Ilika plc - Financial statements for Ilika plc and Ilika Technologies Limited for the Year Ended 30 April 2010

15 Jul 2010

Ilika (AIM:IKA), the advanced cleantech materials discovery company, today announces non-statutory financial results for Ilika plc and for Ilika Technologies Limited for the year ended 30 April 2010.

Financial highlights

  • Gross revenues GBP1.1 million supplemented by GBP0.2 million of grant income
  • Net loss of GBP3.1 million (2009:GBP1.9 million)
  • Adjusted EPS -GBP19.08 (2009: -GBP15.25)
  • Successful AIM IPO on 14 May 2010 in which Ilika plc raised GBP5.175 million by placing 10,147,059 Shares at 51 pence per share together with 10,147,059 Placing Warrants.

Commenting on the results Ilika's Chairman, Jack Boyer, said: "Ilika continues to make excellent progress and is rapidly developing a number of exciting partnerships, such as the announcement today of a JDP with a major vehicle manufacturer, for the development of new materials which will have a major impact on the cleantech sector's development."

"The Company's May 2010 listing served as a major endorsement by current and new investors and we see a number of excellent new opportunities for the business which we expect to deliver significant value to shareholders."

Operational highlights

  • Partnership with CeramTec for the discovery of a lead-free replacement for piezoelectric materials
  • Contract extension with Toyota for the development of new battery materials
  • Appointment of a business development agent in Japan, enlarging the deal pipeline and generating expectations of revenue growth in the coming financial year
  • Altrika, the Company's biomedical subsidiary, commenced trading, commenced sales of its CryoSkin  and MySkin  products for the treatment of burns and wounds in the UK through a specialist distributor
  • Altrika's JDP with a global blood filtration specialist progressed, with new polymers reaching advanced testing
  • Hydrogen Storage project receives further funding from the Technology Strategy Board (TSB)

Post Balance Sheet events

  • In May 2010 Ilika became the first cleantech company to list on AIM in 2010.
  • Diverso, a China-based clean technology investment company ("Diverso"), appointed to develop new business opportunities on its behalf in the People's Republic of China.
  • Agreement signed with Taiwan's premier not-for-profit R&D organisation, the Industrial Technology Research Institute ("ITRI"), to scale-up and commercialise jointly the next generation fuel cell catalysts.
  • New development project signed with the Industrial Technology Research Institute ("ITRI") in Taiwan to make use of Altrika's high throughput materials discovery capability for bio-functional polymers to support a key tissue regeneration research project.
  • Relationship with major vehicle manufacturer progressed from contractual agreement to JDP, to develop new fuel cell materials for use in the transport, stationary power and electronics sectors, as announced today.

Current trading

The current financial year has started well, with the signing of several significant contracts, including an agreement with Diverso to develop business in the People's Republic of China and a contract with ITRI in Taiwan, to scale up and commercialise the next generation of fuel cell catalysts. The Group looks forward to announcing further agreements in the near future.

The Board looks forward to reporting further progress during the coming year and beyond.

Additional information

These non statutory financial statements are for shareholder information only. There will be no Ilika plc AGM to receive these statements.

For more information contact: 
Ilika plc                        +44 (0) 23 80111400            
Graeme Purdy, Chief Executive                                    
Steve Boydell, Finance Director                                
Nomura Code Securities Limited   +44 (0) 20 7776 1200           
Phil Walker / Christopher Golden                                                          
Pelham Bell Pottinger            +44 (0) 20 7861 3232           
Archie Berens / Olly Scott / Francesca Tuckett

About Ilika
 
Ilika (AIM: IKA) is an advanced materials company which accelerates the discovery of new and patentable materials using its unique high throughput technologies ("HTT") process for identified end uses in the energy, electronics and biomedical sectors. This process enables hundreds of scalable materials to be made in a single, automated operation and subsequently tested for key properties.

Traditionally, materials development has been a slow and arduous task, with manual, sequential methods used to make samples of material that are then tested for suitability. On average, it takes between seven and 10 years to move from an initial discovery through to the first commercial prototype. Experiments carried out by the Company can be executed 10 to 100 times faster than using traditional techniques.

The Company focuses on three principal sectors and has a number of active development programmes addressing markets within each sector:

Energy - developing innovative new materials for Lithium-ion batteries for vehicles for Toyota; developing high capacity hydrogen storage materials with Shell Hydrogen and Johnson Matthey through joint development programmes; developing cheaper alternatives to Platinum electrodes for use in fuel cells through a grant-funded project with the Carbon Trust; developing new materials for use in fuel cells for the transport sector for a major vehicle manufacturer; and carrying out in-house research on film photovoltaic solar cells.
 
