REG - Itaconix PLC - Half year results
14/09/2022 07:00
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RNS Number : 3528Z Itaconix PLC 14 September 2022
Itaconix plc
("Itaconix" or the "Company")
Half year results for the period ended 30 June 2022
Itaconix (LSE: ITX) (OTCQB: ITXXF), a leading innovator in sustainable
plant-based polymers used to decarbonise everyday consumer products, is
pleased to announce its unaudited interim results for the six months ended 30
June 2022.
A copy of the Interim Report & Accounts is available for download on
Itaconix's website at www.itaconix.com.
John R. Shaw, CEO of Itaconix, commented:
"We reached a new level of success for our proprietary plant-based technology
platform in the first half of 2022 with record half-year revenues from new and
recurring orders generated out of our growing customer base. These customers
are increasingly relying on our ingredients for competitive advantages in
everyday products used for cleaning, beauty, and hygiene. From detergents and
air fresheners to shampoos and underarm deodorants, our ingredients add
safety, performance, and sustainability to new generations of existing and new
products used by millions of consumers every day."
Financial Highlights
· First half revenues of $3.1 million were 124% higher than the
first half of 2021, 148% higher than the second half of 2021, and 40% higher
than our prior record half-year revenues of $2.2 million in the second half of
2020.
· Gross profits were $0.8 million, representing an increase of 45%
over the first half of 2021 and an increase of 332% over the second half of
2021.
· Gross profit margin was 25% compared to 27% for the full year of
2021 This slight decline in gross profit margin was due to a higher percentage
of revenues from large detergent customers and price support for two large
customers. The Company has implemented three price increases since January
2022 to keep pace with higher raw material costs but held to 2021 pricing for
two customers in early 2022 to support major marketing campaigns that started
in late 2021.
· Adjusted EBITDA(1) was a loss of $0.6 million, compared to a loss
of $0.7 million for the first half of 2021 and a loss of $0.9 million for the
second half of 2021, including continued investment spending on major new
revenue opportunities.
· Cash and Cash Equivalents as at 30 June 2022 was $0.9 million,
compared to $0.7 million as at 31 December 2021.
· In April 2022, the Company completed an equity raise with gross
proceeds of $0.4 million for working capital, predominantly to strengthen
finished goods inventories held in the EU to assure reliable and ready
delivery times to EU customers.
Company Milestones:
· Cleaning revenues were $2.7 million for the first half of 2022
compared to $0.9 million in the first half of 2021 and $0.9 million in the
second half of 2021, reflecting increased market share for Itaconix® TSI™
322 as the key ingredient in a new generation of non-phosphate dishwashing
detergents. Continued growth is expected as current customers gain market
share, new customers go into full production in Europe and North America, and
additional customers emerge in 2023 from the current pipeline of new cleaning
projects.
· Combined hygiene, beauty, and BIO*Asterix revenues remained
steady at $0.4 million for the first half of 2022 compared to $0.5 million in
the first half of 2021 and $0.3 million in the second half of 2021. New
growth is expected as post-Covid formulation activity increases and more
projects in the Company's customer pipeline advance to commercial launch.
· The Company advanced further new revenue opportunities for 2023
with a new development effort announced with a major pulp and paper company
for odour control in hygiene products.
· Iaconix's addressable market increased from $750 million to $2.3
billion with three new commercial opportunities emerging from the Company's
proprietary technology platform in hygiene with a plant-based superabsorbent,
in composites with a new plant-based intermediate, and in beauty with a new
hair care product.
· Replacement of fossil-based acrylate superabsorbents with
Itaconix's VELAFRESH® SAP80 plant-based superabsorbent is a major new revenue
opportunity. The Company announced early commercial work with a potential
hygiene customer in January. Testing and further development with this and
other potential customers are expected to continue through 2023 for initial
use in consumer products in 2024.
· One new patent application filing was announced in February 2022
for a plant-based ingredient with potential use in composites.
· An additional new patent application filing was announced in
April 2022 for a new plant-based hair care ingredient that the Company will
introduce in the second half of 2022.
