Biome Tech Regulatory News (BIOM)

14 Mar 2008 07:01

Stanelco PLC14 March 2008 14th March 2008 Stanelco Plc ("Stanelco","the Company" or "the Group") Preliminary Results for the 12 months ended 31st December 2007 Financial Highlights Note - 2006 was a 14 month period • Group revenue £8.1m (2006: £6.7m) • Loss from operations excluding exceptional items £3.1m (2006: loss £6.6m) • Closing Group cash position £8.1m; ahead of Board's expectations • Loss per share 0.169p (2006: Loss per share 1.213p) Business Highlights • A year of transition and focus; re-organised Group into two distinct divisions: - BioPlastics - strengthened Biotec sales; commenced commercialisation of further IP from Aquasol portfolio - RF Applications - generating increased orders for traditional RF business • Organisational changes resulted in a tight management team with clear priority of achieving growth through commercialisation of technology and products • Disciplined and careful approach to cash control John Standen, Non-Executive Chairman said: "This past year has been one of significant achievements and positive changesfor Stanelco, led by Paul Mines and his team. We have focused the business ontwo distinct areas that the Board believes will provide the Company with asustainable, profitable future." "With our substantial cash resources enabling us to look at sensible investmentopportunities and improving sales showing the benefits of good management, weremain confident that the resources are in place to improve our businessperformance over time." "The current year has started well and we expect continued good progress in theGroup's main businesses. This gives the Board confidence in the outlook forfurther development in 2008." - Ends - For further information please contact: Paul Mines, Chief Executive, Stanelco plc Tel: +44 (0) 2380 867100Clive Warner, Finance Director, Stanelco plc Jonathon Brill/Caroline Stewart, Tel: +44 (0) 20 7831 3113Financial Dynamics Chairman's statement This year has seen a number of significant achievements and positive changes forStanelco. In particular, we have begun the commercialisation of more of the IPfrom the Aquasol portfolio with a credible partner; Stanelco's direct sales ofproduct from the Biotec joint venture (JV) have increased materially in thesecond half of the year (albeit from a small base); and our RF subsidiary isbuilding a sizeable enquiry book compared with its previous performance in 2006.Management changes at the beginning of the year, and the appointment of PaulMines as CEO, are having a positive effect. Results In line with the Board's expectations, we made a trading loss before exceptionalitems for the year ended 31 December 2007 of £3.1 million (2006: loss £6.6million). The loss before taxation was £5.0 million (2006: loss £15.3 million)resulting in a loss per share of 0.169 pence (2006: loss 1.213 pence). Turnoverof £8.1 million (2006: £6.7 million) was lower than our expectations,principally due to reduced volume take-off at Biotec in the second half of theyear by its principal customer SPhere SA (SPhere). The Board do not recommendthe payment of a dividend. Our cash position at year end was £8.1 million, significantly ahead of theBoard's expectations, due to a disciplined and careful approach being taken onexpenditure by our financial management. With our substantial cash resources enabling us to look at sensible investmentopportunities and improving sales showing the benefits of good management, weremain confident that the resources are in place to improve our businessperformance over time. When we achieve profitability we should have substantialprotection from taxation due to the ability to offset prior years' losses. Strategy Since our interim statement, the Board has planned the future strategic path forthe business. Stanelco has been reorganised and focused into two distinctareas; BioPlastics and Radio Frequency Applications (RF). Our BioPlastics division encompasses all our activities in bio-based plastics.We have grouped together in this division Aquasol, the Biotec JV and ourbusiness based on growing sales of bioplastics, either based on Biotec's IP oron IP offering similar advantages in the marketplace. We regard this as our corebusiness going forward and are looking for new opportunities to increase itscritical mass quickly. The investment we are making in pilot facilities and additional technical/science skills in the UK is underway and we look forward to the extra impetusand capability that this will bring to the development and