REG - Symphony Environment - Preliminary Results
30/05/2023 07:15
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RNS Number : 8805A Symphony Environmental Tech. PLC 30 May 2023
30 May 2023
SYMPHONY ENVIRONMENTAL TECHNOLOGIES PLC
("Symphony", the "Company" or the "Group")
Preliminary results
Symphony Environmental Technologies Plc (AIM:SYM) global specialists in
technologies that make plastic and rubber products "smarter, safer and
sustainable", is pleased to announce its preliminary results for the year
ended 31 December 2022.
Financial highlights:
· Group revenues £6.15 million (2021: £9.16 million)
· Gross profit £2.28 million (2021: £3.59 million)
· Reported loss before tax £3.01 million (2021: £1.53 million)
· Basic loss per share 1.65p (2021: 0.81p)
· Cash used in operations £1.59 million (2021: £0.60 million)
· Cash raised by way of equity subscription £1.0 million
Business highlights:
d2p
· Supply agreement with Grupo Bimbo, the western world's largest
bread producer for the Group's FDA-approved d2p antimicrobial ("AM") bread
packaging technology
· Rivulis increases orders for d2p AI (insecticide technology)
d2w
· Better Earth LLC exclusive contract for USA Nutritional bottles
· Middle East - manufacturing agreement for d2w masterbatch
production
· d2w legal challenge succeeds in Peru ruling that
oxo-biodegradable is not the same as oxo-degradable
· New Mexican biodegradability standard suitable for d2w
Post year end
· Secured convertible loan of £1.0 million
· Middle East manufacturing and sales on plan
· Better Earth LLC signs exclusive agreement with TricorBraun
· Successful cost reductions effected, with normalised
administrative cost base now 25% lower than 2022 levels, whilst distribution
costs significantly reduced due to lower shipping costs and new Middle East
factory
Chairman's Statement
FY-22 is a year that leaves me with mixed emotions. Considerable operational
milestones and successes were achieved. However, it was also a challenging and
frustrating year with Group revenue for FY-22 down to £6.15 million from
£9.16 million in 2021. This follows, as previously advised, a soft first half
of the year with results affected by short term logistics and resource issues,
temporary destocking issues, primarily in the Middle East, and a change to our
glove strategy. The second half of the year was slightly stronger but still
affected by these events which were slowly resolving together with delayed
government certifications for our partner's new factory in the Middle East,
which were not received until the end of the year.
Whilst I am pleased that these situations have now been resolved,
unfortunately they were too late to have a positive effect on FY-22s operating
results.
Pleasingly, strong momentum in d2p sales continues with revenue in FY-22 of
£0.79 million, representing 76% year-on-year growth (2021: £0.45 million).
The increase in FY-22 d2p sales has mainly been due to continued conversion of
higher value d2p anti-insect ("AI") technology.
These financial results do not therefore reflect the commercial progress made
during the year, and the outlook for the Group remains as positive as
previously described. This includes key developments and growth in respect to
(as detailed in the CEO statement):
· d2p AM ("antimicrobial") USA FDA & Canadian Health food
approved bread-packaging technology - Agreement with Grupo Bimbo
· Joint venture in India with Indorama Corporation - Symphony
Environmental India Pvt Ltd
· d2w bottles initiative in the USA - partnered with Better Earth
and TricorBraun
· Developing d2p AI global business with Rivulis Irrigation
In December we disclosed a £14.0 million annualised revenue run-rate target
during H1 2023, and whilst the Board are focused on achieving this target,
some key trials will extend into H2-2023. It is worth noting that as a result
of the Group's improved cost base, higher gross margins and lower distribution
and shipping costs, the previously anticipated resultant profit at this
revenue level will be significantly higher than we previously anticipated.
Based upon the Group's trading in Q1-23 which saw a 27% increase in revenues
(compared with Q1-22), and more recent trading in Q2, coupled with the
benefits from the Middle East manufacturing plus further short term
opportunities which are expected to come to fruition in the very near term,
the Board expect Symphony to show a significantly stronger financial result
for H1-2023 and move back into profitability in the very near term.
None of this takes into account the joint venture in India, where we wait for
approval that plastic producers using d2w technology will become certified
suppliers.
The near-term commercialisation of several of our key projects and resultant
sales are significant, and we are confident in delivering positive updates in
this regard in the very near term and throughout 2023.
N Clavel
Interim Chairman
Enquiries:
Symphony Environmental Technologies Plc
Michael Laurier, CEO Tel: +44 (0) 20 8207 5900
Ian Bristow, CFO
www.symphonyenvironmental.com (http://www.symphonyenvironmental.com)
Zeus (Nominated Adviser and Joint Broker)
David Foreman, Kieran Russell (Investment Banking) Tel: +44 (0) 161 831 1512
Dominic King, Victoria Ayton (Sales) Tel: +44 (0) 203 829 5000
Hybridan LLP (Joint Broker)
Claire Louise Noyce Tel: +44 (0) 203 764 2341
About Symphony Environnemental Technologies Plc
https://www.symphonyenvironmental.com (https://www.symphonyenvironmental.com)
Symphony has developed a range of additives, concentrates and master-batches
marketed under its d(2)p® ("designed to protect") trademark, which can be
incorporated in a wide variety of plastic and non-plastic products so as to
provide protection against many different types of bacteria, viruses, fungi,
algae, moulds, and insects, and against fire. d(2)p products also include
odour, moisture and ethylene adsorbers as well as other types of
food-preserving technologies. For an overview see www.d2p.net
(http://www.d2p.net) Symphony has launched d(2)p anti-microbial household
gloves and toothbrushes and "Symfresh" food-packaging and is developing a
range of other d(2)p finished-products for retail sale.
Symphony has also developed a biodegradable plastic technology which addresses
the problem of persistent microplastics, by turning ordinary plastic at the
end of its service-life into a waxy substance which is biodegradable. It is
then no longer a plastic and can be bioassimilated in the open environment in
a similar way to a leaf without leaving microplastics behind. The technology
is branded d(2)w® and appears as a droplet logo on many thousands of tonnes
of plastic packaging and other plastic products around the world, much of
which has been recycled. In some countries, most recently Saudi Arabia,
oxo-biodegradable plastic is mandatory for short-life plastic products.
d(2)w technology was studied for three years in the Oxomar project, sponsored
by the French government, which concluded that plastic made with Symphony's
d(2)w oxo-biodegradable technology will biodegrade in seawater significantly
more efficiently than conventional plastic. See
https://www.biodeg.org/subjects-of-interest/agriculture-and-horticulture/the-marine-environment/
(https://www.biodeg.org/subjects-of-interest/agriculture-and-horticulture/the-marine-environment/)
Following this report, the scientists allowed bacteria commonly found in the
open environment access to d(2)w oxo-biodegradable plastic containing Carbon
13. They found Carbon 13 in the carbon dioxide exhaled by the bacteria,
proving beyond doubt that the plastic had been bioassimilated by the bacteria.
Symphony has complemented its d(2)w and d(2)p product ranges with d(2)c
"compostable resins and products" that have been tested to US and EU
composting standards and has invested in Eranova - a French company extracting
starch for making plastics, out of algae.
Symphony has also developed the d(2)Detector®, a portable device which
analyses plastics and detects counterfeit products. This is useful for
government officials tasked with enforcing legislation, and Symphony's d(2)t
tagging and tracer technology is available for further security.
Symphony has a diverse and growing customer-base and has established itself as
an international business with over 70 distributors around the world. Products
made with Symphony's plastic technologies are now available in nearly 100
countries and in many different product applications. Symphony itself is
accredited to ISO9001 and ISO14001.
Symphony is a member of The BPA (www.biodeg.org) and actively participates in
the Committee work of the British Standards Institute (BSI), the American
Standards Organisation (ASTM), the European Standards Organisation (CEN), and
the International Standards Organisation (ISO).
Further information on the Group can be found at www.symphonyenvironmental.com
and twitter @SymphonyEnv See also Symphony on Instagram. A Symphony App is
available for downloading to smartphones.
Chief Executive's Review
In line with the Group's strategy, substantial investment continued into the
pre-commercialisation phases of several d2p formulations and a far-reaching
advocacy program that is focussed on specific markets and sectors. Whilst
revenues were much lower in 2022, new formulations and products were
successfully developed and existing, as well as new, strategic relationships
were strengthened with established sector leaders. All of this will help to
accelerate sales revenue in the short and longer term. The most important near
term revenue generators are as follows:
d2p AM ("antimicrobial") USA FDA & Canadian Health food approved
bread-packaging technology - Agreement with Grupo Bimbo
Following several years of substantial investment and development, an
exclusive 3 year supply agreement was signed in June with Grupo Bimbo, the
western world's largest bread manufacturer. We commenced supply of our d2p
masterbatch technology in Q1-2023 to certain packaging manufacturers of Grupo
Bimbo and whilst volumes at the outset are modest, this is expected to
increase in the near term and throughout 2023 and 2024.
d2p AM Global
Symphony is the only company in the world to have been awarded the above
important regulatory approvals and global interest continues to be positive in
most food market sectors outside of the EU, noting also that we have other
formulations for the EU, not yet launched.
Separate from the markets where Grupo Bimbo have exclusivity, our d2p AM
technology is currently at different stages of development with a number of
customers. Some customers are in commercial trials and others are at early
stages in development. Our technology is being evaluated in both bread and
other food related products, and in a wide range of geographies including
China, India, Middle East, South Africa, South Korea, and Turkey. Our sales
team are engaged in extensive discussions, trials, semi-commercial trials and
some final commercial trials, and we are optimistic of being able to provide
positive updates during 2023.
