Why Backlog quality matters now

ITM Power's most recent announcements have been procedural. (LSE:ITM) On 2 November 2026 the Sheffield-based electrolyser maker reported that all 13 resolutions at its Annual General Meeting on 30 October had passed on a poll, and on 27 October it gave notice of a general meeting on 13 November alongside publication of its annual report. Neither statement contained new trading information, and the GM announcement does not set out the Business of that meeting.

This article therefore returns to the preliminary results for the year to 30 April 2026, published on 19 October, to examine a less discussed theme: the shifting quality of ITM's order book and the legacy contracts that still weigh on margins.

What the company reported

ITM designs and manufactures proton exchange membrane electrolysers that use electricity to split water into hydrogen and oxygen. (LSE:ITM) It also offers hydrogen Supply through Hydropulse, a business that builds, owns and operates plants. For FY26 it reported Revenue of £43.6m, up 68%, an adjusted EBITDA loss of £20.2m, narrower than the prior year's £33.0m, and year-end cash of £215.6m, which included a £40.0m Equity Investment from Great British Energy.

Contract backlog stood at £144.0m, similar to a year earlier despite record revenue recognition. (LSE:ITM) More notably, the company said 83% of that backlog now consists of profitable contracts, up from 60% in April 2025. On our reading, that improvement suggests newer orders are being priced on terms that cover costs, while older contracts signed before the company's reset continue to run off.

The onerous contract provision

The accounts quantify that legacy. (LSE:ITM) ITM first booked a provision in FY23 for expected losses on several earlier contracts. At the FY26 year end it recorded a net onerous contract provision of £9.5m, after reallocating £11.1m against related inventory, giving a gross figure of £20.6m. The company expects most of this to be released during FY27 as the projects complete, but cautions that the timing is outside its control.

ITM reported a gross loss of £6.1m, down almost 75% from £23.7m, which it attributed to £7.5m of under-absorbed factory costs and £5.0m of Manufacturing losses or inventory write-off provisions.

How quickly the book converts

The notes add a timing dimension. Revenue allocated to remaining performance obligations on build contracts was £139.4m, of which the company expects to recognise 43% within one year and 57% afterwards. That figure differs from the headline backlog because the latter also includes engineering and other contractual revenue.

For FY27, management has guided to revenue of £50m to £60m and an adjusted EBITDA loss of £17m to £20m, which it describes as a function of factory loading. Those are company targets, not results.

Risks and judgements

Onerous contract accounting relies on estimates of remaining costs, and the company acknowledges a range of possible outcomes. Delays at customer sites could push both revenue and provision releases into later periods. On our reading, provision releases offset losses already recognised rather than adding new cash. Under-utilised factory capacity remains a cost until order intake rises, and several large selections, including Uniper and a 300MW-plus Asia-Pacific project, are not the same as firm orders. Green hydrogen Demand depends heavily on Subsidy schemes in the UK and Europe.

Shareholder support for the board appeared solid, with every resolution passing comfortably, although the vote on letting the audit committee set auditor pay drew 9.22% against, the largest opposition recorded.

Next steps

The general meeting is scheduled for 10:00 on Friday 13 November 2026 in Sheffield. The Going Concern review covers the period to 31 October 2027 and indicates no need for further fundraising if the existing pipeline is delivered. The 3 November session closed at 77.75p, on LSE delayed data.