commercialisation ofbioplastics. Biotec is our JV with SPhere. It has valuable know-how and IP in the bioplasticsarena and has volume capacity substantially above its current output. Biotec hashad a mixed performance this year, due principally to Novamont S.p.A ("Novamont"), an Italian based competitor, making claims that a patent infringement existswith both Biotec and SPhere. This dispute is being defended vigorously followingadvice from our legal advisors. Inevitably, this has caused SPhere to reduce thevolume purchased from Biotec somewhat. We believe that the Biotec business is avaluable asset and is important to our future strategy and we will do all we canto further its growth within Stanelco. RF was the traditional base of the group and has been re-invigorated to seek andservice business opportunities in its loyal market; this change in approach iscapturing new business, encouraging existing customers to increase volumes andre-activating former customers. With improving performance now apparent from Stanelco, my task, and that of theBoard, is to secure the confidence of our shareholders and to pursue a strategythat delivers sustainable and profitable growth into the future. Board and employees We are now a small board of directors devoted to achieving success for ourshareholders. The quality and depth of management skills that Paul Mines and hissubsequent appointees have brought to the business is beginning to emerge andthere is more to come. Our employees have experienced considerable management change over the past twoyears and have put in a magnificent level of commitment during that time. Theemployee base has been reduced significantly but is now beginning an upwardcurve in line with improving sales. I hope that our employees will be able toreap rewards in the same way as our shareholders as our success grows. May Ioffer my thanks to all those who have contributed to our improving performancethis year. Outlook The current year has started well and we expect continued good progress in theGroup's main businesses. This gives the Board confidence in the outlook forfurther development in 2008. John Standen Chairman 14th March 2008 Chief Executive's statement The last year has been a very exciting and challenging one for Stanelco as theGroup has brought greater focus and development impetus to its technology andproducts. This will allow us to ensure we deliver the commercialisation of ourcurrent portfolio of developments. The decision to concentrate the management attention onto two key areas of thebusiness is yielding benefits in the clarity of purpose of our team andencouragingly greater interest from customers for trials and tenders. There issome early indication of direct sales uplift but this remains limited to-date. We have a cohesive new product origination and industrialisation plan that isalready seeing several innovative new products launched in the RF Applicationsbusiness and others in the pipe-line of the BioPlastics business. The year has seen considerable progress on the elimination of vestigial claimsand issues holding back the business by managerial distraction or legal/financial obligation. Whilst minor issues remain, these no longer represent adistraction to the business. In the future we are seeking to commercialise our developing product rangethrough direct sales, partnerships and other innovative routes. Operational Review STANELCO BIOPLASTICS A single Stanelco BioPlastics operating unit was established in the yearincorporating Biotec, the global sales function for bioplastic resins and theactivities of Aquasol. Stanelco's bioplastic products build on 17 years of development at Biotec andare being enhanced by both ongoing development at Biotec and the increasingdepth and experience of the technical team at Stanelco. The global bioplastics market is emergent with various technology typescompeting for what still remains a limited requirement. In Europe the market todate has been focused on biodegradability and compostability; this has favouredthinner materials such as films for bags. In North America and Asia it appearsthat the market has a greater desire for "sustainability" and for bio materialswhich replace oil based materials in part or completely. Specific underlyingdemands and growth rates remain difficult to predict as various customer basesassess their appetite for the differing properties and often additional costsassociated with biomaterials. Whilst we believe the existing product offering is "best-in-class" versuscompetitive biomaterials, the