Symphony Environmental Tech. PLC Preliminary Results for the year ended 31 Dec 2016 (9220Y)

TIDMSYM

RNS Number : 9220Y

Symphony Environmental Tech. PLC

09 March 2017

 
   9 March 2017 
 

SYMPHONY ENVIRONMENTAL TECHNOLOGIES PLC

("Symphony", the "Company" or "the Group")

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is considered to be in the public domain

Preliminary Results for the year ended 31 December 2016

Symphony Environmental Technologies Plc (AIM: SYM and NASDAQ OTC: SEPTY), a global specialist in products and technologies that "make plastic smarter", is pleased to announce its preliminary results for the year ended 31 December 2016.

Highlights

   --      Revenues increase by 6.8% to GBP6.80 million (2015: GBP6.37 million) 
   --      Gross profit increases by 16.3% to GBP3.41 million (2015: GBP2.93 million) 
   --      Operating profit before non-recurring costs of GBP0.20 million (2015: loss GBP0.97 million) 
   --      Non-recurring costs of GBP0.05 million (2015: GBP1.31 million) 
   --      Profit before tax of GBP0.12 million (2015: loss GBP2.30 million) 
   --      Profit after tax of GBP0.17 million (2015: loss GBP3.33 million) 
   --      Basic earnings per share of 0.11p (2015: loss per share 2.26p) 
   --      Operating performance ahead of market expectations 

Post year-end

   --      Launch of d2p anti-microbial gloves and UK product listing 
   --      Launch of d2p-treated water pipes 

Nirj Deva DL, FRSA, MEP, Chairman of Symphony, said:

I am very pleased to report a profit before tax of GBP123,000. This positive performance compares well with the loss of GBP2.3 million reported in 2015. This result was achieved by an increase in revenues to GBP6.80 million (2015: GBP6.37 million) and resultant 16.3% increase in gross profits to GBP3.41 million, but in particular, a substantial reduction in overheads.

During the year, d2w continued to generate the majority of its revenues in markets mainly outside of Europe. The political momentum has been encouraging in several overseas territories where governments aim to resolve the plastic litter crisis, as regularly highlighted in the media. As communicated by me last year, the opportunities for d2w oxo-biodegradable technology remain good even though Symphony's investment levels in the technology have reduced. d2w remains the only oxo-biodegradable technology to have an Eco-label, a Life Cycle Assessment, and reports on Recycling Studies, Bio-degradation and Eco-toxicity on land and in the sea. d2w oxo-biodegradable technology fits well with the circular economy as well as overall strategies to improve the environment.

We also advised last year that your Board intended to focus more on delivering products and technologies that will create value for shareholders in the near term. For our d2p "designed to protect" range, we have progressed significantly, and our suite of technologies now includes anti-fungal, anti-bacterial, odour absorber, insecticide and flame-retardants. We have now begun commercialising d2p anti-microbial gloves and d2p anti-microbial water pipes, with launches announced for early 2017. These product developments have been the result of an extensive pipeline of activities over the last three years, and we are planning further technology commercialisations in the short term.

We have a valuable asset in our global distributor network and are working with them and their customers to develop products as well as selling the completed technologies through them.

The Board would like to thank its management, distributors and staff for all their hard work over the last year and we look forward to further progress in 2017.

N Deva DL FRSA MEP

Chairman

Contacts

 
 Symphony Environmental Technologies 
  Plc 
 Michael Laurier, CEO                  Tel: +44 (0) 
                                        20 8207 5900 
 Ian Bristow, FD 
 
 Cantor Fitzgerald Europe 
 David Foreman/Michael Reynolds        Tel: +44 (0) 
  (Corporate Finance)                   20 7894 7000 
 David Banks (Sales) 
 
 
 
 
 

Chief Executive's review

In the year under review we achieved an increase in sales, gross and net profit - and all from a lower cost base. Sales of d2w products continued to account for the greater part of turnover, with the majority exported outside Europe in US and Euro currencies.

d2w Controlled-life Plastic Technology

The Group has continued to invest in enhancing its credentials for oxo-biodegradable plastic technology. Within the period, two new international recycling studies were completed that further evidenced that plastic products made with d2w could be safely recycled with normal plastic, and are not harmful to the recycling process nor to products made with the recycled raw material. An additional two biodegradation studies were also completed that showed that plastics made with d2w technology would safely and harmlessly degrade and biodegrade in both the terrestrial and marine environments. These further studies and reports are being used when presenting d2w as a viable and credible option for resolving the many issues caused by plastic leakage on land and into the oceans. Plastic products made with d2w technology have been proven not to leave micro-particles of plastics in the environment - which is a major topic of concern.