Electronics - developing lead-free piezoelectric materials through a joint development programme with CeramTec; and developing phase change memory materials for high capacity memory.
 
Biomedical - developing polymers to enable the filtering of somatic stem cells from blood with a major global supplier of filters; it has been selling its CryoSkin  and MySkin  products for the treatment of burns and wounds in the UK through a specialist distributor and intends to commence clinical trials of its corneal bandage candidate.

The Group's commercialisation strategy is to enter into joint development or licensing agreements with large multinational companies which are seeking to commercialise products developed using the intellectual property created through jointly-funded programmes. Current commercialisation partners include large multinational companies such as Toyota, Shell, Johnson Matthey and CeramTec. The Company generates revenues from three sources: licensing and milestone payments from joint development programmes; fee for service from contract research projects; and from sales of CryoSkin  and MySkin.

www.ilika.com

CHAIRMAN'S STATEMENT
 
Introduction
I am pleased to present the non-statutory financial statements for the year ended 30 April 2010 for Ilika plc and for Ilika Technologies Limited, update shareholders on the Group's performance in the financial year to date and provide an introduction to our unique technology.

Ilika's materials discovery capabilities significantly reduce the long timelines traditionally required for the development of new materials. The Group's primary commercialisation strategy is to enter into joint development or licensing agreements with large multinational companies seeking to commercialise products developed using the intellectual property created through jointly funded programmes.

The Company focuses its efforts on those industrial partnerships where an end need has been identified and an addressable market in excess of $1 billion is expected to exist. Ilika aims to exploit the huge opportunities unlocked by having its materials integrated into market-leading commercial products sold worldwide.

Current commercialisation partners include large multinational companies such as Toyota, Shell, Johnson Matthey and CeramTec. Ilika generates revenues from three sources: licensing and milestone payments from joint development programmes, fees for service from contract research projects, and from sales of CryoSkin and MySkin.

The majority of Ilika's business is in the development of materials for the energy sector, but it is also active in the electronics and biomedical areas.

Ilika's Technology
Ilika's unique high throughput technology (HTT), accelerates the discovery of new and patentable materials for identified end uses in our chosen sectors. This process enables hundreds of materials to be made in a single, automated operation and subsequently tested for the necessary properties.

Experiments carried out by Ilika can be executed 10 to 100 times faster than by using conventional techniques. The production of a new material has traditionally been a slow and arduous process, taking between 7 and 10 years to move from an initial discovery through to the first commercial prototype.

Ilika's HTT process has the additional attraction of enabling materials to be rapidly scaled up for commercial application once the requisite chemical and physical properties have been achieved.

Review of the Year
 
The Company's corporate development has moved forward significantly in 2009-10. Major milestones achieved during the year include entering into a joint development programme with CeramTec for the discovery of novel piezoelectric materials, and a contract extension with Toyota for the development of battery materials.

In July 2009, Ilika's subsidiary, Altrika, commenced trading to manage all of the Group's biomedical products and development programmes. Altrika has been selling its CryoSkin  and MySkin  products for the treatment of burns and wounds in the UK through a specialist distributor appointed in October 2009.

People
 
Ilika is fortunate to benefit from a highly experienced Board of Directors, including its founder and Chief Scientific Officer, Professor Brian Hayden. Brian is one of the world's leading experts in materials science and among the most academically cited globally. During the year Ilika was privileged to have Dr. Werner Braun and Professor Sir William Wakeham on the Board. Their experience in the UK and internationally has been instrumental in supporting the Group's development. The Board was also pleased to welcome Clare Spottiswoode CBE at the time of the IPO. Her experience in the energy sector will be a significant asset to the Company as it continues to develop new materials solutions in that market. All these directors have been appointed to the Ilika plc board post year end.

Our research focused team of 22 PhDs are fundamental to the success of Ilika. I would like to take this opportunity to acknowledge all of these dedicated scientists for their hard work and commitment to making Ilika a world class company. I would also like to thank our strategic partners, distributors and advisers for their contribution to the development of the Company during the course of the financial year.

Outlook
 
In May Ilika became the first cleantech company in 2010 to list on AIM. The proceeds of the listing are expected to be sufficient to fund the Group's development until financial break-even and will increase production capacity for current and future joint development partnerships.

A major benefit of the IPO has been to publicise the transparency and organisational discipline which characterises Ilika's operations. The Group's current and future partners can do business with Ilika knowing that it meets the exacting standards of corporate governance that come with a listing on the public markets.

