Biome Tech Regulatory News (BIOM)

29 Jun 2005 07:00

Stanelco PLC29 June 2005 29 June 2005 Stanelco PLC Interim Results for the six months ending 30 April 2005 Highlights • Substantial progress towards commercialisation of GREENSEAL (TM) technology with ASDA • Strategic alliances signed with Premier Technology Inc and Advanced Energy Inc. to enable rapid rollout of GREENSEAL (TM) in North America and elsewhere • Strategic acquisition of Biotec Holdings (Biotec) subject to shareholder approval • Successful launch of Frog Pack(TM) into the UK market • Two placings of Ordinary Shares raising a total of £13.1 million (before expenses) successfully completed with UK institutions Financial Highlights • Turnover of £629,000 (2004: £320,000) • Loss before taxation of £960,000 (2004: £490,000) • Net cash at 30 April 2005 of £2.9 million Phillip Lovegrove, Chairman of Stanelco, commented: "The two commercial agreements for GREENSEAL(TM) signed in the last few weeks with ASDA suppliers and the support from ASDA itself give us enormous confidence in our technology. We look forward to its continued rollout in both the UK andoverseas markets as we seek to establish GREENSEAL(TM) as a must have application in the global packaging marketplace. We also believe that the market potential for starch based films in the mediumterm is substantial and the recent acquisition of Biotec places Stanelco at thevery forefront of this exciting market. With a healthy cash position followingthe well-supported institutional placings, the Board looks forward to the futurewith great confidence." For further information contact: Stanelco Ian Balchin, Chief ExecutiveTel: 44 (0) 2380 867 100 Press: Financial Dynamics Jonathon Brill/Billy CleggTel: 44 (0) 20 7831 3113 Investors: IR focus Neville HarrisTel: 44 (0)20 7378 7033 CHIEF EXECUTIVE'S STATEMENT FOR THE SIX MONTHS ENDED 30 APRIL 2005 It has been an exciting six months for Stanelco PLC. We have made considerableprogress in the adoption of our GREENSEAL(TM) technology, in particular with ourincreasingly strong relationship with ASDA in the UK. In the last few monthsthese have progressed to the point of two ASDA suppliers placing orders for anumber of their machines to be retrofitted. We expect the momentum to continueto accelerate over the year ahead as we look to our goal of establishingGREENSEAL(TM) as an industry standard in the packaging sector. However Stanelco is more than just one product and over the period we have beenfurther using our IP in radio frequency technology (RF), environmentally soundmaterial sciences and design to create a revolutionary range of packagingtechnologies. Our philosophy is simple; New products and processes must offer solutions and applications that givehigher added value, are greener, more environmentally sustainable than thosethey replace and have protectable intellectual property rights. Stanelco will develop the products and processes to a demonstration stage andthen work with partners in order to reach the markets; and under thesecircumstances Stanelco will usually seek to license its technology in order torealise revenue. In this way we believe we will minimise commercial risk and preserve the highestvalue for shareholders. The products offering the prospect of near term revenue generation are beinggiven priority over the company's resources. Acquisition of Biotec Group On 6th June 2005 the Company announced that it had entered into an agreement,subject to shareholder approval, for the acquisition of the entire issued sharecapital of Biotec Holding GMBH and subsidiaries (the "Biotec Group" or "Biotec")from EKI (E. Khashoggi Industries LLC) for a total of US$25 million payable overa 24 month period. Biotec is one of the world's leading exponents of starch technology and has aconsiderable intellectual property portfolio, including many patents, extendingto uses in pharmaceutical and edible applications. It also has ranges ofproducts that are ready for commercialisation within the food and beverageindustries. One early example of this, which we have now patented is abiodegradable cork for wine bottles and discussions are currently underway withnew and existing partners to realise revenue from this development. Natural starch is one of the lowest cost biodegradable, compostable, renewableresource materials and Biotec has a unique portfolio of products includingThermoplastic Starch ("TPS"). This portfolio enables the use of environmentallyresponsible material in place of petroleum based plastics, such aspolypropylene. Stanelco will be