Symphony Env. Regulatory News (SYM)

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 information is considered to be in the public domain

SYMPHONY ENVIRONMENTAL TECHNOLOGIES PLC

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

Interim Results

&

Publication of Coronavirus Report

Symphony Environmental Technologies Plc (AIM: SYM), a global specialist in technologies to enhance the properties of plastic and some non-plastic products by making them biodegradable, and/or to provide protection against threats to health and safety, is pleased to announce its interim financial results for the six-month period ended 30 June 2020.

Financial highlights

· Revenues increased to £4.8 million (H1-2019: £4.1 million)

· Gross profit increased to £2.2 million (H1-2019: £2.0 million)

· Reported profit before tax of £18,000 (H1-2019: loss £86,000)

· Basic earnings per share of 0.01 pence (H1-2019: loss per share of 0.05 pence)

Business highlights - Period and Post-Period

d2p "Designed to Protect" Technologies & Finished Products

· FDA approved Symphony's antibacterial d2p bread packaging - customer trials progressing well

· Personal Protective Equipment ("PPE") orders of approximately £1.0 million

· Positive Bovine Coronavirus test report from Eurofins Biolab, Italy

· d2p anti-microbial pipeline in excess of 100 active projects

d2w Oxo-biodegradable Technology

· Positive indications from legislators and opinion-formers in some markets for d2w type biodegradable plastics

· Some single-use plastic bans suspended

· Saudi Arabia added further oxo-biodegradable products to its enforcement programme

· Queen Mary University further evidenced biodegradation in soil and marine environments

· Study funded by French government proved d2w plastics biodegrade in marine environment

Eranova

· Amended terms for participation in the Eranova Green Algae project agreed (with exclusive distribution rights) - completion expected shortly

Commenting on the results Nicolas Clavel, Interim Chairman of Symphony, said:

I am pleased to report total revenues for the six months ended 30 June 2020 increased 17% to £4.8 million (H1-19: £4.1 million) and a return to profitability. As advised in July, some of Symphony's main distributors experienced severe COVID-19 lockdowns which delayed growth in those countries during the second half of this reported period. In this context, we are pleased with the Group's like-for-like revenue growth during the first half of 2020.

Focusing first on Symphony's d2p "designed to protect" technologies, the Group has now developed a comprehensive suite of active formulations, from anti-microbial, to anti-odour and antibacterial protections. We are extremely optimistic as to the commercial need for these products, but it is both right and necessary that we obtained the necessary regulatory approvals and scientific evidence validating the performance of these technologies. In this regard, a number of very significant milestones have been achieved:

In February, the US Food & Drug Administration ("FDA") approved one of Symphony's d2p technologies for use in bread packaging. Since the FDA approval, the Group has continued to work on evaluation trials with customers as well as independently, the results of which are expected over the coming six months.

The Group has also invested in and developed several other types of d2p products for use in food and non-food packaging and products, including active formulations that are approved for their respective applications in the European Union. Many of these d2p formulations have shown good test results and are currently undergoing customer trials in several countries.

Since the period end, the Group has received positive Bovine Coronavirus test results on the Group's d2p antimicrobial technology. The full test report has now been received and has therefore enabled our distributors and sales teams to move forward on this with their customers, both existing and new.

Symphony's d2p products and technologies cover many applications including PPE, food packaging and water and irrigation piping. Unsurprisingly, given COVID-19, enquiries have increased significantly for antimicrobial d2p in PPE and other products and as previously reported, we expect to deliver approximately £1.0 million of such products in the second half of the year.

In terms of the Group's d2w oxo-biodegradable technologies, Symphony has, and is, campaigning in a number of countries at what the Board perceive to be a key juncture in the history of environmental policy making. COVID-19 has reinforced the view that simply banning certain plastics, particularly single-use plastics is inconsistent with societal and economic needs and we have seen some bans being suspended. Symphony's campaigns have focused on the markets where the Group is most active, and the Board is cautiously optimistic that (outside of the EU) legislators and opinion-formers (particularly in Central and South America) will take meaningful steps towards further encouraging the use of Symphony's type of biodegradable technology over the next 12 months.