Joint venture in India with Indorama Corporation - Symphony Environmental
India Pvt Ltd ("Symphony India")
Symphony India is a joint venture ("JV") company established in India during
2022, between Symphony and Indorama India Private Limited ("Indorama"), a
wholly owned subsidiary of Indorama Corporation Pte. Ltd. Symphony India is
owned 46.5% by Symphony, 46.5% by Indorama and 7% by Mr. Arjun Aggarwal, an
Indian citizen, who was appointed Managing Director of the JV.
As previously reported in September 2022, the Plastic Waste Management Rules
2022 (as amended on 6.7.2022) in India permit
government-approved biodegradable plastic products to be exempted from
restrictions that would ban most plastic film products unless they are above
50-micron thickness, and 120 microns for carrier bags, (which generally means
an increase in cost by more than two to three times). Producers and brand
owners using certified biodegradable plastic materials will be free from this
obligation.
Symphony's d2w technology has been tested by Intertek India, an Indian
government approved laboratory and Symphony India continues to wait for
approval that plastic producers using d2w technology will be become certified
suppliers. We are hopeful that this will be granted in the very near future
as we believe our technology meets the required criteria.
Marketing and trials for a wide range of d2p products are moving forward at a
satisfactory pace and we believe that further material sales updates will be
provided, particularly in relation to d2p AM and d2p VCI (vapour corrosion
inhibitors) during the balance of 2023.
Symphony India reported a commendable break-even result for the period from
incorporation to 31 December 2022 being its first start-up period of trading.
Developing d2p AI global business with Rivulis Irrigation
Symphony's collaboration with Rivulis started in December 2017 after
Symphony's R&D department created a masterbatch with anti-insect
properties which could be put into plastic products at the point of
manufacture. Since then, Symphony's technical team has supported Rivulis in
the development of a unique range of irrigation pipes for farmers and growers
across a number of geographies.
Plastic irrigation pipes and drip-tapes are a very effective way to deliver
water to growing plants, but valuable water was being lost because insects
were puncturing the pipes. By incorporating d2p AI into these products,
Rivulis has significantly reduced the damage caused by insects, and
consequently the amount of water being lost - an especially valuable benefit
in dry areas of the world.
Having conducted field trials across several countries, with positive results,
Rivulis has placed a number of orders with Symphony for d2p AI for use in
irrigation systems in France, Turkey, Australia and Mexico. They have
incorporated d2p AI technology into their Rivulis and Eurodrip product ranges,
sold under the trade name Rivulis Defend. We anticipate further adoption of
our technology across other products and other geographies.
New Middle East production facility set up by our partners in the region
As reported on 1 August 2022, an agreement was finalised with Ecobatch in the
UAE for production of our biodegradable d2w masterbatch, primarily for supply
into the Middle East, but the factory can also supply our other markets if
desired. Production was delayed but commenced after the successful
completion of ESMA (UAE) and SASO (Saudi Arabia) certification in December.
The new Ecobatch masterbatch manufacturing facility also produces white, black
and coloured masterbatch products for the plastics industry in the Middle
East.
The Middle East is one of our prime markets and is set for further growth
resulting from legislation supporting our type of d2w biodegradable
technology. The local operation of this facility is improving stock
availability and control throughout the supply chain, as well as reduced costs
and improved efficiencies. Importantly, this is entirely compatible with our
ESG strategy and in particular minimising CO2 emissions through lengthy
transport systems. Also, locally-made products are also often preferred by
customers.
We expect a substantial increase in sales and demand in the region in the
coming months, and production capacity is more than sufficient to meet
expected demand.
d2w bottles initiative in the USA - partnered with Better Earth and
TricorBraun
Symphony signed a two year exclusive USA-focused, d2w supply contract with
Better Earth in February 2022. Better Earth subsequently launched its
nutritional supplement bottles, caps, and scoops using Symphony's d2w
biodegradable technology under Better Earth's BioBottles™ brand "Plastic
IQ™ Technology". In November 2022, Symphony and Better Earth signed a
supplementary d2w supply contract extending the product scope to nutraceutical
products and expanding authorised geographies to include Canada.
Better Earth LLC has subsequently signed an exclusive supply agreement with
TricorBraun for its BioBottles™ brand of polyethylene bottles for the
nutraceutical industry. TricorBraun is a global packaging company, and North
America's largest distributor of primary packaging. It operates from more than
100 locations across the Americas, Europe, Asia, and Australia. TricorBraun
sold over 8 billion containers in 2022 and is working jointly with Better
Earth, supporting its exclusive Agreement with a sales and marketing campaign
in the US and Canada.
Initial orders have been placed and supplied and we anticipate the roll-out
will gather momentum over the coming months.
Trading results
Group revenue was £6.15 million (2021: £9.16 million) and is analysed in the
table below. Gross profit margins reduced to 37.0% (2021: 39.2%) due to higher
raw material costs in the first half of the year. Gross profit decreased to
£2.28 million from £3.59 million in 2021.
As previously advised, we had a soft first half of the year with results
affected by short term logistics and resource issues, temporary destocking
issues, and a change to our glove strategy. Whilst the second half of the year
was stronger, the Middle East destocking issue had still not been resolved by
the year end, mainly due to delays in receiving the requisite government
certifications for our partner's new factory in the UAE, which finally became
fully operational in December.
2022 2021
d2w Masterbatch £4.77 million £7.19 million
d2p Masterbatch £0.79 million £0.45 million
Finished Products £0.47 million £1.40 million
Other £0.12 million £0.12 million
Administrative expenses increased to £4.80 million (2021: £4.57 million).
Staff costs increased £0.20 million during 2022 following further expansion
of the sales and technical departments. Equity-settled share-based charges of
£0.12 million were included in the year (2021: £0.04 million). Distribution
costs (namely shipping) which had been high in relation to revenues started to
reduce in the second half of the year.
The Group expensed R&D costs of £0.51 million in 2022 (2021: £0.49
million). In addition, there were intangible asset development cost additions
of £0.17 million during the year in respect to the Group's d2p bread
technology (2021: £0.17 million). An R&D tax credit of £0.12 million
(2021: £0.13 million) was received during 2022 relating to the previous
period. A further R&D tax credit will be receivable in 2023 with respect
to 2022.
The reported operating loss was £2.93 million (2021: £1.48 million) and loss
after tax of £2.89 million (2021: £1.41 million) with basic loss per share
of 1.65 pence (2021: loss per share 0.81 pence).
The Group's primary selling currency is the US Dollar and therefore a strong
dollar against sterling, our reporting currency, is beneficial for the Group.
The Group self-hedges its foreign exchange exposure by purchasing goods where
possible in US Dollars and utilises, when deemed appropriate, bank forward
currency contract agreements to minimise exchange risk. As at 31 December
2022, the Group had a net balance of US Dollar assets (US Dollar cash balances
and receivables less overdrafts and payables) totalling $1.46 million (2021:
$2.91 million).
Statement of financial position and cash flow
The Group had net borrowings (excluding lease liabilities) of £0.84 million
as at 31 December 2022 (2021: net cash £0.20 million). The Group used cash of
£1.59million from operations (2021: £0.60 million) primarily as a result of
the loss incurred but mitigated by favourable movements in receivables.
During the year, the Group raised net proceeds of £1.0 million by way of an
equity subscription and post year end entered into a £1.0 million convertible
loan agreement.
Eranova
As announced in October 2020, the Group made an investment representing 1.6%
of the enlarged capital of Eranova SAS (at £130,000 including costs) as part
of a €6.00 million pre-industrial plant project. The pilot plant was
completed on schedule during October 2021 and was operational and processing
small volume commercial orders during 2022.
In recent months Eranova raised additional capital and have been awarded
government grants to further expand the early-stage production facility in
Marseille, France. They have finished products with the Eranova technology in
the French retail sector and in particular listed in Casino, Carrefour,
Intermarche and Franprix.
Eranova has also signed its first €2.10 million pre-production licencing
agreement to build a facility in Indonesia which is currently in the early
stages of development. Symphony, as a strategic shareholder of Eranova has an
agreement to market Eranova's biobased green algae product derived from green
algae.
Our d2w and d2p technologies are fully compatible with Eranova's biobased
product and we expect this will become a major growth area for Symphony in the
longer term.
EU action
As previously announced, Symphony commenced a legal action against the
Commission, Parliament and Council of the EU having been advised by three
specialists in EU law that Article 5 of the Directive 2019/904 is
unconstitutional. A court hearing was held in Luxembourg on 20 March 2023. A
written judgment will be delivered in due course, which the Company's legal
advisers estimate could be 12 to 15 months after the hearing.
Following the hearing, Symphony's legal team remain confident that the EU
acted unlawfully in imposing a ban on a material which they call
"oxo-degradable plastic" in Article 5 of the Directive. In any event,
Symphony does not accept that the ban applies to oxo-biodegradable plastics,
which are made by incorporating Symphony's d2w masterbatch into ordinary
plastic, and do not have any of the undesirable characteristics listed in
Recital 15 of the Directive.
Current trading and outlook
Symphony's financial performance in Q1-23 has sharply improved from 2022, and
the Board expect Symphony to move back into profitability in the coming months
which is underpinned by the following:
· Middle East manufacturing and sales on plan
· Global sales increases in most sectors including d2w and d2p
· Administrative cost base now set 25% lower than 2022 levels
· Distribution costs significantly reduced due to generally lower
shipping rates and efficiencies from the Middle East factory
· Gross profit margins currently approximately 5% higher
Additionally, the near-term commercialisation of several projects together
with improving global business dynamics is expected to have a significant and
positive effect on sales with profitability anticipated in the coming months.
After the unexpected and lengthy delays experienced during 2022, we are
encouraged by the sharply improved momentum, activity and trading performance
across the Group and are confident that we will be able to announce further
positive updates in the coming months.
