AFC Energy

Alkaline fuel cell developer AFC Energy (AFC) has declared in its interim results that it plans to begin testing its Beta fuel system in the second half of the year.

The system, which it is hoping to sell to Dutch conglomerate AkzoNobel, represents one of the key stages in its development. The group reported a widening in pre-tax losses on results for the six months to May from £1.4m to £1.98m, with net cash rising from £2.68m to £3.65m.

In an interview with Growth Company Investor, deputy chairman Ian Balchin observed that 'as expected, we are still at the investment stage', adding that AFC has made 'some enormous steps forward and will shortly be announcing further news concerning our commercial-scale fuel cell system'. Balchin remarked that AFC 'has been receiving interest from organisations interested in generating clean energy on site'.

Concerning the memorandum of understanding signed with John Lewis to trial and demonstrate its technology in a Waitrose store, Balchin declared that the retailer 'is looking to reduce the carbon footprint of its supermarkets and department stores', adding that AFC is 'hopeful that John Lewis will become one of the early adopters of our technology'.

Analysts at house broker Allenby are forecasting losses of £3.3m on turnover of £440,000 for the year to October 2011. In 2012 it is pencilling in a paring of losses to £2.6m on sales of £996,000.

Last recommended by Growth Company Investor this June at 44.5p, the shares currently trade at 42.72p. The shares have slipped since our initial recommendation in January at 64p, but with work progressing at a respectable pace on its Beta system and with the possibility of its demo with John Lewis being used to leverage future growth, we think the shares hold long-term value. We therefore reiterate our speculative buy rating.