UPDATED: IkeGPS shares jump on expanded defence deal 9 Oct 2014
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UPDATED: IkeGPS shares jump on expanded defence deal
(Updates with chief executive comment throughout)
By Suze Metherell
Oct. 9 (BusinessDesk) - IkeGPS Group, the makers of remote measuring devices, says it will beat its prospectus forecast and earn some contract revenue this year after it expanded a deal with US defence technology investor In-Q-Tel. The shares jumped.
The Wellington-based company will partner with IQT to further develop its smartphone measuring tool, Spike, for US intelligence and security forces, and will boost contract sales forecast in its June prospectus, chief executive Glenn Milnes told BusinessDesk. According to offer documents lodged with the companies office, ike expected no contract revenue this year, and $617,000 in 2016.
"We're constrained under the terms of the contract from disclosing real detail but it more than underpins the level that was forecast," Milnes said. "For us we see this as a major validator of Spike for the intelligence and defence market, and that's the real implication for this particular contract."
Shares of ike rose as much as 25 percent to a record $1.06, and recently traded at 99 cents. The company raised $25 million in new capital when it listed on the NZX in July, through the sale of 22.7 million shares at $1.10 apiece. Existing shareholders, which include Jenny Morel’s No 8 Ventures and business partner General Electric, withdrew plans to sell $6 million of shares into the float. There was no public pool.
One market source told BusinessDesk the release was confusing, but the market seemed to like it.
According to offer documents, the company expected "revenue and other sources of income" to treble this financial year to $6.5 million, and rise again to $14.3 million in 2016. Other sources of income includes "contract revenue from discrete services contracts" which were "historically at the request of US defence and intelligence customers".
The nature of its deal with IQT was sensitive, Milnes said, however essentially the company acts as a middleman between ike and the client, and helps accelerate security and intelligence products, matching them to the customer and market's needs.
IkeGPS is forecasting its net loss will widen 133 percent to $5.33 million this year, and extend further to a loss of $5.8 million in 2016. The company is forgoing profit as it chases growth in the US market, and sees particular opportunity in the intelligence and security sector. IQT, which is charged with accelerating innovation in the US defence sector, first invested in ike in 2012 and is a shareholder in the business, according to offer documents.
As the contract was materially realised the market would be updated, Milnes said. The company said first-half earnings were in line with guidance and will release its interim report next month.
(BusinessDesk)
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