M Laurier
Chief Executive
Consolidated statement of comprehensive income
for the year ended 31 December 2022
2022 2021
Note £'000 £'000
Revenue 4 6,154 9,161
Cost of sales (3,874) (5,569)
Gross profit 2,280 3,592
Distribution costs (408) (500)
Administrative expenses (4,802) (4,571)
Operating loss 5 (2,930) (1,479)
Finance costs 7 (77) (54)
(3,007) (1,533)
Loss for the year before tax
Taxation 8 120 127
(2,887) (1,406)
Loss for the year
Total comprehensive loss for the year (2,887) (1,406)
Basic earnings per share 9 (1.65)p (0.81)p
Diluted earnings per share 9 (1.65)p (0.81)p
All results are attributable to the parent company equity holders. There were
no discontinued operations for either of the above periods.
Consolidated statement of financial position
as at 31 December 2022
Company number 03676824
2022 2021
Note £'000 £'000
ASSETS
Non-current
Property, plant and equipment 10 138 171
Right-of-use assets 11 379 548
Intangible assets 12 439 260
Investments 13 130 123
Interest in joint venture 14 101 -
1,187 1,102
Current
Inventories 15 1,175 1,316
Trade and other receivables 16 2,349 3,146
Cash and cash equivalents 17 1,152 881
5,343
4,676
5,863 6,445
Total assets
EQUITY AND LIABILITIES
Equity
Equity attributable to shareholders of
Symphony Environmental Technologies plc
Ordinary shares 18 1,848 1,793
Share premium 18 4,854 3,910
Retained earnings 18 (4,999) (2,231)
1,703 3,472
Total equity
Liabilities
Non-current
Lease liabilities 19 181 338
Current
Lease liabilities 19 167 167
Borrowings 19 1,991 677
Trade and other payables 20 1,821 1,791
3,979 2,635
4,160 2,973
Total liabilities
Total equity and liabilities 5,863 6,445
Consolidated statement of changes in equity
for the year ended 31 December 2022
Equity attributable to the equity holders of Symphony Environmental
Technologies plc:
Share Share premium Retained Total
capital earnings equity
£'000 £'000 £'000 £'000
For the year to 31 December 2022
Balance at 1 January 2022 1,793 3,910 (2,231) 3,472
Share based options (note 18) - - 119 119
Issue of share capital (note 18) 55 944 - 999
Transactions with owners 55 944 119 1,118
Total comprehensive loss for the year
- - (2,887) (2,887)
Balance at 31 December 2022 1,848 4,854 (4,999) 1,703
For the year to 31 December 2021
Balance at 1 January 2021 1,768 3,185 (865) 4,088
Share based options (note 18) - - 40 40
Issue of share capital (note 18) 25 725 - 750
Transactions with owners 25 725 40 790
Total comprehensive loss for the year
- - (1,406) (1,406)
Balance at 31 December 2021 1,793 3,910 (2,231) 3,472
Consolidated cash flow statement
for the year ended 31 December 2022
2022 2021
£'000 £'000
Cash flows from operating activities
Loss after tax (2,887) (1,406)
Adjustments for:
Depreciation 229 223
Amortisation 14 12
Loss on disposal of foxed assets 14 -
Share-based charges 119 40
Foreign exchange - 25
Interest expense 77 46
Tax credit (120) (127)
Changes in working capital:
Movement in inventories 141 (256)
Movement in trade and other receivables 797 453
Movement in trade and other payables 30 389
Net cash used in operations (1,586) (601)
R&D tax credit 120 127
(1,466) (474)
Net cash used in operating activities
Cash flows from investing activities
Additions to property, plant and equipment (18) (54)
Additions to right of use asset (22) (17)
Additions to intangible assets (194) (227)
Additions to joint venture (101) -
Additions to investments (7) -
Net cash used in investing activities (342) (298)
Cash flows from financing activities
Increase in invoice finance facility 857 -
Repayment of lease capital (179) (198)
New lease 22 -
Proceeds from share issue 999 750
Lease interest paid (22) (29)
Bank and invoice finance interest paid (55) (17)
Net cash generated in financing activities 1,622 506
Net change in cash and cash equivalents (186) (266)
Cash and cash equivalents, beginning of year 204 470
18 204
Cash and cash equivalents, end of year
Represented by:
Cash and cash equivalents (note 17) 1,152 881
Bank overdraft (note 19) (1,134) (677)
18 204
Notes to the Annual Report and Accounts
1 General information
Symphony Environmental Technologies plc ('the Company') and subsidiaries
(together 'the Group') develops and supplies environmental plastic additives
and masterbatches, together with plastic and rubber finished products to a
global market.
The Company, a public limited company, is the Group's ultimate parent company.
It is incorporated and domiciled in England (Company number 03676824). The
address of its registered office is 6 Elstree Gate, Elstree Way, Borehamwood,
Hertfordshire, WD6 1JD, England. The Company's shares are listed on the AIM
market of the London Stock Exchange.
2 Basis of preparation and significant accounting
policies
Basis of preparation
The financial information set out in this report does not constitute the
Company's statutory annual report and accounts for the years ended 31 December
2022 or 2021 but is derived from the 2022 annual report and accounts.
Statutory accounts for 2021 have been delivered to the Registrar of
Companies and those for 2022 will be delivered to the Registrar of Companies
following Notice of the Annual General Meeting. The auditor has reported on
the financial statements for the year ended 31 December 2022; its report was
(i) unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying the report and
(iii) did not contain a statement under section 498(2) or section 498(3) of
the Companies Act 2006.
This consolidated annual report and accounts has been prepared in accordance
with UK-adopted international accounting standards in conformity with the
requirements of the Companies Act 2006.
These consolidated annual report and accounts have been prepared under the
historical cost convention except for investments and derivative financial
instruments that are measured at fair value. Financial information is
presented in pounds sterling unless otherwise stated, and amounts are
expressed in thousands (£'000) and rounded accordingly.
Changes to accounting policies during the year are detailed in 'Standards and
interpretations adopted during the year' further in this note.
Consolidation
This consolidated annual report and accounts are made up to 31 December 2022.
All intra-group transactions, balances and unrealised gains on transactions
between group companies are eliminated on consolidation. Unrealised losses are
also eliminated unless the transaction provides evidence of an impairment of
the asset transferred. Where necessary, adjustments are made to the annual
report and accounts of subsidiaries to bring the accounting policies used into
line with those used by other members of the Group.
Going concern
The Group has made an operating loss of £2.93 million for the year (2021:
loss £1.48 million). The Group has continued to invest heavily on marginal
costs to drive its operations on a technical and marketing standpoint. This
has resulted in multiple sales opportunities which are expected to come to
fruition in the short-term.
On the basis of current financial projections, which have been drawn out to
the end of 2024, including a sensitised cash flow analysis, together with
available funds and facilities, the Directors are satisfied that the Group has
adequate resources to continue in operational existence for at least 12 months
from the date of approval of the financial statements, and accordingly,
continue to adopt the going concern basis in preparing the Group and Company
financial statements.
This is primarily underpinned by the Group being on track to achieve at least
break even during H1-2023 which is driven by the following:
· Middle East volumes in Q1-2023 matching FY-2022
· Repeat and growing d2p AI business
· Steadier main markets in Far East and Latin America
· New/growing business for d2w in North America
· Administrative costs significantly lower than in 2022
· Distribution costs significantly lower than in 2022 with general
freight rates down and new the Middle East factory cutting out expensive
shipping from Taiwan
· Lower raw material costs - mainly in polymer which makes up 90%
plus of product volume
In addition, the Group has since the year end received a £1 million
convertible loan (see Events since statement of financial position date) and
is also supported by an invoice finance facility from the Group's bankers.
Revenue
- Plastic additives and finished products, and associated products
Revenue is stated at the fair value of the consideration receivable and
excludes VAT and trade discounts.
The Group's revenue is from the sale of goods. Revenue from the sale of
goods is recognised in conformity to IFRS 15 following the 5 step approach.
This has been detailed below:
· Identification of the contract - Due to the nature of the goods
sold, the Group effectively approves an implied contract with a customer when
it accepts a purchase order from the customer.
· Identification of the separate performance obligations in the
contract - The Group must fulfil the following obligations, which are agreed
on acceptance of the purchase order:
- To make the goods available for dispatch on the required date;
- To organise freight in accordance with agreed INCOTERMs (a
series of pre-defined commercial terms published by the International Chamber
of Commerce).
· Determine the transaction price of the contract - The transaction
price is determined as the fair value of the consideration the Group expects
to receive on transfer of the goods. The price of the sale includes the goods
price and the cost of the transport, if applicable.
· Allocation of the transaction price to the performance
obligations identified - Sales prices are agreed with each customer and are
not generally a fixed price per unit. The transport price will also vary
across sales as it is based on quotes received from the Group's freight
agents, as transport is charged at cost. Although the Group is effectively an
agent in the provision of transport rather than the principal under IFRS 15,
the transport cost is insignificant in the context of the overall sale price
and therefore it is not netted out of revenue and cost;
· Recognition of revenue when each performance obligation is
satisfied - Provided that the goods have been made available for dispatch on
the required date, this performance obligation has been fulfilled and the
revenue for this performance obligation is therefore recognised at this date.
In respect to the freight element, the agreed INCOTERMs need to be satisfied.
At this point, the Group recognises the revenue for this separate performance
obligation.
Intangible assets
- Research and development costs
Expenditure on research (or the research phase of an internal project) is
recognised as an expense in the period in which it is incurred. Development
costs incurred on specific projects are capitalised when all the following
conditions are satisfied:
· completion of the intangible asset is technically feasible so
that it will be available for use or sale;
· the Group intends to complete the intangible asset and use or
sell it;
· the Group has the ability to use or sell the intangible asset;
and
· the intangible asset will generate probable future economic
benefits.
