.122 million, whereas it was £6.689 million for the period ended 31 March 2018. The underlying profit before tax for the half-year ended 31 March 2019 was £3.312 million, compared to an underlying profit before tax of £2.064 million for the period ended 31 March 2018. The net profit for the first half-year ended 31 March 2019 was £2.654 million, whereas it was a net profit of £1.651 million for the half-year ended 31 March 2018. The profit per share (diluted) was 1.2 pence for the half-year period ended 31 March 2019, whereas for the half-year period ended 31 March 2018 it was 0.8 pence per share. The Company though has not declared any dividend during this period (half-year ended 31 March 2019).

Share Price Performance

Daily Chart of PCF Group Plc, as on 13 August 2019, before the market close (Source: Thomson Reuters)

On 13 August 2019, at the time of writing the report (before the market close, GMT 01.54 PM), PCF shares were trading on the London Stock Exchange at GBX 26.84, down by 0.59 per cent over the previous day’s closing price of GBX 27.00. The stock has a 52- week High of GBX 42.9, and a 52-week low of GBX 26.0. The total market capitalization of the Company was around £67.33 million.

Outlook

The bank is an outperformer in its class of contemporary banking and financial services providers. Its simple mode of operations and customers aligned to tailor-made services have made it an instant hit with its borrowers and depositors. The bank’s assets to liabilities ratio stands at 1.21 and cash generated from operating activities are at – 29,278, meaning that more funds have been lent out compared to deposits taken from depositors.

 The bank’s balance sheet and liquidity position seem to be in a good position and the business performance is rapid. The new lines of business that the bank has entered into are also highly profitable and have been delivering good returns for contemporary competitors. The bank has also been recognized for its good work by various market observers and rewarded accordingly.

The bank should be able to replicate its performance in the future periods, and the same results can reasonably be expected from it. The management is very confident and satisfied with the bank’s performance and expects it to continue to create value for shareholders.