Adrian Potts, the CEO of Applied Graphene Materials (AGM), discusses the company’s commercial progress over the course of the past 12 months, which saw the launch of a number of coatings products based on AGM’s graphene dispersions. These products include industrial anti-corrosion products from Blocksil and Alltimes Coatings and retail products from Halfords and Hycote. He also highlights the progress made in the composite and functional materials markets and why initiatives to develop water-based dispersions are key to enlarging the addressable market. Finally, he explains how management has strengthened its routes to market and the actions the company has taken to mitigate the impact of COVID-19.
Applied Graphene Materials is a leading innovator in the manufacture and application of graphene. The company has developed a proprietary ‘bottom-up’ process for the production of high specification graphene and owns the intellectual property and know-how behind this process. The company’s immediate commercial focus is on the coatings market, where products based on AGM’s graphene dispersions can provide demonstrably improved corrosion protection versus incumbent technologies.
Companies: Applied Graphene Materials
In October 2019 Applied Graphene’s (AGM’s) management announced it was re-aligning resources around dispersion and application technology to better support product development with customers presenting the nearest-term revenue opportunities. This focus supported six customer launches of coating products containing AGM’s graphene dispersion during calendar year 2019. These launches are for both mass-market and specialist applications. As a result of the ensuing uptick in product sales, revenues so far for FY20 are already 20% higher than the whole of FY19.
AGM’s interims contain no surprises, with EBITDA losses and net cash (£4.3m at 31st January) in line with our expectations. Commercial highlights of the period have been mainly focused on Coatings, as we have discussed previously (e.g. Halfords aerosol primer). Management continues to prioritise near term revenue opportunities, demonstrating the properties of graphene in dispersions and other formats that can be readily adopted in customers’ products. Having streamlined operations in Q4’19, the cash run way has been extended to Q4’21 and we look forward to further commercial progress over coming periods.
Today’s AGM statement focuses on recent customer product launches by James Briggs, Halfords, Alltimes and Blocksil, looking forward to their development over coming periods. The re-alignment process which commenced in October 2019 to extend AGM’s cash runway is now complete and the anticipated cost reductions (c.£1m per annum indicated at the time) have been achieved. Management’s ambition remains to become a global graphene market leader and we look forward to further updates as the year progresses.
FY19 results confirm further commercial progress, particularly around AGM’s dispersion expertise, a key differentiator. The timing of revenue growth remains difficult to predict but management is focused on the conversion of the 100 active engagements in the pipeline, while carefully managing the cost base. With a number of near term revenue opportunities and a cash runway to at least Q4 2021, we look forward to further updates as the year progresses.
Essensys plc—a provider of mission-critical SaaS platforms and on-demand cloud services to the high growth flexible workspace industry, plans to join AIM. Offer TBC, expected 29 May 2019. Induction Healthcare Group plc—a healthcare technology company focused on streamlining the delivery of care by Healthcare Professionals looking to join AIM. Expected raise of £14.58m at 115p, market cap of £34.07m. Expected 22 May 2019. SDX Energy plc—a North Africa focused oil and gas company, announces its intention to complete a Canadian plan of arrangement under section 192 of the Canada Business Corporations Act and will have shares de-listed from the TSX-V and admitted to trading on AIM. Expected 28 May 2019, anticipated market cap of £76m Renold plc—a leading international supplier of industrial chains and related power transmission products, announced that it will cancel the listing of the Company from the premium segment and apply for admission on AIM. Expected 06 June 2019. Alumasc Group plc, the premium building products, systems and solutions group, has announced its intention to move from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019
Companies: SHED ACT SCHO POW FFI PPIX AGM OSI CHH HUNT
Whilst AGM’s interims highlight some slight delays in the conversion of active engagements, H2 should see first sales from James Briggs in coatings and Airbus and a new customer (under NDA) in functional materials. The strategy of the new management team includes a greater focus on coatings and engagement with distributors to accelerate revenue growth.
Today’s AGM statement, the first under the new management team of Adrian Potts and David Blain, confirms that good progress has been made in recent months, as the Board continues to focus on the commercialisation of its products and proprietary technologies. Importantly, the James Briggs Limited (JBL) “Hycote” branded aerosol is on track for product launch in the current year, JBL having successfully completed its first production batch. AGM also participated in the opening of the UK’s Graphene Engineering and Innovation Centre (GEIC) in Manchester last week as part of its ongoing engagement with other industry participants to develop practical applications for graphene technologies.
Block Energy— UK based oil exploration and production company whose main country of operation is the Republic of Georgia. Raising £4m. Mkt cap £9.3m. Due early June.
Codemasters Group— video game developer and publisher, specialising in high quality racing games. Offer TBA. Seeking £15m in primary. Due 1 June.
Strongbow Exploration (TSX:SBW) intends to dual list on AIM. Holds rights to the South Crofty underground tin mine, a former producing tin mine located in the towns of Pool and Camborne, Cornwall . The project is estimated to require the Company to raise £25 million over the next 18 months to progress to a production decision. Offer TBS. Due June.
