The market is reacting with scepticism to Mycelx (MYXR:AIM) full-year expectations despite the first half facing a hit from customer delays. The shares are down 10.7% to 437.5p. The AIM-quoted concern, headquartered in Georgia, owns a patented technology which separates hydrocarbons from waste water.
Confidence in the long-term future has led the group to hire new staff and add fresh infrastructure but this will lead to higher costs in the short-term.
Today's announcement therefore sees house broker Numis cuts its 2014 revenue forecast from $27.4 million to $26.3 million and its estimates of 2014 and 2015 EBITDA (earnings before interest, tax, depreciation and amortisation) from $5 million to $2.1 million and $8.7 million to $5.2 million respectively.
The firm uses uses a polymer to permanently clean water which has been dirtied by the oil industry, removing the oil and any other associated waste. It sells both the external equipment which houses the MyCelx media, essentially filters immersed in its polymer, and the consumable filters themselves. All manufacturing is outsourced.
During the first six months of this year the company sold an offshore water treatment system to a global integrated oil company, marking its fourth product sale to this customer. In addition it sold a system for process water treatment to a major oil and gas producer in India whilst also extending and renewing rental contracts with two major petrochemical customers in Saudi Arabia.
New trials of MyCelx's equipment are also underway with two new prospective clients, both significant oil producers, in the North Sea and Oman and it says another will take place in India within the third quarter.
Although a strong pipeline of projects underpins its faith in a second half turnaround it warns that 'a number of the individual projects are of a large size and should any significant delays occur with those projects, the associated revenue will likely move into 2015'.
Numis, which reiterates its hold recommendation and 450p price target, comments: 'The business remains profitable and the topline continues to grow rapidly. We expect to see strong operational profit in 2016 and beyond as MyCelx takes advantage of the impact of operational gearing and new senior hires.'
