Australian industrial enabler LaserBond (ASX: LBL) is setting its sights on double-digit revenue growth after announcing that the company has signed its second technology license agreement, this time with a UK-based multinational engineering company.
In May 2017, LaserBond shipped its first customised “turnkey cladding system” to a licensee partner in mainland China, as part of an expansion intended to leverage 25 years of its experience in surface-engineering technology development.
The sale was estimated to be worth somewhere around A$1.4 million plus ongoing royalties and fees.
Today’s agreement, with the as yet unnamed UK company, means LaserBond will supply its laser cladding system, ongoing training and support and consumable sales. The deal is expected to yield a 10% increase in revenue this financial year “with associated overhead recovery and increase in profits,” the company said.
Revenue in future years will include ongoing royalty fees over a seven-year license term as well as consumable sales, in addition to the ongoing revenue growth expected from its respective services and products divisions.
Furthermore, LaserBond said that it expects its solutions to have many applications in other areas of the licensee’s product portfolio and may generate “future technology division sales”.
Developing surface-engineering technology
Since its establishment in 1992, LaserBond has carried out extensive research, development and implementation of advanced surface-engineering techniques to dramatically reduce the wear rates, maintenance and operating costs of production-vital components of industrial customers.
With concurrent operations in both Sydney and Adelaide, LaserBond specialises in repairing and “reclaiming” components for a broad range of capital-intensive industries – often for critical applications that require “optimised” surface properties.
The emergent industrial enabler also says its dedication to researching and implementing leading-edge technologies has propelled LaserBond to being acknowledged as a national and international leader in surface-engineering and wear part protection that extends equipment and component operating life.
In its most recent company results published last month, LaserBond’s core services and products divisions were estimated to have generated A$15.65 million revenue in the last financial year, after reporting A$12.35 million a year earlier – equating to 27% growth in revenue on a year-on-year basis.
Its facilities in New South Wales and South Australia both report “significant year on year growth” with 27% and 25% improvements, respectively.
During the 2017 AGM and within the December 2017 half year report, LaserBond advised that the 2018 financial year would be a “year of investment” focusing on obtaining additional skills, capacity and capabilities to deliver planned growth.
Therefore, the company confirms that in the first half of the financial year, reported profitability was impacted by temporary increases in the “cost of sale” expenses from this investment.
However, the second half of the past financial year has provided the “expected return to near historical gross profit percentages” thereby providing a positive impact on profitability.
LaserBond has said that the business plans for the coming financial year target “continued double-digit revenue growth whilst retaining historical gross profit rates,” and has assured both investors and internal staff that there will be continued investment in resources as well as research and development to deliver future growth.
‘‘This agreement with a multi-billion-dollar engineering company illustrates the intrinsic value in the technology and associated intellectual property we have developed and the growing global reputation of LaserBond as a solution provider,” said Mr Gregory Hooper, chief technology officer and founder of LaserBond.
“Through our R&D efforts, we continue to develop the performance of the wear solutions we provide and continue to enhance the performance, automation and ease of operation of the equipment to apply such solutions. LaserBond has received a number of other enquiries and we are confident in the future strong growth of the Technology Division,” he added.
News of the deal saw LaserBond’s shares swell by 22%, now trading at $0.165 per share.