There’s a distinct whiff of burnt fingers in the City of London on Thursday morning.
The share price of punter’s favourite Pursuit Dynamics has crashed and burned after the fluid technology specialist announced a big revenue shortfall, a £10m rights issue and the resignation of its colourful chief executive Roel Pieper.
Picking over the wreckage of this morning’s statement, it seems Pursuit was banking on a license fee from Procter & Gamble to meet its forecasts.
That deal has yet to materialise, although the company remains confident.
The Industrial Licensing group are working on a range of opportunities for the atomiser and reactor technologies. The most immediate and significant is that previously announced with P&G. With P&G PDX has agreed a one month extension to the Joint Development Agreement (JDA), allowing P&G additional time to complete the complex technical and commercial evaluation of the PDX technology. The evaluation is expected to reach a conclusion during the first quarter of 2012. Successful completion of all learning objectives of the JDA would then clear the way for the two sides to move into commercial discussions of a fee structure that would allow P&G to license PDX’s technology.
So much so, that Pursuit, which has been dubbed the ultimate ‘jam tomorrow’ company by the bears, believes it will generate sales of not less than £22m next year. To put that figure in perspective, revenues this year were just £490,00. (The City had been expected revenues of around £6.5m this year).
PDX has made substantial progress with the commercialisation of its technology and products. Customer relationships were formed in increasing numbers during the past year across its lines of business. Despite this progress, the rate at which binding contracts have been signed has been slower than the Board had expected and revenues generated from those contracts have been slower to emerge than anticipated. This timing delay means that much of the income that the Board had expected to generate in the 2011 financial year is instead expected to be recognised in the coming year and for this reason the Company’s cash resources are lower than the Board had forecast. The Board therefore proposes to raise additional funds to provide the Company with the financial resources required to become profitable and cash generative. In order to allow all Shareholders to participate in the fundraising the Board has, following consultation with the Company’s major Shareholders, chosen to raise the required funds by way of a rights issue.
Why Pursuit is so confident these deals will be signed, defeats us. Indeed, it’s interesting to note that royalty income from the much hyped bio-ethanol division was just £8,600 in financial year ending on September.
Anyway, the cash call — 1 for 8 at 100p — is pretty much underwritten. That’s just as well because the shares are trading below the rights price already.
As for Pieper, he’s returning to his venture capital activities, which haven’t been a spectacular success either, and leaving shareholders with badly burned hands.
Related link:
Pursuit Dynamics and the ‘dodgy dossier’ – FT Alphaville