The global momentum forcing change in current waste management practices, together with a need to resolve plastic leakage into the environment, has created more interest and opportunities for products made with d2w controlled-life plastic technology. In both corporate and political situations, Symphony has seen, and is continuing to see, a substantial increase in activity.

d2p "Designed to Protect"

As reported in earlier announcements, Symphony has expanded its product-offering to new and existing customers for its d2p technologies.

We have more than 100 live projects in development with a wide range of customers and potential customers from the majority of our global distribution network. These projects include anti-fungal, anti-bacterial, odour absorber, insecticide and flame retardant masterbatches and finished products.

As previously advised, some of these technologies may require regulatory clearance before commercial use in some countries, and the Group is working hard to obtain these with our distributors.

Trading results

Group revenues were 6.8% higher at GBP6.80 million (2015: GBP6.37 million) with an increased gross profit margin at 50.1% from 46.0% in 2015, driven mainly by a more profitable sales mix and favourable currency movements. As a result, the contribution from gross profit increased by 16.3% to GBP3.41 million from GBP2.93 million in 2015.

Recurring administrative expenses decreased by 17.6% to GBP3.03 million (2015: GBP3.68 million) due to cost reductions as part of a strategic review completed in early 2016. Non-recurring administrative expenses of GBP0.05 million were incurred as part of the implementation this review, following the non-recurring costs in 2015 which were GBP1.31 million, and included a GBP1.28 million impairment charge relating to development cost within intangible fixed assets and GBP0.03 million relating to staff costs.

The Group's operating profit before non-recurring items was GBP0.20 million - an improvement of more than GBP1.17 million compared with 2015. Even when taking into account the non-recurring items, the Group made an operating profit of GBP0.15 million in 2016 compared to an operating loss of GBP2.29 million in 2015. This resulted in a profit before tax of GBP0.12 million in 2016 (2015: loss GBP2.30 million).

The taxation credit of GBP0.05 million is in respect of a Research and Development ("R&D") tax credit. The 2015 tax charge of GBP1.03 million comprises a deferred tax asset impairment of GBP1.14 million and an R&D tax credit of GBP0.11 million.

The Group therefore reports a profit for the year of GBP0.17 million (2015: loss GBP3.33 million) with basic earnings per share of 0.11 pence (2015: loss per share 2.26 pence).

The Group's primary selling currency is the US Dollar and therefore a strong dollar is beneficial for the Group. The Group self-hedges where possible by purchasing in US Dollars, and has banking facilities in place in order to secure rates going forward. As at 31 December 2016, the Group had a net balance of US Dollar assets totalling $0.91 million (2015: $0.82 million).

The Board has reviewed its policy on segmental reporting and now consider there is ultimately just one operating segment as define under IFRS8. This is as a result of no material costs being incurred in Waste to Value projects over the last two accounting periods, and having no plans to incur any material costs in that segment going forward. Management reviews the performance of the Group by reference to the total performance of the whole business.

The Group expensed R&D costs of GBP514,000 in 2016 (2015: GBP521,000).

Balance sheet and cash flow

The Group had net cash in the bank of GBP0.26 million at the year-end (2015: GBP0.12 million) and consumed cash of GBP0.30 million from operations (2015: cash generated GBP0.02 million). The increase in cash consumed was as a result of an increase in trade receivables to GBP1.42 million as at 31 December 2016 (31 December 2015: GBP0.72 million). The increase in trade receivables was primarily due to a change in terms for one of the Group's major customers from letter of credit to 90-day open account, covered by credit insurance.

