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Ensurge has signed two commercial agreements so far this year, giving it a route to market in both of its initial target markets. The company has validated the performance of battery cells deposited using its existing roll-to-roll production line and is installing cell stacking equipment, keeping it on track to deliver initial product revenues in late 2021.
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Ensurge Micropower |
Still on track to deliver first microbatteries in Q421 |
Q221 results |
Tech hardware & equipment |
31 August 2021 |
Share price performance
Business description
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Ensurge Micropower is a research client of Edison Investment Research Limited |
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Ensurge has signed two commercial agreements so far this year, giving it a route to market in both of its initial target markets. The company has validated the performance of battery cells deposited using its existing roll-to-roll production line and is installing cell stacking equipment, keeping it on track to deliver initial product revenues in late 2021.
Year end |
Revenue ($m) |
EBITDA |
PBT* |
EPS* |
DPS |
P/E |
12/17** |
5.9 |
(50.9) |
(54.5) |
(0.06) |
0.00 |
N/A |
12/18** |
3.4 |
(49.3) |
(54.3) |
(0.93) |
0.00 |
N/A |
12/19** |
1.2 |
(30.6) |
(35.9) |
(0.61) |
0.00 |
N/A |
12/20 |
0.5** |
(11.4) |
(15.3) |
(0.04) |
0.00 |
N/A |
Note: *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 H121 and the $0.5m revenues in H120 related to sales of legacy stock of anti-theft tags. Payroll costs were $1.6m higher year-on-year in H121 as management invested in engineering, manufacturing and business development personnel, resulting in a widening of EBITDA losses, excluding share-based payments, by $1.5m to $6.9m. Following a fund-raising programme generating $11.2m (net) from a private placing and exercise of warrants, cash (excluding restricted cash) totalled $5.5m. Management estimates that this cash, together with $13.6m (gross) generated from the remaining warrants during Q3, is sufficient to fund the company into Q122. Management has stated that it intends to seek additional financing, including institutional investment in Europe and the United States, to fund the company’s activities further into 2022.
Still on track for first microbattery sales by end FY21
Ensurge formally completed its first product design in January and has manufactured its first prototype cells. It is continuing with its programme to transfer process technology from a sheet-based production line to the much higher-volume roll-to-roll line ahead of delivery of samples by end FY21. The company now has customer agreements in both of its two initial target markets, having signed an agreement in May with a Fortune Global 500 company addressing the broader wearables market and an agreement with a global leader in the medical hearables market in July. Management notes that there are additional commercial agreements in the pipeline and has identified a priority list of more than 10 additional customers that will be receiving some of the initial samples.
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 and 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. However, we note that the company is at the early stage of its development, with execution, delivery and funding availability key to its success.
Preparing for manufacture of samples
A critical part of preparing to deliver samples during Q421 is ensuring that the roll-based production line at its facility in San Jose, California is ready. A key milestone was reached in this regard with the successful deposition of battery materials on ultrathin 10-micron steel substrates using existing roll-to-roll equipment. The company has also confirmed, ahead of schedule, validation of the complete roll to-roll tool set. This validation activity resulted in an increase in manufacturing expenses, raising the cost associated with premises and supplies by $0.8m year-on-year to $2.0m.
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Exhibit 1: Roll-to-roll equipment working with ultrathin steel substrate |
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Source: Ensurge Micropower |
The roll-to-roll equipment deposits multiple layers, forming a battery cell on the steel substrate. These layers need to be stacked to create cells with sufficient energy storage capacity and the high volumetric energy density desired for the wearables market. Ensurge has received initial deliveries of equipment that enables the stacking of multiple ultrathin stainless steel-based layers. This equipment is critical to achieving high volumetric energy densities up to double that of comparable lithium-ion microbatteries. It is also critical for matching stacking capacity to the output of the roll-to-roll line so Ensurge can manufacture complete battery cells in commercially relevant quantities. We note that capital expenditure during H121 was $1.2m, compared to $0.1m in H120 and $0.2m in H220. Management has not disclosed the capital expenditure required for the stacking equipment, but it is modelled in management’s cash runway guidance.