The current financial year has started well, with the signing of several significant contracts, including an agreement with Diverso to develop business in the People's Republic of China and a contract with ITRI in Taiwan, to scale up and commercialise the next generation of fuel cell catalysts. We are delighted to announce today that the Company has progressed the relationship with a major vehicle manufacturer into a JDP to develop new fuel cell materials for use in the transport, stationary power and electronics sectors. The Group looks forward to announcing further agreements in the near future.

Thanks to its highly innovative technology, Ilika already has a strong presence with well-known global customers, particularly in Europe and Asia. The Company will continue to build its presence in these important markets in addition to pursing the considerable opportunities in North America for materials discovery and development.

The Board looks forward to reporting further progress during the coming year and beyond.

Jack Boyer
Chairman
14 July 2010

CHIEF EXECUTIVE'S REVIEW

Introduction
Ilika's unique high throughput technology (HTT) enables the synthesis and screening of new materials which are vital to solving some of the world's most important unmet needs.

The Company has built a portfolio of blue chip partners in significant markets that validate its technology. It has secured up-front payments in Joint Development Programmes (JDPs) from these partners to offset development costs prior to mass market commercialisation of the materials. The JDPs provide income, development expertise and a route to market for the new materials that Ilika develops.

Ilika's technology platform can be applied to a large number of substantial potential markets but its priorities, in order of importance, are the energy, electronics and biomedical sectors. These markets have been chosen because they combine clear unmet needs with large potential revenues and are a close fit with the HTT platform's technical capabilities. Renewable energy applications require innovative new materials and Ilika views demand in the sector to be especially attractive.

Approximately 70% of the Company's business is in the area of new materials for efficient energy conversion and storage. A further 20% of its work relates to the electronics sector, where regulation and consumer demand are driving the search for materials with lower heavy metal content and better performance. This operational weighting is the reason why Ilika describes itself as a cleantech materials discovery business.

Ilika's wholly-owned subsidiary, Altrika, addresses the burgeoning need for materials with a biological function. Altrika's facility in Sheffield manufactures the Group's revolutionary cell-based treatment for burns victims and is regulated by the Human Tissue Authority and Medicines and Healthcare products Regulatory Agency.

Energy

In most cases energy from renewable sources needs to be efficiently converted from one form into another, in addition to being effectively stored. Ilika has active programmes in batteries, hydrogen storage, fuel cells and solar cells.

Batteries

The past year has seen tremendous interest in using batteries in vehicles, where rapid charging and compact design are essential for mass adoption. Improved battery performance will require new cell chemistries, where the principal components of the cell, the electrodes and electrolytes, are made from carefully selected materials. The objective is to make them suitably light and small without losing performance.

Since 2008, Ilika has had a commercial relationship with Toyota, one of the world's most innovative automotive companies. This relationship has provided Ilika with a resounding customer endorsement and driven the Company to stay at the forefront of this rapidly moving field.

Hydrogen Storage

The use of hydrogen as an energy carrier has been widely discussed in recent years, but it must overcome significant challenges before it becomes a mainstream alternative. Hydrogen's limitations revolve around the difficulty in transporting it and converting it into electricity cheaply.

Hydrogen transportation is largely carried out in compressed gas cylinders at pressures of up to 700 bar for use in prototype vehicles. Such pressures present a major hazard to both suppliers and users. In addition, large energy losses are incurred in compressing hydrogen to such pressures. Cryogenic storage of hydrogen is similarly fraught with difficulties because of the high vapour pressure of hydrogen even at low temperatures and the energy required to condense hydrogen released as a result of boil-off.

Ilika believes the answer to effective hydrogen storage lies in the use of metal hydrides, (metal alloys which have reacted with hydrogen to form a stable solid). These hydrides often exist in powder form and can store hydrogen chemically to yield much greater energy densities than lithium-ion batteries. Consequently they offer an important and attractive long term alternative to batteries. Ilika has worked with Shell to develop lightweight metal hydrides which have been patented and are now being scaled-up by a consortium lead by Johnson Matthey, supported by grant funding from the Technology Strategy Board.

Hydrogen is most readily converted to electricity using a fuel cell. Despite being invented 170 years ago about 40pc of the cost of a fuel cell is in the so-called membrane electrode assembly, which uses platinum, one of the world's scarcest commodities, as a catalyst. For hydrogen fuel cells to reach the mass market a more abundant and cost effective alternative will need to be developed.

