News

Biome proposes to raise gross proceeds of £1.1 million via the Fundraise to accelerate Biome Bioplastics’ growth and development

Market drivers in favour of bioplastics include the continued focus by leading brands as well as the public on environmental issues caused by non-biodegradable oil-based plastics and the need for alternatives

Undertaking the Financing now will enable the Company to capture and support the momentum of the Bioplastics division

The full announcement can be found here

Revenues in the Bioplastics division continued to grow during H1 2020, reaching £2.1m for the period (H1 2019: £1.2m). Revenue in the second quarter was £1.2m and represented a new record for the division, despite the disruption caused by the pandemic.

The 2020 Interim Results can be found here

Biome announces that its Bioplastics division has been awarded funding of £273,000 from the UK Government’s Innovate UK to support a new £350,000 collaborative project to scale-up its novel compostable bioplastic materials with the University of Nottingham’s Department of Chemical and Environmental Engineering.

In line with expanding Biome Bioplastics materials portfolio using novel technology, this funding will accelerate the testing of the commercial viability of the three most exciting candidate materials in the division’s current research portfolio. This project will use microwave technology in the development of an efficient, industrially scalable manufacturing process and will conduct further larger-scale testing at the Biorenewables Development Centre in York.

Since 2013, Biome’s Bioplastics division has directed more than six million pounds of research and development funding, supported by various grants and in association with a number of leading UK universities, towards a new portfolio of bio-based and biodegradable materials. This work is focused on the replacement of aromatic co-polymers currently widely used in the market with a new generation of heteroaromatic polyesters, which have the potential for differentiated functional performance coupled with tailored biodegradation.

It is anticipated that this project will start in October 2020 and will be completed within two years.

Paul Mines, Biome Technologies’ Chief Executive commented: “This latest research project is an important enabling step in understanding the performance and functionality of Biome’s most exciting novel polymers. We believe these materials could represent an important addition to the business’s product range in due course and will bring benefits to manufacturers, consumers and the environment.”

Derek Irvine, Professor of Materials Chemistry, Faculty of Engineering, University of Nottingham commented:

“Developing differentiated and commercially viable new products and processes, which have sustainability as a key focus, is one of our core interests and capabilities. We are excited to be working with Biome to apply our skills and knowledge to these interesting new sustainable polymers.”

Biome announces that its Bioplastics division has received an order worth US$550,000 from an existing major client operating in the United States packaging market. This order, which provides support for the division’s financial expectations for this year, is the largest single order to date for Biome’s heat-stable and compostable bioplastic for coffee pod applications, which was first commercialised in 2019. Deliveries under this order are due to be completed in the next two months.

This new material takes less than three months to compost in industrial composting environments and is designed to provide the structure for coffee pods, whilst preventing deformation when exposed to hot water brewing conditions. It was developed in the division’s R&D facility in Southampton, UK and is now being manufactured in the United States on a regular production basis in commercial quantities.

Paul Mines, CEO of Biome Technologies plc, commented: “We believe that there is significant commercial potential for this coffee pod material, as brands in the hot beverage sector move to bio-based and compostable solutions to transform the sustainability of their products.”

Biome Technologies plc, a leading bioplastics and radio frequency technology business, today publishes a trading update for the six months ended 30 June 2020. The Company’s unaudited interim results are expected to be announced on 24 September 2020.

Total Group revenues for the first half of the year, including government grant income, were £2.6m (H1 2019: £3.6m), in line with the Board’s expectations.

As anticipated, the Bioplastics division performed well despite the upheaval caused by Covid-19 with a 53% increase in revenues over the same period in the prior year. The revenues of the Stanelco RF division, however, were compromised by both over-capacity in the fibre optic market and the slow-down in industrial activity caused by Covid-19, which remains ongoing.

The Group’s cash position as at 30 June 2020 was £1.1m (31 March 2020: £1.8m), reflecting Group trading performance and an expected increase in the working capital requirement of the Bioplastics division to support the ongoing growth in that business. The Group has no debt.

The Group continues its manufacturing and development operations whilst ensuring the safety of staff and in conformance with Government advice. The Group has continued to make use of the UK Government “furlough scheme” and has curtailed discretionary operational and capital expenditure.

Bioplastics Division

Revenues in the Bioplastics division continued to grow during H1 2020, reaching £2.2m for the period including government grant income of £0.1m (H1 2019: £1.4m including government grant income of £0.2m). Revenue in the second quarter was £1.2m, slightly above the first quarter and representing a new record for the division, despite the disruption caused by the pandemic.

The strong performance in the period was underpinned by increased sales of outer packaging for the USA coffee market and by growing revenues for rigid ring materials for the coffee-pod market. Despite the lockdown and supply chain constraints in both Europe and the USA, the Bioplastics division’s work flows proved resilient and production output met customer requirements throughout the first half.

We are working with an expanding list of potential new customers in the USA and developmental work in that context continues with some vigour. The business is well positioned to exploit further opportunities in this growing market.

The division’s medium-term research activities in Industrial Biotechnology continue, which include the development of a new range of performance polymers with properties which are expected to improve the existing generation of products. This work, taking place at the universities of Nottingham and York, is supported by government grants. Whilst university closures have slowed this work, post period end, the division has received an Innovate UK Continuity Grant of £63,000 to support the recovery of time lost on this work

Stanelco RF Technologies Division

Revenues for the first half of 2020 in the Stanelco RF division were £0.4m (H1 2019: £2.2m).

