Intelligent Energy’s interims were in line with the guidance given at the AGM in March. The results demonstrate that management has succeeded in reducing cash burn to its stated target of c £1.6m/month. It intends to bring the group to a cash break-even position within the next two years through volume roll-out of standard air-cooled products. Project wins during the period indicate there is appetite for Intelligent Energy’s fuel cell stacks in the target markets, although we note that additional funding will be required to support this process. We leave our estimates unchanged.
Stripping out revenues from the power management activity, which was discontinued in November (£16.7m H117, £40.9m H116), revenues dropped from £3.0m to £2.0m. Total adjusted EBITDA losses more than halved from £21.6m to £9.1m, reflecting the cost-reduction programme implemented during H216. Cash consumption during the half-year period totalled £7.7m, of which £2.0m was interest on the convertible loan notes, leaving £13.0m at the end of March. Our model shows that if costs are maintained at these levels, the group has sufficient cash to support the expected growth in commercial products during FY17, but will need to secure additional funding to reach positive cash flow. Management is in discussions with potential customers to deliver a trading-related solution.
During H117, Intelligent Energy was reshaped to focus on driving sales of commercially ready B2B products. The group exited from its Indian energy management business and won contracts in two of its target segments: stationary power and drones. It sold technology demonstration units for stationary power applications in China, India, Japan and the US. In May, it was appointed technology lead on a €3.5m EU programme involving Toyota Motor Europe, among others, to provide a blueprint for fully automated mass manufacture of fuel cell stacks for the automotive market. The existing relationship with Suzuki continues.
Our analysis indicates that Intelligent Energy is trading on EV/sales multiples that are towards the lower end of the range of its peers. We believe that removal of the funding uncertainty will be a key catalyst for the share price performance.