· Following the period end, Dr. Peter Nieuwenhuizen was appointed
in July 2022 as Non-Executive Director and Interim Chair. As the former CTO
of AkzoNobel Specialty Chemicals and current Founding Partner of the European
Circular Bioeconomy Fund as well as Chair of the Green Chemistry &
Commerce Council, Peter is a recognised business and technical leader in
advancing plant-based chemistries across supply chains to create the
Low-Carbon Economy.
· Also following period end, Laura Denner, CFO since 2018, was
appointed in July 2022 as an Executive Director of the Company.
Commenting on the outlook John R. Shaw, CEO added:
"The immediate and long-term prospects for Itaconix are progressing very well
as existing customers expand into more retailers, new customers bring new
formulations to market, and potential major new customer projects advance in
our pipeline. We expect to see at least one new EU detergent product on the
market this year, a new hair care ingredient launched in the coming months,
and major new potential in hygiene applications.
The Company remains on course to deliver full year 2022 revenues ahead of
current market expectations based on progress in commercial volumes and
success in passing on increases in direct costs. Adjusted EBITDA(1) loss for
full year 2022 is expected to be an improvement on 2021, but below previous
market expectations, reflecting continued investment in the growth of the
business."
(1) Adjusted EBITDA is defined and reconciled to Operating loss in Note 4 of
the Interim Report.
For further information please contact:
Itaconix plc +1 603 775-4400
John R. Shaw / Laura Denner
Belvedere Communications +44 (0) 20 3008 6864
John West / Llew Angus
finnCap +44 (0) 20 7220 0500
Ed Frisby / Abigail Kelly / Milesh Hindocha (Corporate Finance)
Andrew Burdis / Sunila de Silva (ECM)
About Itaconix
Itaconix uses its proprietary plant-based polymer technology platform to
produce and sell specialty ingredients that improve the safety, performance,
and sustainability of consumer products. The Company's current ingredients
are enabling and leading new generations of products in cleaning, hygiene, and
beauty. Itaconix's contributions to the global low carbon economy are
recognised by the London Stock Exchange's Green Economy Mark.
www.itaconix.com (http://www.itaconix.com)
Chief Executive's Statement
Overview
Itaconix is leading the development of the Low-Carbon Economy for consumer
products with a growing line of sustainable ingredients generating from the
Itaconix plant-based technology platform.
We are using our technology and products to build a large, high-gross-margin,
capital-efficient company that produces and sells key ingredients for
decarbonising everyday products based on their performance, value, safety, and
sustainability.
We achieved major advances in the first half of 2022 towards realizing the
large revenue potential in every household for our plant-based technologies.
With record half-year revenues, we continue to make great strides in
developing a diverse and growing base of customers that are using our
ingredients to launch new generations of consumers products. From detergents
and air fresheners to shampoos and underarm deodorants, our ingredients are
increasingly being used to add efficacy and sustainability to existing and new
products used by millions of consumers every day.
We are also continuing to invest in our technology platform to generate new
plant-based solutions for emerging consumer needs in the Low-Carbon Economy.
With the announcements we made on initial commercial efforts for our
plant-based superabsorbent and the filing of new patent applications in hair
care and composites, we expanded our addressable market potential from $750
million to $2.3 billion.
Financial Results
First half revenues of $3.1 million were 124% higher than the first half of
2021, 148% higher than the second half of 2021, and 40% higher than our prior
record half-year revenues of $2.2 million in the second half of 2020. In
addition, they are 118% of the full year revenues for 2021 and 93% of the full
year revenues for 2020. Revenue growth came from increased demand from current
customers, new recurring orders from new 2021 customers, and initial orders
from new 2022 customers. The Company is in a strong position to deliver 2022
revenues ahead of current market expectations and is making major progress
towards building the customer base to meet market expectations for revenues in
2023.
Gross profits were $0.8 million, representing an increase of 45% over the
first half of 2021 and an increase of 332% over the second half of 2021.
