REG - Biome Technologies - Final Results 2021
24/03/2022 07:01
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RNS Number : 8195F Biome Technologies PLC 24 March 2022
The information contained within this announcement is deemed by the Company to
constitute inside information for the purposes of Regulation 11 of the Market
Abuse (Amendment) (EU Exit) Regulations 2019/310.
24 March 2022
Biome Technologies plc
("Biome", "the Company" or "the Group")
Final Results 2021
Biome Technologies plc announces its audited Final Results for the year ended
31 December 2021.
Highlights:
Final Results
· Challenging year for the Bioplastics division with continuing
strength shown in the pipeline of commercial opportunities but saw a revenue
decline of 3.0% as the division contended with various logistics and
development issues.
· RF Technologies division revenues increased by 23.4% to £0.9m
(2020: £0.8m) (after elimination of intra-group trade) as its markets started
to recover. As previously announced, significant contracts from the
fibre-optic, medical and food packaging industries have been secured and help
underpin the Board's expectations for the division in 2022.
· Reported Group loss before interest, depreciation, taxation and
amortisation (LBITDA) of £0.6m (2020: LBITDA of £1.0m restated), in line
with market expectations, with Group operating loss of £1.1m (2020: loss of
£1.6m).
· Group cash position as at 31 December 2021 was £1.0m (31
December 2020: £1.7m) with no bank borrowings.
Paul Mines, Chief Executive Officer said: "The Group has good opportunities
for growth in 2022. In 2021, the Bioplastics division continued to develop
its strong product base but sales growth was frustrated by third party delays.
Towards the end of 2021, the RF Technologies division saw a strong recovery in
its order book which bodes well for 2022".
- Ends -
For further information please contact: Biome Technologies plc
Paul Mines, Chief Executive Officer
Rob Smith, Chief Financial Officer
www.biometechnologiesplc.com Tel: +44 (0) 2380 867 100
Allenby Capital
David Hart/Alex Brearley (Nominated Adviser)
Kelly Gardiner (Sales and Corporate Broking)
www.allenbycapital.com Tel: +44 (0) 20 3328 5656
About Biome
Biome Technologies plc is an AIM listed, growth-orientated, commercially
driven technology group. Our strategy is founded on building market-leading
positions based on patented technology and serving international customers in
valuable market sectors. We have chosen to do this by developing products in
application areas where the value-added pricing can be justified and are not
reliant on government legislation. These products are driven by customer
requirements and are compatible with existing manufacturing processes. They
are market rather than technology-led.
The Group comprises two divisions, Biome Bioplastics Limited ("Bioplastic")
and Stanelco RF Technologies Limited ("RF Technologies").
Biome Bioplastics is a leading developer of highly-functional, bio-based and
biodegradable plastics. The company's mission is to produce bioplastics that
challenge the dominance of oil- based polymers.
Stanelco RF Technologies designs, builds and services advanced radio frequency
(RF) systems. Dielectric and induction heating products are at the core of a
product offering that ranges from portable sealing devices to large furnaces
for the fibre optics markets.
www.biometechnologiesplc.com (http://www.biometechnologiesplc.com)
www.biomebioplastics.com (http://www.biomebioplastics.com) and
www.thinkbioplastic.com (http://www.thinkbioplastic.com)
www.stanelcorftechnologies.com (http://www.stanelcorftechnologies.com)
Chairman's Statement
Business performance
2021 was a challenging year for the Group with delays to anticipated growth as the Group had to contend with a number of third-party operating issues. Project implementation by customers for our Bioplastics' products; shipping and other logistics issues; and with little sign of a return to furnace sales growth in our RF Technologies division, until the second half of the year. As a result, we had to reduce our expectations during the year.
An increased focus on cost and working capital management in the year ensured that the year-end cash position was better than anticipated at £1.0m with more identified improvements underway to provide for further anticipated growth.
Bioplastics division
A significant commitment was secured in March 2021 for the deployment of the
Bioplastics division's proprietary compostable filtration material, expected
to support a significant portion of the Group's expected revenue growth during
2021 and beyond. However, the ultimate potential of this commitment was not
delivered in the year as the customer delayed on more machines from the two
currently in use.
In our placing circular to shareholders in 2020, we laid out four growth
drivers which we believed would deliver significant value for shareholders and
maintain our KPI target of 40% revenue growth in the Bioplastics division
through 31 December 2023. I would like to return to these growth drivers again
specifically and update you on progress in each of them:
1. Continued growth from existing customers with
existing products, especially flexible film in both industrial and
particularly home compostable formats, in the North American market.
Growth from our existing customers and products stalled in 2021 as
transatlantic shipments were delayed by up to five months and our customers
struggled with material and labour shortages. We expect growth in flexible
film in North America to be more pronounced in the medium term.
2. Filtration mesh: The Company envisaged growth with a
second end-customer with a material that has been proven with an existing
customer over the last four years.
This project, with anticipated significant and recurring revenues from H2
2021, turned into a commitment in March 2021. However, first engineering
delays and then logistics issues meant that a more gradual ramp-up is now
expected during 2022. Substantive discussions have begun with two further
customers to deploy this material.
3. Coffee pod material: The Company launched a project
for a heat stable material for coffee pods within the US at the end of 2019.
Commercial sales of this product are now well embedded with a lead customer.
In addition to continued demand from the lead customer this material is now at
a late stage of testing with another large end-user organisation. Following
Covid related delays, commercial volumes are now expected to ramp-up in H2
2022.
4. Packaging film: The Company is working on seven new
customer projects that focus on the conversion of flexible packaging to
compostable formats. Six of these projects are for the North American Market.
Six of these original projects continue and whilst trials turned to commercial
usage in 2021, we now expect two or three of these to become commercially
meaningful during 2022.
