TIDMBIOM
RNS Number : 9047F
Biome Technologies PLC
10 November 2022
This announcement contains inside information for the purposes
of Regulation 11 of the Market Abuse (Amendment) (EU Exit)
Regulations 2019/310. With the publication of this announcement,
this information is now considered to be in the public domain.
10 November 2022
Biome Technologies plc
("Biome", "the Company" or "the Group")
Trading Update
Biome Technologies plc, a leading bioplastics and radio
frequency technology business, today provides an unaudited Trading
Update for the quarter ended 30 September 2022.
Group revenues for the quarter ended 30 September 2022 were in
line with management expectations at GBP1.9m and were 77% ahead of
the similar period last year (Q3 2021: GBP1.1m). There was some
catch-up of revenues delayed from Q2 in both divisions as
anticipated. This takes the Group's revenues for the nine months to
30 September 2022 to GBP4.3m (nine months to 30 September 2021:
GBP3.6m).
The Group had a cash balance as at 30 September 2022 of
approximately GBP0.5m (30 June 2022 GBP0.7m and September 2021:
GBP1.0m), no bank debt and access to a working capital facility of
up to GBP600k.
Bioplastics Division
Revenues of GBP1.2m were achieved in the period (Q3 2021:
GBP0.8m). This reflected demand from across the customer portfolio
and some catch-up from Q2 as raw materials required for production
finally cleared supply chain hurdles. The division's revenues in
the first nine months of the financial year stood at GBP3.2m,
slightly ahead of the equivalent period last year (2021:
GBP3.1m).
As has been referenced in various trading statements, in the
first half of 2021, the business received a commitment from a
second US end customer for conversion to our biodegradable coffee
filtration material. Whilst the end customer has been purchasing
regularly in the last eighteen months at limited levels, the
subsequent expected acceleration of revenues has been constrained
by various matters. These constraints are now clearing and a
substantial increase in orders for this customer has been received
for delivery in Q4 2022. Fulfilment of these orders in the coming
weeks is expected to double the year's revenues from this source.
Further, there are reasonable grounds to believe that this
increased offtake rate will persist into 2023. However, whilst
management believe there is scope for additional revenue growth
with this customer, it has not factored any such growth into its
revenue expectations for 2023 given the challenges experienced
to-date.
In the first nine months of 2022, a single long-standing
customer for Biome's materials used in packaging films procured
GBP0.8m less of product than it did in the same period in 2021.
This was due to that customer rebalancing its inventory as its own
demand patterns changed. Whilst a substantial reduction had been
factored into management expectations during 2022, the reduction of
offtake proved deeper and longer than initially expected. This was
reflected in the sentiment of the Interim Statement and, whilst we
remain optimistic procurement from this customer will increase, it
is premature to include such revenues in our expectations at this
time. This has increased the division's proportion of revenues
through its other main US customer and distributor.
Biome's team has won a number of new business contracts with
other new mostly filmic customers in both North America and Europe.
These grew three-fold in terms of revenue contribution in H1 2022,
accounting for 32% of the division's revenues (H1 2021: 10%) and
are an important part of management's future growth plan.
Several further opportunities are being pursued by the
Bioplastics division. These opportunities are at various stages of
progress and, whilst encouraging, can be subject to technical,
operational and commercial delays. A selected few of these
opportunities are outlined below, but are not included at any scale
in management's expectations for the financial outturn of 2023:
Filtration mesh Rigid parts Filmic (packaging)
materials
Name : Alternate Name : Second pod Name : Labels
coffee format opportunity Market : North America,
Market : USA commercial Market : North America global
coffee consumer pods Progress : Initial
Progress : Customer Progress : Technical technical validation;
paid development; challenges overcome relies on Biome's
success rests on home at small scale; larger Home Compostable technology
compostable technology; scale operational (in part); engagement
launch has been delayed testing ongoing at brand and converter
once Supply : Materials level
Supply : Materials (in part) from Asia. Supply : Manufacturing
and manufacturing Manufacturing in North envisaged in North
in USA America America and Europe
------------------------------ ------------------------------
Name : Third pod Name : Treeguards Name : UK packaging
opportunity Market : UK, global Market : North America,
Market : North America Progress : Main technical Australia fresh food
consumer pods challenges overcome; packaging
Progress : Early performance in field Progress : Initial
stage being validated; operational quantities for validation
Supply : Materials ramp-up phase shipped; validation
and manufacturing Supply : Multi-stage for Australian certification
in USA manufacturing process required
Supply : European
supply chain with
some materials from
Asia
------------------------------ ------------------------------
Stanelco RF Division
Revenue of GBP0.7m in the quarter (Q3 2021: GBP0.3m) reflects
reasonable underlying demand and delivery of some of the major
contracts announced in 2021 and earlier this year. This resulted in
revenues in the first nine months of the financial year of GBP1.1m,
well ahead of the same period in the prior year (2021:
GBP0.3m).
Some revenues, originally anticipated in Q2, were delivered in
Q3 as critical electronic components became available. There is
some easing in these supply chains, but specialist computer parts
remain on long and uncertain delivery schedules.