Gross profit margin was 25% compared to 27% for the full year of 2021, which
is below our overall gross profit margin goal of at least 35%. The Company has
had overall success in keeping pace with higher raw material prices through
three price increases since January 2022. There are little or no direct
replacements for Itaconix's ingredients in customer products without extensive
reformulation, and Itaconix is the sole producer in the world of its
proprietary ingredients. The lower gross profit margin was due to a higher
percentage of overall revenues from cleaning volumes, continuation of 2021
pricing commitments into early 2022 to support marketing campaigns for a large
detergent customer and a new customer in sustainable leather, and the effects
of some price inflation on production overhead expenses. With the most
recent price increases taking effect in September, raw material costs
stabilizing, and more beauty and hygiene revenues, the Company expects
significant improvements to gross margins in the second half of 2022.
Adjusted EBITDA(1) was at a loss of $0.6 million, compared to a loss of $0.7
million for the first half of 2021 and a loss of $0.9 million for the second
half of 2021. As noted above, the Company continues to make judicious
investments in the research and development for new product and applications
that are adding new addressable markets and major new revenue opportunities.
Loss for the period was $1.1 million, compared to a loss of $0.2 million in
the first half of 2021 and a loss of $0.3 million in the second half of
2021. Revaluation of the contingent consideration liability as a non-cash
item reduced the loss in the first half of 2021 by $0.5 million and in the
second half of 2021 by $1.0 million. Loss for the period without revaluation
of contingent liability was $0.9 million in the first half of 2022, $1.3
million in the second half of 2021, and $0.7 million in the first half of
2021.
Cash and Cash Equivalents as at 30 June 2022 was $0.9 million, compared to
$0.7 million as at 31 December 2021.
In April 2022, the Company completed an equity raise with net proceeds of $0.4
million to fund working capital, predominantly to strengthen finished goods
inventories held in the EU to assure reliable and ready delivery times to EU
customers.
Commercial Progress
The Company is leading the introduction of new generations of products in
major consumer care applications, particularly within the 360 million
households across Europe and North America. As brands and retailers face
increased pressure from consumers to act on climate change, Itaconix's
plant-based ingredients have the functional value to decarbonise everyday
products with performance, safety, cost, and sustainability.
Used as key ingredients in over 130 consumer brands, Itaconix products are
found in cleaning, hygiene, and beauty products in major retailers across
North America and Europe. With new products continuing to emerge from its
technology platform and over $30 million in new revenue potential currently in
its customer project pipeline, the Company expects sustained high growth in
new and recurring orders.
Cleaning
Cleaning revenues were $2.7 million for the first half of 2022 compared to
$0.9 million in the first half of 2021 and $0.9 million in the second half of
2021. A new generation of non-phosphate dishwashing detergents based on the
multifunctional value of Itaconix® TSI™ 322 is gaining market share in
North America and initial traction in Europe. Itaconix® TSI™ 322 is the key
ingredient in this new generation of detergents for managing water hardness
and assuring shiny, spotless glasses and dishes. When formulated correctly
into a detergent, our plant-based polymer provides these detergents with
excellent shine performance, lower overall cost, and industry-leading
bio-based content.
The acceleration in revenues is partly due to the technical and production
solutions that the Company offers to transition brands quickly and effectively
to formulations that realise the full value of Itaconix® TSI™ 322. From
performance and shelf-life testing to validating label claims and assuring the
supply and cost of other key ingredients, current and potential customers in
North America are increasingly looking to Itaconix for full formulation
solutions. The Company generated $0.6 million in revenues in the first half
of 2022 from providing these solutions, up from $0.3 million for the full year
in 2021. These revenues fund our technical support capabilities while also
speeding the adoption rate for Itaconix® TSI™ 322 and assuring the supply
of other key ingredients.
