Byotrol Regulatory News (BYOT)

8 December 2021

Byotrol Plc

("Byotrol" or the "Group")

Interim results and Notice of Investor Presentation

Byotrol Plc (AIM: BYOT), the specialist infection prevention and control company, is pleased to announce today its unaudited interim results for the six months ended 30 September 2021.

Highlights

Performance in the first six months showed substantial and ongoing improvements compared to our performance pre-Covid, but was below management expectations for the period, matching the experience of other companies in our markets and reflecting slower than expected and overstocked markets post the peak of the pandemic demand.

Strategic initiatives progressing well:

During the year we have been making substantial investment in the team, including:

Outlook

Whilst this pandemic is far from over, we find ourselves in a much better position than we were in late 2019. We have an increasingly integrated, profitable, IP-rich and cash generative business in a much expanded market with enhanced annualised growth. Accordingly, the Board remains highly confident in medium and long-term growth and, with the benefit of a stronger balance sheet and contractual cash flows from prior IP sales or licenses, is investing further in the team to deliver it, particularly at leadership level in sales and marketing.

After a challenging H1, particularly in hand hygiene products, sales in October and November have been ahead of the average for H1 and the order book is now building strongly, sitting currently at £850k versus an average of £300k in H1 and approximately £350k pre-Covid. Notably this demand includes a number of sizable orders from new customers in both the UK and overseas.

Market demand and gross margin, however, is likely to remain volatile in the short term and is subject to a potential negative impact of full and partial lockdowns on the demand for consumables. This is especially so at the current time with the current uncertainty introduced by the new Omicron variant of Covid.

Third party interest in our IP and related commercialisation remains strong, with a number of active client discussions under way. Such agreements can be profitable, but we cannot say with certainty which agreements will close and when. We anticipate our first material royalty income in the current financial year.

Whilst we expect to be both profitable and cash generative in the second half of the year, with these uncertainties it is difficult to predict the quantum at this juncture. At present we are expecting IP sales to offset the majority of the anticipated shortfall in profit on product sale, but projecting the timing of IP sales is even more uncertain, so we feel it prudent to now reduce market guidance for the current financial year. Regardless of the timing of our revenues and IP commercialisations over the next four months we remain very well positioned for future growth and are excited by the significant opportunities ahead of us.

Investor Presentation

David Traynor, CEO, and Nic Hellyer, CFO will provide a live presentation relating to these results via the Investor Meet Company platform on 8th Dec 2021 at 2:30pm GMT.

The presentation is open to all existing and potential shareholders. Questions can be submitted at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet BYOTROL PLC via:

https://www.investormeetcompany.com/byotrol-plc/register-investor

Investors who already follow BYOTROL PLC on the Investor Meet Company platform will automatically be invited.

John Langlands, non-executive Chairman of Byotrol commented:

"The Group remains substantially ahead of the pre-Covid period in sales and profits and we expect that performance to endure. 

The team is working hard to consolidate and increase the underlying growth, and also to address the short-term challenges in market conditions. We continue to see multiple opportunities for growth in the medium term and are investing confidently to deliver medium and long-term returns."

For further information contact:

This announcement is released by Byotrol Plc and, prior to publication, the information contained herein was deemed to constitute inside information under the Market Abuse Regulations (EU) No. 596/2014. Such information is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person who arranged for the release of this announcement on behalf of Byotrol Plc was Nic Hellyer, CFO.

* Comparative figures for H1 2020 restated for closure of US business

** Adjusted EBITDA is defined as Earnings before Interest, Tax, Depreciation and Amortisation and exceptional items, share-based payments, non-trading items such as profit or loss on disposal of assets, plus revenue recognised as interest under IFRS 15

Notes to editors

Byotrol plc (BYOT.L), quoted on AIM, is a specialist infection prevention and control company, operating globally in the Healthcare, Industrial, Food and Consumer sectors, providing low toxicity products with a broad-based and targeted efficacy across all microbial classes; bacteria, viruses (including coronavirus), fungi, moulds, mycobacteria and algae.

Byotrol's products can be used stand-alone or as ingredients within existing products, where they can significantly improve their performance, especially in personal hygiene, domestic and industrial disinfection, odour control, food production and food management.

Byotrol develops and commercialises technologies that create easier, safer and cleaner lives for everyone.

For more information, go to byotrol.co.uk

Chief Executive's report and financial review

The first six months of this financial year have followed the pattern expected by management since last year end, with improvement in all financial indicators compared to pre-Covid, but below the extraordinary results during the peak of the pandemic, and indeed a little below management expectations, particularly in product sales and especially in hand hygiene products.

Most market participants have been projecting sales growth in infection control at around 10% across the recent cycle (compared to the 5% normally quoted pre-Covid), which we have exceeded in our own results compared to the first half of our 2020 financial year, and low double digit earnings growth, which we have also exceeded substantially.

