Versarien (LON:VRS) is confident it is well placed to capitalise on the opportunities in the emerging advanced materials market.
The company has been increasing investment to accelerate the development of its technologies, and notably its graphene production operation, which is currently scaling up following a confirmation of its commercial manufacturing method and patent protection.
Speaking with Proactive Investors, chief executive Neil Ricketts highlighted that the oversubscribed share placing, completed in 2014, gave the company the financial firepower to be able to accelerate the progress in Versarien’s technology businesses.
“It resulted in a number of product launches,” he said. “For a company of our size to come up with multiple product launches is quite unprecedented really, and these are quite transformational events.”
For example, an e-commerce web site recently launched for the sale of graphene products, and it has also launched a new graphene oxide product.
Meanwhile, sales of the group’s air-cooled heat sinks continue in North America where a distribution partner is now supplying 49 new customers; the company has also now launched an aluminium-based sink.
Having grown and diversified in recent years from being solely a producer of hard-wearing tungsten carbide, used in engineering for extreme environments such as offshore oil and gas installations, the company currently has three units.
A meaningful proportion of group revenue (£1.7mln of the £2.4mln generated in the first half) still comes from the Hard Wear Products division, though there is now more than just oil and gas customers.
The thermal division generated £0.6mln of revenue and produces disruptive cooling technology (a conductive copper foam) for electronic engineering. Customers include General Motors, Google, and thermal imaging specialist FLIR.
Versarien’s 2 Dimensional Products division, meanwhile, is the source of much recent excitement.
This business, which was described as ‘largely pre-revenue’ in the first half, is focused on the production of the so-called ‘wonder material’ graphene
“With the 2 Dimensional Products it was very much an embryonic business when we took it on last year,” Ricketts said.
“And we’ve seen that now become a proper manufacturing method, it has got its patent, and it is approved out in the US.
“We’ve had some very good enquiries from very large international companies.
“We now need to continue to develop our production capacity, and to really capitalise on our investments in terms of getting commercial traction.”
Ricketts said the financial results, out today, are “what he would expect” of a company at this stage in its development.
Group revenue for the six months, to September was broadly maintained at £2.4mln, from £2.5mln in the same period of 2014, and it reported a £0.81mln loss.
At the end of the six month period the company had net assets of £6.6mln, including £2.6mln of cash.
Second half financials should be similar to the first half with full year losses narrowing.
Business will continue to scale up through 2016 before reaching break-even in 2017 (to do so it forecast 2017 sales of £6.5mln) and moving into profit by 2018.
Chris Leigh, Versarien’s chief financial officer, describes these forecasts as ‘fairly conservative’ and said the company will be working to beat the targets.
Forecasts from newly appointed house broker WH IRELAND echo the company’s with a small profit seen by 2018 on revenues of £9.2mln.
“We forecast the group will move into profit in FY 2018E and then grow rapidly as Versarien’s products achieve wider adoption, assisted by recent distribution deals, increased scale and an enhanced product portfolio,” said John Cummins, a WH IRELAND analyst.
“This is likely to be further supplemented by future acquisitions and partnerships.”
In this morning’s outlook statement the company told investors it continues to look for appropriate acquisition opportunities to complement its organic growth, especially for graphene applications.
While no mergers and acquisition activity is imminent, Ricketts is keeping “a very open mind” to the possibility of deals.
“There are always a number of opportunities for us, which we are pursuing all the time,” he added.
“The problem is, as the old adage goes, that we do have kiss a lot of frogs to find a prince.
“For every twenty (potential deals) we look at there’s usually only one that will meet our needs or our aspirations.”
“Our ideal target is someone who already uses our technology, so we can accelerate the development. So, you could think that a plastics producer or a carbon-fibre composites producer would be an ideal target for our graphene business.
“That is what we’ve already done with the heat sink business, where there was an ideal bolt-on acquisition for our copper foam business.
“It is the kind of thing that we generally keep our eyes out for, but we are a bit opportunistic as well sometimes and things might come out that you (investors) are not expecting.”
“We keep an open mind and an open view.”