While these turn-key formulation solutions are effective in North America,
transitioning to new detergent formulations in Europe has required customer
product development teams to return to their laboratories after the Covid
pandemic. The Company's direct selling efforts to major detergent producers in
Europe had already established strong interest in Itaconix® TSI™ 322, so
the renewed product development efforts are creating new traction for major
revenue growth in Europe. Itaconix is delivering increased order volumes in
Europe, has one brand launching a new dishwashing product this fall, and has
other potential customers completing production trials for new products. The
Company is rebuilding finished goods inventories in Europe to shorten delivery
times and assure reliable fulfillment as customer commitments to Itaconix
products grow.
The Company currently generates new customers from its direct selling efforts
to major consumer detergent producers in North America and Europe. New efforts
are underway to access smaller accounts through distributors, with a
particular focus on institutional detergent suppliers and new emerging
consumer brands.
Hygiene
Hygiene revenues from direct sales of VELAFRESH® products and through Croda
for ZINADOR® products were $0.2 million for the first half of 2022 compared
to $0.3 million in the first half of 2021 and $0.2 million in the second half
of 2021. Similar to European detergents, new formulation and reformulation
efforts were delayed in many product categories for the Company's odour
control ingredients as potential customers focused on disinfectants and
surface cleaners. Although current revenues remain relatively flat, the end of
the Covid pandemic is generating new activity on odour control products. The
Company is also expanding its direct odour control sales efforts into new
applications, which has already produced a development program with a major
pulp and paper company on a new application in hygiene.
The most important new revenue opportunity for Itaconix is the Company's
VELAFRESH® SAP80 plant-based superabsorbent. Initial commercial efforts are
underway to selectively replace fossil-based acrylate superabsorbents in baby
diapers, adult incontinence pads, and feminine hygiene products. The Company
announced early commercial work with a potential hygiene customer in January.
Since some design modifications to hygiene products are likely needed to
accommodate for the differences in the absorption profile of VELAFRESH® SAP80
compared to current acylate products, testing and further development are
expected to continue through 2023 for initial use in consumer products in
2024.
Beauty
Beauty revenues from direct sales of VELASOFT® products and through Nouryon
for its Amaze® SP product were $0.1 million for the first half of 2022
compared to $0.1 million in the first half of 2021 and $0.1 million in the
second half of 2021. Renewed beauty sales and formulation activity coming out
of the Covid pandemic are expected to reinvigorate sales of these current
products.
The Company announced the filing of an important patent application in April
for new plant-based technology to maintain the natural health and shine of
hair. A new VELASOFT® product will launch this fall based on this proprietary
technology for use as a key ingredient in consumer and professional products
to prevent or repair damaged hair.
BIO*Asterix
BIO*Asterix revenues were $0.1 million for the first half of 2022 compared to
$0.0 million in the first half of 2021 and $0.1 million in the second half of
2021. These revenues are for Itaconix products that are sold to specialty
chemical producers to use as intermediates or components in their
ingredients. The Company has initial sales into ingredients used in
sustainable leather and expects attractive growth as current customers gain
traction and new potential customers begin production trials.
The Company announced the filing of an important patent application in
February for the use of Itaconix technology for ingredients in the production
of materials used in composites. Similar to the Company's efforts in additives
to biodegradable packaging, the commercial development for these products will
take several years before new revenues are possible, with some risk that the
ingredients do not make it to commercial launch. For example, progress on
additives to biodegradable packaging is delayed as focus in the industry has
shifted more towards new blends of existing biodegradable materials.
Operational Review
The Company met all customer orders in the first half of 2022 and has the
capacity and capabilities in place to meet customer needs in the second half
of 2022. Management worked successfully to address increasing raw material
prices, extended deliver times for incoming and outgoing shipments, and
growing demand in Europe. With raw material prices stabilizing, new finished
goods inventory in Europe to meet new order volumes, declining effects from
the Covid pandemic, and no increase in instability from global economic
factors and the Russia-Ukraine war, the Company is expecting fewer challenges
in the second half of 2022.
Low unemployment in New Hampshire, wage inflation, and difficulty in hiring
new employees present potential operating challenges for 2023. Although the
Company has very low employee turnover and has good results hiring new
employees, management has proactively implemented and continues to review
measures to retain current employees and attract new employees with current
compensation and long-term incentives.