A substantial proportion of the Stanelco RF division’s revenues are normally derived from the production and maintenance of furnaces for the manufacture of fibre optic cable. Overcapacity in the fibre optic cable market, apparent from late 2018, has been exacerbated by the pandemic as telecommunication companies have suffered restrictions on cable deployment activity and international trade disputes have slowed the deployment of 5G. These factors have led to temporary shut-downs of a number of manufacturing facilities at Stanelco RF’s customers, with a consequential reduction in the requirement for Stanelco RF to provide equipment, spares and service support. The expectation is that in the long term, the fibre optic market will benefit from the pandemic through the enhanced pace of global digitisation required to meet the demands of, for example, increased home working and the 5G roll-out. However, in the short term, demand is likely to remain weak.

The division also provides induction heating and welding equipment to various end markets in the UK and continental Europe. Activity in these markets in the second quarter was very weak, with many facilities closed and customers deferring the purchase of capital goods. The Company is pleased that in the last few weeks, the enquiry level has increased and there have been some small contract wins albeit overall demand levels remains subdued.

Outlook

The Board has sought to provide investors with as clear a view as possible on its expectations for the Company during this exceptional year. During the first half of 2020, the Group’s two divisions performed in line with the expectations communicated and considered appropriate by the Board in April 2020, during the early stages of the Covid-19 pandemic.

The Bioplastics division now has a range of products with a more predictable and improving growth profile and is selling in the USA predominantly, into a buoyant home-delivered coffee sector. Its orderbook now extends further forward than the division has ever experienced before, and the Board is therefore confident on the outlook for the Bioplastics division for the remainder of the current financial year.

Covid-19 has had a much greater impact on the Stanelco RF division. The fibre optic cable market remains oversupplied and the current pace of recovery in demand in the industrial goods sector now appears slower and more uncertain than was anticipated in April 2020. Whilst refilling of the division’s orderbook has begun in a modest manner, significant further momentum would be required in the second half of the year to meet the expectations previously set by the Board. As a result, the Board has concluded that it is necessary to revise downwards the revenue expectations for the Stanelco RF division for the second half of the year.

The Annual General Meeting (“AGM”) of Biome Technologies, a leading bioplastics and radio frequency technology business, was due to be held today. Whilst the AGM has been delayed due to Covid-19, the Board is pleased to announce the Company’s customary trading update for the three months ended 31 March 2020.

Group revenues achieved for the first three months of the year were £1.3m (Q1 2019: £2.1m), reflecting a very strong revenue performance from the Bioplastics division and subdued demand in the Stanelco RF division.

The impact of Covid-19 on Biome during the first quarter of 2020 was limited, with trading in the quarter being in line with management’s expectations at the time of the Group’s trading update on 30 January 2020. The Group continues its manufacturing and development operations with the upmost consideration for the safety of its staff and in conformance with Government advice.

The Group remained debt free as at 31 March 2020 and had cash of £1.8m (31 December 2019: £2.1m) and had cash of £1.7m as at 14 April 2020 and no debt.

Bioplastics Division

Revenues in the Bioplastics division of £1.1m were up 83% on the same period last year and matched the record quarterly revenues of Q4 2019 (Q1 2019: £0.6m; Q4 2019: £1.1m). The performance in the period was underpinned by increased sales of outer packaging for the US single serve coffee market and by growing revenues for rigid ring materials for the coffee-pod market. There is growing evidence that the ordering of coffee products for home delivery was supporting demand towards the end of the quarter. Progress on other projects, such as the nutraceutical pod, was more limited as Covid-19 began to impact some customers’ developmental activities. For others, developmental work continues with some vigour and the business is well positioned to exploit various opportunities in this growing market as and when conditions allow.

Stanelco RF Technologies Division

Revenues for the first quarter of 2020 in the Stanelco RF division were £0.2m (Q1 2019: £1.5m). The Stanelco RF division’s principal revenues are derived from the production and maintenance of furnaces for the manufacture of fibre optical cable. Market intelligence currently indicates that there is over capacity in the fibre optic cable market. This market position is now exacerbated by the effect of Covid-19 on sentiment towards purchases of capital goods. It is unlikely that this position will change quickly and the Group’s expectations are already set accordingly. The Board expects demand for fibre optic cable for internet capacity and 5G implementation to recover in due course. At present the division’s sales activities are focused on alternative industrial markets in the UK/Europe which the Board believes will support increased revenues in the second half of 2020.

Other matters

In Biome’s announcement on 25 March 2020, it was stated that the Company’s AGM had been deferred to a date in June 2020 due to the Covid-19 crisis. A further announcement will be made when the precise date when the AGM will be held can be confirmed. Outlook The Group’s trading continues in line with the expectations set out in the Company’s Final Result’s announcement released on 16 April 2020. The Final Results announcement also outlined the range of actions the Board is taking as a result of Covid19. The focus of these actions is to maximise Biome’s commercial opportunities whilst managing the Group’s cost base and cash resources with the aim of delivering good medium-term growth for shareholders.