The increase in trade receivables was funded by an increase in the Group's trade finance facility to GBP0.63 million at 31 December 2016 (31 December 2015: GBP0.16 million). The Group has a GBP1.50 million trade finance facility with HSBC Bank plc, and the Board do not envisage any working capital constraints should sales materially increase.

Outlook

Our expectations for the short term are that more countries outside Europe will pass legislation in favour of a d2w-type oxo-biodegrading plastic solution, and that other countries who already have legislation will progress their enforcement programs. If these expectations are met, then this should lead to an increase in demand for our d2w products.

As mentioned earlier in this report, we have over 100 customer-led development projects for the wide range of d2p technologies, for both masterbatches and finished products. A good foundation has therefore been created to further increase revenues and profitability going forward.

The Group's focus will continue to be the delivery of products and technologies that create value in the near term for its shareholders.

We expect to build on the positive momentum and are optimistic for a successful year ahead, in an environment that is becoming more receptive to our growing range of technologies and products.

Michael Laurier, Chief Executive

Consolidated statement of comprehensive income

for the year ended 31 December 2016

 
                                                  2016                2015 
                              Note    GBP'000   GBP'000    GBP'000     GBP'000 
---------------------------  -----  ---------  --------  ---------  ---------- 
 
 
 Revenue                                          6,801                  6,365 
 
 
 Cost of sales                                  (3,395)                (3,437) 
 
 Gross profit                                     3,406                  2,928 
 
 Distribution costs                               (176)                  (221) 
 
 Administrative 
  expenses - recurring                (3,031)              (3,679) 
 Administrative 
  expenses - non-recurring               (54)              (1,313) 
                                    ---------            --------- 
 Administrative 
  expenses                                      (3,085)                (4,992) 
 
 Operating profit/(loss) 
  - before non-recurring 
  items                                   199                (972) 
 Operating loss 
  - non-recurring                        (54)              (1,313) 
---------------------------         ---------            --------- 
 Operating profit/(loss)                            145                (2,285) 
 
 Finance costs                                     (22)                   (16) 
 
 
   Profit/(loss) for 
   the year before 
   tax                                              123                (2,301) 
 
 Taxation                                            45                (1,031) 
 
 
   Profit/(Loss) for 
   the year                                         168                (3,332) 
---------------------------  -----  ---------  --------  ---------  ---------- 
 
 Total comprehensive 
  income for the 
  year                                              168                (3,332) 
---------------------------  -----  ---------  --------  ---------  ---------- 
 
 Basic earnings 
  per share                      2                0.11p                (2.26)p 
 Diluted profit/(loss) 
  per share                      2                0.10p                (2.26)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 2016

 
 
                                     2016      2015 
                                  GBP'000   GBP'000 
------------------------------   --------  -------- 
 Assets 
 Non-current 
 Property, plant and 
  equipment                           298       397 
 Intangible assets                     62        73 
 
 
                                      360       470 
 Current 
 Inventories                          416       477 
 Trade and other receivables        1,576       852 
 Cash and cash equivalents            437       122 
 
 
                                    2,429     1,451 
 
   Total assets                     2,789     1,921 
-------------------------------  --------  -------- 
 
 Equity 
 Equity attributable 
  to shareholders of 
  Symphony Environmental 
  Technologies plc 
 Ordinary shares                    1,499     1,499 
 Share premium                      3,533     3,533 
 Retained earnings deficit        (3,971)   (4,139) 
 
 
   Total equity                     1,061       893 
-------------------------------  --------  -------- 
 
 Liabilities 
 Non-current 
 Interest bearing loans 
  and borrowings                        2         6 
 
 
                                        2         6 
 Current 
 Interest bearing loans 
  and borrowings                      808       170 
 Trade and other payables             918       852 
 
 
                                    1,726     1,022 
 
   Total liabilities                1,728     1,028 
-------------------------------  --------  -------- 
 
 Total equity and liabilities       2,789     1,921 
-------------------------------  --------  -------- 
 

These financial statements were approved by the Board of Directors on 8 February 2017 and authorised for issue on 8 February 2017.

