Alexium primed for success: doubles revenue, lifts margins

By Meagan Evans. Published at Feb 27, 2020, in Technology

Alexium international Group Ltd (ASX:AJX) is at the forefront of global flame retardant technology.

Alexium utilises phase change materials in developing proprietary products for advanced thermoregulation. The group’s chemical treatments are currently marketed as Alexicool® and Alexiflam®, while applications under development include textiles, packaging, electronics, and building materials.

Over the past 18 months, Alexium with a renewed management team, has made tangible progress in repositioning the business for future growth. Actions taken by the current management team across the business in that time are driving a strong and continued improvement in profitability.

The company’s progress was reflected in its half yearly report and presentation announced this morning.

The group made meaningful progress across all key financial indicators over the half year to December 31. Highlights include:

  • Revenues more than doubled from US$1.548 million (AU$2.2M) in the six months to December 31 2018 to US$3.177 million for the corresponding six-month period a year later (H1 2020).
  • Improved gross margins by 9.8% through pricing and manufacturing controls and processes from 30.1% in H1 2019 to 39.9% in H1 2020.
  • The group had a tight control of overheads with operating overhead reduced by 18% from US$3.3 million to US$2.7 million from fiscal stewardship and increased efficiencies.
  • The total operating loss (EBITDA) improved by US$1.4 million versus same 6-month period last year.

While incremental growth has continued, Alexium has leveraged its broad product portfolio and analytical tools to develop total mattress cooling systems (TCMS) where a suite of textile and foam-based Alexicool® products are used.

This increases revenue per unit, strengthens the reliance on Alexium IP, and promotes the utilisation of the company’s analytical tools.

These opportunities provide a step change in revenue growth and are the basis for achieving cash flow positive.

Capital position

Alexium successfully raised US$15.1 million in December 2019 / January 2020 with proceeds used to retire GPB debt.

The capital raising process reduced debt by US$5.5 and annual interest costs by circa US$1.0 million.

The group’s US$6.9m of cash on hand (post tranche 2 of placement) provides sufficient funding to realise the significant opportunities ahead.

The financing saw well regarded institutional investor, Colinton Capital Partners become a cornerstone investor in Alexium, investing a total of A$9.2 million in Alexium shares and convertible note.

Colinton is now working with the Board and management to realise the near-term potential of Alexium. Additionally, Simon Moore, Senior Partner of Colinton Capital Partners joined the Alexium Board in February 2020.

Highlights for the product lines

Alexicool®

Alexium’s Alexicool® products are expanding in the US bedding market.

The group recorded revenue growth in the half year from new customers of Alexicool® products in the three categories of Foam, Top of Bed and Textile, along with increased revenue from existing customers.

The graph below shows first half revenue growth FY19 v FY20 comparison (blue) and the business lines and their contribution to that growth (green):

While incremental growth has continued, Alexium has leveraged its broad product portfolio and analytical tools to develop total mattress cooling systems (TCMS) where a suite of textile- and foam-based Alexicool® products are used.

This increases revenue per unit, strengthens the reliance on Alexium IP, and promotes the utilisation of the Company’s analytical tools.

These opportunities provide a step change in revenue growth and are the basis for achieving cash flow positive.

Alexiflam®

In the first half, the group’s product ‘Alexiflam® NF-treated Cotton Socks for Protection of Foam Mattresses’ had its product design validated in laboratory-scale testing, cost and supply chain models established, and commercial production efforts commenced.

Based on H1 FY2020 achievements, production scale work has now commenced in preparation for and to support a full mattress scale burn test.

In parallel, Alexium will continue to meet with customers to introduce the product. Initial customer interest is positive given hazards of the incumbent products.

Given addressable market, strong value proposition and established customer relationships, commercialisation is a 12-month priority here.

Over the six-month period, a framework was established with ICL (a global leader in flame retardants) for the commercialisation of Alexiflam® NF with ICL customers in target markets.

Over the coming year, Alemium will finalise the Alexiflam® NF commercial agreement with ICL, and support ICL commercial efforts with research, product development and manufacturing resources. The Alexium commercial team will continue to work on established FR opportunities.

Alexiflam® FR NyCo

Minor adjustments have been made to Alexiflam® flame retardant NyCo (nylon/cotton) fabrics for military applications to suit the Pine Belt manufacturing process and promote even chemical application.

Alexium will support Pine Belt in finalising and optimising production scale processes, complete technical production testing on lowest weight add-on with FR NyCo process, deliver FR NyCo fabrics to USMC for testing and evaluation (T&E), and support Pine Belt and USMC efforts.

The company will host a conference call and live audio webcast at 9:00am AEST on Friday, 28 February 2020. CEO Bob Brookins and CFO Jason Lewis will review Alexium’s progress over this period as well as provide updates on major initiatives. You can join the meeting by clicking HERE.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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