Ilika plc (LON:IKA) is the topic of conversation when Morphose Capital Partners’ Clean-tech Equities Specialist Dr Tom McColm caught up with DirectorsTalk for an exclusive interview.
Q1: Ilika announced its interim results this morning. Tom, what did you make of them generally?
A1: Generally, in line, very good, things progressing well. Usually the numbers aren’t that interesting, but there was a couple of points on the numbers this time to note.
The first was that this was the half-year results and we’ve reduced our full year top-line revenue number by about £1 million down to £1.5 million. The reason for that is that still predominantly most of Ilika’s revenue as it develops its products comes via UK government innovation grants to develop the battery industry. Due to government admin changes and things, there’s been a few delays and not permanent delays, but changes. It’s affected the cash flow timings for their existing and some new grants that they’ve won and that’s why that’s happened. So, it’s not that relevant.
The second point to note on the numbers is despite that happening, the real key metric for Ilika as a cash burn company still is always the cash. The OPEX and CAPEX that we’ve predicted is quite a lot less also for this full year, the actual cash balance at the end of the year that we think they’ll have is actually slightly ahead of what we had at about £5 million.
Third point, which is not that quantum relative to the numbers yet, but is symbolic and interesting, is that Ilika announced its first regular commercial contract. This time it was with their Stereax development partner or commercialisation partner Cirtec, Ilika basically sent its first PO and Cirtec have started supplying the electrode into Cirtec to build the full battery. That will be an ongoing monthly commercial revenue that Ilika will be receiving.
Q2: How would you then expect Cirtec electrode supply contract revenues developing?
A2: Like I said, it’s going to start very modestly as Cirtec basically sends out seed and trial quantities of their devices to their partners. So, it will build slowly, I would say a few new customers coming on but based on the existing taking a few more. It will build slowly over the first probably 18–24 months, while these customers get their devices working and approved etc.
After that point, there’ll be quite a steep uplift from all those existing as they actually hit the market with those medical device products and Ilika will start receiving, on top of just the commercial supply revenue, its licensing, its non-recurring revenue income and also eventually royalties.
So, very steady, modest, increasing slowly over 18 to 24 months and then picking up quite sharply and growing from there to become a proper meaningful business stream basically.
Q3: So, it sounds like the Stereax side of the business is on track. What about the larger format Goliath battery platform?
A3: The same there, great news flow in the period for Goliath and expect this to continue going forward.
They’ve really improved their prototype cell in terms of capacity and performance and the big thing to look out for is announcement in this, hopefully, calendar year of what they call the A-class cell or what’s known as the MVP, the minimum viable product.
When that comes out, that’s quite significant. It’s a real key point on the manufacturing scale-up towards full-scale giga production with their manufacturing partners, and key partner in this journey with Ilika is Agratas, who are a tier one supplier to Jaguar Land Rover.
Q4: Are there any other markets other than EVs for the Goliath platform?
A4: That’s quite an interesting question, and relevant, and the answer is yes.
A very key one is due to the geopolitical changes that are going on at the moment. There’s a lot more interest, money, and activity going on in defence applications and markets, particularly portable power and drones and things like that, and Ilika’s Goliath tech platform is very well suited to some of those markets. There’s already conversations and discussions and I would think that that’s an interesting area for Ilika to grow its business.
Q5: So, what should shareholders and potential investors be looking for over the coming year?
A5: I think we’ve touched on it all before but to summarise, Stereax, around that Cirtec electrode supply agreement going nicely and growing slowly and then again, it’s a progression with existing companies and Cirtec engaging with potentially new customers to build that. I think there’s about 21 companies in that portfolio at the moment, hopefully those should progress and that number should increase.
Goliath, as I mentioned, a big one to look out for is the A-class minimum viable product announcement at some point and just generally news around feedback from Ilika. It’s got quite an impressive blue-chip pipeline of partners/customers and just news flow from them about how they’re testing and interaction, if you like, with Ilika’s technology is going.
So, that’s what to be looking out for.
