REG - HeiQ PLC - Trading Update

HeiqAnnouncement

12/09/2024 07:00

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RNS Number : 9237D  HeiQ PLC  12 September 2024

This announcement contains inside information

 

12 September 2024

 

HeiQ Plc

("HeiQ" or "the Company")

Trading Update

 

HeiQ Plc (LSE: HEIQ), a leading company in materials innovation and hygiene
technologies, announces a trading update for its extended financial year
ending 30 June 2024.

As announced earlier, the Board extended the Company's accounting reference
date for its 2023 financial year by six months to 30 June 2024 to enable the
new auditor to complete the audit. The Company will publish its audited
financial report and accounts for the 18-month period commencing 1 January
2023 to 30 June 2024 ("FY 2024") by 31 October 2024.

Trading update

Challenging market conditions continued throughout the period, as pressure on
consumer discretionary spending impacted our textiles, flooring,
antimicrobials and other established revenue lines. Despite these challenges,
the Company has managed to maintain relatively stable revenue generation over
the past 24 months and expects to report total revenues of approximately US$62
million for the 18-month period (FY 2022 12-month period: US$47 million).

A breakdown of revenues on a half-yearly basis is shown below:

 Calendar half-year                   1HY 2022  2HY 2022  1HY 2023  2HY 2023  1HY 2024

(expected)
 Consolidated revenues (US$ million)  27.6      19.6      20.5      21.2      20.4

 

As previously announced, the Company has been focusing on improving
operational efficiencies and adapting its cost base. Sales volumes were stable
throughout the period. However, sales prices remained lower than usual whilst
the cost of raw materials, energy and logistics remained high. The Company
continues to implement its strategy of balancing cost reduction within its
more established commercial businesses whilst making significant value
building investment into its nascent ventures HeiQ AeoniQ™, HeiQ GrapheneX
™ and HeiQ Xpectra ™. HeiQ is also investing in its growing commercial
business unit Life Sciences ("BU LS") which recently signed up the global
market leader for hygiene, ECOLAB, as its exclusive distribution partner for
the EU.

Therefore, losses from operations for the period are expected to be
approximately US$18 million, significantly reduced from US$29 million in FY
2022 (12-months). Having reported losses from operations for the first 12
months in 2023 of US$11.6 million (US$6.9 million excluding depreciation &
amortization charges), the loss from operations for the 6 months to 30 June
2024 is expected to be US$6 million (US$3.5 million excluding depreciation
& amortization charges).

Business Unit Textile & Flooring / Business Unit Antimicrobials

Within our largest commercial business unit, Textiles & Flooring ("BU
T&F"), pressure on consumer discretionary spending caused by macroeconomic
pressures weakened demand in these markets which has persisted since H2 2022.
BU T&F contributed approximately US$46 million to Group revenues during
the period. Similar issues with low demand were seen within our Antimicrobials
business unit, which contributed approximately US$4 million to Group revenues
during the period. We anticipate demand to recover earliest during Q2/Q3 of
the calendar year 2025.

Since the end of 2022, HeiQ has been implementing measures to reduce costs by
relocating capabilities to its hub in Portugal and capturing synergies amongst
business units with the objective of enhanced long-term resilience to market
downturns and greater agility in the face of today's buyers-market.  Our
recent innovations, HeiQ Allergen Tech and HeiQ Mint have allowed us to
maintain sales levels and build a healthy pipeline.

Business Unit Life Sciences - HeiQ Synbio ™

Our growing Life Sciences business unit ("BU LS") achieved large contract wins
and contributed approximately US$7 million in Group revenues during the
period. An exclusive distribution agreement was entered into with ECOLAB, the
global market leader in water, hygiene, and energy technologies and services.
To capitalize on these contract wins and prepare for significant anticipated
growth, the business unit has invested in its manufacturing capabilities and
strengthened its commercial team. The new contracts are expected to start
contributing to the growth of the business unit in Q4 2024. BU LS is an area
of significant growth for HeiQ.

Venture Unit - HeiQ AeoniQ™

HeiQ AeoniQ™, our most advanced Venture, has made significant progress. In
Q2 2024 HUGO BOSS, which invested in HeiQ AeoniQ™, launched the "HeiQ
AeoniQ™ Change Sneaker", a statement to sustainability and change in the
world of footwear. HeiQ acquired a 20'000m(2) factory building in Portugal and
progressed the blueprints for a two-kiloton factory with its engineering
partners. The production plant is scheduled to begin operations in 2026,
subject to the required additional capital expenditure. As the project
progresses, we expect funding needs to further accelerate. Therefore, we are
happy to report that progress has been made regarding the acquisition of
substantial Portuguese and European government grants, which we expect to be
confirmed shortly. Further, we have engaged Banco Santander to source external
equity financing for the HeiQ AeoniQ™ subsidiary.