Innovative materials
As a separate enterprise, Biome Bioplastics has coordinated research and
development funding in conjunction with leading universities, in pursuit of
bringing new novel bio-based and biodegradable polyesters to market. Exciting
new materials are now being produced at pilot scale on a regular basis and
their technical and commercial properties assessed. We expect to undertake
initial small-scale manufacturing on semi-commercial equipment in 2022.
Our tree-guard contracts, with Innovate UK, the UK's innovation agency, and
Suregreen Ltd, a leading manufacturer in the sector, to bring a biodegradable
tree-guard to market, has accelerated production of the new product in 2022.
There are now tens of thousands of such products being tested at various UK
locations and commercial sales have begun. As both increased tree planting and
environmental pressures increase, we believe we have developed an excellent
material for a growing market and will seek to exploit its potential in the
coming years.
Home composting, rather than industrial composting, is a trend that is coming
closer to market acceptance. There has been a shift in technical requirements
in the bioplastic market with more consumers and brands seeking products that
can be certified for home composting as well as through industrial scale
facilities. The division's scientists have been working to deliver products
that deliver this technical performance at a competitive price point and a
patent for a new family of materials has been filed recently. Work to exploit
this technology commercially will step-up in this financial year.
We believe that the progress described above highlights the growing reputation
of our Bioplastics business for innovative materials and how it will lead to
market success and penetration, particularly in the USA.
RF Technologies division
The downturn in demand for capital goods in the fibre optic cable
manufacturing sector that the division first saw during 2019 continued through
the first half of 2021. However, as the year progressed, we saw improvement in
spares and service orders and then interest in quotations for increased
capacity. Ultimately this resulted in the first substantive new order for
additional capacity for the fibre optic sector since 2018.
The division's efforts to diversify its revenue stream also gained traction in
2021. The bounce back in demand as Covid-19 restrictions were eased in some
territories, saw an uplift in enquiries for new capacity. This was manifested
in a substantive order for the medical sector in December 2021 and another for
the food packaging sector in Continental Europe in January 2022. These are
important steps for the division as it refines and demonstrates its capability
on a wider stage.
The division is experiencing the disruptions to supply lines other
manufacturers are having to contend with. Innovative and more costly solutions
are occasionally having to be applied to this challenge to enable our
contracts to be delivered in a timely fashion. We expect this situation to
continue for the time being.
Covid-19
The Group continues to monitor the ongoing impact of the Covid-19 epidemic and
places high importance on caring for its staff and customers. Some adjustments
made in 2020 to commercial and manufacturing activities remain but are now
being progressively eased in line with government guidance on these matters.
We have experienced substantive supply chain issues in the Bioplastics
division and whilst this turbulence is expected to continue through 2022, we
are improving our capability to foresee and manage such issues. We have seen
and continue to see an increase in input costs, including raw material,
shipping, fuel and labour. We have, in the main, been able to pass these costs
on to customers and we are continually working to mitigate the effects of
inflation on our business. Business development in the North American market
that has been successfully managed remotely for two years is now taking place
in person again.
The RF Technologies division's ongoing activity to widen the markets that it
sells to was frustrated in 2020 and early 2021 by a slowdown in capital
expenditure and restrictions placed on travelling to and meeting with
potential customers. However, as the pandemic has eased, more normal business
development has resumed not least with three face-to-face exhibitions planned
for 2022.
Whilst we expect to see a continuing limited impact from Covid-19, the
business has adapted to the challenges that the pandemic has presented, and we
look forward to a more normal environment in the future.
We have not experienced any further operational issues since the beginning of
the Russian invasion of Ukraine.
Results
The Group's results were broadly in line with the revised market expectations
for the year ended 31 December 2021.
Consolidated Group revenue for the year was £5.7m (2020: £5.7m) reflecting
the slight decrease in Bioplastics sales offset by the modest uptick in those
from the RF Technologies division. Group gross margins for the year were 33.8%
(2020: 29.4%) reflecting an improved mix of sales during the year.
The Group loss before taxation reduced to £1.2m (2020: £1.7m) whilst the
non-GAAP measure of loss before interest, taxation, depreciation and
amortisation (LBITDA) was slightly better than market expectations at £0.6m
(2020: £1.0m LBITDA restated). A Group operating loss of £1.1m for the year
was incurred (2020: £1.6m loss).
The Bioplastics division saw a slight decrease in sales to £4.8m (2020:
£4.9m) representing a 3.0% decline and flat loss before taxation of £0.6m
(2020: £0.5m loss restated). The division recorded a slightly higher LBITDA
of £0.2m (2020: £0.1m LBITDA) as sales marginally decreased.
The RF Technologies division's revenues were up 23.4% to £0.9m (2020: £0.8m)
reflecting the start of a recovery in demand for the division's products. Loss
before taxation was significantly reduced at £0.1m (2020: £0.5m). The
division reported a LBITDA of £nil / breakeven for the year (2020: £0.4m
LBITDA) and an operating loss of £0.1m (2020: £0.5m Loss). These results
reflect the improved sales in the year and the full-year benefit of cost
reductions made in 2020.
The Group's cash balances as at 31 December 2021 were £1.0m (31 December
2020: £1.7m) reflecting trading losses for the year offset by lower working
capital. The Group had no debt, other than leases in respect of right of use
assets, as at 31 December 2021 (2020: £nil). Capitalised product investment
in the Bioplastics division was £0.3m (2020: £0.3m).
Strategy
The Group continues to execute on its strategy to be a leading player in its
chosen markets. In both markets addressed by the Group our products are
developed to meet our customers' demanding requirements and incorporate a high
level of technological knowhow that differentiates our offerings from the
competition.
In my statement, made as part of the interim results for 2020, I updated and
restated our high-level Key Performance Indicators (KPIs) to 31 December 2023
to reflect the continued growth in the Bioplastics division as well as the
market headwinds facing the RF Technologies division. The revised KPIs and the
progress made as at 31 December 2021 is set out below: -
40% annual revenue growth in the Bioplastics division.