aiming to commercialise some of this portfolioduring the remainder of 2005 with the pilot launch of a new thermoplasticmaterial provisionally marketed as Starpol 2000(TM). Starpol 2000(TM) is certified biocompostable. The material can be used to produce food trays and other products and can be processed on most conventional machines and should notrequire major capital investment by convertors. The initial focus will be on the North American market, where polypropylene iswidely used for food trays and where there is increasing demand forbiodegradable packaging. Starpol 2000(TM) additionally provides a stronger gasbarrier for modified atmosphere packaging (MAP) which helps to lengthen shelflife. Sample product has been manufactured and discussions have commenced withmajor retailers. Furthermore, with the rise in oil prices, the cost of petroleum based packagingmaterials is inevitably rising faster than our alternatives - making themincreasingly attractive. In particular APET/PE sheet for making food trays iscurrently in the order of £1.70 per kilo and the target price of the Biotecmaterial will be in the region of £1.80 per kilo. This acquisition also createsa further barrier to entry for potential competition in the GREENSEAL(TM) project. We will be able to provide a turnkey, ecologically, environmentally responsible solution to MAP food-packaging requirements, as Stanelco's RF Sealing and Welding technology can be used to process starch polymers without the degradation or cross-linking caused by other methods such as thermal processing which can render the material unsuitable for food and pharmaceuticalapplications. Biotec will also be a supplier of film to the InGel capsule project. Biotec'sproprietary pharmaceutical grade film is suited for applications where itreplaces conventional polymers such as gelatine. Depending upon thespecification, the film has a cost base of between US$5 to US$8 per kilogram,offering customers significant cost savings when compared to gelatine and othermaterials, which it may replace. In addition, being a mono material, wastegenerated during manufacture can often be immediately re-used. GREENSEAL(TM) Following successful trials, on the 24th March 2005, Stanelco announced that ithas signed a binding contract with ASDA for a 12-month exclusive agreement forthe application of the group's GREENSEAL(TM)tray lidding and thermoforming RFtechnology in the UK and Ireland. ASDA anticipate that several hundred machineswill be adapted in the next 12 months to utilise the technology due to thesignificant benefits it delivers. The main benefits of Stanelco's GREENSEAL(TM)technology are: • an up to 20% lower cost of packaging material; • a higher integrity seal substantially reducing the possibility of packs leaking; • a removal of laminated plastics in favour of mono plastics, which can be easily recycled providing significant environmental benefits and • a saving of up to 70% on power usage in the traylidding/thermoforming machines. Since then the first two full commercial trials have been run successfully andconditional orders received from Youngs Bluecrest and Hitchen Foods plc for upto five machines in the first instance. Further trials are in progress. In order to roll GREENSEAL(TM) Technology out in the USA and elsewhere, Stanelcohas entered into strategic alliances with Advanced Energy Corporation andPremier Technologies. I am also delighted to report that Howard White has beenappointed as Group Managing Director of the Company and President of Stanelco'sUS operations to more accurately reflect the role that Howard has beenfulfilling for Stanelco. Howard has been instrumental in directing theGREENSEAL(TM) project. Two subsidiaries have been incorporated in the USA toenable commercialisation in the North American Continent. Starpol(TM) Starpol(TM) is a range of materials that utilises a patent applied for technology that permits the combining of starch and PVA (polyvinyl alcohol) in any combination into a homogenous material. Adept Polymers developed these materials to both lower the cost of water-soluble and biodegradable materials and to produce materials with improved properties over those currently available. We intend to incorporate these materials in several of our new applications such as CradleWrap(TM). Frog Pack(TM) Frog Pack(TM) is a patent applied for box designed to replace traditionalpackaging used for transporting delicate and or valuable items that arevulnerable to damage in transit due to crushing or shock, such as electronics,car parts, glass