Among other things, this requires that there is a market for the output from
the intangible asset or for the intangible asset itself, or, if it is to be
used internally, the asset will be used in generating such benefits:
· there are adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset; and
· the expenditure attributable to the intangible asset during its
development can be measured reliably.
Development costs not meeting the criteria for capitalisation are expensed as
incurred.
The cost of an internally generated intangible asset comprises all directly
attributable costs necessary to create, produce, and prepare the asset to be
capable of operating in the manner intended by management. The nature of the
Group's activities in the field of development work renders some internally
generated intangible assets unable to meet the above criteria at present.
Amortisation commences upon completion of the asset and is shown within
administrative expenses and is included at the following rate:
Plastic masterbatches and other additives - 10 years straight line.
Judgements and estimates made by the Directors when deciding whether the
recognition requirements for development costs have been met are included in
note 3. All amounts disclosed within note 12 in development costs relate to
plastic masterbatches and other additives.
- Trademarks
Trademarks represent the cost of registration and are carried at cost less
amortisation. Amortisation is calculated so as to write off the cost of an
asset, less its estimated residual value, to administrative expenses over the
useful economic life of that asset as follows:
Trademarks -
10 years straight line.
Property, plant and equipment
Property, plant and equipment are stated at cost, net of depreciation and any
provision for impairment. The cost comprises of the purchase price of the
asset plus directly attributable costs.
Depreciation is calculated so as to write off the cost of an asset, less its
estimated residual value, to administrative expenses over the useful economic
life of that asset as follows:
Plant and machinery - 20% reducing
balance.
Fixtures and fittings - 10%
straight line.
Motor vehicles
- 25% reducing balance.
Office equipment - 25%
straight line.
The residual value and useful economic lives are reconsidered annually.
Impairment testing of intangible assets and property, plant and equipment
All individual assets are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher
of fair value, reflecting market conditions less costs to sell, and value in
use based on an internal discounted cash flow evaluation. All assets are
subsequently reassessed for indications that an impairment loss previously
recognised may no longer exist. Any impairment is recognised within expenses
in the statement of comprehensive income.
Leased assets
A lease is defined as 'a contract, or part of a contract, that conveys the
right to use an asset (the underlying asset) for a period of time in exchange
for consideration'. To apply this definition three key evaluations are
assessed:
• whether the contract contains an identified asset, which is
either explicitly identified in the contract or implicitly specified by being
identified at the time the asset is made available to the Group
• whether the Group has the right to obtain substantially all of
the economic benefits from use of the identified asset throughout the period
of use, considering its rights within the defined scope of the contract
• whether the Group has the right to direct the use of the
identified asset throughout the period of use. The Group assess whether it has
the right to direct 'how and for what purpose' the asset is used throughout
the period of use.
A right-of-use asset and a lease liability is recognised on the statement of
financial position at the lease commencement date. The right-of-use asset is
measured at cost, which is made up of the initial measurement of the lease
liability, any initial direct costs incurred, an estimate of any costs to
dismantle and remove the asset at the end of the lease, and any lease payments
made in advance of the lease commencement date (net of any incentives
received).
Right-of-use assets are depreciated on a straight-line basis from the lease
commencement date to the earlier of the end of the useful life of the
right-of-use asset or the end of the lease term. Impairment is assessed when
such indicators exist.
The lease liability is measured on commencement of the lease at the present
value of the lease payments unpaid at that date, discounted using the Group's
incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up
of fixed payments included in the lease agreement and together with any
in-substance fixed payments.
Subsequent to initial measurement, the liability will be reduced for payments
made and increased for interest. It is remeasured to reflect any reassessment
or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is
reflected in the right-of-use asset, or profit and loss if the right-of-use
asset is already reduced to zero.
Investments in joint ventures
A joint venture is a joint arrangement whereby the parties that have joint
control of the arrangement have rights to the net assets of the joint
arrangement. Joint control is the contractually agreed sharing of control of
an arrangement, which exists only when decisions about the relevant activities
require unanimous consent of the parties sharing control.
The results and assets and liabilities of joint ventures are incorporated in
these financial statements using the equity method of accounting, except when
the investment is classified as held for sale, in which case it is accounted
for in accordance with IFRS 5.
Under the equity method, an investment in a joint venture is recognised
initially in the consolidated statement of financial position at cost as at
the date of acquisition and adjusted thereafter to recognise the Group's share
of the profit or loss and other comprehensive income of the associate or joint
venture. When the Group's share of losses of an associate or a joint venture
exceeds the Group's interest in that associate or joint venture (which
includes any long-term interests that, in substance, form part of the Group's
net investment in the associate or joint venture), the Group discontinues
recognising its share of further losses. Additional losses are recognised only
to the extent that the Group has incurred legal or constructive obligations or
made payments on behalf of the associate or joint venture.
Investments
Minority investments in shares are held at cost less any provision for
impairment.
Inventories
Inventories are valued at the lower of cost and net realisable value, after
making due allowance for obsolete and slow moving items. Cost is determined on
the basis of purchase value plus all directly attributable costs of bringing
the inventory to the current location and condition, on a first-in first-out
basis.
Employee costs
- Employee compensation
Employee benefits are recognised as an expense.
- Post employment obligations
The Group operates a defined contribution pension scheme for employees. The
assets of the scheme are held separately from those of the Group. The pension
costs charged against profits are the contributions payable to the scheme in
respect of the accounting period.
Taxation
Current tax is the tax currently payable based on taxable profit for the year.
Deferred income taxes are calculated using the liability method on temporary
differences. Deferred tax is generally provided on the difference between
the carrying amounts of assets and liabilities and their tax bases. Tax losses
available to be carried forward as well as other income tax credits to the
Group are assessed for recognition as deferred tax assets, insofar as Group
companies are entitled to UK tax credits on qualifying research and
development expenditure, such amounts are presented in the income tax line
within the statement of comprehensive income.
Deferred tax liabilities are provided in full, with no discounting. Deferred
tax assets are recognised to the extent that it is probable that the
underlying deductible temporary differences will be able to be offset against
future taxable income. Current and deferred tax assets and liabilities are
calculated at tax rates that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted at the
statement of financial postion date.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in profit or loss, except where they either relate to items that
are charged or credited directly to equity in which case the related deferred
tax is also charged or credited directly to equity, or where they relate to
items charged or credited in other comprehensive income the deferred tax
change is recognised in other comprehensive income.
Foreign currencies
Monetary assets and liabilities in foreign currencies are translated into
Sterling at the rates of exchange ruling at the statement of financial
position date. Transactions in foreign currencies are translated into Sterling
at the rate of exchange ruling at the date of the transaction. Exchange
differences are taken into account in arriving at the operating result. The
Group uses derivatives such as forward rate agreements to mitigate its current
or future positions against foreign exchange rate risks. These derivatives are
measured at fair value, determined by reference to observable market prices at
the reporting date.
Financial assets
The Group classifies all of its financial assets measured at amortised cost,
apart from investments and derivatives which are measured at fair value
through profit and loss. Financial assets do not comprise prepayments.
Management determines the classification of its financial assets at initial
recognition.
These assets arise principally from the provision of goods and services to
customers (e.g. trade receivables), but also incorporate other types of
financial assets where the objective is to hold their assets in order to
collect contractual cash flows and the contractual cash flows are solely
payments of the principal and interest. They are initially recognised at fair
value plus transaction costs that are directly attributable to their
acquisition or issue and are subsequently carried at amortised cost using the
effective interest rate method, less provision for impairment.
Impairment provisions are recognised based on the simplified approach within
IFRS 9 using the lifetime expected credit losses. During this process the
probability of the non-payment of the trade receivables is assessed. This
probability is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the trade
receivables. The Group considers a financial asset in default when it is
unlikely to receive the outstanding contractual amounts in full. For trade
receivables, which are reported net; such provisions are recorded in a
separate provision account with the loss being recognised within
administrative expenses in the consolidated statement of comprehensive income.
On confirmation that the trade receivable will not be collectable, the gross
carrying value of the asset is written off against the associated provision.
The Group's financial assets held at amortised cost comprise trade and other
receivables and cash and cash equivalents in the consolidated statement of
financial position.
The Group has an invoice financing facility whereby it transfers the rights to
the cash flows from the related receivables to a third party but retains the
credit risk by providing a guarantee. As the Group does not transfer
substantially all the risks and rewards of the receivables, no derecognition
of financial assets is required.
- Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and other short-term, highly
liquid deposits that are readily convertible into known amounts of cash and
which are subject to an insignificant risk of changes in value.
Financial liabilities
The Group classifies its financial liabilities in the category of financial
liabilities at amortised cost. All financial liabilities are recognised in
the statement of financial position when the Group becomes a party to the
contractual provision of the instrument.
Financial liabilities measured at amortised cost include:
· Trade payables and other short-dated monetary liabilities, which
are initially recognised at fair value and subsequently carried at amortised
cost using the effective interest rate method.
· Bank and other borrowings are initially recognised at fair value
net of any transaction costs directly attributable to the issue of the
instrument. Such interest-bearing liabilities are subsequently measured at
amortised cost using the effective interest rate method, which ensures that
any interest expense over the period to repayment is at a constant rate on the
balance of the liability carried in the consolidated statement of financial
position. For the purposes of each financial liability, interest expense
includes initial transaction costs and any premium payable on redemption, as
well as any interest or coupon payable while the liability is outstanding.
Unless otherwise indicated, the carrying values of the Group's financial
liabilities measured at amortised cost represents a reasonable approximation
of their fair values.
Equity settled share-based payments
All goods and services received in exchange for the grant of any share-based
payment are measured at their fair values. Where employees and third parties
are rewarded using share-based payments, the fair values of the instrument
granted are determined using the Black-Scholes model. This fair value is
appraised at the grant date. For employees, the fair value is charged to the
statement of comprehensive income between the date of issue and the date the
share options vest with a corresponding credit taken to equity. For third
parties the fair value is charged over the length of services received.