The Board is confident that the Group is in a strong position, and is, with its suite of highly relevant technologies, well placed in the current environment to deliver meaningful revenue growth.

Enquiries:

The person responsible for arranging the release of this information is Michael Laurier, CEO of the Company.

Chief Executive's review

We are pleased to report that revenues increased by 17% during the first half of the year to £4.8 million (H1-19: £4.1 million), resulting in a profit of £18,000 compared with a loss of £86,000 in H1-2019. Despite COVID-19, Symphony has continued to invest in product development, regulatory advice and government lobbying (both at the EU and non-EU), together with technical support at levels broadly comparable with the first half of 2019.

d2p "Designed to Protect"

This product range comprises many different formulations and product types that cover numerous applications (see www.d2p.net) and this update just focuses on the most recent d2pAM antimicrobial developments.

Symphony's d2p antibacterial technology was approved by the US FDA for bread packaging in February, and in July we were informed that independent test results had shown that a d2p treated plastic product achieved a virus reduction of 99.8% within 24 hours against the bovine form of Coronavirus. This scientific breakthrough was reported by The Times on 24 July 2020.

We believe that this technology can help with the fight against Coronavirus as it can be applied to a vast range of day-to-day items such as credit cards, banknotes, worktops, door-handles, shopping bags and packaging as well as water pipes and air conditioning pipes. Such products, if intended for short-term use, can be further enhanced by making them fully biodegradable in case they are littered in the open environment, having escaped the waste collection systems. The Group currently has in excess of 100 active d2pAM antimicrobial customer projects.

Our d2p treated and non-treated PPE products order book is strong, with an EU delivery program running into 2021, combined with a high level of anticipated ongoing demand.

Coronavirus test & results

Our global customers and distributors had been waiting for the full report on the Coronavirus tests by Eurofins Biolab, Italy. This was issued on 27 August 2020 and the customer-led process for evaluation and purchasing of additives and products has now accelerated.

The laboratory reported that the virus used for the test was the Bovine Coronavirus BCoV, Strain S379 Riems, and the host cells on which the virus was tested are human tissue -(HRT-18) cells. BCoV is a Coronavirus virus surrogate closely related to the SARS viruses (SARS-CoV and SARS-CoV-2) and COVID-19 as it belongs to the same beta Coronavirus genus and showed similar susceptibility to World Health Organisation formulations in published studies.

The conclusions of the test are extremely positive for Symphony: "The antiviral treatment causes a good viral reduction in accordance with the ISO Standard 21702 requirement of 24 hours contact time and the treated surface does not have any cytotoxic effect on the host cell line". 

Further laboratory trials are ongoing to ascertain performance using different formulations, product types, exposure times, and applications.

d2w Oxo-biodegradable

The global market for d2w biodegradable plastic technology continues to see a "tug of war" game with legislators and users that are clearly misguided or confused on what to do about the serious issue of plastic litter. This issue has become acute as a result of the COVID-19 pandemic, which has caused much greater use of single-use plastics, and in particular, items such as face masks and gloves, which are now beginning to wash up on beaches and in other unwanted places.

We are continually having to address issues that are politically or commercially motivated, and not scientifically based. Our d2w biodegradable plastic technology is proven and supported by more than four decades of independent studies, and has been confirmed this year by Queen Mary University in the UK and LOMIC in France.

We have for many years had to compete with plastic marketed as "compostable" even though our product is designed for a quite different purpose. It is designed to address the problem of litter, by biodegrading in the open environment, and does not need to be taken to an industrial composting facility. We still encounter governments and end users believing that a "compostable" product, that meets EU or US composting standards will biodegrade in the open environment or home composting, when it has actually been tested according to those standards to biodegrade in an industrial composting facility. Many also believe that it will convert into compost, when in fact it is required by those same standards to convert almost entirely into CO2.

