Zeus Capital Research Director Dr Tom McColm caught up with DirectorsTalk to discuss Ilika plc (LON:IKA)
Q1: Now I wanted to talk to you today about Ilika plc, can you summarise for us the last 12-18 months?
A1: Yes, it’s been a very interesting period for Ilika and they’ve basically been really focussing on commercialising the solid state battery IP that they developed in their joint development agreement with Toyota and they’ve sort of morphed their business model a bit really, moving from a pure kind of contract R&D business to an actual IP commercialisation business. They’ve invested quite a lot of their resources and time over the last 12-18 months into doing this and they’ve kind of got there now, they’ve got the team in place, they’ve got their pilot facility in place to sort of produce pilot numbers of these solid state batteries and they’ve turned themselves from what I would call a service company into potentially an IP commercialisation company which is actually quite exciting.
Q2: What milestones should investors be looking out for in the next 12 months?
A2: Well know that they’ve put the sort of building blocks in place to ramp up commercialisation, we need to looking for signs that that is coming to fruition and the real key milestones we should be looking for in the next 12 months is at least one, but hopefully two, solid state battery licencing deals with OEM partners. So that’s what to look out for, I think the company’s relatively confident that it will achieve this and that’ll move the top line and the bottom line.
Q3: So what’s the biggest risk to Ilika’s business going forward?
A3: I would say that there’s still some execution risk on this business model, they’re kind of basing themselves on, almost replicating, the ARM model. What ARM did in semi-conductors they’re looking to do in that solid state battery market, to that extent, their Chairman Mike Inglis, is the ex-Commercial Director of ARM, now that’s a great idea and I think they will pull it off but I think the risk is that it isn’t quite the same. Batteries are not quite the same as semi-conductors, they’re a little bit more rough and ready so the idea of licencing out, if you like, recipes in a way and recipe books for customers to make their own batteries may not work quite as well as it does in the semi-conductor industry which is a much more precision industry. So I’d say that there may be some teething problems there, some tech transfer problems will be the biggest risk I would assess to Ilika’s business.
Q4: Do you think they’ll be affected by the Brexit?
A4: That’s a good question, I think everyone is a bit affected by the Brexit aren’t they? One thing about Ilika’s business is that the majority of these big battery producers and big battery companies are actually Asian, for instance Toyota, it’s in the public domain and for a long time has been their largest customer. So to that end I would say they’re not so European/UK, their customers in the end are going to come from Asia so probably not a big victim or badly affected by the Brexit.
Q5: Where do you see Ilika plc in 5 years’ time?
A5: I’m an optimist, I’ve followed Ilika for a long time and I’m assuming that the risk that I pointed out earlier that they will get over that, they’ll execute this business plan and this could be a very very cash generative profitable company when it’s licencing out. Lots of licences fees from partners over the next 2-3 years but in 5 years you’d hope that the royalties are starting to come in from all the little batteries they’re putting out there into the Internet of Things which is exploding and other sectors as well, potentially consumer electronics and automotive.