Equity
Equity comprises the following:
· "Share capital" represents the nominal value of equity shares;
· "Share premium" represents the excess over nominal value of the
fair value of consideration received for equity shares, net of expenses of the
share issue and after capital reduction; and
· "Retained earnings" represents non-distributed but distributable
reserves.
Standards and interpretations adopted during the year
At the date of authorisation of these annual report and accounts, certain new
standards, amendments and interpretations to existing standards became
effective, as they had not been previously adopted by the Group.
Information on new standards, amendments and interpretations that are relevant
to the Group's annual report and accounts is provided below. Certain other new
standards and interpretations have been issued but are not expected to have a
material impact on the Group's annual report and accounts.
Other new effective Standards and interpretations with no material impact to
the Group
The following new and amended standards became effective during the current
year and have not had a material impact on the Group's/Company's financial
statements:
· IAS 16 Property, Plant and Equipment: Amendments in relation to
proceeds before intended use.
· IAS 37 Provisions, Contingent Liabilities and Contingent Assets:
Amendments in relation to the cost of fulfilling a contract when assessing
onerous contracts.
· IFRS 3 Business Combinations: Amendments to update references to
the Conceptual Framework.
· Annual Improvements to IFRSs (2018-2021 cycle).
New and revised UK-adopted international accounting standards in issue but not
yet effective
At the date of authorisation of these financial statements, The Group has not
applied the following new and revised UK-adopted international accounting
standards that have been issued but are not yet effective. The Group does not
expect any of the standards which have been issued, but are not yet effective,
to have a material impact on the Group.
· IAS 1 Presentation of Financial Statements: Amendments in
relation to the classification of liabilities as current or non-current.
Effective 1 January 2023
· IAS 1 Presentation of Financial Statements: Disclosure of
accounting policies. Effective 1 January 2023
· IAS 8 Accounting policies, changes in accounting estimates and
errors (Amendment): Definition of accounting estimates. Effective 1 January
2023
· IAS 12 Income taxes: Deferred tax relating to assets and
liabilities arising from a single transaction. Effective 1 January 2023
Other
The Group does not expect any other standards issued by the IASB, but not yet
effective, to have a material impact on the Group.
3 Significant accounting estimates and judgements
Estimates and judgements are evaluated continually and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Although these estimates
are based on management's best knowledge of current events and actions, actual
results may ultimately differ from those actions. Material changes to the
estimates and judgements made in the preparation of the interim statements are
detailed in the notes.
Estimates:
In preparing these accounts the following areas were considered to involve
significant estimates:
- Recognition of deferred tax assets
Judgements and estimates relating to a deferred tax asset are detailed in
notes 2 and 8. In particular, estimates are made as to future revenues which
derive profit and loss projections. However, management does not consider it
appropriate to recognise a deferred tax asset where there is uncertainty over
the amount of future profits. The unrecognised deferred tax asset as at 31
December 2022 was approximately £4,735,000.
- Share-based payments
Estimates and related judgements in respect to share-based payment charges are
detailed in note 18. Estimates are made on the fair value of the option using
the Black-Scholes model. Changes to these estimates would not have a material
impact on the Group's statement of comprehensive income. The carrying amount
of share options as at 31 December 2022 was £168,000.
- Investments
Estimates and judgements are made as to the carrying value of Investments
based on the status of the investment against expectations and the
forward-looking prospects. The Eranova SAS project is currently on schedule
with the pre-industrial plant completed during October 2021. This plant was
fully operational during 2022. This plant was fully operational during 2022.
Forward prospects are encouraging, and the Board currently consider that the
fair value is consistent with cost while the project considers the next phase.
The carrying value of investments as at 31 December 2022 was £130,000. See
note 13.
- Joint ventures
Estimates and judgements are made as to the carrying value of joint ventures
based on the status of the investment against expectations and the
forward-looking prospects. Symphony Environmental India (Private) Limited
broke even in its first period of trading, to 31 December 2022 and forward
prospects are encouraging. The Board currently consider that the fair value is
consistent with cost. The carrying value of joint ventures as at 31 December
2022 was £101,000. See note 14.
- Inventory provisions
Estimates are made as to impairment provisions to the carrying value of
inventories based whether the items are still saleable, and also the expected
net value that can be achieved on sale. The impairment provision for 2022
includes a 50% reduction in certain glove carrying values due to a continued
fall in prices during the later part of 2021. The resultant value was
calculated based on net proceeds fairly achievable over the short to medium
term. There is a provision of £252,000 for the impairment of inventories as
at 31 December 2022. See note 15.
- Expected credit losses (ECLs)
Trade receivables are reflected net of an estimated provision for impairment
losses. In line with IFRS 9, the Group uses an expected credit loss model to
determine the provision for doubtful debts and also specific provisions for
balances for which it has specific concerns over recoverability. The expected
credit loss model involves segmenting debtors into groups and applying
specific percentages to each of the debtor groupings. The Group has considered
the profile of its debtor balance and has determined that a grouping based on
credit terms and aging is considered the most appropriate. In addition,
forward looking information has been used in the assessment and conclusion of
ECLs in line with the model.
Higher percentages are applied the longer the term with the customer and the
older the debt with the customer, with the view that there is a greater risk
of unforeseen circumstances arising the further away the settlement date. See
note 16 for further information. At the year end, the Group has provisions of
£78,000 (2021: £35,000) on a total trade receivables balance of £1,901,000
(2021: £2,608,000) calculated using this method.
Judgements:
In preparing these accounts the following areas were considered to involve
significant judgements:
- Functional currency
A significant proportion of the revenues generated by entities within the
group are denominated in United States Dollars (USD). The functional currency
of the Company and of all individual entities within the Group has been
determined to be Sterling. Identification of functional currencies requires a
judgement as to the currency of the primary economic environment in which the
companies of the Group operate. This is based on analysis of the economic
environment and cash flows of the subsidiaries of the Group, which has
determined, based upon the currency of funding and operating costs, that the
functional currency continues to be Sterling.
- Development costs
Judgements by the Directors are applied when deciding whether the recognition
requirements for development costs have been met. In capitalising these costs,
judgements are made relating to ongoing feasibility and commerciality of
products being developed. In making these judgements, cash flow forecasts are
used, and these include significant estimates in respect to sales forecasts
and future economic feasibility. See note 12.
4 Segmental information and revenue analysis
The Board has reviewed the requirements of IFRS 8 "Operating Segments",
including consideration of what results and information the Board reviews
regularly to assess performance and allocate resources, and concluded that all
revenue falls under a single business segment. The Board assesses the
commercial performance of the business based upon the revenues of the main
products items within its single business segment as follows:
2022 2021
£'000 £'000
Revenues:
d2w masterbatches 4,768 7,191
d2p masterbatches 793 447
Finished products 472 1,401
Other 121 122
Total 6,154 9,161
The revenues of the Group are divided in the following geographical areas:
Geographical area 2022 2021
£'000 £'000
UK 408 541
Europe 722 1,490
North America 274 227
Central and South America 2,582 3,289
Middle East 1,183 2,476
Asia 985 1,138
Total 6,154 9,161
Revenues attributable to the above geographical areas are made on the basis of
final destination of the customer to which the goods are sold. The
geographical areas above are what the Company considers to be key markets. All
revenue is of the same nature, timing and uncertainty and so the Directors
have not provided a further disaggregation of the revenue beyond the
geographical and product analysis provided above. Credits are made to revenue
on agreement of a dispute. Payments are made by customers either before or
after satisfaction of performance obligations depending on the credit risk
associated with the customer. Payments made before satisfaction of performance
obligations are disclosed as a liability in accounts payable in the financial
statements. If the satisfaction of performance obligations is made before
payment, then the value is included in accounts receivable until extinguished
by the payment.
Products are sold based on quality criteria, and the Group warrants
performance of its products after appropriate tests and trials are undertaken.
Refunds are given or products are replaced if there is a failure within the
product quality assured by Symphony, or its agreed performance.
Non-current assets of £14,100 are held outside of the UK (2021: £14,000).
Major customers
There was one customer that accounted for greater than 10% of total Group
revenues for 2022 (2021: two customers). In 2022 the one customer accounted
for £654,000 or 11% (2021: £2,477,000 and two customers being 27%) of total
group revenues. The Group promotes its products through a global network of
distributors and aims to generate revenues from as many sources as
practicable.
5 Operating loss
The operating loss is stated after crediting:
2022 2021
£'000 £'000
Depreciation - property, plant and equipment 50 49
Depreciation - right-of-use assets 179 174
Amortisation 14 12
Research and development 510 494
expenditure*
Fees payable to the Company's auditor:
Audit related services:
Audit of the annual report and accounts 30 25
Audit of the annual report and accounts of the Company's subsidiaries 45 30
Net foreign exchange (gain)/loss (29) 41
* Further development expenditure of £168,000 (2021: £166,000) is included
in Development cost additions - see note 12.
6 Directors and employees
Staff costs (including directors) during the year comprise:
2022 2021
£'000 £'000
Wages and salaries 2,115 1,836
Social security costs 162 264
Pension contributions 156 130
2,433 2,230
Average monthly number of people (including directors) by activity:
2022 2021
R&D, testing and technical 10 10
Selling 11 9
Administration 12 13
Management 7 6
Marketing 3 3
Total average headcount 43 41
Remuneration in respect of the Directors, who are also the key management, was
as follows:
2022 2021
£'000 £'000
Emoluments (all short term) 590 567
There were no Directors' pension contributions made during the year (2021:
£nil).
The Directors are considered to be the key management personnel of the Group.
Further details on Directors' remuneration and share options are set out in
the Remuneration Committee Report.