The EU's "Single Use Plastics" Directive adds to the confusion as it requires EU members to ban oxo-degradable products that do not properly biodegrade and are not recyclable with ordinary plastics. We continue to explain the difference between oxo-degradable and oxo-biodegradable plastic, and we believe that Symphony's d2w technology would achieve considerably better traction both within the EU and outside Europe if we could resolve this confusion.

Despite these challenging headwinds, the Group has gained positive traction across many markets outside of the EU, as d2w technology offers superior value, with no supply or product quality disruption, low cost and the lowest life-cycle impact.

The scientific evidence for oxo-biodegradable plastics was first published in the 1970's and continues to evolve, with the publication of a scientific paper by Queen Mary University in February 2020, that showed that plastic products upgraded with d2w biodegraded up to 90 times faster than conventional plastics. The most recent evidence is a summary of work as at September 2020 at the CNRS, Laboratoire d'Oceanographie Microbienne, France. This confirmed that plastics treated with d2w biodegraded in sea water and did so at significantly higher levels of efficiency than conventional plastics, with no toxic effects. The project-team has published six scientific papers since 2017 in relation to their studies of plastics in the oceans.

As previously reported, our d2w sales are mainly outside the EU and cover more than 60 countries. The Middle East and South and Central America are the most active, but our Far-East sales, which currently represent less than 10% of our overall sales, have substantially increased over the last 12 months. Part of this is driven by demand from the Middle East, and China as a result of bans that will come into force in major cities from next year of non-degradable plastic bags for use in supermarkets, shopping centres and food delivery services. These bans include, non-degradable single use plastic straws, plastic cotton buds and foam plastic table disposable dinnerware. China is reported to be one of the world's largest consumers of plastics, with 9.4 million tonnes consumed in 2018 and with forecast usage increasing to 41.3 million tonnes by 2025.

As previously advised, in Saudi Arabia the current enforcement programme is progressing, and now includes three new products; woven plastic bags, disposable tableware, and seedling bags. This is in addition to shopping and garbage bags, clothes bags and table covers.

Eranova

Eranova SAS ("Eranova") has developed a technology which extracts starch from marine algae/seaweed (a natural waste product) for use with other materials. This is a massive uncontrolled resource, polluting beaches and the sea. It is a major environmental concern for maritime cities and states and needs constant clearance.

The extracted starch can be combined with polymers to produce compound resins which are compostable and biodegradable and can be used to manufacture a wide range of bioplastic products. In addition, the technology can be developed to produce biofuel, biopolymers, proteins for food and animal feed, as well as by-products for the pharmaceutical and cosmetic industries. This is in line with the EU Bioeconomy Strategy to produce renewable biological resources from land and sea and to convert these into value-added products.

Following the original collaboration agreement between Symphony and Eranova in 2018, Symphony introduced the project to Indorama Corporation ("Indorama"). Pursuant to a current funding round for Eranova, the collaboration agreement has been amended, with Indorama acting as lead-investor and making an investment of €1.0 million. Symphony's financial exposure has reduced from an originally proposed investment of €0.5 million to €0.1 million. Symphony's fully diluted interest in Eranova will now be 1.6%. Symphony will no longer have the option to subscribe for up to 51% of the enlarged capital of Eranova but will have exclusive distribution rights for certain territories.

This investment enables the development of the Eranova project to be accelerated. Pre-industrial development is expected to start during this year with the construction of long seawater tanks, called "raceways" on land provided by the Port of Marseilles, where Eranova will optimise cultivation of algae for the production of the starch extract.

