|
Oxonica - Turkish troubles |
|
|
|
|
First published in InFocus: UK Quoted Clean Motoring, July 2007. © Cleantech Investor Ltd.
AIM listed nanomaterials developer Oxonica provides a warning of the uncertainties of newly developed technologies. When its management reported 2006 figures in March they were still upbeat about the potential of the Envirox fuel borne catalyst. One month later, the main customer Petrol Ofisi cancelled its agreement because Envirox’s trial results were disappointing. The shares were suspended and only returned from suspension on 6 June.
Oxonica quotes research from 2003 saying that the addressable market for Envirox could be worth $3bn. The company reported that field and laboratory studies show fuel savings of between 5% and 11% for low-sulphur diesel - in addition to reduced levels of CO2 and particulates. Bus operator Stagecoach has used Envirox and appears happy with the product - but Petrol Ofisi was not. A Turkish track trial over 30,000 km for high-sulphur diesel fuel covered 16 trucks. Driven round the service road of a Formula 1 track, the first two-thirds of the trial showed a 1% to 1.5% fuel saving. However, there was no identifiable improvement in fuel economy at the 30,000 km point and Petrol Ofisi terminated the agreement.
High-sulphur diesel is being phased out in Turkey and won’t be used after July 2008. Petrol Ofisi will continue to work with Oxonica to evaluate Envirox in low-sulphur diesel but it’s unclear how much revenue this might generate. At the time of the full year results announcement in March, Oxonica said there were 10 other oil companies interested in Envirox. Oxonica argues that Envirox works with low sulphur diesel, the main form of diesel used in Europe,Asia and the US.
Oxonica has announced redundancies in an attempt to cut overheads now that the expected revenues from Petrol Ofisi won’t come in. It has also made a £475,000 provision against Envirox stocks. Unlike many early stage cleantech companies Oxonica has other strings to its bow so isn’t totally dependent on Envirox. It has developed Optisol, an ingredient for sun creams; diagnostic platform called Nanoplex; and the Nanobarcode security However, the vast majority of £10.2m group turnover in 2006 from Envirox, with Petrol Ofisi contributing £7.6m in the last five months of 2006 alone. Oxonica had net cash of £3.6m the end of April, but average monthly operating costs were £900,000 in first quarter. By 25 May there £2.6m in the bank. Average monthly revenues are £165,000 and operating costs have been cut to £650,000. Allowing for a 55% margin on revenues the monthly cash outflow appears running at £560,000. Continuing revenues don’t include any potential contribution from Petrol Ofisi. Even appears that just five months remains in the business unless there improvements in revenues cost cutting. The shares slumped on returning suspension, from 117.5p to 54p. |