Remuneration in respect to the highest paid director was as follows:
2022 2021
£'000 £'000
Highest paid director 221 215
7 Finance costs
2022 2021
£'000 £'000
Interest expense:
Bank and invoice finance borrowings 55 25
Lease interest (right-of-use assets) 22 29
Total and net finance costs 77 54
8 Taxation
2022 2021
£'000 £'000
R&D tax credit 120 127
Total income tax credit 120 127
No tax arises on the loss for the year.
The tax assessed for the year is different from the standard rate of
corporation tax in the UK of 19% (2021: 19%).The differences are explained as
follows:
2022 2021
£'000 £'000
Loss for the year before tax (3,007) (1,533)
Tax calculated by rate of tax on the result
Effective rate for year at 19% (2021: 19%) (571) (291)
Fixed asset differences (2) -
Expenses not deductible for tax purposes 24 15
R&D tax relief (39) (89)
Movement in deferred tax not recognised 520 208
Surrender of tax losses for R&D tax credit refund 16 37
R&D tax credit not yet recognised 52 120
R&D tax credit in respect of previous periods (120) (127)
Total income tax credit (120) (127)
Symphony Environmental Limited continues to undertake research and development
work which results in a research and development tax credit being made
repayable to the company by HMRC in exchange for tax losses surrendered by the
company at a tax rate of 14.5%. As in prior years, the group has chosen to
recognise such cash tax credits in its financial statements, once the relevant
research and development claim has been accepted and repaid by HMRC. Usually
this is shortly after the submission of the company's tax return. The cash tax
credit of £120,000 shown above relates to a repayment made by HMRC in
relation to the year ended 31 December 2021 (£127,000 relates to the year
ended and 31 December 2020).
In calculating the overall tax charge for the Group for the period, Symphony
Environmental Limited has provisionally included a portion of the anticipated
research and development claim for year ended 31 December 2022 to increase the
trading losses made available for surrender to Symphony Environmental
Technologies Plc as group relief. In doing so, the overall current year tax
charge for the Group for the period has been reduced to £nil. Symphony
Environmental Limited intends to surrender any remaining trading losses, not
claimed as group relief, in exchange for a cash tax credit. The Group expects
to be able to recognise this cash tax credit within next year's financial
statements once this is repaid.
The recognition of the deferred tax asset is based on sensitising management
forecasts to estimate the future taxable profits against which the losses will
be relieved. Judgements have been made in respect to profitability going
forward based upon current sales leads and market receptiveness to anticipated
product launches.
The Group has not recognised a deferred tax asset in respect of losses
available for use against future taxable profits due to uncertainties on
timing. The Group has tax losses of approximately £18,939,000 (2021:
£16,050,000). These tax losses have no expiry date. The unrecognised deferred
tax asset in respect of these losses based on latest profit projections is
approximately £4,735,000 (2021: £4,013,000).
These brought forward losses are subject to the loss restriction rules
introduced on 1 April 2017. Groups with more than £5m taxable profits per
annum will only be able to utilise 50% of their brought forward losses against
taxable profits exceeding the £5m cap. As Symphony does not expect its
taxable profits to exceed £5m in the near to immediate term, it is not
possible to quantify the impact of these changes at this moment in time.
The UK corporation tax rate applicable for the year is 19% (2021: 19%).
On 3 March 2021, the UK government announced that it intended to increase the
main rate of corporation tax to 25% for the financial years beginning 1 April
2023. This new rate was enacted by Finance Act 2021 on 10 June 2021.
The Group also has gross fixed assets of £258,000 (2021: £197,000) which
give rise to a deferred tax liability of £65,000 (2021: £49,000). Other
gross temporary timing differences of £85,000 (2021: £177,000) give rise to
a deferred tax asset of £21,000 (2021: £44,000). The deferred tax liability
of £65,000 (2021: £49,000) is sheltered by the unrecognised deferred tax
asset in respect of losses and temporary timing differences.
The unrecognised deferred tax balances disclosed in the above for 2022 have
been calculated at 25%.
9 Earnings per share and dividends
The calculation of basic earnings per share is based on the loss attributable
to ordinary shareholders divided by the weighted average number of shares in
issue during the year. The calculation of diluted earnings per share is based
on the basic earnings per share, adjusted to allow for the issue of shares on
the assumed conversion of all dilutive options and warrants.
Reconciliations of the profit and weighted average numbers of shares used in
the calculations are set out below:
Basic and diluted
2022 2021
Loss attributable to equity holders of the Company £(2,887,000) £(1,406,000)
Weighted average number of ordinary shares in issue
175,226,254 172,851,825
Basic earnings per share (1.65) pence (0.81) pence
Dilutive effect of weighted average options and warrants 7,498,557 8,649,516
Total of weighted average shares together with dilutive effect of weighted 175,226,254 172,851,825
options- see below
Diluted earnings per share (1.65) pence (0.81) pence
No dividends were paid for the year ended 31 December 2022 (2021: £nil).
The effect of options and warrants for the years ended 31 December 2022 and 31
December 2021 are anti-dilutive.
A total of 21,666,500 options and warrants were outstanding at the end of the
year which may become dilutive in future years.
10 Property, plant and equipment
Year ended 31 December 2022 Plant & Machinery Fixtures & Fittings Motor Vehicles Office Equipment Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2022 387 298 - 140 825
Additions 10 - - 8 18
Disposals - (5) - (10) (15)
At 31 December 2022 397 293 - 138 828
Depreciation
At 1 January 2022 282 269 - 103 654
Charge for the Year 23 8 - 19 50
Disposals - (5) - (9) (14)
At 31 December 2022 305 272 - 113 690
Net Book Value
At 31 December 2022 92 21 - 25 138
At 31 December 2021 105 29 - 37 171
Year ended 31 December 2021 Plant & Machinery Fixtures & Fittings Motor Vehicles Office Equipment Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2021 346 304 14 133 797
Additions 41 2 - 11 54
Disposals - (8) (14) (4) (26)
At 31 December 2021 387 298 - 140 825
Depreciation
At 1 January 2021 264 267 14 86 631
Charge for the Year 18 10 - 21 49
Disposals - (8) (14) (4) (26)
At 31 December 2021 282 269 - 103 654
Net Book Value
At 31 December 2021 105 29 - 37 171
At 31 December 2020 82 37 - 47 166
11 Right-of-use assets
Year ended 31 December 2022 Land & buildings Office Equipment Total
£'000 £'000 £'000
Cost
At 1 January 2022 905 70 975
Additions - 22 22
Disposal - (14) (14)
At 31 December 2022 905 78 983
Depreciation
At 1 January 2022 385 42 427
Charge for the Year 160 19 179
Disposal - (2) (2)
At 31 December 2022 545 59 604
Net Book Value
At 31 December 2022 360 19 379
At 31 December 2021 520 28 548
Right-of-use assets are assets used by the business under operating lease
agreements and accounted for under IFRS 16. The resultant lease liability is
included in borrowings. See note 19.
Year ended 31 December 2021 Land & buildings Office Equipment Total
£'000 £'000 £'000
Cost
At 1 January 2021 707 56 763
Additions 198 14 212
At 31 December 2021 905 70 975
Depreciation
At 1 January 2021 225 28 253
Charge for the Year 160 14 174
At 31 December 2021 385 42 427
Net Book Value
At 31 December 2021 520 28 548
At 31 December 2020 482 28 510
12 Intangible assets
Year ended 31 December 2022 Development Trademarks Total
costs
£'000 £'000 £'000
Cost
At 1 January 2022 2,139 119 2,258
Additions 168 26 194
Disposals - (3) (3)
At 31 December 2022 2,307 142 2,449
Amortisation
At 1 January 2022 245 25 270
Charge for the Year - 14 14
Disposals - (2) (2)
At 31 December 2022 245 37 282
Impairment
At 1 January 2022 1,728 - 1,728
At 31 December 2022 1,728 - 1,728
Net Book Value
At 31 December 2022 334 105 439
At 31 December 2021 166 94 260
Development costs are capitalised in accordance with the policy set out in
note 2. Judgements and estimates applied in accordance with this policy are
set out in note 3. Development costs include a net book value of £334,000
(2021: £166,000). Amortisation will start on completion of the project in
accordance with note 2.
Year ended 31 December 2021 Development Trademarks Total
costs
£'000 £'000 £'000
Cost
At 1 January 2021 1,973 64 2,037
Additions 166 61 227
Disposals - (6) (6)
At 31 December 2021 2,139 119 2,258
Amortisation
At 1 January 2021 245 19 264
Charge for the Year - 12 12
Disposals - (6) (6)
At 31 December 2021 245 25 270
Impairment
At 1 January 2021 1,728 - 1,728
At 31 December 2021 1,728 - 1,728
Net Book Value
At 31 December 2021 166 94 260
At 31 December 2020 - 45 45
13 Investments
The Group holds investment interests in the following minority unlisted
shares.
Total
£'000
Investments held at cost:
At 1 January 2022 123
Additions 7
At 31 December 2022 130
At 31 December 2021 123
The Group has invested £130,000 (1.6%) into Eranova SAS, a French company
developing products from green algae, as part of a total €6,000,000
financing to build a pre-industrial plant. The project is currently on
schedule with the pre-industrial plant completed in 2021. During 2022 the
pre-industrial plant was fully operational. Forward prospects are encouraging,
and the Board currently consider that the fair value is consistent with cost
while the project considers the next phase. There is therefore no impairment
as at 31 December 2022.
The Company is parent to the following subsidiary undertakings
Name Country of incorporation Nature of business Proportion of ordinary shares held by parent Proportion of ordinary shares held by the Group
Symphony Environmental Limited England and Wales Development and supply of environmental plastic additives and products 100% 100%
D2W Limited England and Wales Dormant 0% 100%
Symphony Recycling Technologies Limited England and Wales Dormant 100% 100%
Symphony Energy Limited England and Wales Dormant 100% 100%
All of the above subsidiaries are consolidated in the Group annual report and
accounts. The above companies have their registered offices at 6 Elstree Gate,
Elstree Way, Borehamwood, WD6 1JD.
