Ilika confirms plans for own manufacturing facility

The AIM-traded firm said that, following the successful end of its oversubscribed £15m equity placing in April, it was now implementing its planned manufacturing scale-up for Stereax.

It said that it had assessed various manufacturing options, which included the transfer of manufacturing wafers of Stereax batteries into third-party facilities, and the establishment of its own manufacturing operations.

The board said that, having compared the benefits and risks of installing the key equipment needed for Stereax production in different locations, the “most efficient and cost effective” solution would be to establish its own manufacturing operation.

After detailed negotiations and analysis, Ilika said its management and board had demonstrated that the option of outfitting an Ilika-operated facility offered the lowest implementation risk and best financial return.

Ilika's management and board said they believed that establishing its own manufacturing facility, close to its current operating base in the UK, would have a number of advantages, including the quickest route to product launch, and control of implementation timelines and operations without being subject to third-party-imposed restrictions.

The plan would also see an improved operating margin at volume production, broader access to the expertise of Ilika’s technical team, and the reduced risk of Covid-19-related travel restrictions delaying implementation.

Ilika said its analysis demonstrated that the apparent advantages offered by implementation in an existing third-party facility, such as access to trained operators and reduced infrastructure capital cost, would be “more-than-compensated” by its own lower operating costs and its proven ability to implement facility development plans.

Facility lease negotiations were now in progress, with the company expecting to start facility fit-out in January.

As it confirmed in its trading update on 11 November, Ilika said key tools - which had already been ordered - were expected to be installed in the first half of the 2022 financial year, with manufacturing beginning by the second half of that year.

That would result in a 70x increase in Stereax production capacity by the end of the 2021 calendar year.

Ilika said its expectations for the financial year ending 30 April 2022 were not impacted by the selection of its manufacturing option.

“This decision to implement our own manufacturing capability allows Ilika to fully control Stereax initial scale-up activities and to maintain the on-schedule implementation of our plans,” said chief executive officer Graeme Purdy.

“We are excited by the opportunity to scale up Stereax production by 70x in our own facilities.

“Furthermore, we will continue discussions with potential 3rd party manufacturing partners and customers as we continue to evaluate options for the longer term.”

At 1224 GMT, shares in Ilika were down 2.23% at 100.7p.