items, compact discs, flowers, foodstuffs. Its unique designincorporates the unique SAAP(TM) (shock absorbing arcuate panels) technologydeveloped by Aquasol. The registered design ensures that the optimum energy is adsorbed and dissipatedthrough the package and not the product, no matter which face of the packreceives the impact. Stanelco has appointed its first two distributors ofFrogPack(TM). The product has been well received by the packaging industry inthe UK and orders as well as revenues have begun to flow. It is also availablefor purchase via Ebay. We are currently pursuing routes into other territories,in particular the USA. We anticipate extending the range of protective packaging based upon SAAP(TM)technology with several innovative packaging formats being developed, tested andprotected, such as a new format for transporting cut flowers. CradleWrap(TM) CradleWrap(TM) is a new range of biodegradable air cushion packaging. The firstproduct, CradleWrap(TM) Heavy Duty is a wrapping material containing air bubblesdesigned to absorb high impact. It is now available from our pilot productionline and we expect a gradual take up. Soluble Labels A new range of labels, tapes and films coated with a 100% water-solubleadhesive. Work is progressing with initial applications and we expect this tomove to volume production during 2005. Biodegradable airbag packaging We are currently exploiting our low cost Starpol(TM) biodegradable materials todevelop a range of air pillows used as packaging to fill voids. We are workingclosely with an internationally recognised air pillow manufacturer with a viewto partnering with them to commercialise this technology. Traditional RF business The market for new RF furnaces for the manufacture of optical fibre is showinglittle sign of recovering with customers keen to minimise capital expenditure.Sales of consumable items for furnaces have begun to pick up. We continue to make sales of mobile RF welding units for sealing industrialplastic bags. These units are three times more energy efficient than theheat-sealing units they are designed to replace and give a high integrity seal.Applications include the sealing of waste bags for transit. We have now outsourced all manufacture of RF furnaces and mobile welders whilstretaining control of the intellectual property. InGel Technologies and capsules InGel Technologies Limited (InGel) was established to commercialise Stanelco'ssoft edible capsule making technology. Entitlement to certain patents relating to this technology are the subject oflitigation by our subsidiary Stanelco RF Technologies Ltd against BioProgressTechnology Limited. Further evidence has come to light since the original hearing and having takenlegal advice, Stanelco is confident that it shall be able to continue to pursuethis area of technology. Both parties have been granted leave to appeal theoriginal decision and have filed their appeals. InGel is important but no longer a key element in the success of the Companyand, in mitigation until matters are resolved, we have reduced the resource onthis project. Two other capsule projects are unaffected by the outcome of the litigation andare progressing independently of InGel: We are working with Carclo plc to develop hard shell water soluble capsules fordrug delivery. We are concentrating on increasing the starch content of thecapsules to allow us both to reduce cost and, more importantly, to facilitatethe process of regulatory approval. This technology is in the process of beingpresented to a number of drug development companies. We are anticipating thatthe involvement of Biotec in this venture will significantly reduce developmenttimescales and increase the likelihood of success. We have also been working with Reckitt Benckiser to help develop theirElectrasol(R) 2 in 1 Gelpacs(R)(a) automatic dishwasher detergent capsules.These are now available and selling well in North America. Stanelco receives aroyalty for each capsule sold. Financial Review The Group has made a loss of £0.9m for the six month period ended 30th April2005. The Group has made investments in research and development of £0.7m andincreased its levels of stock by £0.8m from £0.6 m to £1.4m which primarilyrelates to equipment involved in the trials of GREENSEAL(TM). The Group raised£4.8m (net of expenses) by way of an equity placing in February 2005 which hasmainly been utilised as working capital. Shareholders funds have increased from£6.1m to £10.4m in the period. The Group continues to invest in research anddevelopment and is increasing