Consolidated statement of changes in equity

for the year ended 31 December 2016

Equity attributable to the equity holders of Symphony Environmental Technologies plc:

 
                       Share      Share    Retained       Total 
                     capital    premium    earnings      equity 
                                            deficit 
                     GBP'000    GBP'000     GBP'000     GBP'000 
-----------------  ---------  ---------  ----------  ---------- 
 For the year 
  to 31 December 
  2016 
 Balance at 1 
  January 2016         1,499      3,533     (4,139)         893 
 
 Loss and total 
  comprehensive 
  income for the 
  year                     -          -         168         168 
-----------------  ---------  ---------  ----------  ---------- 
 
   Balance at 31 
   December 2016       1,499      3,533     (3,971)       1,061 
-----------------  ---------  ---------  ----------  ---------- 
 
 
 For the year 
  to 31 December 
  2015 
 Balance at 1 
  January 2015         1,446      3,077       (807)       3,716 
 
 Issue of share 
  capital                 53        456           -         509 
 
   Transactions 
   with owners            53        456           -         509 
-----------------  ---------  ---------  ----------  ---------- 
 
 Loss and total 
  comprehensive 
  income for the 
  year                     -          -     (3,332)     (3,332) 
-----------------  ---------  ---------  ----------  ---------- 
 
   Balance at 31 
   December 2015       1,499      3,533     (4,139)         893 
-----------------  ---------  ---------  ----------  ---------- 
 

Consolidated cash flow statement

for the year ended 31 December 2016

 
                                 Note      2016      2015 
                                        GBP'000   GBP'000 
------------------------------  -----  --------  -------- 
 
 Operating activities 
 Net cash used in operations        4     (343)      (80) 
 Tax received - R&D 
  tax credits                                45       111 
------------------------------  -----  --------  -------- 
 
   Net cash (used)/generated 
   in operating activities                (298)        31 
 
 Investing activities 
 Additions to property, 
  plant and equipment                       (8)     (141) 
 Additions to intangible 
  assets                                    (2)     (212) 
 Proceeds from sale 
  of fixed assets                            11         - 
------------------------------  -----  --------  -------- 
 
 Net cash generated/(used) 
  in investing activities                     1     (353) 
 
 Financing activities 
 Repayments of borrowings                     -     (650) 
 Movement in working 
  capital facility                          464        15 
 Movement in finance 
  lease liability                           (4)         7 
 Proceeds from share 
  issue                                       -       509 
 Interest paid                             (22)      (16) 
------------------------------  -----  --------  -------- 
 
 Net cash generated/(used) 
  in financing activities                   438     (135) 
 
 Net change in cash 
  and cash equivalents                      141     (457) 
 Cash and cash equivalents, 
  beginning of year                         117       585 
 Foreign exchange losses                      -      (11) 
 
   Cash and cash equivalents, 
   end of year                              258       117 
------------------------------  -----  --------  -------- 
 
 
 

The reconciliation to the cash and cash equivalents as reported in the statement of financial position is as follows:

 
                                      2016       2015 
                                   GBP'000    GBP'000 
------------------------------   ---------  --------- 
 Loans and receivables: 
  Cash at bank and in 
   hand                                437        122 
 Financial liabilities 
  measured at amortised 
  cost: 
  Bank overdraft                     (179)        (5) 
-------------------------------  ---------  --------- 
 
   Cash and cash equivalents, 
   end of year                         258        117 
-------------------------------  ---------  --------- 
 

Notes to the Preliminary Statement

   1              Basis of preparation 

This preliminary statement has been prepared on the basis of accounting policies consistent with the audited financial statements for the year ended 31 December 2016.

The financial information set out in this report does not constitute the Company's statutory accounts for the years ended 31 December 2016 or 2015 but is derived from the 2016 accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered in due course. The auditor has reported on the financial statements for the year ended 31 December 2016; 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.