functional attributes often fall far short ofexisting oil based products (backed, as they are, by decades of development).The Board has therefore decided to complement the development activities atBiotec with a pilot/development unit at the Company's headquarters inSouthampton under Paul Law's leadership (Paul was appointed MD of theBioPlastics division in October 2007). This unit has recently been commissionedand an extensive set of trials is planned over the next six months. Sales activities were re-organised during the year, particularly in relation toexpanded reach into continental Europe. The early signs from this are promisingwith a greater level of customer contact and pre-commercial trials. Localarrangements for sales in North America were terminated in the period, it isexpected that we shall be developing a renewed approach to this market in 2008. Biotec Biotec is responsible for researching, developing and manufacturing a range ofbiodegradable products from its base in Germany to support the sales andmanufacturing activities of Stanelco and Sphere. Stanelco holds a "Golden Share"in the ownership arrangement with SPhere that is due to expire on 31 December2009. Investment in new equipment at Biotec during the year of £1.0 million increasedeffective capacity to 7,500 tonnes per annum. The end result is a capable andmodern automated facility that, while unproven as yet by demand, may be able toflex up to 20,000 tonnes per annum in its current footprint/configuration. Novamont has brought proceedings against Biotec and SPhere and certain groupcompanies of SPhere claiming infringement of the French and Italian designationsof Novamont's European Patent Numbers EP 0 327 505, EP 0 947 559 and EP 0 937120 (Novamont Patent). Biotec is defending these claims on the basis that the claims in the NovamontPatents relied on by Novamont are not infringed by Biotec and/or are invalid.We are advised that the proceedings are at an early stage and a judgment is notexpected for a year or two at least. Stanelco and Biotec continue to takeprofessional and technical advice with regard to this litigation and areconfident of a successful outcome. Biotec is core to Stanelco's future growth plans and we believe that theexisting product range and underlying science base provide a robust platform forgrowth. Aquasol The Aquasol activities were merged into the Stanelco BioPlastics division duringthe year. The Company commissioned a report from PricewaterhouseCoopers toreview a number of Aquasol patents. This, together with our own analysis, hasenabled us to concentrate development activity into those patents which are mostlikely to provide sustainable and profitable growth. We are also consideringfurther product developments that will utilise Stanelco's own bioplasticmaterials. Royalty and commission agreements continue in place for Quantum Finish withReckitt Benckiser. There is some continuing interest in FrogPack and this isbeing explored with a potential marketing partner. FrogMat is a re-pulpableprotective packaging with cushioning properties, and a pilot production machinefor this product has been completed and validated and is expected to be shippedto our development/commercialisation partner in the first half of 2008. RF APPLICATIONS Our traditional RF business has received significant attention through the year.The Board has reviewed the product portfolio and the market areas that thebusiness can hope to compete in successfully. The core elements of the businessremain mobile welders, fibre optics furnaces, zirconia tubes and general partsand servicing. Work on GreenSeal food tray sealing ceased during the period followingunsuccessful trials and a review of its technological efficacy and cost whencompared with conventional heat sealing alternatives. This has allowedconcentration on the existing customer base which has already produced repeatorders of products not previously sold for some time. Stanelco has a good brandreputation in this area for long-lasting and technically well engineeredproducts. The management team are rebuilding an innovative OEM (original equipmentmanufacturer) RF business. We are refilling the product pipeline andvalue-engineering the existing product range. This is now being followed by areview of the sales and market access structure with around half of enquiries(by value) now originating in Asia. Financial Review The Group's revenue increased to £8.1 million (14 months to 31 December 2006:£6.7 million) principally due to volume increases within Biotec by the sale