Materials development group Ilika plc (LON:IKA) has today warned that revenue from licensing contracts is likely to be delayed as continues negotiations on potential original equipment manufacturer deals.
Shares dropped 15.46% to 41.0p in morning trading.
The group said licensing revenue is more likely to be recognised in its fiscal year 2017 results due to delays on OEM deals and since the 2016 financial year is drawing to a close.
However, the company expects to start the 2017 fiscal year with a record level of revenue commitments at £1.8mln after winning four “significant” commercial deals, including one with Toyota, since its last trading update in November.
The deals have boosted revenue in 2016 and will continue to support growth into 2017, Ilika said.
The company’s recent contracts include a materials development deal with the Toyota Research Institute in the US. Ilika already has a relationship with Toyota as a customer in the electric vehicle battery space.
Ilika also secured a partnership with the bioelectronics company Galvani Bioelectronics to develop a solid state battery for miniature medical implants. Galvani is a UK based research and development joint venture between Google's parent company Alphabet and GlaxoSmithKline. The joint venture was set up in November with agreed funding of up to £540mln over seven years.
The ‘Stereax’ batteries have a high power density, a long battery life and can be produced in miniature form.
Elsewhere , the group has started a funded collaborative project with Sharp Laboratories of Europe to create a device using Stereax..
Last month Ilika announced that it had a renewed a commercial deal with Seagate to develop photonic materials and processes for hard disk drive.
Ilika’s chief executive Graeme Purdy said: "We are continuing to see a reinforcement of our customer relationships, with long-standing partnerships with companies like Toyota and Seagate being further cemented. It's also great to see the upturn in revenues relative to last year allowing us to start 2017/18 with such a strong order book. The number of potential licensees, their level of interest and the diversity of applications is giving us growing confidence in our licensing model."
Numis has kept its rating on Ilika at 'buy' but cut the target price to 80p from 110p, citing its value for money and an attractive risk/reward opportunity.
The broker noted that the timing on securing licensing revenue remains uncertain and reduced its estimates with revenue for 2017 cut to £1.2m from £2.5mln and the operating loss raised to £3.1mln from £2.0mln. For 2018 Numis has lowered its forecast on revenue to £2.9mln from £5.1mln and lifted the operating loss to £1.9mln from £0.6mln.
"Despite the lower estimates the business has a good cash runway extending beyond the end of fiscal year 2019," Numis said.
-- Adds broker comment, updates share price --