The key benefits of the technology are:

· Carbon capture during the production process

· Uses a natural, renewable, waste product

· A non-food-based resource (compared with corn or potatoes)

· Higher yields per hectare due to the fast growing-rate of marine algae compared to food-crops

· Good mechanical properties and competitive cost

· Potential new markets for by-products of the technology

This funding round for Eranova is due to be completed shortly.

Financial results

Group revenue increased by 17% to £4.8 million compared to £4.1million for the first half of 2019. This was due to growth of d2w sales within our main markets. The gross margin during the period was 45.4% (H1-2019: 49.4%) due to the primarily increased direct costs relating to production for our Middle East market.

We continued our investment into product development, government relations, and marketing and technical support during the period. Administrative expenses increased slightly to £1.96 million (H1-2019: £1.91 million).

Due to the increase in revenues, the Group made a small operating profit of £40,000 (H1-2019: loss £39,000), and a profit before tax of £18,000 (H1-2019: loss £86,000). The profit after tax was £18,000 (H1-2019: loss £86,000).

The earnings per share for the period was 0.01 pence (H1-2019: loss per share of 0.05 pence).

Balance sheet and cashflow

The Group had net cash of £0.29 million at the end of the period (31 December 2019: net cash of £0.88 million).

Net cash of £0.62 million was used in operations (H1-2019: £0.23 million) due to increases in receivables and inventory. Extended time to pay has been granted to some debtors due to COVID-19, and increased inventory has been held against any potential COVID-19 supply chain issues.

The Group has an invoice discounting facility of £1.5 million to assist in funding outstanding receivables when required. The Board believes that the Group has sufficient working capital to support the business and its current opportunities going forward.

Brexit 

The Board continues to consider the possible effects of Brexit on the business and, due to most of the business being outside of the EU, believes that Brexit will not have a material impact on the operations, financial performance or future prospects of the Group. However, the Group is actively looking to increase d2p and PPE business in the EU and so the Board continues to monitor the potential challenges arising from Brexit and the current political and economic uncertainties.

COVID-19

COVID-19 has and continues to cause general uncertainty which may affect several markets in which Symphony operates. There has been delay to some operations within the Group's distributor network but overall effects on Symphony's operations and finances have been minimal. The Group's markets are generally not negatively affected by the pandemic which on the contrary may strengthen given that plastics (and particularly antimicrobial plastics) are essential for protecting food and human health. The Group has not needed any COVID-19 financial support from the government.

Outlook 

Following a robust performance in H1, third quarter invoicing started slowly due to disruption caused by COVID-19 and holiday season delays. However, more recent activity within our strong pipeline indicates a pick-up for the rest of the year and into 2021.

Our current PPE product range includes nitrile, latex, vinyl and plastic examination gloves, as well as face masks. As previously advised, orders for PPE of approximately £1,000,000 have been received for these types of finished products for delivery in the second half of this year and enquiries are growing. However, for many of these product items material demand is greater than current supply and therefore we are focused on securing supply into 2021.

Our global network continues to work hard towards commercialising a growing pipeline of customer-led demand for use in many different d2p applications, and the Board is especially confident of gaining success in the short term with the FDA-approved technology together with the suite of technologies which are showing proven anti-viral protection.

d2w progress is expected to continue at a faster rate, with some Governments expected to approve the use of d2w type technology in plastic products that would otherwise be banned.

The Board is confident that the Group is in a good position and is well placed to strongly move forward over the following months with continuing growth in 2021.

Michael Laurier, Chief Executive

Condensed consolidated interim statement of comprehensive income

All results are attributable to the owners of the parent.

There were no discontinuing operations for any of the above periods.

Condensed consolidated interim statement of financial position

Condensed consolidated interim statement of changes in equity

Equity attributable to the owners of Symphony Environmental Technologies plc:

Condensed consolidated interim cash flow statement

Notes to the interim financial statements

1 Nature of operations and general information

Symphony Environmental Technologies plc (the "Company") and subsidiaries' (together the "Group") principal activities include the development and supply of environmental plastic additives and products.

