Walbrock’s Companies Results 11th July 2018

This entry is part 5 of 7 in the series Daily Company results

IIika

Introduction

ILIKA IS A PIONEER IN SOLID-STATE BATTERY TECHNOLOGY AND MATERIALS INNOVATION.

It has revenue of over £1.1m.

Looking at the share price, the market appears to have given up after their initial enthusiasm. The shares currently trading at around 23 pence.

 

Brief business model

It develops solid-state battery technology, which is their Stereax™ P180 which can operate in the extended temperature range -40°C to +150°C.

Overall, Ilika is focusing on operating in the industrial IoT, Automotive, Aerospace and infrastructure.

 

Important factors for shareholders to consider

1). Starting with their revenue, it grew to £2.1m from £1.1m and this marks the first time it has broken the £2m mark on sales (which is a record by the way!).

However, isn’t profitable and report a loss of £2.9m, an improvement from £3.5m.

If one looks at their past, Ilika business doesn’t seem to be moving in an upwards trajectory where revenue is stuck on £1m and losses are around £3m per year for the last 8 YEARS!

2). The balance sheet reveals a lot of information, here goes:

-Trade receivables seem to improve from last year as it accounts for 50% of sales, rather than 100%.

-The asset side of their balance sheet is dominated by having liquid cash. Cash at the bank comes to £2.81m, as total assets amount to £4.75m.

Breaking News: Ilika released a statement saying it is proposing to £5m at 20 pence per share, which would raise cash and cash equivalent to £7.5m or £7m, depending on the time it got the placing done.

3). As you have heard, Ilika is raising more cash and is looking to use the money to build Project Goliath for £1.6m and to meet their operational costs of £1.5m.

Project Goliath refers to Ilika businesses.

The placing of 20 pence proposed is a good placing price and not too far off their current share price of 23 pence. And this is more impressive as the £5m cash funding accounts for 32% of total existing share capital.

The problem investors have is when will this business becomes a profitable entity.

Lastly, the total shares outstanding will have risen to 103m, compared to 2011’s share count of 36.6m, a rise of 181% while the reverse has happened to its share price falling from 51 pence to 21 pence, a decline of 59%.

 

4). Meanwhile, equity collapsed from £6.2m to £3.8m and is simply down to the company burning cash.

What’s more interesting is the total accumulated losses of Ilika’s retained earnings total £26.7m.

5). Ilika is seeing a smaller deterioration in operating cash flow to negative £2.3m from negative £3.2m and it appears the company isn’t burning cash as net investing activities are on the plus side of £2.6m.

But this is an accounting gimmick as we know cash balance has declined.

For more on today’s results, click HERE.

 

Brokers’ forecast

Comparing the actual results with analysts’ forecast tells me that sales meet expectations and EPS is below expectation coming in at -3.67 pence/share.

£m 2018 2019 2020
SALES 2.1 3.2 3.4
EBIT -3.1 -2.1 -1.9
Net Income n/a n/a n/a
EPS (pence) -3.4 -2.2 -2.1
Forward-P/E (times) n/a n/a n/a
       

 

Outlook

Last year, management is very encouraged by the commercial progress. They launched their first Stereax product, the M250, with the launch of a high-temperature battery, the P180, for industrial IoT applications. Also, they secured their first commercial engagements for Stereax.

 

This year, the Chairman touts more partnership deals with big business (see below) and says further growth will come in the year ahead without going into the specific. Looking at brokers’ forecast, analysts expect sales to rise to £3.2m by 2019, but it will still be making losses.

 

My thoughts

If you read the operational highlights, you can a sense this company is going places, when it states they collaborating with BIG GIANT corporations such as Johnson Matthey, Toyota, Seagate, PragmatIC, Arm, Rolls-Royce, BAE Systems and GKN.

But it lacks financial details on these collaborations and market isn’t too impressive as shares tumble by 30% from a year ago.

 

Assessing the liquidity, it is proposing to raise £5m in a placing to resolve short-term cash crunch.

Overall, my impression is they are doing collaborations with big names, but when will it result in a sustainable cash profit. And for the next two years, analysts aren’t forecasting any profits and this brings uncertainty and makes Ilika a speculative investment.

Regarding valuation, the value placed on Ilika of £20m is reasonable. Until you understand the business, the competition and the market size, then Ilika is a speculative investment.

 

Resources for Readers

If you are new to investing or interested in investing, then check out some free resources under the subtitle “recommended readingHERE.

Included in the resource page are some of my recommended investment books which are useful because it helps:

1). people who are new to investing;

2). those who want to follow value investing and growth investing;

3). People looking for an earn extra income;

4). To find quality stocks to invest.

 

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