ofbiodegradable resins to SPhere. The Group's opening cash position was £12.9 million. During the year the netfinal instalment of the Biotec deferred consideration of £1.6 million was paid.The cash movements are detailed in the consolidated cashflow statement andsupporting note. The closing cash position was £8.1 million. The loss from operations before exceptional items for the period, £3.1 million,was in line with the Board's expectations. The finance related income andexpense, including foreign exchange gains, was £0.6 million. The strategic review undertaken during the year resulted in the followingone-off items in the period: • impairment of intangible assets in respect of GreenSeal and Aquasol of £2.3 million; and • costs related to discontinued operation of £0.2 million While the Board is aware that these one-off charges have had a significantimpact on the period's results, the Directors believe that these measures havebeen necessary for the long-term benefit of the Group. The net loss following these one-off items is £5.0 million. The resulting lossper share is 0.169p and shareholders' funds reduced by £3.5 million to £21.3million in the year. The Group has identified that under IFRS, certain aspects of the accounting forprior period acquisitions required restatement. The adjustments required haveno cash impact and no material impact upon the 2007 reported result. Advisory Appointments The Company has appointed advisors during the year which it considers moreappropriate to its future requirements. These include auditors Grant Thornton UKLLP, insurance brokers Heath Lambert Limited, solicitors Osborne Clarke LLP andbankers Royal Bank of Scotland plc Employees There has been considerable organisational change in the year. Average employeenumbers fell from 84 to 54 with most of this difference being accounted for inthe UK business. This has included the recruitment of a number of experienced senior executives,redundancy for some individuals and the significant changing of direction forour staff. I would like to thank all our employees for their commitment during this periodand their readiness to accept the challenges that have faced withprofessionalism and enthusiasm. Paul Mines Chief Executive Officer 14th March 2008 UNAUDITED CONSOLIDATED INCOME STATEMENTFor the period ended 31 December 2007 Note 12 Months ended 14 Months ended 31 December 2007 31 December 2006 as restated £'000 £'000 REVENUE 2 8,064 6,670Cost of sales (5,405) (4,668) GROSS PROFIT 2,659 2,002Distribution costs (227) (220)Recurring Administrative expenses 3 (5,548) (8,388)Exceptional Items 4 (2,527) (8,416) LOSS FROM OPERATIONS (5,643) (15,022) LOSS FROM OPERATIONS EXCLUDING EXCEPTIONAL ITEMS (3,116) (6,606) Interest Received 614 134Finance Charges 5 (458) (580)Foreign Exchange gain 469 187 LOSS BEFORE TAXATION (5,018) (15,281)Taxation (31) 446 LOSS FOR THE PERIOD (5,049) (14,835) Attributable to:Equity holders of the parent (4,583) (14,706)Minority interest (466) (129) RETAINED FOR THE PERIOD (5,049) (14,835) The calculation of earnings per share is based on theloss after tax for the year of £5,049,467 (2006:restated loss of £14,835,000) and a weighted averageof 2,996,577,096 (2006: 1,223,004,193) ordinary sharesin issue Basic and diluted loss per share - pence (0.169) (1.213) All recognised gains and losses are included in the income statement. The accompanying notes form an integral part of the financial statements. UNAUDITED CONSOLIDATED BALANCE SHEETAs at 31 December 2007 At 31 December 2007 At 31 December 2006 as restated £'000 £'000 £'000 £'000 NON-CURRENT ASSETSGoodwill 12,725 13,210Other intangible assets 216 979Property, plant and equipment 4,364 4,018 17,305 18,207CURRENT ASSETSInventories 6,519 1,854Trade and other receivables 1,878 1,152Amounts due on deferred consideration - 1,597Corporation tax - 439Cash and cash equivalents 8,059 12,916 16,456 17,958TOTAL ASSETS 33,761 36,165 CURRENT LIABILITIESTrade and other payables 4,765 1,479Amounts payable in respect of deferredconsideration 466 3,734Promissory notes 5,672 5,205Obligations under finance lease 169 40Bank loans - 5Short term provisions 441 857 11,513 11,320 NON-CURRENT LIABILITIESObligations under finance lease 938 27 938 27 TOTAL LIABILITIES 12,451 11,347 NET ASSETS 21,310 24,818 UNAUDITED CONSOLIDATED BALANCE SHEET (CONTINUED)As at 31 December 2007 At At 31 December 2007 31 December 2006 as restated £'000 £'000 EQUITYShare capital 3,012 2,978Share premium account 38,199 37,932Share options reserve 883 1,016Translation reserves 102 