Governance
The Company announced several Board changes to date in 2022. Dr. Bryan Dobson
stepped down and Charlean Gmunder was appointed as Non-Executive Director of
the Board in April 2022. John Snow was not re-elected and Charlean Gmunder was
not elected as Non-Executive Directors at the Company's Annual General Meeting
in July 2022. Dr. James Barber stepped down as Chair and Non-Executive
Director of the Board and Dr. Peter J. Nieuwenhuizen was appointed Interim
Chair and Non-Executive Director in July 2022. The Company's CFO Laura Denner
was appointed to the Board as an Executive Director in July. The Board is
actively working to further expand the Board to meet the Company's needs in
its next stage of development.
Dr. Barber and Dr. Dobson each served the Company as current or past Chairs
and each provided valuable guidance and direction to the development and
commercial progress of the Company for over a decade. Mr. Snow served as our
Audit Chair since 2018 and assisted the Company through the financial
challenges of the Covid pandemic. The Board greatly appreciates the years of
service and many contributions that they all made to Itaconix.
Dr. Nieuwenhuizen is a recognized international leader in the business,
technical, and environmental aspects of sustainability and has devoted much of
his career to developing products and businesses for the Low-Carbon Economy.
He also has a deep understanding of Itaconix, the value of its products, and
the commercial potential for the technology platform.
Current Trading and Outlook
The Company is experiencing increased traction for its plant-based cleaning
ingredients as existing customers expand into more retailers and important new
customers bring new formulations to market. The Board expects to see at least
one new European detergent product on the market this year, and possibly even
more.
Continued growth is expected as current customers gain market share, new
customers go into full production in Europe and North America, and additional
customers emerge in 2023 from the current pipeline of new cleaning projects.
As the revenues and success of current products become more certain, the
Company is setting its sights on bigger and broader ingredient opportunities
from the technology platform.
With all these factors in mind, breakthroughs in new product areas, and steady
advances in North America and Europe the Board expects continued progress with
a target to increase revenues substantially and achieve Adjusted EBITDA
breakeven in 2023.
The Company remains on course to deliver full year 2022 revenues ahead of
current market expectations based on progress in commercial volumes and
success in passing on increases in direct costs. Adjusted EBITDA loss for full
year 2022 is expected to be an improvement on 2021, but below previous market
expectations, reflecting continued investment in the growth of the business.
John R. Shaw
Chief Executive Officer
13 September 2022
Condensed consolidated income statement and statement of comprehensive income
For the six months ended 30 June 2022
Unaudited Unaudited
6 Months to 6 Months to
30 June 2022
30 June 2021
Notes $000 $000
Revenue 5 3,057 1,366
Cost of sales (2,296) (842)
Gross profit 761 524
Other income 4 - 183
Administrative expenses (1,701) (1,399)
Group operating loss (940) (692)
Exceptional (expense) / income on movement of contingent consideration 6 (174) 514
Loss before tax (1,114) (178)
Taxation expense (6) (1)
Loss for the period (1,120) (179)
Other comprehensive income, net of income tax
Items that may be reclassified subsequently to profit or loss: 97 (93)
Exchange differences on translated foreign operations
Total comprehensive loss for the period (1,023) (272)
Basic and diluted loss per share (£) 7 (0.20p) (0.04p)
Condensed consolidated statement of financial position
As at 30 June 2022
Unaudited Audited
As at As at
30 June 31 December
2022 2021
Notes $000 $000
Non-current assets
Property, plant and equipment 360 402
Right-of-use asset 444 545
804 947
Current assets
Inventories 1,052 1,369
Trade and other receivables 640 280
Cash and cash equivalents 3 921 683
2,613 2,332
Total assets 3,417 3,279
Financed by
Equity shareholders' funds
Equity share capital 8 5,959 5,873
Equity share premium 47,942 47,641
Own shares reserve (5) (5)
Merger reserve 31,343 31,343
Share based payment reserve 9 276 10,386
Foreign translation reserve (97) (194)
Retained losses (85,213) (94,395)