Maestrano Group, a software company with operations in Australia (main country of operation), the UK, US and the UAE, is looking to join AIM. Offer TBC, expected late May.
Yew Grove REIT—newly formed Company will pursue its investment objective by investing in a diversified portfolio of Irish commercial property. Offer TBA. Due Late May
Team17 Group -video games label and creative partner for independent developers. 2017 revenues of £29.6m and Adjusted EBITDA of £12.9m. Raising £45.1m primary and £62.5m secondary at 165p. Mkt Cap £216.6m. Expected 23 May 2018
Companies: STCK POLX MOGP PIL AGM NTOG BIRD SLE LSAI GETB
1Spatial (SPA LN) Focusing on key USP | accesso Technology (ACSO LN) Positive AGM statement | Applied Graphene Materials (AGM LN) James Briggs taking graphene to market in Q4’18 | Carador Income Fund (CIFU LN) CLO refinancing activity increases post risk retention ruling finalisation | First Derivatives (FDP LN) Strong growth in all markets | Halfords Group (HFD LN) Further investment + restraint on price rises = 5-6% consensus d/grades | Scapa Group (SCPA LN) Strategic progress and opportunities ahead | UDG Healthcare (UDG LN) Interims in line, FY EPS guidance unchanged
Companies: ACSO AGM FDP HFD SCPA UDG SPA CIFU
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Treatt demonstrated its strength and resilience in H120, as so far the COVID-19 pandemic has not had any adverse impact on trading performance. Of course, this is in part due to the categories in which Treatt operates, with some of its products being used in household cleaners, which have witnessed a global spike in demand. Nevertheless, the steady performance is testament to the management and culture of the business, which have been able to withstand the unexpected and exogenous shock. H219 and H120 were affected by a global weakness in citrus raw material prices, which in turn affected revenue growth. Citrus prices have now started to firm and we expect growth in this category to return in H2. We leave our forecasts mostly unchanged but roll forward our DCF and hence our fair value rises to 560p (from 530p previously).
COVID-19 update – continuing to operate, div. suspended
Companies: Scapa Group
Companies: AVO AGY ARBB ARIX BUR CMH CLIG DNL GDR HAYD PCA PIN PHP RE/ RECI RMDL STX SHED VTA
There has been much comment on the fact that equity markets in the US and Europe have been shrinking for some years now, certainly in terms of the number of quoted companies, if not in total market capitalisation (MCap). This paper has been written with the assistance of the Quoted Companies Alliance (QCA) and focuses on the evidence for such in the London market and, in particular, that for smaller and midcap companies. It assesses that evidence and considers explanations. Finally, we ask why it matters, and assuming that it does, what practical steps can be taken to reverse the trend. Successful public markets have been a key part of the United Kingdom’s economic success for generations, even centuries, and we should not allow them to wither on the vine.
Companies: AVO AGY ARBB ARIX ASAI DNL GDR HAYD NSF PCA PIN PXC PHP RE/ RECI RMDL STX SCE TRX TON SHED VTA
Against a backdrop of generally negative company announcements, Hardide bucked the trend by releasing solid interim results for the 6 months ended March 2020, noting limited impact to date from COVID-19 and a positive trading outlook. Furthermore, the allimportant move to new facilities and corresponding capacity expansion is both on track and on budget. Several of Hardide’s end markets will clearly be feeling the impact of COVID-19. However, we feel the importance of Hardide’s technology to its customers by extending the useful life of components and its diversity of end markets across multiple sectors including oil & gas, aerospace, flow control, power generation and precision engineering is enabling it to weather the storm. We leave our forecasts unchanged and see potential for an upgrade should end markets maintain strength and H2 margins match those of H1.
Covestro’s management gave some further insights on Q2 developments during its virtual sellside round table. Having gone 2/3rds through the second quarter, management indicated some recovery was to be seen in its core volumes in June having looked into the order book.
Management’s recovery scenario is based on getting back to the pre-crisis GDP level in 2023, which is rather more moderate than our picture but does not force us to take immediate action.
When is a bubble not a bubble but a fundamental and lasting shift in investor sentiment towards a sector? Despite repeated calls from the biotech bear camp that the end is in sight for the continued optimism enjoyed by the sector we continue to enjoy a burst of IPOs, fundraisings and M&A deals.
Companies: EDEN MTFB TILS SDI GDR IMM BMK AVO AVCT
Airbus secures €15bn credit facility but partially restarts production in France & Spain, Cummins suspends production and FY20 guidance as customers shutdown
Companies: CGS HAYD HEAD HTG OXIG RSW RNO ROR TWD TRI ZTF GHH
US & German manufacturing PMI hits lowest readings since 2009, UK manufacturing PMI heads below 50, BorgWarner expects material financial impact from customer production halts
Companies: AVON CGS HAYD HEAD HILS JHD RNO SCPA TWD TRI ZTF SOM GHH
2019 Results – Likely Investor concern over debt