Velocys (VLS) has lost around 70 per cent of its market value over the past 12 months as the gas-to-liquids (GTL) specialist has moved through what it describes as a "backstage" period ahead of the opening of ENVIA Energy’s Oklahoma City biomass plant in the first half of 2016.
The plant will use Velocys's patented GTL technology that converts natural gas or biomass into liquid products such as diesel, jet fuel and lubricants. The Oklahoma City project represents a critical step towards the wider commercialisation of the technology, and it remains on track following timely completion of the reactors and catalyst equipment.
For now, however, the progress isn't reflected in the financial metrics. Given a step-up in research and development spending, Velocys's half-year operating loss expanded by a fifth to £12.5m.
Investor confidence received a jolt in July when the group parted ways with chief executive Roy Lipski following what were initially described as "allegations of serious misconduct". The group's long-serving finance chief Susan Robertson has temporarily taken the reins, even though Velocys subsequently said no misconduct had taken place. Nevertheless, Mr Lipski's sudden departure precipitated another sharp drop in the share price.
Numis has reduced its discounted cashflow valuation from 304p to 189p, citing "slower technology roll-out" and "reduced market size".
| VELOCYS (VLS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 65p | MARKET VALUE: | £270m | |
| TOUCH: | 65-67p | 12-MONTH HIGH: | 230p | LOW: 64p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 18p* | NET CASH: | £45m | |
| Half-year to 30 June | Turnover (£'000) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 958 | -10.5 | -8.7 | nil |
| 2015 | 120 | -12.4 | -8.5 | nil |
| % change | -87 | - | - | - |
| *Includes intangible assets of £28.1m, or 6.8p a share. | ||||
