Interim Results for the six months ended 31 October 2005

Highlights:

    * Research and development activities have exceeded expectations:

        o ITM successfully achieved the first milestone set out at the time of
          the IPO: the production and demonstration of a 20w flexible fuel cell
          stack

        o Operation of ITM's proprietary hydrophilic membrane in an electrolyser
          for in excess of 500 hours without evidence of failure or degradation
          of the membrane

    * Yorkshire Forward awarded ITM £800,000 development grant for expansion of
      laboratory and workshop space in Sheffield

    * Loss after tax £900,000 - within the planned expenditure budget

    * New Chief Financial Officer and Company Secretary appointed

    * Agreement with Heriot Watt University for ITM to fund a PhD student to
      research the production of hydrocarbons from renewable resources
 

Stephen Massey, Chairman commented: "The main focus of our current R&D programme
is to continue to develop the technology that will allow the production of
hydrogen at a cost that is competitive with fossil fuels. ITM believes that
unless hydrogen can be produced cost competitively with existing fuels, it will
be difficult for the hydrogen economy to evolve".

"ITM's strategy is to continue to generate value for shareholders by creating an
expanding portfolio of intellectual property, fundamental to the development of
the hydrogen economy that can be licensed to generate revenue. We believe that
the advances we continue to achieve have great potential value. I am very
pleased with the Company's progress to date and look forward to what I believe
will be another successful full year for ITM."

For further information please contact:

Jim Heathcote          Gemma Chandler                        Tim Linacre
ITM Power Plc          Tavistock Communications              Panmure Gordon & Co
Tel: 01799 532860      Tel: 020 7920 3150/ 07787 510 630     Tel: 020 7459 3600

or visit www.itm-power.com

Chairman's statement

I am pleased to report on the activities of ITM for the six months to 31 October
2005.

Results

During the six months under review there was an operating loss of £1.1 million,
compared with £700,000 in the same period last year. This reflects the increased
level of research and development activity which has taken place at our
Sheffield facilities during 2005. The increased activity has required additional
technical staff, equipment and space, the expenditure on which was in line with
budget. At the end of the period, there was a further increase in activity, and
extra staff and space have been added to the Sheffield facility, which will
result in a further increase in operating costs during the second half year.
This increase, which is also in line with budget, will be mitigated by the
expected receipt of the £800,000 grant awarded by Yorkshire Forward during the
first half of the Financial Year. The loss after tax for the period amounted to
£900,000 compared with £500,000 in the same period in 2004.

Capital expenditure on facilities and test equipment amounted to £400,000. At
the end of the period, net current assets were £6.9 million, of which £6.8
million was in cash and short term deposits - which is considered a satisfactory
position from which to achieve ITM's future technical milestones.

Energy overview

The strong price of oil during the relatively low demand months of the summer
was ominous and suggests there is now little scope to bring on additional spare
production capacity. The "Peak Oil" theory, about the impending historic peak in
oil production, continues to gain supporters as the evidence in its favour
mounts.

This was highlighted in a recent report by the Kuwait Oil Company that Burgan,
the world's second largest oil field, had passed peak production. This news,
together with the reported declining production profiles of countries outside
the Middle East and Russia, highlights growing concerns that future supplies of
energy will be dependent on a small number of fields in politically unstable
geographic areas.

The impact of Hurricane Katrina was important for two reasons; firstly, it
highlighted the fragility of the United States oil production capabilities and
secondly, the devastation of New Orleans raised awareness that increasing carbon
dioxide levels may have reached dangerous levels as global temperatures rise and
the climate changes.

It is apparent that the need for a successor to fossil fuels as our primary
energy source is becoming more urgent and that the atmospheric impact of any
successor must be minimal. It is our belief that the ability to make cost
competitive hydrogen from renewable energy sources is a critical step for the
future of the worldwide energy economy.

Review

I am pleased to report that during the half year in review, progress in our
research and development activities has exceeded expectations as we continue to
pursue fundamental R&D in fuel cell and electrolyser science.

In the last few months we have made a number of significant announcements:

  * In June 2005, ITM successfully achieved the first milestone set out at
    the time of the IPO: the production and demonstration of a 20w flexible fuel
    cell stack, which has the potential use for both military and civilian
    applications. The device operates using two liquids, which enables operation
    in polluted environments, at high altitudes, as well as under water.
 

