Awaiting completion of financing activities

Leclanché 2 October 2020 Update
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Leclanché

Awaiting completion of financing activities

Interim results

Renewable energy

2 October 2020

Price

CHF0.56

Market cap

CHF144m

Net debt (CHFm) at end June 2020 (including CHF54.0m convertible debt and CHF4.1m IFRS16 lease liabilities)

64.4

Shares in issue (after conversion of debt-to-equity)

257.6m

Free float (after conversion of debt to equity)

20.6%

Code

LECN

Primary exchange

SIX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(6.7)

(6.7)

(62.7)

Rel (local)

(7.1)

(8.0)

(63.7)

52-week high/low

CHF1.62

CHF0.50

Business description

Leclanché is a fully vertically integrated energy storage solution provider. It delivers a wide range of energy storage solutions for homes, small offices, large industries and electricity grids, as well as hybridisation for mass transport systems such as bus fleets and ferries.

Next event

FY20 result

June 2021

Analyst

Anne Margaret Crow

+44 (0)20 3077 5700

Leclanché is a research client of Edison Investment Research Limited

Leclanché’s H120 results show strong growth in revenues for marine applications. Together with an order book of over CHF90m for delivery between 2020 and 2022, this demonstrates demand for the group’s energy storage systems. However, management needs to secure financing to progress the transformational stationary energy storage project on St Kitts and expand its cell manufacturing capability to fully take advantage of opportunities in the e-Transport segment. Our estimates and valuation remain under review.

Year end

Revenue (CHFm)

EBITDA*
(CHFm)

PBT*
(CHFm)

EPS
(CHF)

DPS
(CHF)

P/E
(x)

12/17

18.0

(31.1)

(37.8)

(0.68)

0.00

N/A

12/18

48.7

(36.9)

(47.8)

(0.62)

0.00

N/A

12/19

16.3

(57.5)

(71.5)

(0.53)

0.00

N/A

Note: *Adjusted for exceptional items, amortisation of acquired intangibles and share-based payments.

Progress hampered by lack of finance

Revenues rose by CHF3.5m year-on-year in H120 to CHF10.0m. e-Transport revenues jumped by CHF6.3m to CHF6.6m, boosted by delivery to Kongsberg Maritime of the energy storage system for the first of nine Grimaldi vessels. Revenues from the Stationary business unit fell by CHF1.7m to CHF1.3m because two projects potentially worth c CHF6m were postponed to H220. Speciality Battery revenues, which are primarily defence related, declined by CHF1.1m to CHF2.1m. Gross margin remains negative, reflecting low plant utilisation rates. EBITDA losses narrowed by CHF3.3m to CHF16.3m. Net debt (including convertible loans and finance leases) increased by CHF22.7m in H120 to CHF64.4m. Post-period end, Leclanché’s majority shareholder FEFAM converted CHF50.9m of debt to equity and its associate Golden Partner converted CHF10.7m of fees to equity.

Awaiting completion of financing activities

While FEFAM has agreed to provide up to CHF34m in working capital bridge loan financing as an interim measure, management states that it needs to complete a fundraise with a major industrial investor interested in taking a significant stake in the group to be confident of remaining a going concern. In addition, Leclanché needs to secure c CHF120m to increase capacity to up to 2.4GWh/year to provide the volumes that its e-Transport customers will need long term. This financing may be realised by transferring the cell manufacturing plant to a customer-backed JV. Management is still securing finance for a separate holding company that will own the St Kitts solar farm and energy storage facility and operate these under a build-own-operate model. This follows a change in business model in Q120, which sacrificed c CHF50m orders for over CF5m EBITDA/year over a 20-year period.

Valuation: Awaiting progress on JV

Our valuation and estimates remain under review until there is greater clarity on financing and the formation of the potential JV.

Exhibit 1: Financial summary

CHFm

2017

2018

2019

Year-end Dec

PROFIT & LOSS

Revenue

 

18.0

48.7

16.3

Cost of Sales

(15.7)

(45.7)

(31.8)

Gross Profit

2.3

3.0

(15.5)

EBITDA

 

(31.1)

(36.9)

(57.5)

Operating Profit (before amort. and except.)

 

(35.3)

(39.9)

(63.7)

Amortisation of acquired intangibles

0.0

0.0

0.0

Share-based payments

(0.7)

(0.8)

(0.8)

Exceptionals

(0.1)

(1.3)

(10.8)

Operating Profit

(36.1)

(42.1)

(75.3)

Net Interest

(2.5)

(8.0)

(7.2)

Share of profits from JVs and associates

0.0

0.0

(0.5)

Profit Before Tax (norm)

 

(37.8)

(47.8)

(71.5)

Profit Before Tax (FRS 3)

 

(38.5)

(50.0)

(83.1)

Tax

0.1

(0.7)

(0.3)

Profit After Tax (norm)

(37.7)

(48.6)

(71.8)

Profit After Tax (FRS 3)

(38.5)

(50.7)

(83.4)

Minority interest

0.0

0.0

0.0

Net income (norm)

(37.7)

(48.6)

(71.8)

Net income (FRS 3)

(38.5)

(50.7)

(83.4)

Average Number of Shares Outstanding (m)

55.3

79.0

136.4

EPS - normalised (CHFc)

 

(68.3)

(61.5)

(52.6)

EPS - normalised fully diluted (CHFc)

 

(68.3)

(61.5)

(52.6)

EPS - FRS 3 (CHFc)

 

(69.6)

(64.2)

(61.1)

Dividend per share (CHFc)

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

16.6

25.1

32.7

Intangible Assets

4.5

5.6

5.0

Tangible Assets and Deferred tax assets

12.1

19.5

27.7

Current Assets

 

52.1

62.2

40.4

Stocks

12.7

19.9

19.8

Debtors

32.8

33.9

19.1

Cash

6.6

8.4

1.5

Current Liabilities

 

(35.7)

(20.2)

(51.0)

Creditors including tax, social security and provisions

(20.6)

(14.8)

(31.7)

Short term borrowings

(15.1)

(5.4)

(19.3)

Long Term Liabilities

 

(22.1)

(48.7)

(34.8)

Long term borrowings

(13.3)

(37.5)

(23.9)

Retirement benefit obligation

(8.5)

(10.8)

(10.5)

Other long-term liabilities

(0.4)

(0.4)

(0.4)

Net Assets

 

11.0

18.4

(12.7)

Minority interest

0.0

0.0

0.0

Shareholders’ equity

 

11.0

18.4

(12.7)

CASH FLOW

Operating Cash Flow

 

(44.6)

(47.9)

(45.2)

Net Interest

(0.1)

(2.2)

(1.8)

Tax

0.0

(0.1)

(0.4)

Investment activities

(6.6)

(14.2)

(9.2)

Acquisitions/disposals

0.0

0.0

0.0

Equity financing and other financing activities

6.5

0.0

0.0

Dividends

0.0

0.0

0.0

Net Cash Flow

(44.7)

(64.4)

(56.7)

Opening net debt/(cash)

 

17.8

21.7

34.5

HP finance leases initiated

0.0

0.0

0.0

Other

(40.8)

(51.6)

(49.4)

Closing net debt/(cash)

 

21.7

34.5

41.7

Source: Company data


General disclaimer and copyright

This report has been commissioned by Leclanché and prepared and issued by Edison, in consideration of a fee payable by Leclanché. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Leclanché and prepared and issued by Edison, in consideration of a fee payable by Leclanché. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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