Applied Graphene Materials Q&A: Strong product momentum and no material impact from COVID-19 (LON:AGM)

graphene coatings

Applied Graphene Materials plc (LON:AGM) Chief Executive Officer Adrian Potts caught up with DirectorsTalk for an exclusive interview to discuss their interim results, key areas for investors, graphene applications and how COVID-19 is affecting the business.

Q1: Now, it appears that you’ve delivered a strong set of results today, with the improvements to the company’s revenues, continued progress with your product launches, and both while operating for a reduced cost base. You must be pleased?

A1: Yeah, I’m really pleased. It’s a good set of results in terms of forward momentum for the company and our strategic review was very clear, going back to that time, really clear in what we wanted to achieve so four parts really to that.

First of all, increased product momentum for the company and tied with that commercial traction, and we’ve really achieved that through a number of product launches during the period, both to specialist industrial customers in the coating sector, specifically Alltimes Coatings and Blocksil Coatings here in the UK. Secondly, to the mass market customers, again in the coating sector, so the likes of Halfords and the high coat brand for James Briggs. Along with that, we’ve also been able to demonstrate super benefits in the composites arena, with real manufactured structures using our graphene materials.

So, first of all, some great product momentum, and allied with that, some really good commercial traction as well in terms of engagement with customers and the opportunities that will come from those in the future.

Secondly, our focus on cash conservation, and we announced at the back end of last year that we were realigning our cost base and realigning around our core technology of dispersion capability and application technology and we announced that during the period. We’ve been able to extend our cash run rate now for 2021, which again, is a great result and that process is now complete.

Thirdly, progress and really looking at developing the Asian market where we do see significant opportunity engaging with the whole scope of graphene in that territory.

Fourthly, in terms of actual revenues, while modest at £60,000, our year to date revenues are 20% higher than the the full year ended 31st July 2019.

That hopefully is indicative of our overall direction of travel. So, strong product momentum, strong commercial traction, strong engagement, good cash conservation, Asia developing and starting to see revenues coming through.

Q2: Applied Graphene Materials has made it clear that it’s differentiating offer is its dispersion and application IP, it’s knowhow and the data and reference points that underpin this. How are the highlights in the period testament to that? And also, which of these key areas should investors be looking at?

A2: First of all, product launches are an amazing testament to that long term customer collaboration and as we’ve talked to in the past, that takes time to develop product accreditation and proof of concept of our products in individual customer formulations so an amazing testament to see those things come to fruition, see products come to launch status and see customers put their faith in the products that we offer.

So, whilst it’s early stages for these products in terms of an overall commercial context, they do enable an amazing platform for us to build out on the opportunity that our application technology offers. Really, as a provider to the industry, the optimum position that you get to is where you have a set of standardised products for the broadest range of customers and up to now, we’ve really worked hard, we’ve done the hard yards, the hard mileage with those early pioneers, those early adopters, and those early customer collaboration, and this is what we’ve achieved, and it’s led to those tailored solutions.

What we have with that now is an amazing platform of product offering in terms of standardised products, but also the ability to customise to specific customer applications. That creates that broader opportunity for a much wider engagement with the customer base in our core markets of coatings, composites and functional materials. So, overall, it’s a really great place to be right now.

Q3: Strong progress with your graphene applications now appearing in publicly available products, you also make clear the role of data in helping validate the capability of your graphene dispersions. Is the work done here, and I guess if not, why?

A3: Data for us in introducing a new technology to the market, data underpins pretty much everything that we do. So, if you unpeel that and what does that look like?

So, we’re introducing this new specification of material, it’s a novel material, all sorts of challenges with it in terms of adoption so data and proof of concept data is really, really important and that has been what is pivotal in helping get products to market. If you look on our website at some of the quotes that we have with our customers, it’s knowhow, it’s data, it’s proving what we’ve said about our products, that in concept they work, and then proving that in customer formulations.

So, you asked are we done with that now? No, we continue to invest in that, and it’s critical that we do so.

We have strong data sets currently, and we’re now focused on how to evolve that yet further so how to extrapolate what we have into even harsher anti-corrosion environments for the coating sector and this is a huge opportunity for the coatings market and a major opportunity for our materials technology.

So, if we continue to achieve the same success as we have seen so far with both our in-house data generation and the data that we’ve produced with specific customers, that will enable us to engage with key coating suppliers in the market as time goes by.

The key point is that that enables us to engage with both the commercial end of those customers and also the research end of those individual entities. Having proof of concept data, having proof of data in customer formulations really enables end users to see that this is a valid technology, it really works and it enables us ultimately to accelerate customer collaborations even though, as we’ve said before, that all takes time to achieve.

Q4: Just looking forward, what should investors be looking out for in the coming period?

A4: We’re pleased to show real progress with our sales pipeline, we’ve got a number of successful collaborations now entering what we classify as the final commercial discussion points, and then the realisation of revenues from that.

Whilst we can’t be specific at this stage, in the coming months we are anticipating updating the markets with expanded remits both existing customers so being able to report how those revenues are developing with those customers and also to be able to announce good commercial progress with several we’ve not being able to share yet.

So, it’s really exciting times for us, it’s starting to really come together, and we’re excited to see really great progress in the whole arena, principally with coatings, but as I said before, being able to demonstrate our amazing technology with competence as well is no mean feat. So, great traction there as well.

Q5: Finally, the question that everybody’s asking, how is COVID impacting Applied Graphene Materials?

A5: It’s one of the front question on everybody’s lips right now and it’s a challenging time. We follow the UK government guidelines, and clearly the Prime Minister had a great presentation last night.

So, in summary, we’re working efficiently and many of our staff are working from home so we’ve already implemented that, we’re doing a good job already with that as well as the opportunity to conserve cash. We’ve nailed down travel, of course, as you would expect us to, but also a lot of the conventions and conferences where we were planning to present data to in the upcoming weeks and months, they have all of course been postponed, and that enables us in itself to make a significant saving there as well. So, we’re doing a good job in terms of conserving cash over and above the results from the realignment process.

So, I think we’re in pretty good shape as it stands right now, of course, it’s an extremely fluid situation where we are experiencing minor disruption, I would say, no material impact on the business of this stage. That comes, of course, with the caveat that in our business and as a supplier to many coatings customers in particular, we are in the hands of our customers so we’re working hard with them to maintain good connection with them and on a day to day basis just seeing where the opportunities fit to be able to service their needs as time goes on.

While we navigate all of that and have those daily reviews of how we manage that situation, we continue to see that strong progress in the period, some really pleasing product launches that really just underpin and validate our strategy, that market leading graphene dispersion and application and knowhow technology is really the core to everything that we do. We’re really starting to see some great traction from that.

So, excellent progress in the period, and excellent product portfolio that we now boast both for standardised product technology and also the ability to customise to specific customer need, and that being underpinned by significant and ongoing data proof points that really just validate our technology. We’ve got an exciting pipeline to enable us to continue moving forward.

So, in summary, I would say, we’re in good shape, we’re doing really well, we’ve seen great progress. We’ve got an excellent product portfolio and some great opportunities with our customers as we progress along this journey so good stuff, I’m excited.

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