Versarien PLC (LON:VRS) is in an ideal place to capitalise on the opportunities in the emerging advanced materials market, it believes.
The company has been increasing investment to accelerate the development of its technologies, notably its graphene production operation, which is currently scaling up following a confirmation of its commercial manufacturing method and patent protection.
Funds for acquisition
In July, the company raised £1.1mln to fund this push into graphene-related technologies.
The funds were earmarked for the acquisition of a maker of plastic-moulded products where Versarien will use graphene to enhancing an existing range plastic moulded products.
Existing Versarien shareholders Henderson Global Investors and Miton Asset Management both had stakes of more than 10% in the company to be acquired, which makes it a related deal under AIM rules.
What it does
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.
Hard Wear Products, which has traditionally served oil and gas customers.
The thermal division 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 is the business 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,” 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.”
Partnerships a’plenty
The 2016 trading year has seen a strong of partnerships for Versarien in areas where graphene can make a significant improvement to an existing product.
In June, it teamed up with highly regarded Airbus supplier CT Engineering to develop a new range of aerospace components using graphene.
A deal with Absolute Engineering will explore novel technologies for the printing industry, including graphene enhanced composites.
Perhaps most high profile deal in May saw it start work with winter sports olympian Kristan Bromley to develop a range of graphene-enhanced skeleton boards for the Winter games in 2018.
Numbers affected by oil and gas slide
Versarien posted a loss before tax was £1.8mln in the year to march compared to a loss of £0.9mln in 2015, on revenues of £4.4mln versus £4.98mln in 2015.
Cash as at the end of March was £1.6mln against £3.5mln in 2015.
In its statement Versarien said: "The graphene business is experiencing renewed energy after a year of considerable preparation and planning.
"As anticipated, the depressed oil and gas market continues to affect the tungsten carbide business, but green shoots are emerging with new opportunities."
House broker WH IRELAND said full year group revenue, underlying loss before tax and net cash position were all in line with the broker's expectations.
"Fundamentally, we believe that Versarien is extremely well positioned to capitalise on its highly disruptive technologies over the coming years through a management team with a proven track record.
"We maintain both our 'Buy' stance and 25p share price target."
Analyst John Cummins added: "As a result of both advances being made at 2Dimensional Products and cost savings being achieved across the group, we leave our FY 2017E pre-tax loss expectation unchanged, while raising our FY 2018E PBT forecast from £0.5m to £0.6m.
"We expect Versarien to then grow rapidly as its products achieve wider adoption, assisted by recent distribution deals, increased scale and an enhanced product portfolio."
Lots of opportunity
“There are always a number of opportunities for us, which we are pursuing all the time,” Ricketts told Proactive.
“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.”