Venture Unit - HeiQ Xpectra ™

HeiQ Xpectra™, our proprietary transparent conductive coating platform, has
successfully performed a proof of concept with a leading German university.
HeiQ Xpectra™ is currently preparing its market launch in Q1 2025 as an
indoor building insulation varnish with a market leader in building materials.
The opportunity is of the same magnitude as Ecolab. We have plans for further
third party investment into this venture unit to capture the transformative
short-term business opportunities in building insulation materials under
Europe's Green Deal.

Venture Unit - HeiQ GrapheneX ™

HeiQ GrapheneX ™, our proprietary graphene membrane technology platform, has
successfully performed a proof of concept with a leading Swiss university.
HeiQ GrapheneX™ is currently executing joint development agreements with two
large strategic partners. We anticipate raising third party investment into
this venture unit to capture the transformative opportunities in advanced
batteries.

Outlook

The requirement to fund our ventures and grow them into young companies during
a prolonged period of poor market conditions for our main established
commercial business unit continues to strain the liquidity of the Group.

While the Group has adapted its cost base over the past two years to the
worsening market conditions, significant improvements to the Company's
financial position will not be possible without material additional structural
changes to the organization. The Board currently does not see, except for BU
LS, a short-term improvement in market conditions for its commercialized
businesses. Accordingly, it sees limited possibility of materially improving
the Group's operating cashflow in the short term without such structural
changes.

As of June 30, 2024, the cash balance of the Group was US$4.9 million (31
December 2022: US$8.5 million) and net debt (excl. leasing) stood at US$6.6
million (31 December 2022: net cash of US$4.2 million). The Company will
consider refinancing one of the two industrial buildings acquired for US$4.4
million in Portugal at the beginning of the year.

Whilst the Board considers additional cost reduction measures to further
stabilize operations and allow the Group to continue operating on a going
concern basis, the historically low share price restricts the Group's ability
to raise additional equity financing at Group level to finance its high-value
ventures.

Further access to funding is key to enable the Group to achieve its growth
plans, as it intends to scale multiple, high-potential ventures in parallel
over the coming years and capture the value creation for shareholders. During
these continuing challenging market conditions, the board does not believe
that it is possible to sufficiently fund investment into its ventures
exclusively from cash generated from its currently curtailed commercial
activities.

As previously announced on 16(th) July 2024, the Group has therefore initiated
a process to raise capital for HeiQ AeoniQ™ at the subsidiary level by the
H1 2025, to fund required investment into the HeiQ AeoniQ™ plant in
Portugal. As part of the raise, HeiQ has engaged the investment bank Banco
Santander, to lead the fundraise.

The Board is reviewing strategic options for individual units (including
mergers, sales or carve-outs) to improve the balance sheet and financial
position of the Group as required.

 

For further information, please contact:

 HeiQ Plc                                          +41 56 250 68 50

 Carlo Centonze (CEO)
 Cavendish Capital Markets Limited (Broker)        +44 (0) 207 397 8900

 Stephen Keys / Callum Davidson
 SEC Newgate (Media Enquiries)                     +44 (0) 20 3757 6882

 Elisabeth Cowell / Molly Gretton / Tom Carnegie   HeiQ@s (mailto:HeiQ@secnewgate.co.uk) ecnewgate (mailto:HeiQ@secnewgate.co.uk)
                                                   .co.uk (mailto:HeiQ@secnewgate.co.uk)

 

About HeiQ

Founded in 2005, HeiQ is a Swiss-based international company that is a global
leader in biotech ingredients and specialty chemicals for diverse applications
such as textiles, flooring, building materials, glass, plastics, probiotic
cleaning, cosmetics, and more. Working with more than 1000 partners in over 60
countries, our goal is to infuse ordinary products with extraordinary
qualities, offering our co-creation partners sustainable and disruptive
solutions across industries.

Our business model focuses on the commercialization of existing and as well as
the incubation of new technologies, driving shareholder value through sales
growth, entry into lucrative markets, and disruptive innovation. This model
consists of three distinct technology ventures, being HeiQ AeoniQ, HeiQ
Xpectra, and HeiQ GrapheneX, and three growth-orientated business units being
HeiQ Textiles & Flooring, HeiQ Life Sciences, and HeiQ Antimicrobials.

We have a robust track record of innovation, with over 200 technologies
developed in partnership with 300 major brands, including Hanes, Burberry,
HUGO BOSS, Lycra, Zara, Itochu, Bosch Siemens, Ecolab, Woellner, Americhem,
Lixil, and many more. Our global team comprises about 200 professionals from
30 nationalities across five continents. We're committed to shaping a future
where everyday products drive positive change, one innovation at a time.

To learn more about HeiQ and our innovative solutions, visit www.heiq.com.

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