its cost base in a controlled manner to facilitatethe roll out phase of revenue generating products and technologies which has nowcommenced. The Group has recently raised a further £9m (net of expenses) whichwill be used primarily to fund the conditional purchase of Biotec. Outlook As I have described above, we are making good progress on a number of projectswhich have the capability to change fundamentally the dynamics of their targetmarkets and which will build substantial value for our shareholders. This willnot happen overnight, but we expect momentum to continue to build in comingmonths both in relation to GREENSEAL(TM) and to the exciting range of productswithin the Biotec portfolio. Ian BalchinChief Executive29 June 2005 a) Electrasol(R) 2 in 1 Gelpacs(R) are trademarks of Reckitt Benckiser CONSOLIDATED SUMMARISED PROFIT AND LOSS ACCOUNTFOR THE SIX MONTHS ENDED 30 APRIL 2005 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 April 30 April 31 October 2005 2004 2004 £'000 £'000 £'000 TURNOVER 629 320 1,332 Operating results before exceptional items (992) (271) (1,188)Exceptional item - (226) (1,669) OPERATING (LOSS) (992) (497) (2,857)Net interest receivable 33 7 11 (LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION (959) (490) (2,846)Taxation 23 - 59 (LOSS) ON ORDINARY ACTIVITIES AFTER TAXATION (936) (490) (2,787)Minority interest 4 - 4 (LOSS) FOR THE PERIOD (932) (490) (2,783) Dividends - (7) (7) RETAINED (LOSS) FOR THE PERIOD (932) (497) (2,790) EARNINGS PER SHARE Basic and diluted loss per share - pence (0.109) (0.067) (0.370) NOTES TO THE CONSOLIDATED SUMMARISED PROFIT AND LOSS ACCOUNTFOR THE SIX MONTHS ENDED 30 APRIL 2005 Notes 1. Earnings per share The basic loss per share is based on a loss after tax of £936,000 (2004£490,000) and on the basic weighted average ordinary shares in issue during theperiod of 857,040,675 (2004: 733,889,937). 2. Research and development expenditure of £717,000 (2004: £831,000) has beenincurred in the period. Of this expenditure £717,000 (2004: £831,000) has beencapitalised as an intangible asset to be amortised against future revenues.Expenditure of this type is only capitalised where the Board is of the opinionthat future revenues will exceed the costs incurred over the expected productlife in accordance with Statement of Standard Accounting Practice Number 13. 3. Placing On the 9 February 2005 Stanelco placed 38,000,000 ordinary equity shares at aprice of 12.825p per share to raise approximately £4.8m (£4.7m net of expenses)which has mainly been utilised as working capital. Shareholders funds haveincreased from £6.1m to £10.4m in the period. 4. Post balance sheet Acquisition On 6th June 2005 the Company announced that it had entered into an agreement,subject to shareholder approval, for the acquisition of the entire issued sharecapital of Biotec Holding GMBH and subsidiaries (the "Biotec Group" or "Biotec")from EKI (E. Khashoggi Industries LLC) for a total of US$25 million payable overa 24 month period. Of the total consideration, US$1.23 million has already beenpaid in cash to EKI as a non-refundable deposit. A further US$11.27 million isdue to be paid on completion of the acquisition, which will be satisfied incash. A further US$6.25 million in cash is due to be paid in 12 months and afinal payment of US$6.25 million in cash is due 12 months thereafter. Thedeferred elements are not subject to performance criteria. Placing On 8th June Stanelco announced that it had placed 44,000,000 ordinary shares ata price of 21.15p per share to raise approximately £9.3 million (approximately£9.0 million net of expenses). The proceeds of this placing will be usedprimarily to fund the acquisition, which is conditional on shareholder approval. 5. The figures for the year ended 31 October 2004 are an abridged statement ofthe full Group Accounts for that year which have been delivered to the Registrarof Companies and on which the Auditors made an unqualified report and which didnot contain a statement under Section 237 of the Companies Act 1985. The principal accounting policies of the Group have remained unchanged fromthose set out in the Group's 2004 Annual Report and Financial Statements. Thefinancial information set out in this Interim Report does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. The interim financial information in this report has been neither audited, orreviewed by the Company's auditors. 