Total equity 205 649
Non-current liabilities
Contingent consideration 6 - 1,116
Long-term lease liability 193 348
193 1,464
Current liabilities
Trade and other payables 1,642 1,020
Contingent consideration 6 1,175 -
Short-term lease liability 202 146
3,019 1,166
Total liabilities 3,212 2,630
Total equity and liabilities 3,417 3,279
Interim condensed consolidated statement of cash flows
For the six months ended 30 June 2022
Unaudited Unaudited
6 Months to 6 Months to
30 June 2022
30 June 2021
$000 $000
Cash flows from operating activities
Operating loss before tax (1,114) (178)
Adjustments for:
Depreciation of property, plant and equipment 79 86
Depreciation of right-of-use asset 101 101
Share based payment charge 192 31
Revaluation of deferred consideration 59 (478)
Gain on foreign exchange 97 (93)
Taxation (6) (1)
Decrease in inventories 317 4
(Increase) / decrease in receivables (361) 189
(Decrease) / increase in payables 622 (1,091)
Net cash outflow from operating activities (14) (1,430)
Cash flows from investing activities
Purchase of property, plant and equipment (36) (42)
Net cash outflow from investing activities (36) (42)
Cash flows from financing activities
Cash received from issuing share of stock, net 387 1,509
Lease payments (72) (88)
Interest expense on lease payments (27) (19)
Net cash inflow from financing activities 288 1,402
Net inflow / (outflow) in cash and cash equivalents 238 (70)
Cash and cash equivalents at beginning of the period 683 1,448
Cash and cash equivalents at end of the period 921 1,378
Notes of non-cash items
In April 2021, the Company issued 1,923,389 shares of stock to satisfy the
2020 contingent consideration payment of $146k.
In April 2021, the Group received forgiveness from the US Small Business
Administration in the amount of $183k for the Covid-19 relief loan to support
US employees.
Notes to the interim condensed consolidated financial statements
1. General information
These unaudited interim condensed financial statements of Itaconix plc for the
six months ended 30 June 2022 were approved for issue in accordance with a
resolution of the Board on 13 September 2022. Itaconix plc is a public limited
company incorporated in the United Kingdom whose shares are traded on the AIM
Market of the London Stock Exchange.
This half-yearly financial report is also available on the Group's website at
https://itaconix.com/investor/reports-documents/
(https://itaconix.com/investor/reports-documents/) .
2. Accounting policies
These interim consolidated financial statements have been prepared in
accordance with UK adopted International Accounting Standards (collectively
"IFRS"). They do not include all disclosures that would otherwise be required
in a complete set of financial statements and should be read in conjunction
with the 31 December 2021 ('2021') Annual Report. The financial information
for the half years ended 30 June 2022 and 30 June 2021 does not constitute
statutory accounts within the meaning of Section 434 (3) of the Companies Act
2006 and both periods are unaudited.
The annual financial statements of Itaconix Plc ('the Group') are prepared in
accordance with IFRS. The comparative financial information for the year ended
31 December 2021 included within this report does not constitute the full
statutory Annual Report for that period. The statutory Annual Report and
Financial Statements for 2021 have been filed with the Registrar of Companies.
The Independent Auditors' Report on the Annual Report and Financial Statements
for the year ended 31 December 2021 was unqualified, did draw attention to a
matter by way of emphasis, being going concern, and did not contain a
statement under 498(2) - (3) of the Companies Act 2006.
The interim condensed consolidated financial statements are presented in US
dollars and all values are rounded to the nearest thousand ($'000) except when
otherwise indicated. The interim condensed consolidated financial statements
are prepared on the historical cost basis except for contingent consideration
which has been measured at fair value.
The Group has applied the same accounting policies and methods of computation
in its interim consolidated financial statements as in its 31 December 2021
annual financial statements, except for those that relate to new standards and
interpretations effective for the first time for periods beginning on (or
after) 1 January 2022 and will be adopted in the 2022 financial statements.