It is encouraging to report that the business has quoted on a
number of projects of scale for 2023, some of which are included in
management's expectations for Stanelco RF next year, albeit these
have yet to be confirmed as contracts. Revenues from the underlying
industrial induction heating projects, spares and service continue
as expected.
Group Commentary
Internal forecasting approach
In both of the last two years, Biome has had to adjust the
expectations of its performance mid-way through the relevant year,
as follows.
-- In 2021 we cited that post-Covid global issues impacted the
supply chains of Biome and its customers. In addition, the Group's
single largest growth prospect for the Bioplastics division stalled
due to engineering issues.
-- In 2022, we assumed that supply chain pressures would ease in
H2 and that the large bioplastics opportunity that had stalled
would accelerate. This judgement proved incorrect. The supply chain
issues continued for both divisions whilst business instability
caused by inflation and demand variation has caused our key
prospects to delay launches further. In addition, as highlighted
earlier, an anticipated reduction in demand at one of Biome's key
filmic customers proved deeper and longer than expected.
Based on these experiences and in the context of continuing
global economic uncertainties, the Board has resolved to adjust its
forecasting methodology (particularly for the Bioplastics division)
such that new customer prospects are only included in management
expectations when large scale commercialisation is proven. For
example, none of the opportunities highlighted in the table above
are included at scale in management's expectations for the
financial performance of the division in 2023.
Board remuneration
The two Executive Directors and the Chairman have surrendered
rights that have accrued to them under the Group's 2017 long-term
incentive plan (LTIP) and the Chairman's equivalent shadow scheme,
such that any benefit which has accrued to them under these schemes
has been sacrificed.
The Executive Directors have, alongside other measures,
continued with the 2021 remuneration freeze through 2022, saving
Biome GBP25k on an annualised basis, in the context of company-wide
remuneration average increases of 7% in 2022. The NEDs have
similarly forgone any inflationary rises. The Chairman has reduced
his annual fee by 27%, saving the Company GBP17k on an annualised
basis. The Independent NED has reduced his fee by 4.6%, a GBP1.5k
per year saving.
Growth and market proximity
A dominant proportion of the Bioplastics Division's existing
revenues are generated in North America. Management also believes
that most future opportunities of scale for this division are
likely to be located in this region. Until now, business
development and trading activity has been conducted through the UK
entity and by regular contact and visits from the UK-based team.
However, this will now change, and Biome has recently established
trading companies in both the USA and Canada (both named Biome
Bioplastics Inc) through which these activities will occur. In
addition, from December, Biome's Business Development Manager
charged with both commercial and technical responsibilities for
North America will reside permanently in Canada.
Group Outlook
The Board believes that the change to forecasting methodology
outlined above will, in the current economic circumstances, provide
a more consistent basis by which the performance of Biome can be
judged. This change to methodology has resulted in a marginal
reduction in the Board's view of full year revenues for 2022 but no
change to its view of loss before interest, depreciation,
amortisation and share option charges or anticipated 2022 year-end
cash. The Board's view of expected financial performance in 2023 is
unchanged.
The Board has sought to provide investors with as clear a view
as possible on its expectations for the Company. Whilst the
expected growth rate in the Bioplastics division has not taken
place in 2022, there are encouraging signs from the uptick in
demand from the large opportunity we have been pursuing for some
time; growth from the broadened customer base and the portfolio of
scale opportunities that the division has been developing. The
market continues to demand highly functional bioplastic materials
and the Company is in a good position to deliver these.
-ENDS-
For further information please contact:
Biome Technologies plc
Paul Mines, Chief Executive Officer
Rob Smith, Chief Financial Officer
Tel: +44 (0) 2380 867 100
info@biometechnologiesplc.co.uk
Allenby Capital
David Hart/Alex Brearley (Nominated Adviser)
Kelly Gardiner (Sales and Corporate Broking)
Tel: +44 (0) 20 3328 5656
About Biome
Biome Technologies plc (Ticker: BIOM) is an AIM listed,
growth-orientated, commercially driven technology group. Our
strategy is founded on building market-leading positions based on
patented technology and serving international customers in valuable
market sectors. We have chosen to do this by developing products in
application areas where value-added pricing can be justified and
that are not reliant on government legislation. These products are
driven by customer requirements and are compatible with existing
manufacturing processes. They are market rather than
technology-led.
The Group comprises two divisions, Biome Bioplastics Limited and
Stanelco RF Technologies Limited. Biome Bioplastics is a leading
developer of highly functional, bio-based and biodegradable
plastics. The company's mission is to produce bioplastics that
challenge the dominance of oil-based polymers. Stanelco RF
Technologies designs, builds and services advanced radio frequency
(RF) systems. Dielectric and induction heating products are at the
core of a product offering that ranges from portable sealing
devices to large furnaces for the fibre optics markets.
www.biometechnologiesplc.com www.biomebioplastics.com and
www.thinkbioplastic.com www.stanelcorftechnologies.com
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