In line with our strategy, we continued to make progress on the IP side of our business. Larger customers look to us to provide them with future-proofed technologies with the correct regulatory support via licenses or outright sales. This is very solid business once secured, building a long-term cash flow stream, but it is also lumpy revenue-wise and can lead to volatile profitability. Pre pandemic we invested into increasing product sales via the acquisition of Medimark, but Covid has had the perverse effect of making that side of the business volatile too, at least as the current market conditions persist.

That said, we remain very confident in our positioning and in market recovery and have used the extra resources created during the previous financial year to invest in the business:

Many of these incremental costs have been offset through a restructuring in the period, which we estimate will result in an exceptional charge of c. £0.2m. Net of this, the investment will result in an increase of c.10% in annualised full year cash costs, which will start paying back in mid/late calendar 2022 as the resulting operational efficiencies feed through.

The new team is now working on a more focussed strategy, where we can get the best return for our sales and marketing spend. Byotrol has traditionally (and by necessity given its historical resource constraints) offered its technologies into many different market segments with many different commercials, sold on the basis of its outstanding product performance. This has kept the business growing satisfactorily, but we must now become masters in fewer, discrete segments, talking to clients knowledgably about their businesses and solving their problems where we can. This is a natural and correct evolution of the business and will not result in withdrawing from any current activities, but it will likely mean a shift in how we position ourselves publicly. It should also allow us to deliver a higher net margin as we develop a much more targeted and client focused approach.

Results by segment

Professional

H1 revenues decreased to £2.61m from £5.66m, including £0.75m of royalty and licensing revenue compared to £0.59m in the comparable period. Gross profit on product sales (excluding license revenue) decreased to £0.70m from £1.86m.

As reported in September the first half of the year has been a challenge for product sales due to unexpectedly extended lockdowns and office closures and by too much product in our markets chasing too little business consumption. Brexit has not helped either, increasing the amount of administration required to sell our product into the EU and the UK government decision to move away from much of the EU regulatory regime on chemicals. We are now, for instance, increasingly having to re-do regulatory approvals for the UK, based on a new, slightly different to expectations, regime. The good news is that supply chains seem to have stabilised now, and we are now finally starting to reap some benefits from combining the supply chain effort of Byotrol and Medimark.

Product mix remained broadly consistent with previous comparable periods, although hand hygiene sales have been some way behind expectations due to overstocking and heavy price discounting by alcohol-based hand sanitiser producers. Of the Professional segments, facilities management and environmental (laboratory supplies) has been much weaker than expected, but human and animal health has been steady, with the latter picking up rapidly as veterinary practices re-open.

Consumer

H1 revenues decreased to £0.56m from £0.98m, all of which were product sales. Gross profit on products decreased consequently to £0.20m from £0.45m.

Given the recent history of the Group, we remain substantially underinvested in consumer product sales and are now taking steps to address this, particularly as we see increasing sales of our anti-viral alcohol-free hand sanitiser sales into Boots. Recent new hires into the Byotrol leadership team should help here.

Intellectual Property Sales and Licensing

We continue to make progress in monetizing our IP. Of the current activities in place, the three most notable progressions are:

Balance sheet

Our balance sheet continues to be strong, with cash at the period end of £1.9m and a healthy balance of receivables from IP sales and licenses providing regular short and medium term cash flows. Our stock position, which was at a high point at the 2021 year end of £1.1m, has now reduced to a more normal £0.7m. Additions to capitalised development costs in the period reflect the Group's usual investment in regulatory and other IP as well as largely one-off expenditure on the Group's patent portfolio.

Outlook

As we expected mid-pandemic, sales are now settling at a significantly higher rate than pre-Covid. This underlying growth has been hidden slightly by unusually high overstocking, especially in hand sanitisers, one-off market factors such as Brexit and the resultant pricing pressures in the first half of the year, but this challenge does now seem to be unwinding and our order book has more than doubled since period end.

IP sales and activity remains very strong, and incoming levels of enquiry remain high.

We have been busy investing our resources in an upgraded team, with track records of developing new business streams and growing sales generally and this is leading to significantly higher annualised projected annual cost base compared to pre-Covid, before supporting spend on items such as market research and marketing. This is the right thing to do to maximise shareholder returns over the medium term and we are highly confident that payback will accrue in the new financial year, if not earlier. The long-term outlook for your company remains excellent.