During the year ended 31 December 2021, the division missed this target with a
revenue decline of 3.0% as shipments in H2 were held-up and delays in the
implementation of new projects occurred as customers managed their own supply
chain problems. We expect growth of KPI magnitude to return in 2022.
Bioplastics division's profitable revenue growth to achieve a 10%-12.5% EBITDA
margin by the end of the KPI period.
Progress towards this KPI was reversed with the revenue decline described
above.
Continued diversification of the Group's turnover by product and market to
ensure that no single product or end customer contributes more than 15% of
revenues by 2023.
The Group had two customers (2020: two customers) who each accounted for more
than 15% of Group revenues. In 2021, both of these customers were in the
Bioplastics division. The two customers referred to are converters of material
for a further number of end customers. Good progress is being made to
diversify the number of end customers and the variety of products being sold.
Continued investment in the Group's next generation of products by spending
significantly more per annum on average than the £0.3m per annum average
spend over the previous strategic objective cycle.
The Group met this target with £1.0m R&D investment in the year
representing an increase of £0.3m on 2020.
Board and personnel changes
With the retirement of Michael Kayser, Simon Herrick joined the Board as
non-executive director on 25 March 2021 and assumed the responsibilities as
Chair of Audit and Remuneration Committees, member of the Nominations
Committee and has recently assumed the role of senior non-executive director.
Simon qualified as a Chartered Accountant with Price Waterhouse and has held
several executive director roles with listed companies including Northern
Foods plc, Debenhams plc and Blanco Technology Group plc.
Race to Zero
Biome Technologies signed up to the United Nations Race to Zero Climate
Campaign and is committed to reducing its carbon emissions in line with
publicly disclosed targets. Our reporting of actual greenhouse gas emissions
and medium-term targets commences in these Statements and demonstrate good
initial reductions of Scope 1 and 2 emissions (direct energy use) against the
recent baseline. Plans have been developed to drive progress towards both 2030
and 2050 targets.
Our Bioplastics division's products are already subject to individual Life
Cycle Analysis (LCA) that encompass the full supply chain where appropriate,
and we will look to extend our broader Group reporting to include Scope 3
emissions (those from toll manufacture, growing, extraction, manufacture, and
processing of the raw materials used) as robust data becomes available.
Outlook
Despite the challenging frustrations of 2021 we believe the Group has good
opportunities for growth in the current year.
The Bioplastics division will continue to benefit from the move to more
sustainable materials and, as it continues to broaden its product and customer
portfolio and the logistics issues ease, we expect growth to return in the
second half of 2022. It is also anticipated that several of the technical
developments, set out in the Strategic Report, will start to be commercialised
in 2022.
The RF Technologies division has been successful in winning some good
contracts to underpin expectations for 2022 and we are encouraged by the
improvement in its outlook. It is particularly pleasing to see the division
executing on its strategy of diversification in markets served that should put
the business on a more secure long-term footing, particularly in the first
half of the current year.
Trading in the first quarter of 2022 has been in line with our expectations
and the outlook for the year remains unchanged. We continue to manage our cash
resources to ensure that we can support further growth and achieve
sustainability for the Group.
John Standen
Chairman
Strategic Report
Biome Technologies plc is a growth orientated, commercially driven technology
group. Its strategy is founded on building market-leading positions based on
its technology, intellectual property and serving international customers in
the bioplastics and radio frequency heating sectors. We have chosen to do this
by developing products in application areas where value-added pricing can be
justified and that are not reliant on government legislation. The growing
portfolio of products is driven by customer requirements and compatible with
existing manufacturing processes. They are market rather than technology led.
The directors consider its shareholders, employees, customers and suppliers as
its key stakeholders and the divisional analysis below outlines the strategies
that have been adopted to promote the success of the Group and to meet its
objectives.
Biome Bioplastics division
The Bioplastics division achieved sales revenue of £4.8m (2020: £4.9m), a
decrease of 3.0%. The slight decrease in reported revenues, compared to the
record performance in 2020, was attributable to the industry-wide logistics
challenges encountered as the global economy restarted after the first wave of
lockdowns of the coronavirus pandemic. Throughout 2021 we experienced
lengthening lead-times and disruptions to sea-freight and road logistics. The
implementation plans of our customers were impacted by shortages of staffing
and materials affecting their production and purchasing patterns. New product
introductions were delayed as customers focused resource on securing existing
supply to the detriment of new product introductions. The division's operating
loss for the year was £0.6m (2020: £0.5m loss).
Markets
Plastics and their use or misuse by humanity remains a key environmental
topic in global markets. There is sustained pressure from consumers, media and
governments to reduce the environmental impact of plastics. In recent years
the focus of this pressure has been on the "end-of-life" of such materials,
how they are disposed of and the consequence of fugitive release to the
environment. In addition, with rising concerns regarding climate change and
the pursuit of "Net Zero" strategies by governments, there is greater interest
in how such materials might also be manufactured with lower carbon footprints.
The compelling case for compostable (biodegradable) bioplastics lies in their
ability to ensure that organic food waste reaches appropriate treatment (e.g.
industrial scale anaerobic digestion and composting facilities) and that the
resulting digestate and compost does not contain persistent plastic
contamination when spread to soils. This is driving the growth of the
compostable packaging market in sectors such as food waste bags, coffee pods,
tea bags and other food contaminated packaging formats.
The growth of the compostable plastics market is facilitated when there is a
clear route for food waste and food contaminated packaging to reach
appropriate sorting and treatment facilities. This requires appropriate
labelling, user education, collection, sorting and treatment capacity. The
quality of such "Industrial Compostable" disposal supply chains varies
considerably by geographic territory and often within countries although there
is, in general, a move to improve and scale-up such activity.
Arguably, the consumer desire to change the plastic model is pulling through
increased demand for compostable plastics at a rate that is faster than (often
government controlled) collection and disposal supply chains are able to adapt
to. As a result, there is increased demand from the market for bioplastics
that can be composted at home - known as "Home Compostable" products. Whilst
it is a minority of the population that has the access and/or desire to treat
organic waste and packaging at home, those that can, are highly motivated to
treat such waste appropriately. This is driving the compostable plastics
market to producing and certifying products that are suitable for this
end-of-life solution. Such products are required to compost at lower
temperatures and in less well managed conditions than can be expected at
industrial facilities.
The case for bio-based bioplastics is driven by the growing scientific
evidence that the use of biogenic inputs reduces the carbon footprint of such
materials and will in time lead to a more sustainable plastics industry. There
are a limited number of territories that legislatively require bio-based
inputs in some plastics, but it might be expected that this trend is likely to
accelerate. There is some evidence that some consumers will choose bio-based
materials when offered a choice, but this appears, at present, to rank behind
the desire for compostable functionality.
The UK market has been somewhat slower to embrace compostable and bio-based
materials than some other territories. Whilst there is considerable focus on
plastic waste, there is still a continuing debate of how best to manage the
problem. The local council control of the disposal supply chain and its wide
variability is seen by some as part of the problem and a move in England
towards universal food waste collection by 2025 presents an opportunity for
compostable plastics. At present, the UK market remains a smaller part of the
Bioplastics division's short-term focus with the more immediate sales
opportunities and growth being in the US market.
Cost and functionality will remain key hurdles over the widespread adoption of
bioplastics over petro-chemical plastics. Current adoption is therefore driven
by consumer pull, and their willingness to pay a premium for
biodegradability/compostability, or government legislation. To overcome these
hurdles the Group's Bioplastics division focuses on areas of the market where
there is a high technical performance requirement, the cost of the biomaterial
is a small fraction of the end product price, and where there is a consumer
willingness to convert to a biodegradable material.
Research and development within the Bioplastics division is therefore focussed
on these three areas and in particular targeted towards customer requirements
for a biodegradable solution. The commercial lifecycle of our product
developments can be categorised in the following stages of the product
lifecycle:
· Research phase - technology and product development
occurring within Biome's own laboratories or at external support facilities
· Development phase - the product is being developed
and tested with small scale supplies to customers for end use testing
· Initial manufacturing phase - the product is signed
off by the customer as suitable for its requirements and is now undergoing
significant long-term testing to ensure the end product can be run in
commercial quantities across the supply chain
· Commercial phase - the product has been through the
above phases with the customer and is now achieving regular and significant
sales with the end product being purchased and used by the final consumer
Technical Development
Biome Bioplastic's development work remains focussed on innovative
developments where there is a customer requirement for the product and a
willingness to pay a premium for the environmental attributes. During 2021,
the development team worked on a variety of technical challenges that included
the development of a range of home compostable materials for different
applications, the improvement of oxygen and vapour barrier performance, the
soil degradability of materials to be used in tree guards and the improvement
of temperature performance for a variety of end-uses. The home compostable
work made particular progress in the year, an important patent filing has been
made in this area and commercial deployment of this technology is expected to
begin in 2022.
The Bioplastics division also continued its work in medium term Industrial
Biotechnology research into the transformation of lignocellulose (often
sourced from agricultural waste) into low-cost bioplastics using microbial and
enzymatic routes. If successful, it is anticipated that this work will result
in bioplastics with improved functionality at a cost comparable to current
petroleum-based plastics. This development work continues to be supported by
research grants and much of the work is undertaken in collaboration with
leading UK universities. The scale at which the polymerisation activities have
been carried out has been increased over the last twelve months and the
differentiated performance of materials better understood. Plans have been
developed to migrate this activity to a contract partner at pilot scale in
2022 with the capability and capacity to manufacture at commercial scale in
due course.
Stanelco RF Technologies division
The RF Technologies division, through the use of radio frequency technology,
creates innovative solutions for thermal process applications. The division's
products are renowned for their quality and durability. The division's systems
are designed and manufactured to provide exceptional sealing, welding and
heating process solutions to a wide variety of commercial sectors.
The division's core offering is the supply of fibre optic furnaces, although
the business is also engaged with other markets where its expertise in
induction heating can be utilised such as medical, food packaging and
aerospace. Total revenues in 2021, after the elimination of intercompany
sales, were £0.9m (2020: £0.8m) representing a 23.4% improvement. This
improvement reflected an improving demand picture as industry recovers from
the economic effects of the coronavirus pandemic. Order intake in the final
quarter of 2021 and first quarter of 2022 has been particularly encouraging.
As a consequence of the improved sales and cost reductions made in 2020, the
division's operating loss for the period reduced to £0.1m (2020: £0.5m
loss).
The business currently focuses on four key revenue streams:
Optical Fibre Furnace Systems
The RF Technologies division is a world leader in the design and manufacture
of induction furnace systems used in the manufacture and processing of silica
glass "preforms" to produce optical fibre. Each system is bespoke to
customers' exact requirements. After a sustained period of overcapacity in the
fibre-optic manufacturing industry there are signs that producers are starting
to invest in maintenance and upgrades of existing equipment and to add new
capacity. Whilst no new furnaces were shipped in 2021 orders were received for
two systems to be delivered in the first half of 2022. It is expected that as
demand for fibre optic cable grows further furnace systems will be ordered.
Whilst it is not possible to predict the timing and scale of further orders,
we are encouraged by the level of enquiries and quoting activity.
Plastic Welding Equipment
These units are used in a multitude of end-user applications including the
nuclear, medical and industrial sectors. The equipment is provided in either
hand-held, mobile or fully automated static solutions, dependent on customers'
requirements.
Induction Heating Equipment
The division sells bespoke induction heating equipment mainly into the UK and
Continental European industrial sector. Whilst this has been a small part of
the division's sales it is a strategic aim to increase the equipment offering
and expand sales of this type of equipment. During 2021 we were pleased to win
contracts and make some shipments to noteworthy clients in the UK and we were
pleased to announce a significant contract win from a food packaging equipment
manufacturer in early 2022.
Service and Spares
The business continues to support its large installed equipment base through
the provision of maintenance support, system upgrades and specialist spares
across the globe. This provides an underlying base load of revenues for the
division.
Principal Risks and Uncertainties
Biome is subject to a number of risks. The Directors have set out below the
principal risks facing the business. The Directors continually review the
risks identified below and, where possible, processes are in place to monitor
or mitigate all of these risks.
Risk Nature Mitigation strategies Change in year
Suppliers and Raw Materials The Group's products and manufacturing processes utilise a number of raw To mitigate this risk the division is seeking to validate new materials coming 🟥 Supply chains became increasingly stretched during 2022 resulting in
materials and other commodities. In particular the Bioplastics division onto the market which may be used in substitution. longer-lead times and additional shipping costs.
requires a few, key raw materials to manufacture its biodegradable polymer
resins. There are very few suppliers of these key raw materials and with the To mitigate increased shipping lead-times the Bioplastics division is working
current increased demand for biodegradable products there is a risk that the closely with customers to improve visibility and forecast accuracy to ensure
division may not be able to purchase the required volumes of materials to meet materials are ordered sufficiently far in advance to ensure that they are
customer demand or that prices may be increased at short notice. available to meet demand.
The Bioplastics division sources raw materials internationally, some of which
are bulk shipped via sea freight mainly to the US.
Intellectual Property Although the Group attempts to protect its intellectual property, there is a The Group takes professional advice from experienced patent attorneys and 🟩 The Group continues to develop its intellectual property and has made
risk that patents will not be issued with respect to applications now pending. works hard to win patents applied for and to ensure that the scope is good progress with "home compostable" innovation that has led to a new patent
Furthermore, there is a risk that patents granted or licensed to Group sufficiently broad. application in 2022.
companies may not be sufficiently broad in their scope to provide protection
against other third-party technologies. The Group keeps up to date with its competitors' product developments and
patent portfolios and aims to ensure that no infringements occur. Professional
Other companies are actively engaged in the development of bioplastics. There advice is sought from experienced patent attorneys if there are any concerns.
is a risk that these companies may have applied for (or been granted) patents
which impinge on the areas of activity of the Group. This could prevent the
Group from carrying out certain activities or, if the Group manufactures
products which breach (or may appear to breach) such patents there is a risk
that the Group could become involved in litigation which could be costly and
protracted and ultimately be liable for damages if the breach is proven.
Commercialisation of New Products There is a risk that the Group will not be successful in the commercialisation The Directors ensure that regular reviews of product development are 🟨 The Group undertakes several developments and made notable progress with
of its products from early-stage research and development to full-scale undertaken so that unsuccessful developments can be terminated early in their its Tree Guards project during the year. However, other new product
commercial sales. The Group develops a number of products, and some may not life cycle. Impairment testing of the capitalised costs is performed twice a introductions were delayed due to the disruption to supplies and issues with
prove to be successful. Specifically, the risks associated with the product year with any impaired capitalised costs written off. customers caused by Covid-19.
life cycle are as follows:
· Research and Development phase - the development of the products
may prove not to be technically feasible or do not exactly match the perceived
customer need
· Initial manufacturing phase - whilst the product matches the
customer needs it may not be able to be produced at the required commercial
speeds and/or at the required efficiency and quality
· Commercialisation phase - the product may be superseded either
through price or a competitor product being more advanced
Customers and customer concentration The Group's ability to generate revenues for a number of its products is The Group works closely with its customers with the aim of ensuring that its 🟨 Customer concentration levels remain a concern for the Group with two
reliant on a small number of customers. If one of these customers was to products evolve in line with their requirements. In addition, the Group is customers each accounting for more than 15% of sales during 2021.
significantly reduce its orders, then this could have a significant impact on continually seeking to add to its customer base and, as its revenues grow,
the Group's results. seeks to become less dependent on any single customer.
In addition to the principal risks the Group is subject to a range of other
risks and uncertainties. The Board maintains a risk register and reviews this
biannually to ensure that the Group's operations management identifies actual
and potential risks and develops appropriate mitigating activities to ensure
that these risks are managed.
These risks, which also apply to many other industries and businesses,
include: -
· Financial
· Political, Economic and Regulatory Environment
· Exchange rate fluctuations
· Competition
· Brexit
· Health and Safety (including Covid-19)
· Cyber Security
· Ongoing geo-political insecurity (including the
Russian invasion of Ukraine)
Financial review
The KPIs which the Board uses to assess the performance of the Group are
detailed in the Chairman's Statement. The Chairman's statement forms part of
the Strategic Report.
The summary results for the Group are shown below:
Like-for-like comparisons 2021 2020 Growth
restated
£'m £'m
Revenues
Bioplastics 4.8 4.9 (3.0%)
RF Technologies 0.9 0.8 23.4%
Reported Group revenues 5.7 5.7 0.5%
(L)/EBITDA
Bioplastics (0.2) (0.1)
RF Technologies - (0.4)
Central Costs (0.4) (0.5)
Reported (L)/EBITDA (0.6) (1.0)
less depreciation, amortisation and equity share option charges:
Bioplastics (0.4) (0.4)
RF Technologies (0.1) (0.1)
Central Costs - (0.1)
(0.5) (0.6)
(Loss)/Profit from Operations
Bioplastics (0.6) (0.5)
RF Technologies (0.1) (0.5)
Central Costs (0.4) (0.6)
Operating Loss (1.1) (1.6)
Net Assets
Non-current assets 1.2 1.4
Inventories 0.9 0.8
Trade and other receivables 1.4 1.4
Tax receivable 0.1 0.2
Cash 1.0 1.7
Trade and other payables (1.3) (1.1)
Long term lease commitments (0.4) (0.4)
Net assets 2.9 4.0
Revenues
Reported Group revenues were unchanged in the year at £5.7m due to lower
sales of Bioplastics products offset by increased revenues from the RF
Technology division. Good order intake in the final quarter of 2021 and first
quarter of 2022 for the RF Technology division suggests a return to more
normal levels of trading, whilst new product introductions and on-boarding of
new customers for the Bioplastics division was delayed in 2021, we remain
confident over the longer-term prospects for the business.