293Retained losses (25,056) (20,473) EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE 17,140 21,746PARENT Minority interest 4,170 3,072 TOTAL EQUITY 21,310 24,818 The accompanying notes form an integral part of the financial statements UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYAs at 31 December 2007 Share Share Shares to Share Translation Retained Attributable Minority TOTAL capital premium be issued options reserves losses to equity interest account reserve holders of EQUITY the parent £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 929 19,899 1,050 393 19 (5,780) 16,510 2,498 19,0081 November 2005 asrestatedExchange translation - - - - 274 (50) 224 21 245differencesNet income recognised - - - - 274 (50) 224 21 245directly in equityLoss for the period - - - - - (14,706) (14,706) (129) (14,835)Total recognised income - - - - 274 (14,756) (14,482) (108) (14,590)and expense for theperiodNew share capital 2,049 18,033 - - - - 20,082 - 20,082subscribedMinority share of - - - - - - - 682 682increase insubsidiaries capitalreserveShares issued in - - (400) - - - (400) - (400)respect deferredconsiderationAdjustment to deferred - - 150 - - - 150 - 150considerationTransfer to non-current (800) (800) (800)liabilitiesShare option charges - - - 686 - - 686 - 686Share options exercised - - - (63) - 63 - - -in periodBalance at 31 December 2,978 37,932 - 1,016 293 (20,473) 21,746 3,072 24,8182006 as restated Balance at 2,978 37,932 - 1,016 293 (20,473) 21,746 3,072 24,8181 January 2007Exchange translation - - - - (191) - (191) 835 644differencesNet income recognised - - - - (191) - (191) 835 644directly in equityLoss for the period - - - - (4,583) (4,583) (466) (5,049)Total recognised income - - - - (191) (4,583) (4,774) 369 (4,405)and expense for theperiodNew share capital 34 267 - - - - 301 - 301subscribedMinority share of - - - - - - - 729 729investment in jointventureShare option charges in - - - (133) - - (133) - (133)periodBalance at 3,012 38,199 - 883 102 (25,056) 17,140 4,170 21,31031 December 2007 UNAUDITED CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2007 Note 12 Months ended 14 Months ended 31 December 2007 31 December 2006 £'000 as restated £'000 NET CASH OUTFLOW FROM OPERATING ACTIVITIES 7 (4,248) (6,926) INVESTING ACTIVITIESInterest received 614 134Proceeds on disposal of property, plant andequipment 673 34Investment in intangible assets (71) (1,406)Purchase of property, plant and equipment (1,029) (2,067)Settlement of deferred consideration (net) (1,909) (1,719) NET CASH USED IN INVESTING ACTIVITIES (1,722) (5,024) FINANCING ACTIVITIESRepayment of loan capital (5) (132)Repayment of obligations under finance lease (157) (83)Proceeds of issue of ordinary share capital 301 19,682Minority interest investment from jointventure partner 729 682Proceeds from finance lease 1,300 76 NET CASH FROM FINANCING ACTIVITIES 2,168 20,225 NET INCREASE/(DECREASE) IN CASH AND CASHEQUIVALENTS (3,802) 8,275 CASH AND CASH EQUIVALENTS AT BEGINNING OFPERIOD 12,916 4,396Effect of foreign exchange rate changes (1,055) 245 CASH AND CASH EQUIVALENTS AT END OF PERIOD 8,059 12,916 The accompanying notes form an integral part of the financial statements UNAUDITED NOTES TO THE FINANCIAL STATEMENTS For the period ended 31 December 2007 1. RESTATEMENT OF PRIOR YEAR RESULTS 12 Months ended 14 Months ended 31 October 2005 31 December 2006 as restated as restated £'000 £'000Increase in transaction costs* 180 Increase in finance charges** 417Increase in pre-tax loss 180 417Cumulative loss bought forward (180)Decrease in Goodwill (856)Increase amounts due to third party in respect (800)of deferred consideration***Increase amounts due to third party in respect 676 (417)of deferred consideration**Reduction in net assets (180) (1,397)Cumulative loss bought forward 180Shares to be issued*** 800Retained Earnings 180 417Reduction in equity 180 1,397 *In the period ended 31 October 2005 transaction costs incurred on anacquisition of £180,000 were included as a cost of investment. These costsshould have been expensed through the profit and loss account. The impact ofthis restatement in the consolidated accounts is to decrease goodwill and todecrease the profit and loss reserve at 31 October 2005 by £180,000. There isno impact upon the results or cash flows reported for the periods ended 31December 2006 or 2007. **Upon transition to IFRS deferred consideration in relation to two acquisitionsmade prior to 31 October 2005 was not discounted as required by IFRS 3. Theimpact of this restatement on the consolidated accounts is to reduce bothgoodwill and deferred consideration payable at 31 October 2005 by £676,000.Interest payable for the period ended 31 December 2006 and deferredconsideration payable at 31 December 2006 are both increased by £417,000. Thereis no impact upon reported cash flows for 2006. ***In the period ended 31 December 2006 deferred consideration payable of£800,000 was described as "Shares to be issued" and was included within Equity.The impact of this restatement is to decrease equity and increase non-currentliabilities as at 31 December 2006 by £800,000. There is no impact upon thereported profit or cash flows for 2006. 