  * In October 2005, ITM announced significant progress in its development
    of durable modular electrolysers, which could enable the realisation of cost
    competitive hydrogen fuel as an alternative to hydrocarbons. ITM operated
    its proprietary hydrophilic membrane in an electrolyser for a period in
    excess of 500 hours without evidence of failure or degradation of the
    membrane. Since the period end, ITM has announced further longevity test
    results of the new Mark IV electrolyser, which was operated for a period of
    1,000 hours without evidence of failure or degradation of the membrane.

  * In August 2005, ITM updated the market further on the ITM-DTI alcohol
    fuel cell programme, which potentially significantly broadens ITM's
    intellectual property portfolio. The DTI provided ITM with funding to
    research, develop and patent additional materials specifically designed to
    operate with methanol as the fuel. ITM tested their low cost materials as
    direct methanol fuel cells in both acid and alkaline forms, which was
    important because alkaline conditions allow for the use of lower cost,
    non-platinum catalysts, such as palladium.

  * In September 2005, the European Patent Office formally allowed ITM's
    core patent application on electrochemical cells using hydrophilic polymers.
    The application covers both low cost materials and novel manufacturing
    processes used separately or in a combination to produce membrane electrode
    assemblies for use in fuel cells and electrolysers.

  * In July 2005, ITM was delighted to report that Yorkshire Forward, the
    Regional Development Agency responsible for sustainable economic and
    regeneration of Yorkshire and Humber area, had awarded ITM a £800,000
    development grant to encourage ITM to expand its laboratory and workshop
    space in Sheffield. The award of this grant has enabled ITM to expand into
    the adjacent building.

  * Finally, ITM concluded an agreement with Heriot Watt University for ITM
    to fund a PhD student to research the production of hydrocarbons by
    combining hydrogen produced electrolytically from renewable resources (or
    electricity) and carbon dioxide recovered from the atmosphere. ITM will own
    the intellectual property resulting from the agreement and has already filed
    a patent application covering the use of renewable hydrogen and waste carbon
    dioxide to permanently sequester carbon dioxide in commercially valuable
    products such as bitumen.

Recent developments

Since the period end, we have announced several further developments. In
November 2005, we announced we had filed a patent application on composite
membranes. These new membranes may be a significant advance as there is reason
to believe they may help solve important hydration control issues in operating
fuel cells. Using two membrane materials, which establish and maintain two
different pH levels at the electrodes, may increase the electrochemical
potential of the hydrogen/oxygen reaction above 1.23 volts.

At the same time, we announced the filing of an additional patent application
involving a composite membrane with an electronic control grid inside the
membrane. By adjusting the voltage applied to the grid we have developed a new
way of controlling the ion flow through the membrane, and thus the power output
of the fuel cell. We believe that the potential impact of this technology could
be comparable to the development of the early electronic transistors.

In early January 2006, we announced the early completion of the milestones that
were set out in the prospectus at the time of the IPO and, as reported above,
the extension of our electrolyser durability testing to in excess of 1,000
hours.

Board and staff

To enable further acceleration of ITM's technical development activity, we have
recently recruited a further 10 new staff to our technical and support team.

In August 2005, Gervas Steele resigned from the Board as a non-executive 
director to pursue other business interests.  In June 2005, John Wreford 
announced his intention to retire from the Board as Finance Director. John 
intends to step down from the Board on 31 January 2006. I am delighted to report
that we have appointed Marcus Scott as Chief Finance Officer to undertake the
financial planning and Company Secretariat duties of the Company. Previously,
Marcus was Chief Finance Officer at Antenova, which develops and sells novel
wireless applications to major blue chip organisations.

In July 2005, 6,818,181 existing ordinary shares were successfully placed with
existing and new investors on behalf of the founders of ITM: John Wreford, Dr
Jon Lloyd and Dr Donald Highgate. John's sale, of part of his interest in ITM,
was to fund his retirement. The total shares placed represented 7.4 per cent of
the issued share capital of the Company and were placed at a price of 88 pence
per share. Mr Wreford, Dr Lloyd and Dr Highgate have all agreed not to sell any
further shares for a period of twelve months.