6. Copies of this statement are being sent to all shareholders and will beavailable to the public at the Company's registered office. CONSOLIDATED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDSFOR THE SIX MONTHS ENDED 30 APRIL 2005 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 April 30 April 31 October 2005 2004 2004 £'000 £'000 £'000 (Loss) for the financial period (936) (490) (2,787)Minority interest 4 - 4Dividends - (7) (7) (932) (497) (2,790) New share capital subscribed 5,022 1568 3,742Shares to be issued - - 2,500New share capital subscribed in subsidiary undertaking 205 456 -Less minority interest (4) - - Net addition to shareholders' funds 4,291 1527 3452 Opening shareholders' funds 6,099 2,647 2,647 Closing shareholders' funds 10,390 4,174 6,099 CONSOLIDATED BALANCE SHEETAT 30 APRIL 2005 Unaudited Audited At 30 April 2005 At 31 October 2004 £'000 £'000 £'000 £'000 FIXED ASSETSIntangible assets 6,031 5,567Tangible assets 992 918 7,023 6,485CURRENT ASSETSStocks 1,435 610Debtors 676 651Cash at bank and in hand 3,034 920 5,145 2,181CREDITORS: amounts falling duewithin one year (908) (1,292) NET CURRENT ASSETS 4,237 889 TOTAL ASSETS LESS CURRENT LIABILITIES 11,260 7,374CREDITORS: amounts falling due After more than one year (139) (159) PROVISIONS FOR LIABILITIESAND CHARGES (696) (1,093) 10,425 6,122 CAPITAL AND RESERVESCalled up share capital 882 832Share premium account 10,371 5,209Shares to be issued 2,500 2,500Profit and loss account (3,363) (2,442) SHAREHOLDERS' FUNDS 10,390 6,099Minority interest 35 23 10,425 6,122 The Interim Accounts were approved by the Board on 29 June 2005 Signed on behalf of the Board of Directors Ian H Balchin (Chief Executive) Robert P Boardman (Finance Director) CONSOLIDATED CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 APRIL 2005 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 April 30 April 31 October 2005 2004 2004 Notes £'000 £'000 £'000 NET CASH (OUTFLOW) FROM OPERATING ACTIVITIES 1 (2,231) (282) (731) RETURNS ON INVESTMENT ANDSERVICING OF FINANCEInterest received 18 8 14Interest paid (3) (1) (3) NET CASH INFLOW FROM RETURNS ON INVESTMENTS ANDSERVICING OF FINANCE 15 7 11 TAXATIONCorporation tax (paid) (11) - - CAPITAL EXPENDITURE ANDFINANCIAL INVESTMENTInvestment in intangible fixed assets (717) (831) (1,466)Purchase of tangible fixed assets (140) (12) (280)Sale of tangible fixed assets 10 12 79 NET CASH OUTFLOW FROMCAPITAL EXPENDITURE ANDFINANCIAL INVESTMENT (847) (831) (1,667) ACQUISITIONS AND DISPOSALSCash at bank acquired withsubsidiary - - 59 EQUITY DIVIDENDS PAID Dividend paid (1) (3) (79) FINANCINGIssue of ordinary share capital 5,212 1,702 2,919Capital element of finance lease payments (9) - (3)New bank loan - - 150Repayment of loan capital (14) - (3) NET CASH INFLOW FROMFINANCING 5,189 1,702 3,063 INCREASE IN CASH 2 2,114 593 656 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 APRIL 2005 1. RECONCILIATION OF OPERATING PROFIT TO THE NET CASH INFLOW FROM OPERATINGACTIVITIES Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 April 30 April 31 October 2005 2004 2004 £'000 £'000 £'000 Operating (loss) for the period (992) (497) (2,857)Amortisation and impairment of intangible fixed Assets 187 33 348Depreciation of tangible fixed assets 71 67 171Amortisation of goodwill 72 - 60Loss on disposal of tangible fixed assets - 10 68(Increase)/decrease in stocks (825) (52) (61)(Increase)/decrease in debtors (37) 250 (98)(Decrease)/increase in creditors due within one year (310) (93) 563(Decrease)/increase in provision for liabilitiesand charges (397) - 1075 Net cash (outflow) from operatingactivities (2,231) (282) (731) 2. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 April 30 April 31 October 2005 2004 2004 £'000 £'000 £'000 Increase in cash in the period 2,114 593 656Cash outflow/(inflow) from decrease/(increase) in debt lease financing 23 - (144)New finance leases - - (54)Change in net debt resulting from cash flows 2,137 593 458 Net funds at beginning of period 722 264 264 Net funds at end of period 2,859 857 722 3. ANALYSIS OF CHANGES IN NET FUNDS At At 1 November 30 April 2004 Cash flow 2005Unaudited £'000 £'000 £'000 Cash at bank and in hand 920 2,114 3,034 2,114Bank loan (147) 14 (133)Finance leases (51) 9 (42) 722 2,137 2,859 At At 1 November 30 April 2003 Cash flow 2004Unaudited £'000 £'000 £'000 Cash at bank and in hand 264 593 857 At Other non At 1 November Cash changes 31 October 2003 Cash flow 2004Audited £'000 £'000 £'000 £'000 Cash at bank and in hand 264 656 - 920 656Bank Loan - (147) - (147)Finance Leases - 3 (54) (51) 264 512 (54) 722 This information is provided by RNS The company news service from the London Stock Exchange