2. SEGMENTAL INFORMATION BY GEOGRAPHICAL REGION FOR 12 MONTHS TO DECEMBER 2007 Turnover Segment Capital Assets Expenditure 12 months to As at 31 12 months to December 2007 December 2007 December 2007 £'000's £'000's £'000'sEurope 6,428 23,506 972UK 413 10,255 57Other 1,223 - - 8,064 33,761 1,029 SEGMENTAL INFORMATION BY GEOGRAPHICAL REGION FOR 14 MONTHS TO DECEMBER 2006 Turnover Segment Capital Assets Expenditure 14 months to As at 31 14 months to December 2006 December 2006 December 2006 £'000's £'000's £'000'sEurope 5,385 16,993 1,617UK 645 19,172 1,490Other 640 - - 6,670 36,165 3,107 3. REVENUE AND LOSS FROM OPERATIONS BEFORE EXCEPTIONAL ITEMS AND TAXATION 12 Months ended 14 Months ended 31 December 31 December 2006 2007 as restated £'000 £'000 The loss on operations before exceptional items and taxation is stated after charging/(crediting):Depreciation, amortisation and impairment:Other intangible fixed assets, owned 114 503 Property, plant and equipment, owned 372 607Property, plant and equipment, leased 68 13(Profit)/loss on disposal of property, plant and equipment (204) 9Auditors' remuneration: audit work 76 82 non-audit work 15 90Hire of plant and machinery 12 34Operating lease rentals: Land and buildings 241 217Charge for share based payments (133) 686Bad debt provision - 6 4. EXCEPTIONAL ITEMS 12 Months ended 14 Months ended 31 December 31 December 2007 2006 £'000 £'000The loss from operations after exceptional items and before taxation is stated after charging /(crediting):Exceptional items:Bad debt provision - 66Discontinued operations 217Impairment of intangible assets 2,310 5,529Impairment of inventories - 1,416Impairment and disposal of property, plant and equipment - 696Provision for costs relating to strategic review - 709 2,527 8,416 5. FINANCE CHARGES 12 Months ended 14 Months ended 31 December 31 December 2007 2006 £'000 £'000Finance leases 100 14Bank loan and other interest 64 89Interest on promissory notes 56 60Finance charge on deferred consideration 238 417 458 580 6. DIVIDEND The directors do not recommend the payment of a dividend. 7. NOTES TO CONSOLIDATED CASH FLOW STATEMENT 12 Months ended 14 Months ended 31 December 2007 31 December 2006 £'000s £'000 as restated Loss from operations and exceptional items (5,643) (14,835)Adjustment for:-Amortisation and impairment of intangible fixed assets 2,424 6,032Depreciation of property, plant and equipment 440 1,276Share based payments (133) 686(Profit)/loss on disposal of property, plant and (204) 49equipment(Decrease)/increase in provisions (416) (596)Foreign exchange 469 -Minority interest share of loss 837Operating cash flows before movement in working capital (2,226) (7,388) Decrease / (increase) in inventories (4,665) 750Decrease / (increase) in receivables 1,279 218(Decrease) in payables 1,419 (44) Cash utilised by operations (4,193) (6,464) Corporation tax received/(paid) 403 59Interest paid (458) (521) Net cash outflow from operating activities (4,248) (6,926) Additions to property, plant and equipment during the period amounting to£1,276,691 (2006: £75,656) were financed by new finance leases. 8. REPORT AND FINANCIAL STATEMENTS The financial information set out in this preliminary announcement does notconstitute the Group's statutory accounts for the year ended 31 December 2007 orthe 14 month period ended 31 December 2006. The statutory accounts for 2007 will be finalised on the basis of the financialinformation presented by the directors in this preliminary announcement and willbe delivered to the Registrar of Companies following the Group's Annual GeneralMeeting. The information relating to the 14 months ended 31 December 2006 is extractedfrom the audited accounts that have been filed at Companies House and on whichthe auditors issued an unqualified opinion. The above financial information does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange