REG - Biome Technologies - Interim Results
22/09/2022 07:00
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RNS Number : 2206A Biome Technologies PLC 22 September 2022
This announcement contains inside information for the purposes of Regulation
11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the
publication of this announcement, this information is now considered to be in
the public domain.
22 September 2022
Biome Technologies plc
("Biome", "the Company" or "the Group")
Interim Results
Biome Technologies plc announces its unaudited Interim Results for the six
months ended 30 June 2022.
Highlights
· The Group generated revenues of £2.4m (H1 2021: £2.6m) and gross
profit of £0.9m (H1 2021: £0.9m)
· The Biome Bioplastics division was the principal revenue generator
for the Group. However, raw material availability limited revenues achieved
in H1
· New customers for Biome Bioplastics, gained in the last few years
in both North America and Europe, grew three-fold in terms of revenue
contribution in the period and now count for 32% of revenues (H1 2021: 10%)
· Anticipated H2 2022 revenues from Biome Bioplastics' increased
supply of biodegradable coffee filter material to a second large US customer
are now expected to be significantly lower than previously anticipated,
impacting expected revenues from this customer in 2022 and 2023
· Biome Bioplastics is also experiencing other customer launch delays
related to raw material supply, logistics and uncertainty of end-consumer
behaviour in the current economic climate, all of which have and will have an
impact on the revenue generation of this division
· The Stanelco RF Technologies division is working to deliver the
major contracts announced previously. Elongated lead-times for critical
components, particularly electronics, have delayed some shipments. However,
key issues have been resolved and these shipments have or are expected to
occur in H2 2022 with revenues from this division in the second half expected
to be above previous Board expectations
· The Board now believes that Group revenues for the years ending 31
December 2022 and 2023 will be substantially below current market expectations
with a consequential substantial impact on the Group's loss/profit before
interest, taxation, depreciation, amortisation and share option charges in
those years
· Despite trading conditions deteriorating significantly, the Board
believes the Group has sufficient working capital for the foreseeable future
· Accounts receivable financing agreement signed in August 2022
provides new working capital finance of up to £600k as required
ul Mines, Chief Executive Officer said:
"Growth has been limited in both divisions in the first half by ongoing supply
challenges. The trading environment for Biome Bioplastics is becoming more
difficult with a number of factors impacting our revenue expectations for this
year and 2023. We continue to work with our customers on new products that we
believe will unlock more value and I am particularly encouraged by the
diversification of our customer base and applications in both divisions."
For further information please contact:
Biome Technologies plc
Paul Mines, Chief Executive Officer
Rob Smith, Chief Financial Officer
Tel: +44 (0) 2380 867 100
info@biometechnologiesplc.co.uk
Allenby Capital
David Hart/Alex Brearley (Nominated Adviser)
Kelly Gardiner (Sales and Corporate Broking)
Tel: +44 (0) 20 3328 5656
About Biome
Biome Technologies plc (Ticker: BIOM) 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 value-added pricing can be
justified and that 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 and Stanelco RF
Technologies Limited. 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 www.biomebioplastics.com and
www.thinkbioplastic.com www.stanelcorftechnologies.com
Chairman's Statement
As mentioned in our last trading update, the Group's two divisions were
challenged by supply constraints in the global economy during the first half
of 2022. For the Biome Bioplastics Division ("Bioplastics") the realisation of
ambition was limited by the challenges of procuring raw materials in a timely
manner and by end-customers struggling with their own production schedules.
For Stanelco RF Technologies Division ("RF Technologies") the problems related
to sourcing specific electronic components and sub-assemblies, which limited
revenues despite a good order book backlog. The net result was Group revenues
for the period of £2.4m, slightly behind the previous half year (H1 2021:
£2.6m).
Gross profit for the Group was £0.9m (H1 2021: £0.9m) on the back of
improved margins and mix of sales. Other income, in the form of grant receipts
in support of the Group's work on novel bioplastics, was £0.2m (H1 2021:
£0.1m). The overall gross margin for the Group rose to 36% (H1 2021: 33%)
reflecting an improved mix of product sales and tight controls on purchase
pricing in both divisions.
Despite the context of inflationary pressures, administrative expenses
continued to be tightly controlled in the period and were in line with the
first half of 2021 at £1.7m (H1 2021: £1.7m). The Group recorded a loss
before interest, depreciation, amortisation and share option charges for the
six months to 30 June 2022 of £0.4m (H1 2021: £0.5m loss)(1). The loss after
taxation was £0.6m (H1 2021: £0.7m loss), which equates to a loss per share
of 17 pence on both a basic and diluted basis (H1 2021: loss per share of 19
pence on a basic and diluted basis).
The Group's cash position as at 30 June 2022 was £0.7m (31 December 2021:
£1.0m) reflecting the first half's losses. As at 30 June 2022, the Group
continued to have no external bank borrowings. Post period end, we were
pleased to announce that the Group has entered into a receivables financing
agreement with Accelerated Payments Limited.
Revenues in Bioplastics for the period fell just short of internal
expectations as the late delivery of raw materials to one of the North
American manufacturing sites limited the realisation of some revenues towards
the end of the second quarter. Sales for H1 2022 of £2.0m (H1 2021: £2.3m)
represented a decrease of 10.6% when compared to the corresponding period in
the prior year.
We are seeing some easing of the logistics issues that have limited the
business in the last 18 months albeit our customers are experiencing
volatility in their own production schedules and are struggling to launch new
products on defined timescales into markets in which there is considerable
demand and pricing variability.
The revenue performance in the period remained underpinned by a continuance of
sales to existing customers for outer packaging for the US coffee market,
albeit limited by supply chain issues and stocking reductions. However, of
note is that revenues to new customers in both North America and Europe grew
three-fold in the period and now represent 32% of revenues (H1 2021: 10%). A
number of these new customers are in the packaging film area where the Company
has been 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 and one is in the UK.
In the first half of 2021, the business received a contractual commitment from
a second US end customer for conversion to our biodegradable coffee filtration
material. This has been referred to in various trading statements. Whilst
initial implementation proceeded well and the end customer has been purchasing
regularly in the past year, the subsequent acceleration of revenues has been
constrained by various engineering matters within the customer's facilities.
After some work, we understand that these engineering constraints have been
addressed and we appear to be moving forward again, albeit not at the pace
previously envisaged.
In the winter of 2021/22 Biome launched materials designed to allow tree
shelters (plastic tubes around saplings) to be left in the forest after use to
biodegrade in a benign manner. Last year, Biome announced the commencement of
large-scale, UK-wide field testing and initial commercial sales by Suregreen
Ltd (Biome's UK commercial partner) of biodegradable tree shelters using
Biome's proprietary bioplastics materials. Based on extensive field testing of
nearly 40,000 shelters, the Company is pleased that the real-world
biodegradable product has performed exactly as expected.
Biome's scientists took samples of the biodegradable tree shelters this summer
and tested them for mechanical properties and overall product performance. The
product's tubes remain strong and resistant, degrading at the expected rate
for their respective time periods. Comparing these lab-based field trial
results against the Company's predictive models showed that the biodegradable
tree shelters also performed as well as conventional counterparts. After this
considerable piece of product performance monitoring work, the business is now
preparing for a larger promotional campaign for the 2022/23 winter planting
season in association with Suregreen Ltd (UK commercial partner).
The Bioplastics division will continue to benefit from the move to more
sustainable materials. Future near-term growth is expected to be underpinned
by several of the Division's customers which are planning product launches in
H1 2023. Some of these launches are based on our new "home compostable"
bio-based and biodegradable plastic grades ('BiomeHC') that are subject to the
protection of a pending patent. The key "end-of-life" functionality of such
materials is that they degrade much faster in conditions akin to a home
compost bin rather than those materials designed to biodegrade in the
controlled and higher temperature environments of industrial composting
facilities. Biome's team has been working on this new range of materials for
some three years and they are now ready for commercial service with a number
of customers.
However, notwithstanding the various positive matters and initiatives
described above, Biome Bioplastics is experiencing various customer launch
delays related to raw material supply, logistics and uncertainty of
end-consumer behaviour in the current economic climate. Some of these delays
are significant and considered unlikely to resolve quickly, resulting in the
Board's conclusion that Group revenues for the years ending 31 December 2022
and 2023 will be substantially below current market expectations.
Stanelco RF Technologies Division
Revenues for the first half of 2022 in RF Technologies were £0.4m (H1 2021:
£0.3m), representing an increase of 24.8%.
The RF Technologies division has made good progress in securing business both
in the latter half of 2021 and during H1 2022 across different industry
sectors including food packaging and medical applications. In addition, we won
a contract for two fibre-optic furnaces in late 2021 that are due for shipment
in 2022. Like many businesses we have seen supply side challenges. This has
affected deliveries of some critical long-lead time components and in
particular, those items that contain semiconductors are on extended
lead-times. Consequently, some of the orders that we had anticipated
completing in H1 2022 have now or are now expected to ship in H2. Whilst this
is frustrating, customers are understanding of such delays in the current
environment.
Enquiry levels remain encouraging, and we continue to tender for contracts
over a range of industry sectors and despite the requirement for new capacity
in the fibre optic furnace market remaining modest there are pockets of
activity for upgrades and spares that we are addressing. New order intake,
during the year-to-date, has continued to be positive and an improving
opportunity pipeline in sectors other than fibre optics gives us confidence
that management's expectations for the RF Technologies division will be
achieved.
With the medium to longer-term trend for the RF Technologies division
improving, we have commenced recruitment to improve the range of internal
technical resources required to achieve our growth targets whilst ensuring
overhead expenditure remains controlled.
Outlook
The RF Technologies Division has been progressively overcoming the supply
constraints that delayed customer deliveries during the first half of the year
and the Board now expects that shipments in relation to all previously
announced contracts will occur in H2 2022.
Biome Bioplastics' trading is seeing significantly increased risks and
uncertainties surrounding the timing and scale of revenue opportunities as
evidenced by the slower ramp of revenues from its second US customer. Whilst
the Board is confident that new products to be launched in 2023 utilising
Biome's Home Compostable materials will meet market approval, given the
economic outlook generally and its impact on the Group's customers, the Board
is taking a very cautious approach and considers that further delays and a
scaling back of volumes are inevitable in the shorter term.
As a consequence of the challenging trading conditions described above, the
Board now believes that Group revenues for the years ending 31 December 2023
and 2023 will be substantially below current market expectations with a
consequential substantial impact on the Group's loss/profit before interest,
taxation, depreciation, amortisation and share option charges.
Despite trading conditions deteriorating significantly, we believe we have
sufficient working capital for the foreseeable future.
John Standen
Chairman
(1) Loss before interest, taxation, depreciation and amortisation is an
alternative profit measure as detailed in Note 7.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 30 June 2022
Note 6 Months Ended 6 Months Ended Year
30 June 30 June Ended
2022 2021 31 December 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue 5 2,428 2,589 5,734
Cost of goods sold (1,562) (1,731) (3,794)
Gross Profit 866 858 1,940
Other operating income 203 110 364
Administrative expenses (1,718) (1,739) (3,439)
Loss from operations (649) (771) (1,135)
Finance and similar charges (18) (19) (34)
Loss before taxation (667) (790) (1,169)
Taxation 30 90 29
Total comprehensive loss for the period (637) (700) (1,140)
Basic loss per share - pence (17)p (19)p (30)p
Diluted loss per share - pence (17)p (19)p (30)p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
At At At
30 June
30 June
31 December 2021
2022
2021
Unaudited Unaudited Audited
£'000 £'000 £'000
NON-CURRENT ASSETS
Other intangible assets 765 797 726
Property, plant and equipment 473 541 502
1,238 1,338 1,228
CURRENT ASSETS
Inventories 1,552 1,205 920
Trade and other receivables 861 1,228 1,377
Taxation receivable 109 90 79
Cash and cash equivalents 652 1,390 996
3,174 3,913 3,372
TOTAL ASSETS 4,412 5,251 4,600
CURRENT LIABILITIES
Trade and other payables (1,761) (1,587) (1,298)
Lease liabilities (47) (43) (40)
(1,808) (1,630) (1,338)
NON-CURRENT LIABILITIES
Lease liabilities (340) (381) (361)
(340) (381) (361)
TOTAL LIABILITIES (2,148) (2,011) (1,699)
NET ASSETS 2,264 3,240 2,901
EQUITY
Share capital 189 189 189
Share premium 2,282 2,282 2,282
Capital redemption reserve 4 4 4
Share options reserve 487 647 487
Translation reserve (85) (85) (85)
Treasury shares reserve (55) (55) (55)
Retained earnings (558) 258 79
TOTAL EQUITY 2,264 3,240 2,901
The interim statements were approved by the Board on 21 September 2022.
Signed on behalf of the Board of Directors
Paul R Mines Rob
Smith
Chief Executive Officer Chief Financial
Officer
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 30 June 2022
At At At
30 June
30 June
31 December
2022
2021
2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Loss after taxation: (637) (700) (1,140)
Adjustments for: -
Taxation (30) (90) (29)
Finance charges 18 19 34
Loss from operations (649) (771) (1,135)
Adjustments for: -
Amortisation and impairment of intangible assets 174 169 353
Depreciation of property, plant and equipment 44 44 88
Share based payments - equity settled - 38 48
Operating cash flows before movement in working capital (431) (520) (646)
Increase in inventories (632) (459) (174)
Decrease in receivables 516 211 13
Increase in payables 463 538 230
Cash utilised in operations (84) (230) (577)
Taxation received - 155 239
Interest paid (18) (19) (34)
Net cashflow from operating activities (102) (94) (372)
Investing activities
Investment in intangible assets (213) (145) (258)
Purchase of property, plant and equipment (7) (10) (8)
Net cash used in investing activities (220) (155) (266)
Financing activities
Proceeds from issue of share capital - 1 1
Repayment of obligations under leasing activities (22) (40) (45)
Net cash from financing activities (22) (39) (44)
Net decrease in cash and cash equivalents (344) (288) (682)
Cash and cash equivalents at the beginning of the period 996 1,678 1,678
Cash and cash equivalents at the end of the period 652 1,390 996
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the period ended 30 June 2022
1. CORPORATE INFORMATION
The financial information for the period ended 30 June 2022 set out in this
interim report does not constitute statutory accounts as defined in Section
434 of the Companies Act 2006. The Group's statutory financial statements for
the year ended 31 December 2021 have been filed with the Registrar of
Companies. The auditor's report on those financial statements was unqualified
and did not contain statements under Section 498 of the Companies Act 2006.
The interim results are unaudited. Biome Technologies plc is a public limited
company incorporated and domiciled in England & Wales. The Company's
ordinary shares are publicly traded on the AIM market of the London Stock
Exchange.
2. BASIS OF PREPARATION
These interim consolidated financial statements (the interim financial
statements) are for the six months ended 30 June 2022. They have been prepared
in accordance with UK-adopted international accounting standards. They do not
include all of the information required for full annual financial statements
and should be read in conjunction with the consolidated financial statements
of the Group for the year ended 31 December 2021.
These interim financial statements have been prepared in accordance with the
accounting policies adopted in the last annual financial statements for the
year to 31 December 2021.
The accounting policies have been applied consistently throughout the Group
for the purposes of preparation of the interim financial statements.
3. BASIS OF CONSOLIDATION
The Group's interim financial statements consolidate the results of the
Company and all of its subsidiary undertakings drawn up to 30 June 2022. As at
30 June 2022, the subsidiary undertakings were Biome Bioplastics Limited,
Biome Bioplastics Inc., Stanelco RF Technologies Limited, Aquasol Limited and
InGel Technologies Limited.
4. GOING CONCERN
The Directors have reviewed forecasts for the period to December 2023. These
have been prepared with appropriate regard for the difficult current
macroeconomic environment including the ongoing impact of Covid-19 "lockdowns"
in China affecting supply chains and the markets and circumstances in which
the Group operates. The forecasts included assumptions on exchange rates,
supplier lead times and receipts from customers being broadly in line with
agreed terms. The directors believe the assumptions to be reasonable but
fundamental to the forecasts.
The Directors have considered the future 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.
On the basis of the above, the Directors are satisfied that the Group has
sufficient working capital to continue as a going concern for at least one
year from the date of approval of these Interim Results.
5. SEGMENTAL INFORMATION
Revenue from external customers
For the period ended 30 June 2022
6 Months Ended 6 Months Ended Year
30 June
30 June
Ended
2022
2021
31 December 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Biome Bioplastics Division 2,031 2,271 4,797
Stanelco RF Technologies Division 397 318 937
Total Revenue 2,428 2,589 5,734
6. LOSS PER SHARE
The calculation of basic earnings per share is based on the loss attributable
to the equity holders of the parent for the period of £637,000 (H1 2021: loss
of £700,000, FY 2021: loss of £1,140,000) and a weighted average of
3,755,930 ordinary shares in issue (H1 2021: 3,729,527, FY 2021: 3,742,655).
The calculation uses the same weighted average number of shares under the
basic and diluted basis in the current and comparative periods due to a loss
being made.
7. ALTERNATIVE PROFIT MEASURE
The Group measures and reports on Earnings (Loss) Before Interest, Taxation,
Amortisation and Depreciation (E(L)BITDA). The following table sets out the
calculation of E(L)BITDA.
For the period ended 30 June 2022
6 Months Ended 6 Months Ended Year
30 June
30 June
Ended
2022
2021
31 December 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Biome Bioplastics Division 2,031 2,271 4,797
Stanelco RF Technologies Division 397 318 937
Total Revenue 2,428 2,589 5,734
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