There are deemed to be no new and amended standards and/or interpretations
that will apply for the first time in the next annual financial statements
that are expected to have a material impact on the Group.
Going concern
This Interim Report has been prepared on the assumption that the business is a
going concern. In reaching their assessment, the Directors have considered a
period extending at least 12 months from the date of approval of this
half-yearly financial report. This assessment has included consideration of
the forecast performance of the business for the foreseeable future and the
cash available to the Group. As such, the Directors have concluded that
there exists a material uncertainty which may cast doubt as to the Group's
ability to continue as a going concern. However, taking account of the Group's
working capital at the date of this report, the Group's current revenues, and
current shareholder authority to raise capital if needed, the Directors
believe the Group will continue as a going concern for the foreseeable future.
The interim financial statements do not include the adjustments that would be
required if the Group were unable to continue as a going concern.
Risks and uncertainties
The principal risks and uncertainties facing the Group remain broadly
consistent with the Principal Risks and Uncertainties reported in Itaconix
plc's 31 December 2021 Annual Report.
3. Cash and cash equivalents
Unaudited Audited
As at As at
30 June 31 December
2022 2021
$000 $000
Cash at bank and in hand 921 683
921 683
4. Reconciliation of Operating Loss to Adjusted EBITDA
The detail below shows the reconciliation of operating loss to earnings before
change in value of contingent consideration, share based payment charge
(non-cash), government loan forgiveness for Covid-19 relief, interest, taxes,
depreciation and amortisation (Adjusted EBITDA).
Unaudited Unaudited
6 Months to
6 Months to
30 June 2022
30 June 2021
$000 $000
Loss for the period (1,120) (179)
Revaluation of contingent consideration 174 (514)
Share based payment charge 192 31
Other Income - government loan forgiveness - (183)
Taxes 6 1
Depreciation and amortisation 180 187
Adjusted EBITDA (568) (657)
5. Segmental analysis
Revenue by business segments:
The Group has two business segments. Performance Ingredients develops,
produces and sells proprietary specialty polymers that are used as functional
ingredients to meet customers' needs in cleaning, beauty and hygiene products.
Formulation Solutions provides technical services and ingredient supplies for
formulated products developed for customers based on Performance Ingredients.
These segments make up the continuing operations above.
Net assets of the Group are attributable solely to Europe and North America.
Six months ended 30 June 2022
Performance Ingredients Formulation Solutions Unaudited
6 months to
30 June 2022
$000 $000 $000
Revenue
Sale of goods 2,452 605 3,057
Segment revenue 2,452 605 3,057
Results
Depreciation and amortisation 180 - 180
Segment (loss) / gain (1,164) 44 (1,120)
Operating assets 3,354 63 3,417
Operating liabilities 3,014 198 3,212
Other disclosure:
Capital expenditure* 36 nil 36
Six months ended 30 June 2021
Performance Ingredients Formulation Solutions Unaudited
6 months to
30 June 2021
$000 $000 $000
Revenue
Sale of goods 1,260 106 1,366
Segment revenue 1,260 106 1,366
Results
Depreciation and amortisation 187 - 187
Segment (loss) / gain (212) 2 (210)
Operating assets 4,112 - 4,112
Operating liabilities 3,325 - 3,325
Other disclosure:
Capital expenditure* 42 nil 42
*Capital expenditure consists of additions of property, plant and equipment,
and intangible assets.
Segmental information
Revenues
Unaudited Unaudited
Six Months to Six Months to
30 June 2022 30 June 2021
$000 $000
Cleaning 2,691 899
Hygiene 183 326
Beauty 72 86
Other 111 55
3,057 1,366
Geographical information
Revenues Net assets
Unaudited Unaudited Unaudited Audited
Six Months to Six Months to Six Months to Year to
31 December 2021
30 June 2022 30 June 2021 30 June 2022
$000 $000 $000 $000
Europe 192 64 (629) (457)
North America 2,865 1,302 834 1,106
3,057 1,366 205 649
The revenue information above is based on the location of the customer.
