Intelligent Energy (IEH) has developed a high power density fuel cell technology suitable for use in multiple sectors. The group has an excellent record of providing technology for automotive companies, most notably for the Suzuki Burgman electric scooter. Under its revised strategy, it is focusing on near-term opportunities to deliver products for deployment in distributed power generation, UAV and consumer electronics applications to drive revenue growth during the years before mainstream adoption of fuel cell vehicles. We reintroduce our estimates to reflect the new strategy.
CEO Martin Bloom, who was appointed in June 2016, has refined the diversification strategy so it is focused on sales of commercially ready B2B products for deployment in mobile and distributed power generation including diesel generator replacements and commercial drone applications. We model this as contributing £5.0m revenues during FY17. Funded development work on stacks for embedded portable electronic devices and lower power, air-cooled motive applications is being continued. However, development work on higher power output, evaporatively cooled technology has been mothballed unless third party funding for IEH’s work materialises. The power management activity in India is either to be split off into a separate entity in which the group has a minority stake, or restructured, hence the reduction in our FY17 group revenue estimate compared to FY16. The capability to sustain fuel cell deployment will be sustained in either scenario.
FY16 performance was in line with the September trading update. Revenues rose by 17% y-o-y reflecting a full year of operating the GTP portfolio of c 27,000 telecoms towers. Staffing levels have been halved, so adjusted EBITDA losses narrowed to £33.4m (£46.2m in FY15). The group exited FY16 with an adjusted EBITDA loss of c £1.1m/month, c £1.6m including cash interest charges and capex. The cash balance at end FY16 was £20.6m. Our estimates show that the group has sufficient funds to support activities throughout FY17, but may need additional finance in FY18, depending on the rate and nature of sales growth.
Our analysis indicates that IEH is trading on a prospective EV/sales multiples that is towards the lower end of the range of its peers. We believe the successful execution of the revised strategy, resulting in meaningful product sales during FY17, will be a key catalyst for future share price performance.