Symphony Environmental Technologies plc, a public limited company, is the Group's ultimate parent company. It is incorporated and domiciled in England (company number 03676824). The address of its registered office is 6 Elstree Gate, Elstree Way, Borehamwood, Hertfordshire, WD6 1JD, England. The Company's shares are listed on the AIM market of the London Stock Exchange.

These condensed interim consolidated financial statements ("interim financial statements" or "interim report") are for the six months ended 30 June 2020. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2019.

The financial information set out in this interim report does not constitute statutory accounts. The Group's statutory financial statements for the year ended 31 December 2019 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006. These interim condensed consolidated financial statements have not been audited.

These interim financial statements have been prepared in accordance with the requirements of International Accounting Standard ("IAS") 34 "Interim Financial Reporting", and are presented in Pounds Sterling (£), which is the functional currency of the parent company. They have been prepared under the historical cost convention. They have also been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards that are adopted by the European Union, and the policies and measurements are consistent with those stated in the financial statements for the year ended 31 December 2019.

These interim financial statements were approved by the board on 11 September 2020.

2 Significant accounting policies

These interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year ended 31 December 2019.

3 Seasonal fluctuations

The Group operates in many countries and in many different markets. There are therefore no formal or considered seasonal fluctuations affecting the operations of the Group.

4 Segmental analysis

The Board considers that the Group does not have separate operating segments as defined under IFRS 8.

5 Shares issued

 Shares issued are summarised as follows:

6 Earnings per share and dividends

The calculation of earnings per share is based on the result attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.

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 dilutive options and warrants which were exercisable during the period.

Reconciliations of the results and weighted average numbers of shares used in the calculations are set out below:

No dividends were paid for the year ended 31 December 2019.

The effect of options and warrants for the six months to 30 June 2019 and year to 31 December 2019 are anti-dilutive.

7 Availability of Interim Financial Statements

Paper copies of the Interim Financial Statements will be sent to shareholders upon request. Shareholders will be able to download a copy of the Interim Financial Statements from the Group's website www.symphonyenvironmental.com. Further copies of the Interim Financial Statements will be available from the Company's Registered Office at 6 Elstree Gate, Elstree Way, Borehamwood, Hertfordshire WD6 1JD.

NOTES TO EDITORS:

Symphony Environmental Technologies plc

https://www.symphonyenvironmental.com

Symphony has developed a range of additives, concentrates and master-batches marketed under its d2p® ("designed to protect") trademark, which can be incorporated in a wide variety of plastic and non-plastic products so as to provide protection against many different types of microbes, and insects and rodents, and against fire. d2p products also include odour, moisture and ethylene adsorbers as well as other types of food-preserving technologies. Symphony has also launched d2p anti-microbial household gloves and toothbrushes and is developing a range of other d2p finished products for retail sale. See www.d2p.net

Symphony has developed and continues to develop and market, a biodegradable plastic technology which helps tackle the problem of microplastics by turning 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 a similar way to a leaf. The technology is branded d2w® and appears as a droplet logo on many thousands of tonnes of plastic packaging and other plastic products around the world. In some countries, most recently Saudi Arabia, oxo-biodegradable plastic is mandatory. See www.d2w.net 

The Group has complemented its d2w biodegradable product range with d2c "compostable resins and products" that have been tested to US and EU composting standards.

Symphony has also developed the d2Detector®, a portable device which analyses plastics and detects counterfeit products. This is useful to government officials tasked with enforcing legislation, and Symphony's d2t tagging and tracer technology is available for further security.

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 nearly 100 countries and in many different product applications. Symphony itself is accredited to ISO9001 and ISO14001.

Symphony is a member of The OPA (www.biodeg.org) and 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 Group can be found at www.symphonyenvironmental.com and twitter @SymphonyEnv See also Symphony on Instagram. A Symphony App is available for downloading to smartphones.