I would like to take this opportunity to welcome the new recruits to ITM and to
thank John Wreford for his contributions to our growth and wish him a long and
happy retirement. On behalf of the Directors, I would also like to thank all of
our staff for their hard work and commitment during the last six months.

Outlook

During the next year, the main focus of our technical programme is to continue
to develop the technology that will allow the production of hydrogen at a cost
that is competitive with fossil fuels. ITM believes that unless hydrogen can be
produced cost competitively with existing fuels, it will be difficult for the
hydrogen economy to evolve.

ITM believes that the advent of the low cost modular electrolyser will be the
key contributor to realising the hydrogen economy, because such electrolysers
could provide low cost on-site generation of hydrogen using the existing
electricity network. This reduces the need for new methods of storage and
distribution. The electrolyser could effectively simultaneously solve the cost
and infrastructure problems that have blocked the general adoption of hydrogen
as a fuel.

ITM's strategy is to continue to generate value for shareholders by creating an
expanding portfolio of intellectual property, fundamental to the development of
the hydrogen economy that can be licensed to generate revenue. We believe that
the advances we continue to achieve have great potential value. I am very
pleased with the Company's progress to date and look forward to what I believe
will be another successful full year for ITM.

Stephen Massey
Chairman
31 January 2006
 

Interim Results for the Six Months to 31 October 2005
 

CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
Results for the six months ended 31 October 2005

                                                      Six months      Six months
                                                        ended 31        ended 31      Year ended
                                                    October 2005    October 2004   30 April 2005
                                                     (unaudited)     (unaudited)       (audited)
                                                               £               £               £
Administrative expenses                                                                         
- Research and development                              (718,951)       (355,368)       (930,525)
- Share option charges                                         -       &        -        (175,000)
- Other                                                 (391,123)       (374,781)       (745,938)
                                                      -----------     ------------     -----------
                                                      (1,110,074)       (730,149)     (1,851,463)
Other operating income                                    40,178          30,000         241,306
                                                      -----------     ------------     -----------
Operating loss                                        (1,069,896)       (700,149)     (1,610,157)
                                                                                                
Interest receivable and similar income                   161,080         161,441         346,461
                                                      -----------     ------------     -----------
Loss on ordinary activities before taxation             (908,816)       (538,708)     (1,263,696)
                                                                                                
Tax on loss on ordinary activities                        30,000          24,000          58,108
                                                      -----------     ------------     -----------
Loss on ordinary activities after taxation,                                                     
being retained loss for the financial period            (878,816)       (514,708)     (1,205,588)
                                                      ===========     ===========     ===========
Loss per share                                                                                  
Basic and diluted                                          (1.0p)          (0.6p)          (1.3p)
                                                      ===========     ===========     ===========

There are no recognised gains or losses for the current financial period and
preceding financial periods other than as stated in the profit and loss account.
 
 

CONSOLIDATED BALANCE SHEET (UNAUDITED)
31 October 2005

                                                        As at 31        As at 31
                                                         October         October        As at 30
                                                            2005            2004      April 2005
                                                     (unaudited)     (unaudited)       (audited)
                                                               £               £               £
FIXED ASSETS                                                                                    
Tangible assets                                          673,596         128,223         396,481
                                                      -----------     ------------     -----------
CURRENT ASSETS                                                                                  
Debtors                                                  393,352         371,452         464,500
Investments - short term deposits                      6,553,155       8,601,308       7,550,000
Cash at bank and in hand                                 206,749          40,177         193,469
                                                      -----------     ------------     -----------
                                                       7,153,256       9,012,937       8,207,969
                                                      -----------     ------------     -----------
CREDITORS:                                                                                      
amounts falling due within one year                     (261,931)       (182,630)       (161,799)
                                                      -----------     ------------     -----------
NET CURRENT ASSETS                                     6,891,325       8,830,307       8,046,170
                                                      -----------     ------------     -----------
TOTAL ASSETS LESS CURRENT                                                                       
LIABILITIES, BEING NET ASSETS                          7,564,921       8,958,530       8,442,651
                                                      ===========     ===========     ===========
                                                                                                
