A company with a nose for success

New technology is exciting but often makes for a bumpy share price ride with near-term prospects clouded by delays and fundraisings while the distant prospect of untold wealth seems to remain just that.

One company that embodies this heady mix of risk and potentially large rewards is Aromascan, which produces technology to scan smells in digital form.

Capitalised at pounds 41m, the group makes no secret of the fact that it will be showing significant losses (pounds 1.5m plus) when it reports later in June against the house stockbroker's earlier hoped-for pounds 900,000 loss. Although the balance sheet is healthy, with more than pounds 4m cash, a further fundraising will be required later in the year.

Against that background there may be little rush to buy the shares - they have recently fallen away from a peak of over 180p to 155p.

There is also a slightly comic air to a company that has invented a machine that smells - an "electronic nose" would probably be more at home in a fairground.

But investors will take the company more seriously when they understand it better. Sensors of all kinds are playing an important role in many fields including industrial processing. Other companies producing equipment based on sensors, such as Renishaw with its touch probes and Druck with its pressure sensors, are highly regarded by investors. Sensors in smell, measuring airborne chemicals, could have wide application. Aromascan is talking to a string of well-known companies in industrial controls about possible uses for its polymer-based sensing equipment. As the year unfolds there are likely to be more link-ups.

One deal announced last month is a strategic alliance with Japanese giant, Mitsubishi. The shares have weakened since, partly because Aromascan is reluctant to talk freely about what it could all mean.

Mitsubishi first began talking to Aromascan in January, 1995. It set up four pilot schemes to test the technology in the field of industrial process controls. One example related to rice. Japanese rice sells for three times the price of imports, making substitution tempting despite tough domestic controls. Aromascan's equipment offers a potential deterrent since the only thing it could not do, according to the Japanese, was identify the village from which the Japanese rice came.

No big deal, you may think, but the implications for industrial processes are enormous. One idea is that Aromascan's sensors will be incorporated in the production line and linked with neural network software that can learn from patterns of activity and deal with problems while the line is running. For example, sensors linked to a food production line might sense that tea, say, is being tainted.

Allied to other sensors based on vision and touch we have the basis of the intelligent factory of the future. Indeed Aromascan's managing director, Allan Syms, says that on the basis of pilot studies giving encouraging results, Mitsubishi believes in the growth potential in linking all types of industrial sensors, including the electronic nose.

The deal with the Japanese firm is structured in an attractive way for Aromascan. Instead of merely selling its sensors or making a royalty, it will have exclusive rights in Europe to products developed by the joint venture and share the rights with Mitsubishi in the rest of the world except Japan. Even in Japan the group will generate revenue from the sale of its sensors to Mitsubishi. Dr Syms talks of a pounds 1bn global market with potential profits of pounds 150m on normal margins.

When Aromascan was first floated, it targeted the much smaller laboratory equipment market and raised funding appropriate to those goals. Now, additional funding will be required - perhaps another pounds 10m. But shareholders should be happy to oblige, given the huge size of the markets being addressed and the relationships the company is developing.

The group is also moving from DC to AC technology. Put simply, DC means the equipment needs 37 sensors to identify aromas to the required degree of accuracy. AC makes it possible to achieve many of the same results with one sensor making miniaturisation possible and helping in the development of handheld equipment.

Initial products from Aromascan's collaboration with Mitsubishi should hit the market in the summer of 1997. Before then other such strategic alliances are likely. Aromascan will concentrate on its patented skills in using polymer technology to identify aromas and in developing the associated software while its multinational partners use their skills and financial and marketing muscle to develop products for specific applications and introduce them into world markets.

The shares look a worthwhile gamble with potential that, by the standards of many blue sky ventures, is comparatively modestly priced.

Start your day with The Independent, sign up for daily news emails
ebooksA celebration of British elections
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
Fans take a selfie with Ed Miliband in Kempston, near Bedford, on Tuesday
election 2015
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
Chuck Norris pictured in 1996
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power