Exhibit 2: Financial summary
US$m |
2017 |
2018 |
2019 |
2020 |
||
Year end December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
5.9 |
3.4 |
1.2 |
0.5 |
EBITDA |
|
|
(50.9) |
(49.3) |
(30.6) |
(11.4) |
Operating Profit (before amort. and except.) |
|
|
(54.8) |
(53.3) |
(34.5) |
(11.4) |
Intangible Amortisation |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(3.0) |
(15.6) |
(42.4) |
0.0 |
||
Share-based payments |
(2.2) |
(1.8) |
(0.2) |
(0.6) |
||
Operating Profit |
(60.1) |
(70.6) |
(77.1) |
(12.0) |
||
Net Interest |
0.4 |
(1.1) |
(1.4) |
(3.9) |
||
Profit Before Tax (norm) |
|
|
(54.5) |
(54.3) |
(35.9) |
(15.3) |
Profit Before Tax (FRS 3) |
|
|
(59.7) |
(71.7) |
(78.5) |
(39.1) |
Tax |
0.1 |
(0.0) |
0.0 |
0.0 |
||
Profit After Tax (norm) |
(54.3) |
(54.4) |
(35.9) |
(15.3) |
||
Profit After Tax (FRS 3) |
(59.6) |
(71.7) |
(78.4) |
(39.1) |
||
Average Number of Shares Outstanding (m) |
862.7 |
58.6 |
58.6 |
393.2 |
||
EPS - normalised ($) |
|
|
(0.06) |
(0.93) |
(0.61) |
(0.04) |
EPS - (IFRS) ($) |
|
|
(0.07) |
(1.22) |
(1.34) |
(0.10) |
Dividend per share ($) |
0.00 |
0.00 |
0.00 |
0.00 |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
||
Operating Margin (before GW and except.) (%) |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
34.2 |
35.3 |
0.6 |
0.8 |
Intangible Assets |
2.2 |
2.4 |
0.0 |
0.0 |
||
Tangible Assets |
20.5 |
22.5 |
0.0 |
0.2 |
||
Other |
11.5 |
10.4 |
0.6 |
0.6 |
||
Current Assets |
|
|
115.1 |
44.1 |
11.7 |
6.9 |
Stocks |
0.7 |
2.6 |
0.0 |
0.0 |
||
Debtors |
16.2 |
8.9 |
2.8 |
1.1 |
||
Cash including restricted cash |
98.1 |
32.6 |
8.9 |
5.8 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
(7.3) |
(8.1) |
(6.8) |
(32.7) |
Creditors |
(7.3) |
(8.1) |
(5.5) |
(29.5) |
||
Short term borrowings |
0.0 |
0.0 |
(1.4) |
(3.2) |
||
Long Term Liabilities |
|
|
(12.1) |
(11.5) |
(25.1) |
(21.9) |
Long term borrowings excluding finance leases |
0.0 |
0.0 |
(11.8) |
(9.7) |
||
Other long-term liabilities |
(12.1) |
(11.5) |
(13.2) |
(12.2) |
||
Net Assets |
|
|
129.9 |
59.7 |
(19.7) |
(46.9) |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(52.3) |
(52.3) |
(29.1) |
(11.9) |
Net Interest |
0.3 |
0.3 |
(1.4) |
(3.2) |
||
Tax |
(0.0) |
(0.1) |
0.0 |
0.0 |
||
Capex |
(27.1) |
(11.2) |
(5.1) |
(0.3) |
||
Acquisitions/disposals |
0.0 |
0.0 |
0.0 |
0.0 |
||
Financing |
103.3 |
(0.0) |
0.0 |
13.3 |
||
Dividend payments and other items |
0.2 |
(1.6) |
0.0 |
0.0 |
||
Net Cash Flow |
24.4 |
(64.9) |
(35.5) |
(2.1) |
||
Opening net debt/(cash) excluding finance leases |
|
(74.2) |
(98.1) |
(32.6) |
4.3 |
|
Finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(0.5) |
(0.6) |
(1.4) |
(0.7) |
||
Closing net debt/(cash) excluding finance leases |
|
(98.1) |
(32.6) |
4.3 |
7.2 |
|
Source: Company accounts
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Research: Healthcare
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