(L)/EBITDA
Reported (Loss) / Earnings Before Interest, Taxation, Depreciation and
Amortisation ((L)/EBITDA) for the year was a loss of £0.6m (2020: £1.0m loss
restated). The decrease in LBITDA is a direct result of the higher revenues in
the RF Technologies division.
Operating Profits/(Losses)
The Group recorded an operating loss for the year of £1.1m compared to an
operating loss of £1.6m in the prior year.
Administrative costs across the Group in 2020 were £3.4m (2020: £3.6m). When
the non-cash effects of depreciation, amortisation and equity settled share
option charges are removed, the cash administrative expenses in 2021 were at a
similar level as 2020 at £2.9m.
Investment in product research and development was £1.0m in the year (2020:
£0.7m), which includes the research work in grant backed Industrial
Biotechnology, of which £0.3m (2020: £0.3m) was capitalised in the year. Tax
R&D claims resulted in a credit being recognised in the year of £29,000
(2020: credit of £61,000 restated) and other income from the Research and
Development Expenditure Credit scheme of £50,000 (2020: £24,000 restated).
The Group recorded a loss after tax for the year of £1.1m (2020: restated
loss after tax of £1.6m), giving a basic and diluted loss per share of 30p
(2020: restated loss per share of 53p). A prior year adjustment has been made
in respect of the timing of the recognition of current tax so that the tax
payable or receivable is accrued in the current year as opposed to being
recognised in the year that tax is settled. The adjustment in respect of 2020
is to reduce the tax credit from £155,000 to £61,000. The retained losses
brought forward from 2019 were reduced by £155,000 in respect of the 2019 tax
credit.
Statement of Financial Position
The carrying value of intangible assets relates to capitalised development
costs predominantly within the Bioplastics division for development of the
Group's own intellectual property and product range.
As at 31 December 2021, there was £0.7m of capitalised development costs
(2020: £0.8m) within the Group's statement of financial position, of which
£0.3m relates to Biome Mesh. An assessment is made at least annually which
assumes future potential market take up of the products and the margins
achievable.
Cashflow
2021 2020
restated
£'000 £'000
Loss from operations (1,135) (1,639)
Adjustment for non-cash items 489 658
Movement in working capital 69 (74)
Cash utilised by operations (577) (1,055)
Investment activities (266) (275)
R&D Tax credit 239 -
Interest paid (34) (38)
Financing activities (44) 920
Net decrease in cash (682) (448)
Opening cash balance 1,678 2,126
Closing cash balance 996 1,678
The cash utilised in operations, before working capital movements, was £0.6m
(2020: restated cash utilisation of £1.0m). Working capital movements
generated £0.1m cash in the year (2020: £0.1m utilisation).
Investment in the year in capitalised product development and capex was flat
at £0.3m (2020: £0.3m). Financing activities in the year represented
exercises of share options, purchase and sale of treasury shares and
repayments of obligations under finance leases and rounded to a net £nil,
share issues of net £1.0m were the principal financing activities in 2020.
R&D tax credits of £0.2m were received during 2021 (2020: £nil), the
receipts in 2021 were in respect of the 2019 and 2020 claims.
The resultant closing cash position was £1.0m (2020: £1.7m).
Going Concern
The financial statements have been prepared on a going concern basis as the
directors believe that the Group has access to sufficient resources to
continue in business for the foreseeable future. This is discussed more fully
in the Directors' Report on pages 14 to 17 of the 2021 report and accounts.
The key business risks and conditions that may impact the Group's ability to
continue as a going concern are the utilisation of existing resources to
finance growth, investment and expenditure; the rates of growth and cash
generated by group revenues, the timing of breakeven and positive cashflow
generation and the ability to secure additional debt or equity financing in
future if this became necessary. The primary area of judgement that the Board
considered, in the going concern assessment, related to revenue expectations
and visibility.
The Board was mindful of the guidance surrounding a severe but plausible
assessment and, accordingly, considered a number of scenarios in revenue
reduction against the original plans. A reverse stress test was constructed to
identify at which point the Group might run out of its available cash. The
test was designed specifically to understand how far revenue would need to
fall short of the base case forecast and does not represent the directors view
on current and projected trading. The test was modelled over a 24-month period
commencing 1 January 2022 and was based on budgeted trading that took into
account contracted orderbook, existing revenue streams from current customers
/ products and expected revenue based on management's judgement of the
likelihood of converting current sales opportunities. The sales revenue in the
budgeted model was reduced evenly across the Group to the point where the
projected month-end cash was equal to zero at any point during the 24-month
cycle. In the model, zero month-end cash was reached in November 2023 when
projected sales revenue was reduced to 86.7% of budget. Since the guidance for
going concern is usually based on a period of 12-months from the date of
signing the accounts a further reverse stress test was conducted over a period
to 31 March 2023. In this test reducing sales to 84.0% of budgeted level
resulted in a zero month-end cash position at 31 March 2023. For the reverse
stress test, the Board specifically excluded any significant upsides to this
scenario. This is despite strong incremental demand potential at both existing
and new customers either in the Bioplastics or RF Technology divisions. This
most severe scenario also excludes any mitigating reduction in the cost base
that the Board would clearly undertake in this event. In all scenarios
modelled, including the reverse stress test, the Group has sufficient
resources to operate and meet its liabilities throughout the going concern
review period without the inclusion of the impact of mitigating actions.
