Ilika ready to charge

Ilika, which develops new materials for the energy, electronics and biomedical sectors, said demand from the Japanese electronics sector is primarily behind the surge in revenues it enjoyed last year.

Revenue from operations for the year ended April 30th rose 30% to £2.01m from £1.54m the year before, and were supplemented by £0.29m of government grant income (2011: £0.36m). As a result total revenue rose 21% to £2.30m (2011: £1.90m).

Loss before tax narrowed to £2.84m from £3.15m the year before and the loss per share contracted to 0.07p from 0.08p.

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After tapping the market for £4.6m in April, cash, cash equivalents and bank deposits at the end of April stood at £5.3m, up from £2.8m a year earlier.

"We have enough cash to see us through to profitability," Finance Director Steve Boydell told Sharecast.

"The electronics sector is driving revenue growth," Chief Executive Officer Graeme Purdy said. "We've been very successful in generating business in Japan, and now we are working on getting things moving in US, and also Germany," he added.

Some 18 months after taking on a US sales person, the orders have started to trickle in. That might sound like a long lead time, but Purdy explained that the highly technical nature of Ilika's business means there is a steep learning curve for sales people.

Revenue from customers in the Energy sector eased 9% to £1.01m in the period from £1.10m - partly due to phasing of contracts - but the other parts of the business more than compensated, with Electronics revenue up 125% to £0.66m from £0.29m the year before and Biomedical revenue up 130% to £0.35m from £0.15m the previous year.

Ilika has a lot of blue-chip customers - or partners, as it prefers to call them - including Toyota, Toshiba, Shell and the battery company Energizer.

The reason it prefers to think of customers as partners is because of the collaborative nature of their relationships; essentially, companies use Ilika as part of their research and development process, calling upon Ilika's expertise and patented processes to fast-track the development process.

In many cases having developed a solution for a company (e.g. a thinner battery which retains a charge for longer), the intellectual property can then be licensed to other parties.

"We're choosy in what projects we take on," Purdy explained. "The rule of thumb is the market has to be worth $1bn dollars before we consider working on it."

Ilika will also look at the customer's market share before taking on a project.

"You might ask why we don't just come up with these clever solutions off our own bat and market them ourselves, but partnering with commercial companies is good because they know what the market wants. That way, we don't end up creating materials for which there is no commercial use. They also pay up front, which helps the cash flow," Purdy explained.

The company has a number of projects in the pipeline and says that revenues usually peak within three to five years after launch.

"We have a strong IP [intellectual property] portfolio and a number of joint development agreements with major partners that continue to make good progress," said company Chairman Jack Boyer.

"We have strengthened the international reach of our business development activities and with early successes in the US and the appointment of a business development director in Germany, our sales pipeline for 2013 is growing and provides us with significant confidence for the future," he added.