Insider: ex-Rolls boss backs one of AIM’s biggest stocks

A former Rolls-Royce Holdings (LSE:RR.) boss has built a £200,000 ITM Power (LSE:ITM) stake after the green hydrogen company he joined last year shed 45% of its value in the space of a month.

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Warren East’s dealings were priced at 114.8p, having seen the AIM-listed electrolyser technology business lose momentum after a spectacular run took it from April’s 66p to 209p by the end of May.

The stock, currently one of the 10 largest on the AIM market, was among the most bought on the interactive investor platform during April and May as ITM highlighted confidence in its technology through two key strategic announcements.

The first involved a £40 million investment by Great British Energy, followed by a collaboration with defence industry supplier Rheinmetall focused on energy security for armed forces.

The subsequent slump for shares came in a period when Goldman Sachs reiterated a Sell stance with a price target of 63p.

However, ITM picked up speed last week to trade at 127p after it unveiled a research partnership in the transport sector and Berenberg lifted its price target from 110p to 200p.

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The City firm’s upgrade came as it revisited the “significant growth opportunity” of the Rheinmetall collaboration, which has opened up a new end market beyond net zero or decarbonisation goals.

Düsseldorf-based Rheinmetall's Giga PtX project aims to establish a Europe-wide network of decentralised synthetic fuel production plants for NATO armed forces.

Each will have an electrolysis capacity of up to 50 MW (megawatts), capable of producing approximately 5,000 to 7,000 tonnes of e-fuel per annum per facility.

Berenberg said: “This military-related demand driver can act as a significant catalyst that could rapidly accelerate both the demand and scale of the European green hydrogen market.”

ITM said the agreement was a repeatable deployment opportunity for large-scale electrolysers.

Chief executive Dennis Schulz added: “By combining Rheinmetall's system integration capability and defence experience with our leading electrolyser technology, together we are well-positioned to deliver scalable solutions."

Following two decades focused on R&D and innovation, Sheffield-based ITM is now a high-volume manufacturer that has worked with industrial, energy and transport companies including Shell, Tokyo Gas, RWE and current 16% shareholder Linde.

Green hydrogen is essential for decarbonising sectors that are challenging to electrify, such as petrochemicals, iron, steel, heavy-duty transport, cement, aviation, and shipping.

Schulz has narrowed the portfolio so that the core electrolyser product is capable of mass manufacture, with the same stack technology in projects of any size and region.

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In April, ITM received a vote of confidence from the UK government when it secured an £86.5 million investment package. This included Great British Energy’s purchase of 72 million new shares at 56p, which was a 13.7% discount to April’s price and a 10.4% stake.

The funds will support the establishment of a new large-scale automated manufacturing line with an annual capacity of 1 gigawatt (GW) for its next-generation stack Chronos.

Two months earlier, ITM announced that full-year revenues are expected to be between £40 million and £43 million, an 11% midpoint increase on previous guidance after it reported strong project progress and contributions from recently announced contracts.

East, who became a non-executive director in October, disclosed his investment on Wednesday.

He spent 30 years in the semiconductor industry, serving as chief executive of Arm Holdings from 2001 to 2013. He was then given the task of modernising Rolls-Royce, a role he held from 2015 until 2022.

‘An opportunistic entry point’

Two directors of Rosebank Industries  Ordinary Shares (LSE:ROSE) have made investments totalling £450,000 after the “Buy, Improve, Sell” business suffered a tough start to life on the main London market.

The venture aims to repeat the success of GKN Aerospace owner Melrose Industries (LSE:MRO), which in the 19 years after its first deal in 2005 returned £8.3 billion to its shareholders.

Rosebank was admitted to AIM in July 2024 before the acquisition of US-based Electrical Components International (ECI) a year later represented the first step in its strategy of targeting the improvement of underperforming industrial businesses.

The ECI deal has been followed by May’s $2.1 billion (£1.6 billion) acquisition of CPM, whose processing equipment is used in oilseed, animal feed production and renewable energy, and the $950 million deal for MW Components.

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The deals have doubled the revenue of Rosebank to $2.4 billion as the FTSE 250-listed company sets about improving margins by 600-700 basis points over a three-to-five-year timeframe.

Rosebank shares were 370p when they joined the main market on 1 May but fell as far as 311p at the start of the last week, which compares with 330p in a March equity raise.

Chief executive Simon Peckham, who is one of the three original Melrose co-founders, bought £350,000 worth of shares at 318.9p, while recently-appointed chief operating officer Liam Butterworth spent £100,000 at 321p.

He is the former boss of FTSE 250 business Dowlais Group, which owned GKN Automotive.

Berenberg reiterated a price target of 450p and said the recent sell-off looked to be overdone.

It believes the weakness was mostly related to concerns over ECI’s US consumer exposure and potential impact of higher US interest rates on Rosebank’s leveraged position.

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Berenberg said it viewed the ECI strategy as ahead of its five-year timeframe for margin improvement and on track to achieve management’s target of doubling that part of the equity story.

The bank added: “We see this as an opportunistic entry point to gain exposure to Rosebank’s self-help margin improvement strategy.