At 31 December 2021, the Group had a net cash balance of £1.0m and as at 22
March 2022 a balance of £0.9m. On a revised base case scenario adopted for
their assessment, the Board is comfortable that the Group can continue its
operations for at least a 12-month period following the approval of these
financial statements.
As a result of this review, which incorporated sensitivities and risk
analysis, the Directors believe that the Group has sufficient resources and
working capital to meet their present and foreseeable obligations for a period
of at least 12 months from the approval of these financial statements.
By order of the Board.
Paul Mines
Chief Executive Officer
Consolidated statement of comprehensive income
For the year ended 31 December 2021
Note 2021 2020
restated*
£'000 £'000
REVENUE 5 5,734 5,705
Cost of goods sold (3,794) (4,029)
GROSS PROFIT 1,940 1,676
Other operating income 364 324
Administrative expenses (3,439) (3,639)
LOSS FROM OPERATIONS (1,135) (1,639)
Investment income - 2
Finance charges (34) (38)
LOSS BEFORE TAXATION (1,169) (1,675)
Taxation 7 29 61
LOSS AND TOTAL COMPREHENSIVE LOSS FOR THE YEAR (1,140) (1,614)
Basic loss per share - pence (30)p (53)p
Diluted loss per share - pence (30)p (53)p
* A prior year adjustment has been made in respect of the timing of
recognition of tax, see note 7 for details as well as a reclassification of
£88,000 of foreign exchange loss to administrative expenses, previously
presented below the operating loss.
The accompanying accounting policies and notes form an integral part of the
financial statements.
Consolidated statement of financial position
as at 31 December 2021
Restated
balances as at
Note 2021 2020 01-Jan-2020
Restated*
£'000 £'000 £'000
NON-CURRENT ASSETS
Other intangible assets 726 821 883
Property, plant and equipment 502 574 653
1,228 1,395 1,536
CURRENT ASSETS
Inventories 920 746 555
Trade and other receivables 1,377 1,440 1,885
Tax receivable 7 79 239 155
Cash and cash equivalents 996 1,678 2,126
3,372 4,103 4,721
TOTAL ASSETS 4,600 5,498 6,257
CURRENT LIABILITIES
Trade and other payables 1,298 1,076 1,381
Lease liabilities 40 38 76
1,338 1,114 1,457
NON-CURRENT LIABILITIES
Lease liabilities 361 400 438
361 400 438
TOTAL LIABILITIES 1,699 1,514 1,895
NET ASSETS 2,901 3,984 4,362
EQUITY
Share capital 189 186 140
Share premium account 2,282 2,200 1,250
Capital redemption reserve 4 4 4
Share options reserve 487 617 377
Translation reserves (85) (85) (85)
Treasury shares reserve (55) - -
Retained earnings 79 1,062 2,676
TOTAL EQUITY 2,901 3,984 4,362
* A prior year adjustment has been made in respect of the timing of
recognition of tax and to disclose a tax receivable on the Statement of
Financial Position, previously included within trade and other receivables,
see note 7 for details.
The financial statements were approved by the Board and authorised for issue
on 23 March 2022.
Signed on behalf of the Board of Directors
Paul Mines (Chief Executive)
Rob Smith (Chief Financial Officer)
23 March 2022
The accompanying accounting policies and notes form an integral part of the
financial statements.
Consolidated statement of changes in equity
AS AST 31 DECEMBER 2021
Share capital Share premium account Capital redemption reserve Share options reserve Translation reserve Treasury Shares Restated* retained earnings TOTAL EQUITY
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2021 186 2,200 4 617 (85) - 1,062 3,984
Share options issued in share based payments - - - 48 - - - 48
Issue of share capital 3 82 - - - - - 85
Purchase of own shares - - - - - (122) - (122)
Sale of treasury shares - - - - - 67 (21) 46
Exercise of share options - - - (170) - - 170 -
Cancellation of expired options - - - (8) - - 8 -
Transactions with owners 3 82 - (130) - (55) 157 57
Loss for the year - - - - - - (1,140) (1,140)
Total comprehensive loss for the year - - - - - - (1,140) (1,140)
Balance at 31 December 2021 189 2,282 4 487 (85) (55) 79 2,901
Balance at 1 January 2020 140 1,250 4 377 (85) - 2,521 4,207
Prior year adjustment - - - - - - 155 155
Restated balance at 1 January 2020 140 1,250 4 377 (85) - 2,676 4,362
Share options issued in share based payments - - - 240 - - - 240
Issue of share capital 46 950 - - - - - 996
Transactions with owners 46 950 - 240 - - - 1,236
Loss for the year - - - - - - (1,614) (1,614)
Total comprehensive loss for the year - - - - - - (1,614) (1,614)
Balance at 31 December 2020 186 2,200 4 617 (85) - 1,062 3,984
* A prior year adjustment has been made in respect of the timing of
recognition of tax (see note 7).
