Ilika story has much further to run

"Everything is positive," says Graeme Purdy, the man who runs AIM-listed materials developer Ilika. He was, of course, referring to decent full-year numbers, but the company's super-efficient solid state batteries and cheap fuel cell catalyst are causing a stir, too, and the next 12 months could be transformational.

A small increase in revenue to above £1m and a cut in overheads of about £500,000 reduced losses for the year ended 30 April by a fifth to £2.8 million, and over £600,000 of revenue is already secured for the current year. And following an oversubscribed fundraising at 60p and slug of cash from the exercise of IPO warrants, Ilika is currently sitting on about £8 million of cash. That should last for about three years at the current burn rate and see the company through to profitability, reckons Mr Purdy.

Those profits will only come with commercialisation of Ilika's technology, but prospects here look good. Ilika has developed the first stacked solid-state cell battery, which could halve the size of existing smartphone batteries and cut the recharge time to just 10 minutes, six times faster than normal.

Equipment manufacturers need samples to evaluate, and Ilika expects to have a prototype ready during the first quarter of 2015. A pilot plant is almost finished and should be commissioned in September, we're told. Of course, the manufacturers are talking to the opposition, too - big guys like STMicroelectronics, IPS and Cymbet - "but they like Ilika's stack feature and want to work with us," says Mr Purdy who has already signed non-disclosure agreements (NDAs) with ten of the big electronics companies. Expect licensing discussions next year, he says.

Ilika's more efficient solid state batteries will most likely be first used in so-called wireless sensor network (WSN) applications used to control lighting and temperature in the home. But in 2016, Ilika will target the $2 billion (£1.16 billion) wearable device market from where it is not such a huge leap to the $23 billion consumer market for smart devices like phones and tablets.

Remember, too, that Ilika has developed a low-cost fuel cell catalyst, which it says is further advanced than solid state batteries. It's received "positive feedback" following tests with Toyota and believes a licensing deal is possible by Christmas. Talks are already underway.

According to Zeus Capital, Ilika will get an upfront licence issue fee of £250,000 and charge an annual maintenance fee of up to £500,000 to get to commercial production. After that, it will receive royalty sales of 2-8% of the sale price.

While timing is always susceptible to change with any new technology, Ilika looks to have a clear pathway to profitability. With commercial ramp beginning late next year, Numis Securities expects sales to top £3 million for the 12 months to April 2016 and for operating losses to narrow to £1.9 million. Get to that stage and the potential profits could be enormous.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.