David Traynor

Chief Executive

Group statement of comprehensive income

Group statement of financial position

Group statement of cash flows

Group statement of changes in equity

Notes to the Group financial statements

1 Basis of preparation

The Group has prepared its interim financial statements for the 6 months ended 30 September 2021 (the "interim results") in accordance with the recognition and measurement principles of International Financial Reporting Standards ("IFRS") as adopted by the European Union and also in accordance with the recognition and measurement principles of IFRS issued by the International Accounting Standards Board, but do not include all the disclosures that would otherwise be required. They have been prepared under the historical cost convention as modified to include the revaluation of certain non-current assets. The accounting policies adopted in the interim financial statements are consistent with those adopted in the Group's Annual Report and Financial Statements for the year ended 31 March 2021 and those which will be adopted in the preparation of the annual report for the year ending 31 March 2022.

As permitted, the interim results have been prepared in accordance with the AIM Rules of the London Stock Exchange and not in accordance with IAS34 Interim Financial Reporting. They do not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006 and are unaudited.

Certain comparative amounts for the 6 months ended 30 September 2020 in the Group Statement of Comprehensive Income, Group Statement of Cash Flows and related notes have been reclassified or restated to achieve a more appropriate presentation as required by IFRS 5: Non-current assets held for sale and discontinued operations.

Going concern

The Directors have considered trading and cash flow forecasts prepared for the Group, and based on these are satisfied that the Group will continue to be able to meet its liabilities as they fall due for at least one year from the date of these results. On this basis, they consider it appropriate to have adopted the going concern basis in the preparation of the interim results, which were approved by the Board of Directors on 7 December 2021.

Comparative financial information

The comparative financial information presented herein for the year ended 31 March 2021 does not constitute full statutory accounts for that period. The statutory accounts for the year ended 31 March 2021 carried an unqualified Auditor's Report, did not draw attention to any matters by way of emphasis and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006.

2 Segmental analysis

Revenue and gross profit by segment

Revenue by geography

The Group recognises revenue in three geographical regions based on the location of customers, as follows:

* this represents revenue other than that arising from discontinued operations

Management makes no allocation of costs, assets or liabilities between these segments since all trading activities are operated as a single business unit.

License revenue and finance income

License contracts (and certain other contracts relating to the sale of IP) typically provide for fixed payments to be made by customers over a given term (typically between three and five years but which may extend longer). Under IFRS 15, in order to reflect the time value of money, such contracts are recognised as the capitalised value of the income stream plus notional interest accruing for the period on the credit deemed to be extended to the customer (on a reducing balance basis). For the 6 months to 30 September 2021 this figure amounts to license revenue of £0.75m and notional interest income of £26,000.

3 Non-GAAP profit measures and exceptional items

Reconciliation of operating profit to adjusted EBITDA (earnings before interest, taxation, depreciation and amortisation):

The criterion for adjusting items in the calculation of adjusted EBITDA is operating income or expenses that are material and either (i) arise from an irregular and significant event or (ii) are such that the income/cost is recognised in a pattern that is unrelated to the resulting operational performance. Materiality is defined as an amount which, to a user, would influence decision-making based on, and understandability of, the financial statements. Adjustment for share-based payment expense is made because, once the cost has been calculated, the Directors cannot influence the share based payment charge incurred in subsequent years, and the value of the share option to the employee differs considerably in value and timing from the actual cash cost to the Group.

Exceptional items are treated as exceptional by reason of their size or nature and are excluded from the calculation of adjusted EBITDA (and adjusted earnings per ordinary share) to allow a better understanding of comparable year-on-year trading and thereby an assessment of the underlying trends in the Group's financial performance. These measures also provide consistency with the Group's internal management reporting.

Adjusted EPS

The calculation of adjusted EPS is shown in Note 6.

4 Finance income

5 Finance expense

6 Earnings per share

The following sets out the earnings and share data used in the basic and diluted earnings per share computations:

Denominator for earnings per share ("EPS") calculations

The Group has one category of potentially dilutive ordinary share, being those share options granted to employees where the exercise price (plus the remaining expected charge to profit under IFRS 2 per option) is less than the average price of the Company's ordinary shares during the period. The weighted average number of shares for the calculation of diluted earnings per share is computed using the treasury share method.

Numerator for EPS calculations

The criteria for inclusion of adjusting items in the calculation of adjusted EPS are the same as those relating to the calculation of adjusted EBITDA as set out in Note 3. Amortisation of acquisition-related intangibles (and the associated tax credit) relates to the amortisation of intangible assets in respect of customer relationships and brands which are recognised on a business combination and are non-cash in nature.

EPS - reported

* Continuing operations only

EPS - adjusted

* Continuing operations only

7 Intangible assets

Intangible assets comprise capitalised development costs, acquired software, customer relationships and goodwill.

Other Intangible Assets comprise:

8 Right-of-use assets

Right-of-use assets comprise leases over office buildings and vehicles.

9 Lease liabilities

Lease liabilities comprise liabilities arising from the committed and expected payments on leases over office buildings and vehicles.

10 Post balance sheet events

There have been no events subsequent to the reporting date which would have a material impact on these interim financial results

 [END]