Biofuel IPO in the UK

15 June 2004

Biofuels Corporation, a UK biodiesel refiner, is raising £15m through a flotation this week on the Alternative Investment Market.

The company has placed 20 million shares at 75p with 10 institutions, valuing it at £22m, and dealings will begin on Thursday.

The company expects to make a pre-tax profit in the year to March 2006 of £6.2m on projected sales of £110m. A second plant would significantly increase profit and cashflow.

With that sort of revenue, the valuation seems a bit low, although the date of reckoning is 21 months away. Plus, this company already has distribution agreements in place, which should seem to add to the value.

The company expects to become a significant European biodiesel manufacturer following the construction of its first 250,000-tonne biodiesel producing plant at Seal Sands on Teesside. It will be the first large-scale biodiesel production plant in the UK and is expected to cost £21m in total. The plant is due for completion in the first quarter of next year.

Let’s see how the float goes this week, and I’ll rummage around to see if I can find the filing financials. I’m interested to know how the market is valuing biofuels companies, given the current situation.