Ilika plc (LON:IKA) Chief Executive Officer Graeme Purdy caught up with DirectorsTalk for an exclusive interview to discuss their positive trading update, the Cirtec relationship, EV headwinds, and the impact of the US election and the UK budget.
Q1: Graeme, positive trading update this morning. Is it fair to say that there’s been strong operational progress with both product lines?
A1: Absolutely. I think we’re very excited actually about Stereax now coming to the end of the commissioning activities for the equipment that we sent across to Cirtec Medical’s clean room facility in Lowell in Massachusetts. We’ll shortly be running trial batches of batteries to fully qualify that Stereax manufacturing line over there with a view really to teeing us up for a kick-off for commercial production in 2025.
Of course, we’re doing a lot of co-marketing with Cirtec in the early part of 2025. We’ll be at a couple of important conferences so the NANS, so that’s the North America Neurostimulation Conference, and then the MD&M West Show. We’ll be sharing the stand with Cirtec and co-marketing our product and building that commercial pipeline.
On the Goliath side, there’s been some fantastic milestones that we’ve hit there. The P1 prototypes that we sent out to our customers for their evaluation in the earlier part of the summer, there’s been a lot of testing going on, validation of the performance. A
Not so long ago, just a few weeks ago, we were talking about our D5 development milestone, which is where we’ve got all of that third-party test data, the safety test data that shows real improvements relative to commercially available EV batteries.
There’s a great video course that hopefully some of the people who are interested in Ilika will have watched, where we’ve got a normal NMC chemistry, so automotive style chemistry, battery exploding like a small firework, and then the same nail penetration test alongside it with an Ilika Goliath battery. It’s a very dull video, very little happens, but it does show actually the real safety benefits of that, which then translates into reduced vehicle weight and cost and an extended range.
This is exactly what the automotive industry needs as we start to look at the European competitive position relative to some of the imports that are coming onto the market now.
Q2: Just go back to Cirtec, how is the relationship working out?
A2: I think we’re very happy with it, actually. There’s been a significant investment on Cirtec’s part in their manufacturing facility to accommodate our equipment. The team there is very committed, very focused, as you might imagine, on getting a return on investment of the technology and working closely together with us. Hardly a day goes by when our teams don’t speak.
So, very happy with that degree of collaboration.
Q3: You were talking about Goliath a minute ago. Generally, it seems like the EV sector is suffering from headwinds, how does that affect the group?
A3: There’s been some sobering news, really, from the EV sector with, obviously, a slowdown in EV sales relative to expectations, and some of that rippling through the supply chain. So, not only the OEMs, the headline brands that we all know and love, but some of the supporting tier one companies having to trim their sales somewhat.
Actually, I think that whole narrative really plays into cutting-edge technologies like the one that we have to offer, because our Goliath batteries offer something different. The thing is that customers have voted with their wallets, they think that EVs don’t quite fit the bill at the minute, they’re looking for extended range, they’re looking for lower cost points.
You need technologies like Ilika’s in order to address those concerns.
I’ve just actually got back from Berlin from the Future Battery Conference. We posted a little bit about that on LinkedIn over the last week, very active discussions there, fantastic panel debate about the way forward for the industry. Technologies like ours is really literally centre stage.
Q4: How might the recent US election results affect the group’s prospects, do you think?
A4: Well, it’s a complex picture, but I think there’s a few takeaways that can give us comfort.
First of all, the majority of Ilika’s interactions are actually with European OEMs. We published some data during the summer that showed that the companies that were primarily engaged with for the EV part of our business are 75% here in Europe. Only about 10% of our pipeline is related to US interactions. Having said that, I think Mr. Musk has positioned himself very cleverly, as we know, right? He runs the most valuable automotive company in the world and clearly, he’s going to make sure that EVs are very much on the agenda in terms of government policy, given his governmental role that’s just been announced.
So I’m not actually expecting any negative impact really on Ilika from that US presidential outcome.
Certainly, our interaction with Cirtec is really outside of the scope of any of the core policy changes that might be instigated by the Trump government.
Q5: How does you view the recent UK budget?
A5: I think we shouldn’t ignore the fact that IHT relief on AIM companies has been reduced and that has led to some pressure on AIM listed companies, some pressure on the share price of those companies. So, we’ve seen a number of organisations like ours that are listed on AIM that would benefit from IHT sheltered investment, we’ve seen companies in our sector suffer from reduced market capitalisation and some of the funds who invest in us have seen capital outflows. So, it’s been a difficult time.
I think that the market is starting to stabilise and investors should realise that companies like Ilika in this sector are looking like an all-time bargain in terms of their current valuations. There was an interesting bit of coverage that DirectorsTalk wrote earlier on today, that was showing the 500% upside in share price relative to analysts’ target prices.
So, it’s an interesting time to shop the market, isn’t it?
