Ilika Plc “making good progress increasing its commercialisation activities” says Beaufort Securities

Ilika Plc LON:IKA, a pioneer in materials innovation and solid-state battery technology, yesterday announced its results for the 6 months ended 31 October 2016 (‘H1 FY2017’). During the period, the Group revenue advanced by +29.5% to £329k, while due to higher administrative expenses and share-based payment charge, loss before tax widened by -17.0% to £2.19m, against the comparable period (H1 FY2016). Loss per share remained flat at 3p. As a result of the £5.8m (net of expenses) placing in October, cash at the period end stood at £7.1m (H1 FY2016: £4.5m). On the operation front, the Group has been granted patents in China for process to produce solid-state batteries and in Europe for High-Throughput Vapour Deposition synthesis platform. The Group refined solid-state battery development roadmap with improved definition of temperature, capacity and miniaturisation requirements, while shipped evaluation volumes of StereaxTM M250 batteries to potential OEM (original equipment manufacturer) partners. Ilika has also awarded a £365k grant to develop protected anodes for lithium sulphur batteries. Ilika’s CEO, Graeme Purdy, commented “In the first half of the year we have intensified commercial discussions with potential solid-state battery licensees, further strengthened our IP portfolio and augmented our materials discovery programmes.”

Beaufort Securities view: Ilika has made a good progress during the period, increasing its commercialisation activities while also successfully secured further financing through an equity placing. This demonstrates continued supportive shareholder base confident for the Group’s capabilities to deploy its high throughput materials development amongst the energy, electronics and aerospace sectors. Ilika’s principal focus remains on the development of solid-state batteries, which have number of advantages compared to standard lithium-ion batteries, including non-flammable features, 6x faster charging, 4x longer charge retention and 2x increased energy density, making them half the volume for a given charge. Post the period, the Group continue to make positive steps, reinforced its order book and sales pipeline through notifications of intent to award 3 new grants, two of which involve solid state battery integration programmes, amounting to an aggregate revenue value to the Group of £1.4m over 2 years, along with an expected commercially-funded materials development programme from an existing customer to the value of around US$1m over 12 months. Management noted that these programmes are expected to start during this financial year, with a globally-recognised OEMs partnership. Ilika also noted that it has received Notices of Allowance in the US for its 2 patent applications covering vapour deposition process for solid state battery materials and metal oxide supports for fuel cell catalysts. With around 24 months of cash based on current burn rate, we believe Ilika’s £35m market capitalisation factors in very little of its potential upside. Given that the Group confirmed progressive discussions with potential solid-state battery licencees (particularly for medical and industrial sectors applications), we are looking forward to Ilika delivering significant commercial progress in the coming year. Beaufort retains its Speculative Buy rating on the shares.

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