The Carbon Trust has recognised the value of Ilika's patents in this field and has supported further development of its platinum-free catalysts which offer cost and availability advantages. A number of organisations around the world, including the Industrial Research Institute of Taiwan (ITRI), have expressed interest in scaling up Ilika's results in this area.

In June 2010, Ilika entered into a non-exclusive agreement with ITRI whereby ITRI will meet the cost of scale-up work with a view to making samples of catalyst available to customers for evaluation by the end of 2011.
 
Solar

The photovoltaic sector is undergoing a period of rationalization which is creating opportunities for Ilika. Manufacturers of thin-film photovoltaic panels clearly need to differentiate themselves from the competition through improvements in their technology. Ilika is currently marketing its expertise in optimising both the active photovoltaic materials and the protective gas barrier layers.

Electronics
Piezo Electrics

In November 2009, Ilika Technologies Limited entered into a JDP with Ceramtec, one of the world's leading manufacturers of technical ceramics. The partnership aims to find a replacement for the lead ingredient in CeramTec's piezoelectric materials following the entry into force of the EU's new Restriction of Hazardous Substances (RoHS) regulations, which prohibit the use of lead in electronic materials.

CeramTec's piezoelectric materials are used in actuators and sensors in the aerospace and automotive industries. There is a large existing market which ceramics manufacturers are supplying under an exemption from the prevailing regulations until a replacement can be found. The initial discovery project is designed to run until May 2011 after which materials offering the most potential will be scaled-up for manufacture. The expectation is that uptake will be rapid given the regulatory drivers in place.

Memory Devices

A second area of the electronics industry where Ilika is active is the development of the next generation of solid-state memory as FLASH devices approach the limits of their physical storage capacity. The demand for terabyte levels of memory capacity on portable devices is growing rapidly, driven in particular by demand for video data content. To meet this demand the electronic memory industry is embracing new types of data storage technology, which, in contrast to traditional silicon-based chip architectures, generally use innovative new materials. Negotiations are maturing with a leading US-based manufacturer of memory devices which is actively developing next generation technology.

Biomedical

Altrika is Ilika's wholly-owned subsidiary which has technology and products focused on producing biologically-functionalised materials for the medical device sector.

Altrika's JDP with a global blood filtration specialist progressed well in the last year and the active polymer materials identified in the earlier stages of the project are now being tested on model filters at the partner's development facility. Results have continued to be positive and a decision is expected in this calendar year regarding the suitability of the materials for further scale-up.

In 2009, Altrika acquired the assets of a business based in Sheffield. These assets include key personnel, supporting IP and a lab (development and small scale production) licensed by both the Human Tissue Authority and Medicines and Healthcare products Regulatory Agency.

A portfolio of three products has been developed based on a novel polymer, initially developed by Altrika, to which live cells can effectively bind, creating bioengineered cell-based products that can be used to repair tissue.

The first two products in this portfolio, CryoSkin  and MySkin , have been successfully launched as burns treatments in the UK and are producing revenues. The third, a corneal bandage, is awaiting clinical trials. Altrika is in discussions with agents and regulators to make CryoSkin  and MySkin  available in other jurisdictions both within and outside of the EU.

Interest levels in Altrika's materials development capabilities continue to be robust, with a number of new JDP's expected to mature in the next financial year.

International Expansion

In 2009, the majority of Ilika's revenue was generated through agreements with organisations in Japan, Europe and the US.

At the beginning of 2010, Ilika appointed an agent to accelerate its business development activities in Japan. As a result, Ilika's deal pipeline from Japan has been enlarged and is expected to deliver revenue growth in the coming financial year.

Ilika has also recently announced a new partnering agreement with Diverso to strengthen its business in China. Diverso will initially focus on the energy sector, with a mandate to arrange and secure collaborative research projects or licensing arrangements between the Company and third party commercialisation partners in China.

Diverso is incentivised to secure new business for Ilika as it will be reimbursed by Ilika based upon the revenues it receives from such third party commercialisation partners.

Through its investment at Ilika's IPO, Diverso, through a subsidiary company, is also a substantial shareholder in Ilika. Ilika believes the large and rapidly growing Chinese market offers significant opportunities: not only is R&D expenditure growing by 20% per year with strong government backing, but Chinese companies are also willing to pay significant sums for technology in order to gain ground on more established western rivals.

The US market appears to be recovering more rapidly than Europe from the recent economic downturn and Ilika plans to increase its business development efforts in that jurisdiction in the current financial year.

Summary

Ilika has made strong progress in the year to 30 April 2010, developing of its IP portfolio, the strength and breadth of its commercialisation agreements and the maturity of the commercialisation efforts relating to forthcoming product launches.