14 Interest in joint ventures
Total
£'000
At 1 January 2022 -
Additions at cost 101
Share of joint venture total comprehensive income (see below) -
At 31 December 2022 101
The Group has a 46.5% share of Symphony Environmental India (Private) Limited,
a company incorporated in India.
The primary activity of Symphony Environmental India (Private) Limited is the
marketing and sale of the Groups d2w and d2p product range in India. The
contractual arrangement provides the Group with only the rights to the net
assets of the joint arrangement, with the rights to the assets and obligation
for liabilities of the joint arrangement resting primarily with Symphony
Environmental India (Private) Limited. Under IFRS 11 this joint arrangement is
classified as a joint venture and has been included in the consolidated
financial statements using the equity method.
Summarised financial information in relation to the joint venture is shown
below.
Year to Year to
31 December 31 December
2022 2021
£'000 £'000
Profit from continuing operations 3 -
Total comprehensive income 3 -
Group's share of total comprehensive income (46.5%) 1 -
Net assets 103 -
Group's share of net assets (46.5%) 48 -
The joint venture's first reporting date will be 31 March 2023. The above is
based in management information. There are no unrecognised losses, material
capital commitments or contingent liabilities as at 31 December 2022.
15 Inventories
2022 2021
£'000 £'000
Finished goods and goods for resale 671 779
Raw materials 504 537
1,316
1,175
The cost of inventories recognised as an expense and included in 'cost of
sales' amounted to £3,094,000 (2021: £4,798,000). There is a provision of
£252,000 for the impairment of inventories (2021: £156,000).
There is no collateral on the above amounts.
16 Trade and other receivables
2022 2021
£'000 £'000
Trade receivables 1,901 2,608
Other receivables 174 199
VAT 29 82
Prepayments 245 257
2,349 3,146
The Directors consider that the carrying value of trade and other receivables
approximates to their fair values.
Symphony Environmental Technologies plc applies the IFRS 9 simplified approach
to measuring expected credit losses (ECL) which uses a lifetime expected loss
allowance for all trade receivables. The ECL balance has been determined based
on historical data available to management such as adherence to payment terms
and length of time to settle payment, in addition to forward looking
information utilising management knowledge such as the anticipated condition
of the market in which its customers operate. Based on the analyses performed,
management expect that all balances will be recovered.
Trade receivables are amounts due from customers for goods sold or services
performed in the ordinary course of business. They are generally due for
settlement within 120 days and therefore are all classified as current. The
majority of trade and other receivables are non-interest bearing. Where the
effect is material, trade and other receivables are discounted using discount
rates which reflect the relevant costs of financing.
The maximum credit risk exposure at the statement of financial position date
equates to the carrying value of trade receivables. Further disclosures are
set out in note 23.
Trade receivables are secured against the facilities provided by the Group's
bankers.
Included in trade receivables are debtors which are past due but where no
provision has been made as there has not been a change in the credit
worthiness of these debtors and the amounts are considered recoverable. The
ageing analysis of debt taking into account credit terms is shown below.
Days past due 0 - 30 31-60 61-90 91-120 >120 Total Gross ECL Total Net
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
31 December 2022 1,488 236 61 19 175 1,979 (78) 1,901
31 December 2021 2,534 33 29 - 47 2,643 (35) 2,608
The ECL is included within debts past 120 days overdue at 74% for 2022 and 19%
for 2021.
17 Cash and cash equivalents
2022 2021
£'000 £'000
Cash at bank and in hand 1,152 881
1,152 881
The carrying amount of cash equivalents approximates to their fair values.
18 Equity
Group and Company Group
Ordinary shares Ordinary shares Share premium Retained earnings Total
Number £'000 £'000 £'000 £'000
At 1 January 2022 179,251,277 1,793 3,910 (2,231) 3,472
Issue of share capital 5,555,556 55 944 - 999
Loss for the year - - - (2,887) (2,887)
Share based payments - - - 119 119
At 31 December 2022 184,806,833 1,848 4,854 (4,999) 1,703
At 1 January 2021 176,751,277 1,768 3,185 (865) 4,088
Issue of share capital 2,500,000 25 725 - 750
Loss for the year - - - (1,406) (1,406)
Share based payments - - - 40 40
At 31 December 2021 179,251,277 1,793 3,910 (2,231) 3,472
During the year the Company issued 5,555,556 Ordinary Shares (2021: 2,500,000
ordinary shares) for a net consideration of £999,000 (2021: £750,000).
Ordinary shares in the Company carry one vote per share and each share gives
equal rights to dividends and to the distribution of the Company's assets in
the event of liquidation.
Share options and warrants
As at 31 December 2022 the Group maintained an approved share-based payment
scheme for employee compensation. All share-based employee compensation will
be settled in equity. The Group has no legal or constructive obligation to
repurchase or settle the options. On 3 May 2022 4,000,000 staff options were
issued which were all outstanding as at 31 December 2022. As at 31 December
2021 there were nil approved staff options outstanding and no approved staff
options were issued in 2021.
The Company has an unapproved share option scheme which is open to directors
and consultants. Options granted under the scheme are for £nil consideration
and are exercisable at a price equal to the quoted market price of the
Company's shares on the date of the grant. The vesting period is 0 to 12
months. If the options remain unexercised after a period of 2-12 years from
the date of grant, the option expires. The Options are forfeited subject to
Board discretion on leaving or termination of services. On 3 May 2022, 750,000
unapproved options were issued to Alexander Brennan (250,000 at a price of 25p
and 500,000 at a price of 30p) exercisable for 3 years, as detailed in the
Remuneration Committee Report on page 27.
On 29 July 2022 4,000,000 warrants were issued as part of a placing at a price
of 25p and exercisable for 1 year.
The weighted average exercise price of all of the Group's options and warrants
are as follows:
2022 2021
Weighted Weighted
average average
Number exercise Number exercise
price price
£ £
Outstanding 1 January 16,441,500 0.14 18,891,500 0.13
Granted 7,725,000 0.25 2,750,000 0.39
Exercised - - - -
Lapsed (2,500,000) 0.40 (5,200,000) 0.25
Outstanding 31 December 21,666,500 0.15 16,441,500 0.14
The weighted average exercise price of options exercised in 2022 was £: nil
as no options were exercised during the period (2021: nil). The number of
share options and warrants exercisable at 31 December 2022 was 21,666,500
(2021: 16,441,000). The weighted average exercise price of those options and
warrants exercisable was 0.15p (2021: 14p). The weighted average option and
warrant contractual life is ten years (2021: nine years) and the range of
exercise prices is 4.5p to 30p (2021: 4.5p to 40p).
Directors
Directors' interests in shares and share incentives are contained in the
Remuneration Committee Report on page 27.
IFRS2 expense
The IFRS 2 share-based payment charge for the year is £119,000 (2021:
£40,000).
£40,000 of the charge was calculated using the Black Scholes model with a
three-year term, risk free rate of 0.48%, volatility of 68.36% and dividend
yield of 0%.
£79,000 of the charge was calculated using the Black Scholes model with a
two-year term, risk free rate of 1.60% to 1.72%, volatility of 54.9% and
dividend yield of 0%.
19 Borrowings
2022 2021
£'000 £'000
Non-current
Leases 181 338
Current
Bank overdraft 1,134 677
Invoice finance facility 857 -
Leases 167 167
2,158 844
Total 2,339 1,182
The bank overdraft relates to US Dollars and kept for hedging purposes as at
the year end. Interest is charged on overdrafts at 2.4% above the host
countries currency base rate. The Group also has an invoice finance facility
with its bankers.
The bank overdraft and invoice finance facility are secured by a fixed and
floating charge over the Group's assets.
The Group's leasing activities are detailed in the table below:
Right-of-use asset Number of assets leased Remaining term
Head office 1 2 years
Office equipment 1 Within 1 year
Office equipment 1 5 years
The weighted average discount rate on initial application was 4.2%.
None of the above leases has a remaining option extension, option to purchase
or termination option. An office equipment lease was terminated during the
period and a new office equipment lease for £22,000 was entered into.
The maturity of lease liabilities are as follows:
Gross payments 2022 2021
£'000 £'000
No later than one year 182 188
Later than one year and no later than five years 190 359
372 547
During the year the Group had no other leases other than those included above.
The following lease payments were made during the year:
Gross payments 2022 2021
£'000 £'000
Lease capital 167 199
Lease interest 22 29
Total cash outflows 189 228
Reconciliation of liabilities arising from financing activities
For the year ended 31 December 2022
1 January 2022 Cash flows Non-cash changes 31 December 2022
£'000 £'000 £'000 £'000
Bank overdraft 677 457 - 1,134
Leases 505 (189) 32 348
Total liabilities from financing activities 1,182 268 32 1,482
The non-cash changes for 2022 are in respect to £22,000 new lease addition,
replacing a £12,000 lease, and £22,000 interest.
For the year ended 31 December 2021
1 January 2021 Cash flows Non-cash changes 31 December 2021
£'000 £'000 £'000 £'000
Bank overdraft 918 (241) - 677
Leases 509 (228) 224 505
Total liabilities from financing activities 1,427 (469) 224 1,182
The non-cash changes for 2021 are in respect to £195,000 new lease additions
and £29,000 interest
20 Trade and other payables
Current 2022 2021
£'000 £'000
Financial liabilities measured at amortised cost:
Trade payables 1,395 1,351
Other payables 23 61
Social security and other taxes 214 130
Accruals 189 249
1,821 1,791
Trade payables and accruals principally comprise amounts outstanding for trade
purchases and ongoing costs. The average credit period taken for trade
purchases is 82 days (2021: 85 days). The Group has financial risk management
policies in place to ensure that all payables are paid within the pre-agreed
credit terms.
