Ensurge Micropower |
Preparing for delivery of first microbatteries
Tech hardware & equipment |
Spotlight - Update
19 November 2021 |
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Ensurge Micropower is a research client of Edison Investment Research Limited |
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During Q321, Ensurge built its first stacked batteries using cell-stacking equipment and roll-based unit cells, which was a significant step towards delivering initial customer samples of milliAmpere hour (mAh) class microbatteries by the end of 2021. It also signed a commercial agreement with a global leader in the medical hearables market, its second agreement in this key market segment and third commercial agreement in total.
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Historical financials
Source: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Discontinued business. |
Cash runway into Q122 secured
Ensurge did not generate revenues during the first nine months of FY21 (9M21) and the $0.5m revenues in 9M20 related to sales of legacy stock of anti-theft tags. Payroll costs were $2.8m higher year-on-year in 9M21 as management invested in engineering, manufacturing and business development personnel, contributing to a widening of EBITDA losses, excluding share-based payments, by $2.5m to $10.9m. Following a fund-raising programme generating $25.2m (net) from a private placing and exercise of the remaining warrants, cash (excluding restricted cash) totalled $11.5m. Management estimates that this cash is sufficient to fund the company into Q122. Management has stated that it intends to seek additional financing from the investor market to fund the company’s activities further into 2022.
Strengthening routes to market
In addition to the three customer agreements already signed, Ensurge is negotiating multiple proposals with several prospects in the medical wearables and industrial markets. In some cases, such as smart rings and smart contact lenses, a potential customer’s planned products are only viable if they incorporate Ensurge’s microbatteries with their highly customisable form factor and architecture. Following the initial sample shipments in Q421, which are likely to generate the first microbattery revenues in early Q122, management expects to have a double-digit number of customers evaluating the company’s microbatteries in Q122 ahead of volume production later in the year.
Valuation: Potential market of over 1bn units a year
Ensurge is initially targeting the medical wearables and hearables markets, followed by the connected sensor and sport & fitness wearables markets. Our scenario analysis calculates that a 5–10% share of these markets represents annual revenues of $330–550m and EBITDA of $211–365m.
Preparing for manufacture of first samples
Now that Ensurge has built its first stacked batteries using cell-stacking equipment and roll-based unit cells, its focus has shifted to the test and optimisation activities required to validate key performance characteristics ahead of initial shipments to customers by the end of calendar 2021. The increased levels of activity resulted in an increase in manufacturing expenses, raising the costs associated with premises and supplies by $0.8m year-on-year during Q321 to $3.0m. The company has already installed and validated the packaging and test equipment required to enable initial customer samples. Management has not disclosed the capital expenditure required for this equipment, but we note that capital expenditure in Q321 was $1.6m compared to $0.2m in Q320.
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Exhibit 1: Roll-to-roll test |
Exhibit 2: Cell stacking |
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Source: Ensurge Micropower |
Source: Ensurge Micropower |
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Exhibit 1: Roll-to-roll test |
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Source: Ensurge Micropower |
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Exhibit 2: Cell stacking |
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Source: Ensurge Micropower |
In parallel, the company is preparing to commence volume manufacture of microbatteries during FY22. It intends to install further production-grade tools and equipment during Q421, with expected qualification in Q122 to support the transition to volume production. Management has not disclosed the capital expenditure required for the stacking equipment, but it is modelled in management’s cash runway guidance. We note that the existing roll-to-roll facility was designed for a different product, so supplementary equipment will be needed.