Consolidated statement of cash flows
For the year ended 31 December 2021
2021 2020
restated*
£'000 £'000
Loss after taxation (1,140) (1,614)
Adjustments for: -
Taxation (29) (61)
Finance charges 34 38
Investment income - (2)
Loss from operations (1,135) (1,639)
Adjustments for: -
Amortisation and impairment of intangible assets 353 320
Depreciation of property, plant and equipment 88 98
Share based payments - equity settled 48 240
Operating cash flows before movement in working capital (646) (981)
Increase in inventories (174) (191)
Decrease in receivables 13 269
Increase/(decrease) in payables 230 (152)
Cash utilised in operations (577) (1,055)
Corporate tax received 239 -
Interest paid (34) (38)
Net cash outflow from operating activities (372) (1,093)
Investing activities
Interest received - 2
Investment in intangible assets (258) (258)
Purchase of property, plant and equipment (8) (19)
Net cash used in investing activities (266) (275)
Financing activities
Proceeds from issue of share capital 1 1,100
Costs of issue of ordinary share capital - (104)
Repayment of obligations under leasing activities (45) (76)
Net cash (used in)/ generated from financing activities (44) 920
Net decrease in cash and cash equivalents (682) (448)
Cash and cash equivalents at the beginning of the year 1,678 2,126
Cash and cash equivalents at the end of the year 996 1,678
* A prior year adjustment has been made in respect of foreign exchange losses
included in administrative expenses that were previously separately disclosed.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2021
1. NON-STATUTORY FINANCIAL STATEMENTS
The financial information set out in this preliminary results announcement
does not constitute the Group's statutory financial statements for the year
ended 31 December 2021 or 2020 but is derived from those financial
statements. Statutory financial statements for 2020 have been delivered to
the Registrar of Companies. Those for 2021 will be delivered following the
Company's Annual General Meeting on 20 April 2022. The auditors have
reported on those accounts: their reports on those financial statements were
unqualified and did not contain statements under Section 498 of the Companies
Act 2006.
The financial statements, and this preliminary statement, of the Group for the
year ended 31 December 2021 were authorised for issue by the Board of
Directors on 23 March 2022 and the statement of financial position was signed
on behalf of the Board by Paul Mines and Rob Smith.
2. BASIS OF PREPARATION
The Group's financial statements have been prepared in accordance with
UK-adopted international accounting standards.
3. BASIS OF CONSOLIDATION
The Group financial statements consolidate the results of the Company and all
of its subsidiary undertakings drawn up to 31 December 2021. Subsidiaries are
entities over which the Group has control. Control comprises an investor
having power over the investee and is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect
those returns through its power. At 31 December 2021 the subsidiary
undertakings were Biome Bioplastics Limited, Biome Bioplastics Inc, Stanelco
RF Technologies Limited, Aquasol Limited, and InGel Technologies Limited
(dormant).
4. GOING CONCERN
The Directors have reviewed forecasts for the period to December 2023. These
have been prepared with appropriate regard for the current macroeconomic
environment including the ongoing impact of Covid-19 and the circumstances in
which the Group operates. In particular, the Directors have considered the
continuing growth of the Bioplastics Division, its need for continued
investment in development resource and working capital, the steps they can
take to improve the efficiency of the working capital deployed and the
availability of future funding.
The model has assumed growth in the period from the Stanelco RF Division and
the Directors have already taken steps to ensure resources meet current
demand.
The Directors are satisfied that the Group has sufficient resources to
continue in operational existence for at least one year from the date of
approval of these Interim Results.
5. SEGMENTAL INFORMATION FOR YEAR ENDED 31 DECEMBER 2021
2021 2020 restated
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Bioplastics RF Central Total Bioplastics RF Central Total
Revenue from sales 4,797 1,140 - 5,937 4,946 804 - 5,750
Removal of inter-segment sales - (203) - (203) - (45) - (45)
Total external sales 4,797 937 - 5,734 4,946 759 - 5,705
(Loss)/profit from operations (601) (59) (475) (1,135) (544) (461) (634) (1,639)
Interest received - - - - - - 2 2
Finance charges - - (34) (34) - - (38) (38)
Loss before taxation (601) (59) (509) (1,169) (544) (461) (670) (1,675)
Taxation 29 - - 29 61 - - 61
Loss for the year (572) (59) (509) (1,140) (483) (461) (670) (1,614)
Reconciliation to Loss Before Interest Tax Depreciation and Amortisation
(LBITDA)
(Loss)/profit from operations (601) (59) (475) (1,135) (544) (461) (634) (1,639)
Depreciation/amortisation (395) (41) (5) (441) (364) (50) (4) (418)
Share based payments (13) (7) (28) (48) (35) (16) (189) (240)
LBITDA (193) (11) (442) (646) (145) (395) (441) (981)
Other segmental information
Capital Expenditure
Property, plant and equipment 3 12 1 16 9 9 1 19
Intangible assets 258 - - 258 258 - - 258
Total Capital Expenditure 261 12 1 274 267 9 1 277
Total Assets 3,408 1,156 36 4,600 3,971 1,414 113 5,498
The Bioplastics division comprises of Biome Bioplastics Limited, Biome
Bioplastics Inc and Aquasol Limited.
5. ALTERNATIVE PROFIT MEASURE
The Group, and divisions, define earnings before interest, taxation,
depreciation and amortisation ("EBITDA") as the operating profit or loss
adjusted for share option charges, depreciation, and amortisation. The Group
(L)/EBITDA is reconciled as follows:
2021 2020
restated*
£'000 £'000
Loss from operations per consolidated statement of comprehensive income (1,135) (1,639)
Amortisation 353 320
Depreciation 88 98
Share option charges - equity settled 48 240
(646) (981)
6. LOSS PER SHARE
The calculation of loss per share is based on the loss attributable to the
equity holders of the parent for the year of £1,140,000 (2020: restated loss
of £1,614,000) and a weighted average of 3,742,655 (2020: 3,033,457) ordinary
shares carrying voting rights for basic earnings per share and a weighted
average of 3,742,655 (2020: 3,033,457) ordinary shares carrying voting rights
for diluted earnings per share.
7. TAXATION
A prior year adjustment has been made in respect of the timing of the
recognition of current tax so that the tax payable or receivable is accrued in
the current year as opposed to being recognised in the year that tax is
settled. The adjustment in respect of 2020 is to reduce the tax credit from
£155,000 to £61,000. The retained losses brought forward from 2019 were
reduced by £155,000 in respect of the 2019 tax credit. The Consolidated
Statement of Financial Position has been adjusted to include an additional
£84,000 tax receivable in respect of 2020.
In the current year other income includes £50,000 (2020: £24,000 restated)
arising from Research and Development Expenditure Credit scheme (RDEC) that is
accounted for as a government grant.
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