The Directors consider that the carrying value of trade and other payables
approximate to their fair value.
21 Commitments and contingencies
a) Capital commitments
The Group had capital commitments totalling £nil at the end of the year
(2021: £nil).
b) Contingent liabilities
Together with its subsidiary, Symphony Environmental Limited, the Group's
bankers have provided a Group composite facility of £10,000 and invoice
finance facility of £1.5million (2021: £100 and £1.5 million).
22 Related party transactions
Alexander Brennan was appointed to the Board as an executive director on 17
May 2022. The Group was employing and continues to employ the services of a
company which he is a shareholder and director, Brennan and Partners Limited.
Since Alexander was appointed to the board of the Company, the Group has paid
£89,400 to Brennan and Partners Limited (2021: not appliable) for advocacy
and other advisory services in relation to the Group's d2w products in the UK,
Spain and Latin America.
There were no other related party transactions during the year (2021: none).
23 Financial Instruments
Classification and measurement
The Group's financial assets and liabilities, which are all held at amortised
cost, are summarised as follows:
2022 2021
£'000 £'000
Financial assets:
Trade receivables 1,901 2,608
Other receivables 174 199
Cash and cash equivalents 1,152 881
3,227 3,688
Financial liabilities:
Trade payables 1,395 1,351
Other payables 23 61
Accruals 189 249
Bank overdraft 1,134 677
Leases 348 505
3,089 2,843
The Group's £130,000 carrying investment in Eranova SAS see note 13, is held
at cost.
Risk management
The main risks arising from the Group's financial instruments are liquidity
risk, interest rate risk, currency risk and credit risk. The Directors
review and agree policies for managing each of these risks and they are
summarised below. These policies have remained unchanged from previous
years.
Liquidity risk
The Group seeks to manage financial risk to ensure financial liquidity is
available to meet foreseeable needs and to invest cash assets safely and
profitability. Short term flexibility is achieved through trade finance
arrangements and overdrafts.
Having reviewed the maturity of financial liabilities and the forecast cash
flows for the forthcoming twelve month period, the Directors believe that
sufficient cash will be generated from trading operations to meet debt
obligations as they fall due.
The maturity of financial liabilities as at 31 December 2022 is summarised as
follows:
Gross cash flows: Trade and other payables and accruals Leases Bank overdraft& other Total
loans
£'000 £'000 £'000 £'000
Zero to sixty days 1,607 3 1,134 2,744
Sixty one days to three months - 46 - 46
Four months to six months - 44 - 44
Seven months to one year - 89 - 89
One to three years - 182 - 182
Four to five years - 8 - 8
1,607 372 1,134 3,113
The maturity of financial liabilities as at 31 December 2021 is summarised as
follows:
Gross cash flows: Trade and other payables and accruals Leases Bank overdraft& other Total
loans
£'000 £'000 £'000 £'000
Zero to sixty days 1,661 3 677 2,341
Sixty one days to three months - 44 - 44
Four months to six months - 46 - 46
Seven months to one year - 95 - 95
One to three years - 358 - 358
Four to five years - 1 - 1
1,661 547 677 2,885
Interest rate risk
The Group seeks to reduce its exposure to interest rate risk where possible,
but this is offset by the availability of trade finance arrangements which are
transaction specific to meet liquidity needs and so have variable interest
rate terms.
Sensitivities have been looked at in the range of an absolute rate increase of
5% or a decrease of 1% which enable an objective calculation to be made
depending on any interest rate changes in the future. Any rate changes would
be outside the control of the Group.
The Group's exposure to interest rate risk as at 31 December 2022 is
summarised as follows:
Fixed Variable Zero Total
£'000 £'000 £'000 £'000
Cash and cash equivalents - 1,152 - 1,152
Trade receivables - - 1,901 1,901
Other receivables - 174 174
- 1,152 2,075 3,227
Trade payables - (1,395) (1,395)
Other payables - - (23) (23)
Leases (348) - - (348)
Bank overdraft - (1,134) - (1,134)
(348) 18 657 327
Sensitivity: increase in interest rates of 5% - 1 - 1
Sensitivity: decrease in interest rates of 1% - - - -
The Group's exposure to interest rate risk as at 31 December 2021 is
summarised as follows:
Fixed Variable Zero Total
£'000 £'000 £'000 £'000
Cash and cash equivalents - 881 - 881
Trade receivables - - 2,608 2,608
Other receivables - - 199 199
- 881 2,807 3,688
Trade payables - - (1,351) (1,351)
Other payables - - (61) (61)
Leases (505) - - (505)
Bank overdraft - (677) - (677)
(505) 204 1,395 1,094
Sensitivity: increase in interest rates of 5% - 10 - 10
Sensitivity: decrease in interest rates of 1% - (2) - (2)
Sensitivity shows the effect on equity and statement of comprehensive income.
Currency risk
The Group operates in overseas markets and is subject to currency exposure on
transactions undertaken during the year. The Group hedges the transactions
where possible by buying goods and selling them in the same currency. The
Group also has bank facilities available for hedging purposes.
A summary of foreign currency financial assets and liabilities as stated in
the statement of financial position together with a sensitivity analysis
showing the effect of a 10% change in rate with Sterling is shown below:
Currency Sterling Currency balance Sterling Currency balance
balance 2022 balance 2021
2022 C'000 2021 C'000
£'000 £'000
Financial assets Euro 235 €266 288 €344
Financial liabilities Euro (98) €(111) (90) €(107)
Net balance Euro 137 €155 198 €237
Effect of 10% Sterling increase (12) (18)
Effect of 10% Sterling decrease (15) 22
Financial assets USD 1,943 $2,695 2,933 $3,963
Financial liabilities USD (1,018) $(1,232) (778) $(1,051)
Net balance USD 925 $1,463 2,155 $2,912
Effect of 10% Sterling increase (110) (196)
Effect of 10% Sterling decrease 134 239
Sensitivity shows the effect on equity and statement of comprehensive income.
A 10% change is shown to enable an objective calculation to be made on
exchange rates which may be assumed for the future.
As at 31 December 2022 the Group had no outstanding foreign currency contract
(2021: the Group had outstanding forward foreign currency contacts which all
matured within three months of the year end and committed the Group to selling
1,500,000 US Dollars and to receive a fixed Sterling amount).
The forward currency contracts are measured at fair value, which is determined
using the valuation techniques that utilise observable inputs. The key inputs
used in valuing the derivatives are the forward exchange rates for USD:GBP.
The fair value of the forward-foreign currency contracts at 31 December 2022
is £nil (2021: loss of £2,000).
Credit risk
The Group's exposure to credit risk is limited to the carrying value of
financial assets at the statement of financial position date, summarised as
follows:
2022 2021
£'000 £'000
Trade receivables 1,901 2,608
Other receivables 174 199
Cash and cash equivalents 1,152 881
3,227 3,688
The credit risk associated with the cash is limited as the counterparties have
high credit ratings assigned by international credit-rating agencies. The
principal credit risk arises therefore from trade receivables. The seven
largest customer balances at the end of the year make up 82% (2021: 85%) of
the above trade receivables.
In order to manage credit risk, the Directors set limits for customers based
on a combination of payment history, third party credit references and use of
credit insurance. These limits are reviewed regularly. The maturity of overdue
debts and details of impairments and amounts written off are set out in note
16.
Capital requirements and management
Interest bearing loans and borrowings are monitored regularly to ensure the
Group has sufficient liquidity and its exposure to interest rate risk is
mitigated. Management consider the capital of the Group comprises the share
capital as detailed in note 18 and interest bearing loans and borrowings as
detailed in note 19. The Company satisfies the Companies Act 2006 requirement
to hold £50,000 issued share capital of which at least 25% is paid up. See
note 18.
The Group's capital management objectives are:
· to ensure the Group's ability to continue as a going concern; and
· to provide an adequate return to shareholders
The Group monitors capital on the basis of the gearing ratio calculated as net
debt divided by total capital. Net debt is calculated as total borrowings as
shown in the consolidated statement of financial position less cash and cash
equivalents. Total capital is calculated as equity as shown in the
consolidated statement of financial position plus net debt. The Group's goal
in capital management is to maintain an optimal gearing ratio (the ratio of
net debt over debt plus equity).
The Group manages the capital structure and makes adjustments to it in the
light of changes in economic conditions and the risk characteristics of the
underlying assets. In order to maintain or adjust the capital structure, the
Group may adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares, or sell assets to reduce debt.
The gearing ratios at 31 December 2022 and 2021 were as follows:
2022 2021
£'000 £'000
Total borrowings (note 19) 1,482 1,182
Cash and cash equivalents (note 17) (1,152) (881)
Net debt 330 301
Total equity (note 18) 1,703 3,472
Borrowings 1,482 1,182
Overall financing 3,185 4,654
Gearing ratio 10% 6%
The gearing ratios are in line with the management's working capital financing
strategy.
24 Events since statement of financial position date
On 9 March 2023 the Company entered into a £1 million convertible loan
agreement with Sea Pearl Ventures LLC with the following main terms
· Loan principal: £1,000,000 (unsecured)
· Conversion at 1 year and 30 days (no earlier)
· Conversion price: 80% of the volume weighted average share price
for the 3 months prior to conversion
· Interest: 7% per annum, payable as accrued on repayment and/or
conversion
· Symphony able to repay the loan in full or in part before
conversion at its discretion
There have been no other material events since the statement of financial
position date.
25 Availability of report and accounts
The Company will advise when copies of the annual report and accounts will be
sent to shareholders and be available from the Company's website
www.symphonyenvironmental.com (http://www.symphonyenvironmental.com)
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