The Company's successful IPO in May 2010 earmarked it as a unique enterprise with a compelling commercial and technical offering. Ilika has been able to announce a series of developments in the few weeks since its IPO and will continue with its strategy of securing JDP's with globally competitive partners.

In the forthcoming year Ilika will also follow through its strategy of portfolio scale-up in preparation for a systematic roll-out of products incorporating Ilika's materials over the medium and long term.

Graeme Purdy
Chief Executive
14 July 2010

FINANCIAL REVIEW

Ilika plc was incorporated on 12 March 2010 with a view to the acquisition of Ilika Technologies Limited and its subsidiary, Altrika Limited, (the "Limited Group") and subsequent AIM listing. The acquisition and subsequent AIM listing occurred on 14 May 2010. The AIM admission document, published on 14 May 2010, contained financial information for the financial period to 31 October 2009 and these non-statutory financial statements are for the year ended 30 April 2010. As, at that date, the Ilika plc group did not exist, the financial information presented in this report, is principally that of the Limited Group, and the Ilika plc balance sheet is shown at the end of this document.

Revenue for the year ended 30 April 2010 was GBP1.06m (GBP0.92m for 2008/9), supplemented by GBP0.22m of grant income (GBP0.20m for 2008/9).

The vast majority of revenue relates to the payments made by Ilika's partners for research and development activities, particularly in the energy and electronics sectors. During the year, Ilika established its own biomedical production facility and released two new biomedical products which contributed GBP88k of revenue.

Grant funding was received from the Carbon Trust, supporting development of Ilika's proprietary fuel cell electrodes and the Technology Strategy Board, to develop hydrogen storage materials with Johnson Matthey plc.

Administration expenses in the year increased by around GBP1.1m in comparison to the year to 30 April 2009. This was partly due to the set up and running costs of the new biomedical facility, but is mainly due to the increased share based payment accounting charge. This charge has risen from GBP86k in 2008/9 to GBP816k this year. It is an accounting entry which has no impact on the Limited Group's cashflows. This increase is attributable to the fact that the listing of Ilika plc's shares, at the market price of the stock, is deemed a maturity event for share options. The prior year's charge was calculated with reference to previous, historical estimates of the fair value of the share options granted.
No share options were exercised in the year. Loss per share for the year was GBP25.81 (GBP15.97 for 2008/9). Loss per share adjusting for the share based payment charge was GBP19.08 (GBP15.25 for 2008/9) - see note 9.

As at 30 April 2010, the Limited Group's cash position was GBP792k. On 14 May 2010, Ilika plc raised GBP5.175m by placing 10,147,059 Shares at 51 pence per share together with 10,147,059 Placing Warrants.

Post balance sheet events

On 6 May 2010, Ilika plc entered into a share exchange agreement with the shareholders of Ilika Technologies limited whereby Ilika plc acquired the entire issued share capital of Ilika Technologies Limited in consideration of the issue and allotment of 10,352,499 Ordinary Shares and 1,781,400 Convertible preference shares to the shareholders of Ilika Technologies Limited, pro rata to their existing shareholdings.

On 14 May 2010, Ilika plc was admitted to AIM.

Steve Boydell
Finance Director and Company Secretary
 
14 July 2010
INDEPENDENT NON STATUTORY AUDITORS' REPORT TO THE DIRECTORS OF ILIKA TECHNOLOGIES LIMITED

We have audited the non-statutory financial statements of Ilika Technologies Limited for the year ended 30 April 2010 which comprise the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of changes in equity and the related notes. These non-statutory financial statements have been prepared in accordance International Financial Reporting Standards ("IFRSs") as adopted by the European Union.

Our report has been prepared pursuant to the requirements of our engagement letter and for no other purpose. Our audit work has been undertaken so that we might state to the company's directors those matters we are required to state to them in an auditor's report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's directors as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

The Directors of Ilika Technologies Limited are responsible for preparing the non-statutory financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and for being satisfied that they give a true and fair view.

Our responsibility is to audit the non-statutory financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).  Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors. Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the non-statutory financial statements sufficient to give reasonable assurance that the non-statutory financial statements are free from material misstatement, whether caused by fraud or error.  This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the non-statutory financial statements.

Opinion on financial statements

In our opinion:
�              the non-statutory financial statements give a true and fair view of the state of the Ilika Technologies Limited group's affairs as at 30 April 2010 and of its loss for the period then ended, and �              the non-statutory financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union.

BDO LLP,
Southampton
United Kingdom
Date:
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)

The full text of this announcement is available via RNS.

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