CAPITAL AND RESERVES                                                                            
Called up share capital                                4,594,663       4,593,712       4,593,713
Share premium account                                  8,102,986       8,102,850       8,102,850
Merger reserve                                        (1,972,820)     (1,972,820)     (1,972,820)
Profit and loss account                               (3,159,908)     (1,765,212)     (2,281,092)
                                                      -----------     ------------     -----------
EQUITY SHAREHOLDERS' FUNDS                             7,564,921       8,958,530       8,442,651
                                                      ===========     ===========     ===========
 
 

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Results for the six months ended 31 October 2005

                                                      Six months      Six months                
                                                        ended 31        ended 31      Year ended
                                                         October         October        30 April
                                                            2005            2004            2005
                                                     (unaudited)     (unaudited)       (audited)
                                                               £               £               £
                                                                                                
Net cash outflow from operations                        (780,101)       (692,904)     (1,355,823)
                                                      -----------     ------------     -----------
Returns on investments and servicing of finance                                                 
Interest received                                        161,080          55,233         121,503
                                                      -----------     ------------     -----------
Taxation                                                                                        
Research and development tax credit                            -       &        -       &   43,555
                                                      -----------     ------------     -----------
Capital expenditure and financial investment                                                    
Purchase of tangible fixed assets                       (365,630)        (38,289)       (383,212)
                                                      -----------     ------------     -----------
Net cash outflow before management of liquid                                                    
resources and financing                                 (984,651)       (675,960)     (1,573,977)
                                                      -----------     ------------     -----------
Management of liquid resources                                                                  
Cash withdrawn from (placed on) term deposits            996,845      (8,325,832)     (7,274,524)
                                                      -----------     ------------     -----------
                                                                                                
Financing                                                                                       
Issue of ordinary share capital (net of expenses)          1,086       9,126,562       9,126,563
                                                      -----------     ------------     -----------
                                                                                                
Increase in cash                                          13,280         124,770         278,062
                                                      ===========     ===========     ===========

1. Loss per share

The loss per ordinary share and diluted loss per share are equal because share
options are only included in the calculation of diluted earnings per share if
their issue would decrease the net profit per share or increase the net loss per
share. The calculation is based on information in the table shown below.

                                                      Six months      Six months                
                                                        ended 31        ended 31      Year ended
                                                         October         October        30 April
                                                            2005            2004            2005
                                                     (unaudited)     (unaudited)       (audited)
                                                               £               £               £
                                                                                                
Loss (£)                                                (878,816)       (514,708)     (1,205,588)
                                                      ===========     ===========     ===========
Weighted average number of shares                     91,877,761      87,253,433      89,501,418
                                                      ===========     ===========     ===========
 

2. Reserves and reconciliation of movement in shareholders' funds

                                   Called up           Share                      Profit and                
                                       share         premium          Merger            loss   Shareholders'
                                     capital         account         reserve         account           funds
                                           £               £               £               £               £
                                                                                                            
At 1 May 2005                      4,593,713       8,102,850      (1,972,820)     (2,281,092)      8,442,651
Issue of shares                          950             136               -       &        -       &    1,086
Retained loss for the period               -       &        -       &        -        (878,816)       (878,816)
                                  -----------     ------------     -----------     ------------     -----------
At 31 October 2005                 4,594,663       8,102,986      (1,972,820)     (3,159,908)      7,564,921
                                  ===========     ===========     ===========     ===========     ===========
 

3. Basis of interim figures

This interim financial information does not constitute statutory financial
statements within the meaning of section 240 of the Companies Act 1985. The
financial information for the six months ended 31 October 2005 and 31 October
2004 has not been audited. The information relating to the year ended 30 April
2005 is an extract from the audited financial statements for that year on which
the auditors gave an unqualified audit report and did not contain a statement
under s237(2) of the Companies Act 1985. A copy of those financial statements
has been filed with the Registrar of Companies.

INDEPENDENT REVIEW REPORT TO ITM POWER PLC
 

Introduction

We have been instructed by the company to review the financial information for
the six months ended 31 October 2005 which comprises the profit and loss
account, the balance sheet, the cash flow statement and related notes 1 to 3. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.

This report is made solely to the company, in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are also responsible for ensuring that the accounting policies and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.

Review work performed

We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 October 2005.

Deloitte & Touche LLP
Chartered Accountants
Cambridge