6. Contingent consideration
$'000
As at 31 December 2021 (Audited) 1,116
Movement in fair value and discounting 174
Movement in foreign exchange (115)
As at 30 June 2022 (Unaudited) 1,175
During 2018, in conjunction with the fund raise, a restructuring of the
contingent consideration was executed. The contingent consideration was
restructured into two components:
· A one-time issue of 15 million new Itaconix plc shares to the
Sellers.
· The continuation of the previous contingent consideration
mechanism (i.e. up to $6m in shares), but with the window of time for
potential achievement expanded to the end of 2022 (from the end of 2020) and
including all the revenues of the Group (which are primarily from products
based on the acquired technology in any event).
It should also be noted that the second component summarised above was
intended to serve as an incentive programme for the two members of management
(John Shaw and Yvon Durant) who were also Sellers and are entitled to 63% of
the total contingent consideration. Accordingly, they were not eligible for
any cash bonus or other share incentive programme until the end of 2020.
Simultaneously, the merger agreement with the former shareholders of Itaconix
Corporation and related agreements were amended to remove various restrictive
clauses, including minimum funding requirements and employment terms.
Based on the share price at the execution of the restructuring agreement in
2018, the 15m shares had a value of £0.3m which was expensed immediately.
In respect of 2022, the deferred consideration for the period was valued using
a discounted cash flow-based assessment of the expected sales of the relevant
products extracted from a recent management prepared forecast, consistent with
the approach in prior years. A discount rate of 10.9% was used in both
periods. The valuation includes elements which are unobservable and which have
a significant impact on the fair value. Accordingly, contingent consideration
is classified as Level 3 fair value measurement.
The value of the adjusted contingent component using a recent management
prepared forecast and assumptions as above is $1.2m (31 December 2021 - $1.1m)
As a result of the changed revenue forecasts, earn out period, and discount
rate from the original value assessments, the contingent consideration at 30
June 2022 was increased to $1.2m. Sensitivity analysis was also performed,
summarised as follows:
· If the sales in the period 2022 were reduced by $1.0m, the fair
value would be reduced by approximately $0.5m
· If the sales in the period 2022 were increased by $1.0m, the fair
value would be increased by approximately $0.5m
· A 1% increase in the discount rate would reduce the fair value by
$8k
Since the forecasts used were a conservative base case, the computed fair
value was deemed appropriate.
7. Weighted-average number of ordinary shares
Unaudited Unaudited
6 Months to 6 Months to
30 June 2022 30 June 2021
No No
Weighted average number of ordinary shares for the 446,018 434,050
purposes of basic and diluted loss per share ('000)
8. Share capital
On 22 April 2022, the Company issued 6,666,668 ordinary shares with a nominal
value of 1p per share for 4.5p per share. The consideration was received in
cash.
9. Share based payment reserve
$'000
As at 31 December 2021 (Audited) 10,386
Termination of UK LTIP and EMI scheme (10,302)
Share based payment charge 192
As at 30 June 2022 (Unaudited) 276
On 28 June 2022, the Itaconix LTIP ("Long Term Incentive Plan") and EMI
("Employee Options") scheme expired such that no further options could be
issued. At that date, $10.3m of historically charged share based payments
expenses (for options previously issued but not exercised) were held in the
share based payment reserve in respect of the terminated scheme. They have
been reclassified to retained losses in the period.
10. Events after the reporting period
There were no material post balance sheet events.
11. Cautionary statement
This document contains certain forward-looking statements relating to Itaconix
plc. The Company considers any statements that are not historical facts as
"forward-looking statements". They relate to events and trends that are
subject to risk and uncertainty that may cause actual results and the
financial performance of the Company to differ materially from those contained
in any forward-looking statement. These statements are made by the Directors
in good faith based on information available to them and such statements
should be treated with caution due to the inherent uncertainties, including
both economic and business risk factors, underlying any such forward-looking
information.
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