   2              Earnings per share and dividends 

The calculation of basic earnings per share is based on the profit/(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 loss and weighted average numbers of shares used in the calculations are set out below:

 
 
 Basic and diluted                       2016             2015 
-----------------------------  --------------  --------------- 
 
 Profit/(loss) attributable        GBP168,000   GBP(3,332,000) 
  to equity holders of 
  the Company 
-----------------------------  --------------  --------------- 
 
   Weighted average number 
   of ordinary shares 
   in issue                       149,939,377      147,616,172 
-----------------------------  --------------  --------------- 
 
   Basic earnings/(loss)           0.11 pence     (2.26) pence 
   per share 
-----------------------------  --------------  --------------- 
 
 
   Dilutive effect of              15,794,717                - 
   weighted average options 
   and warrants 
 
 Total of weighted average 
  shares together with 
  dilutive effect of 
  weighted options                165,734,094      147,616,172 
-----------------------------  --------------  --------------- 
 
   Diluted earnings/(loss)         0.10 pence     (2.26) pence 
   per share 
-----------------------------  --------------  --------------- 
 

No dividends were paid for the year ended 31 December 2016 (2015: GBPnil). The effect of options and warrants in 2016 and 2015 are anti-dilutive.

A total of 24,456,500 options and warrants were outstanding at the end of the year which may become dilutive in future years.

   3              Segmental reporting 

The Board has reviewed the requirements of IFRS 8 "Operating Segments", including consideration of what results and information the Board (the Chief Operating Decision Maker) reviews regularly to assess performance and allocate resources, and concluded that all revenue falls under a single business segment. The Directors consider the business does not have separate divisional segments as defined under IFRS 8. The Board assesses the commercial performance of the business based upon a single set of revenues, margins, operating costs and assets.

   4              Net cash used from operations 
 
                                        2016       2015 
                                     GBP'000    GBP'000 
-------------------------------    ---------  --------- 
 
 Profit/(loss) after 
  tax                                    168    (3,332) 
 Adjustments for: 
   Depreciation                           86        101 
   Amortisation                           13         29 
   Impairment of intangible 
    assets                                 -      1,279 
   Loss on disposal of 
    tangible assets                       10         14 
   Tax credit                           (45)      (111) 
   Impairment of deferred 
    tax asset                              -      1,142 
   Interest expense                       22         16 
 Changes in working capital: 
   Inventories                            62         99 
   Trade and other receivables         (724)        584 
   Trade and other payables               65         99 
 
 Cash used in operations               (343)       (80) 
---------------------------------  ---------  --------- 
 
   4          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.symphonyenviornmental.com

NOTES TO EDITORS:

About Symphony Environmental Technologies plc

Symphony has developed a range of additives, concentrates and master-batches marketed as d(2) p, which can be incorporated in a wide variety of plastic and non-plastic products and applications, so as to give them protection against many different types of bacteria, fungi, algae, moulds, insects and fire.

In addition, Symphony has already developed and continues to develop, controlled-life plastic technology which turns ordinary plastic at the end of its service-life into biodegradable materials. It is then no longer a plastic and can be bioassimilated in the open environment in the same way as a leaf. The technology is branded d(2) w(R) and appears as a droplet logo on many thousands of tonnes of plastic packaging and other plastic products around the world. In some countries oxo-biodegradable plastic is mandatory. For a video of d(2) w(R) plastic degrading see http://degradable.net/play-videos/4.

Symphony has also developed the d(2) Detector(R), a portable device which analyses plastics and detects counterfeit products. Symphony's d(2) t tagging and tracer technology is also available for further security. See www.d2t.net

Symphony has a diverse and growing customer-base and has established itself as an international business with 74 distributors around the world. Products made with Symphony's plastic technologies are now available in 97countries and in many different product applications. Symphony is certified to ISO9001 and ISO14001.

Symphony is a member of The Oxo-biodegradable Plastics Association (www.biodeg.org) (OPA), the Society for the Chemical Industry (UK), and the Pacific Basin Environmental Council. Symphony 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 Symphony Group can be found at www.symphonyenvironmental.com

.

This information is provided by RNS

The company news service from the London Stock Exchange

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March 09, 2017 02:00 ET (07:00 GMT)