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Exhibit 3: Technical and commercial roadmap |
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Source: Ensurge Micropower |
Exhibit 4: Financial summary
US$m |
2017* |
2018* |
2019* |
2020 |
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Year end December |
IFRS |
IFRS |
IFRS |
IFRS |
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PROFIT & LOSS |
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Revenue |
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5.9 |
3.4 |
1.2 |
0.5* |
EBITDA |
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(50.9) |
(49.3) |
(30.6) |
(11.4) |
Operating Profit (before amort. and except.) |
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(54.8) |
(53.3) |
(34.5) |
(11.4) |
Intangible Amortisation |
0.0 |
0.0 |
0.0 |
0.0 |
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Exceptionals |
(3.0) |
(15.6) |
(42.4) |
0.0 |
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Share-based payments |
(2.2) |
(1.8) |
(0.2) |
(0.6) |
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Operating Profit |
(60.1) |
(70.6) |
(77.1) |
(12.0) |
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Net Interest |
0.4 |
(1.1) |
(1.4) |
(3.9) |
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Profit Before Tax (norm) |
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(54.5) |
(54.3) |
(35.9) |
(15.3) |
Profit Before Tax (FRS 3) |
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(59.7) |
(71.7) |
(78.5) |
(39.1) |
Tax |
0.1 |
(0.0) |
0.0 |
0.0 |
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Profit After Tax (norm) |
(54.3) |
(54.4) |
(35.9) |
(15.3) |
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Profit After Tax (FRS 3) |
(59.6) |
(71.7) |
(78.4) |
(39.1) |
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Average Number of Shares Outstanding (m) |
862.7 |
58.6 |
58.6 |
393.2 |
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EPS - normalised ($) |
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(0.06) |
(0.93) |
(0.61) |
(0.04) |
EPS - (IFRS) ($) |
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(0.07) |
(1.22) |
(1.34) |
(0.10) |
Dividend per share ($) |
0.00 |
0.00 |
0.00 |
0.00 |
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EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
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Operating Margin (before GW and except.) (%) |
N/A |
N/A |
N/A |
N/A |
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BALANCE SHEET |
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Fixed Assets |
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34.2 |
35.3 |
0.6 |
0.8 |
Intangible Assets |
2.2 |
2.4 |
0.0 |
0.0 |
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Tangible Assets |
20.5 |
22.5 |
0.0 |
0.2 |
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Other |
11.5 |
10.4 |
0.6 |
0.6 |
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Current Assets |
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115.1 |
44.1 |
11.7 |
6.9 |
Stocks |
0.7 |
2.6 |
0.0 |
0.0 |
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Debtors |
16.2 |
8.9 |
2.8 |
1.1 |
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Cash including restricted cash |
98.1 |
32.6 |
8.9 |
5.8 |
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Other |
0.0 |
0.0 |
0.0 |
0.0 |
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Current Liabilities |
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(7.3) |
(8.1) |
(6.8) |
(32.7) |
Creditors |
(7.3) |
(8.1) |
(5.5) |
(29.5) |
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Short term borrowings |
0.0 |
0.0 |
(1.4) |
(3.2) |
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Long Term Liabilities |
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(12.1) |
(11.5) |
(25.1) |
(21.9) |
Long term borrowings excluding finance leases |
0.0 |
0.0 |
(11.8) |
(9.7) |
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Other long-term liabilities |
(12.1) |
(11.5) |
(13.2) |
(12.2) |
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Net Assets |
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129.9 |
59.7 |
(19.7) |
(46.9) |
CASH FLOW |
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Operating Cash Flow |
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(52.3) |
(52.3) |
(29.1) |
(11.9) |
Net Interest |
0.3 |
0.3 |
(1.4) |
(3.2) |
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Tax |
(0.0) |
(0.1) |
0.0 |
0.0 |
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Capex |
(27.1) |
(11.2) |
(5.1) |
(0.3) |
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Acquisitions/disposals |
0.0 |
0.0 |
0.0 |
0.0 |
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Financing |
103.3 |
(0.0) |
0.0 |
13.3 |
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Dividend payments and other items |
0.2 |
(1.6) |
0.0 |
0.0 |
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Net Cash Flow |
24.4 |
(64.9) |
(35.5) |
(2.1) |
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Opening net debt/(cash) excluding finance leases |
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(74.2) |
(98.1) |
(32.6) |
4.3 |
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Finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
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Other |
(0.5) |
(0.6) |
(1.4) |
(0.7) |
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Closing net debt/(cash) excluding finance leases |
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(98.1) |
(32.6) |
4.3 |
7.2 |
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Source: Company accounts. Note: *Discontinued business.
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