It has been a disappointing 12 months for shareholders in Ceres Energy (LSE: CWR). The share value has tanked 62% in that interval.

But there are promising indicators of enterprise improvement on the firm.

In its annual outcomes introduced at present (15 April), it stated that revenues grew final yr – and Ceres Energy expects them to double this yr. That’s simply from present partnerships, so new clients would possibly add much more gross sales progress on prime of that.

Given the upbeat outlook for gross sales, what’s going on with the share value?

Ongoing losses

The gross sales surge anticipated this yr has already been factored into the share value because the deal was introduced earlier this yr.

In the meantime, though revenues grew final yr in comparison with the restated prior yr determine, so did losses. The working loss was £59m, on gross sales of £22m. These usually are not engaging economics for any enterprise. The overall loss for the yr grew to £54m from £48m the prior yr.

Unsurprisingly on condition that, the inexperienced power firm continues to burn money.

It ended the yr with web money and investments of £140m. That’s considerably decrease than the £182m it had on the finish of the prior yr.

It’s nonetheless a sizeable money cushion (particularly for a corporation with a market capitalisation of £267m). But when the corporate retains burning money then there’s a threat that at some future level it might dilute present shareholders to lift extra funds.

Gross sales outlook appears good

What concerning the anticipated surge in gross sales revenues, although?

I see that as constructive. Normally it’s simpler to make the economics of a enterprise work when gross sales are giant quite than small. Fastened prices may be unfold extra extensively and greater gross sales will help money flows (although that’s not at all times the case in apply).

On prime of that, the massive cope with Taiwanese firm Delta is a sizeable vote of confidence in Ceres’ know-how.

Not solely may that imply we see additional income from that buyer in future, it might additionally assist the agency persuade different potential purchasers to begin shopping for its merchandise.

Heaps nonetheless to show

However the deal brings dangers too. It makes Ceres Energy closely reliant on a single buyer for its revenues.

That kind of focus may be problematic, as if something goes fallacious with that one buyer relationship then it will possibly have an outsized affect on the enterprise total.

Large contracts sound good however they could be a blended blessing. Scaling up manufacturing and servicing capabilities to ship them may be pricey.

Not solely that, however the agency has been bleeding crimson ink partly as a result of its business mannequin stays unproven. One deal, even a chunky one, doesn’t essentially change that.

I believe the present Ceres Vitality share value may but develop into an enormous cut price. It has spectacular know-how, an present gross sales base and revenues look set to soar.

Whether or not it in reality seems to be a cut price, relies upon partially on how effectively it commercialises its merchandise. That continues to be to be seen and for now, I can’t be investing.