28th Jun 2007 07:01
Symphony Environmental Tech. PLC28 June 2007 For Immediate Release 28 June 2007 SYMPHONY ENVIRONMENTAL TECHNOLOGIES PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 Symphony Environmental Technologies Plc ("Symphony" or "the Company"), thedegradable plastics and waste-to-energy Group, today announces its preliminaryresults for the year ended 31 December 2006. HIGHLIGHTS • Turnover down 54% to £4.20m (2005: £9.11m)• Gross profit margin increased to 20% (2005: 19%)• Gross profit down 53% to £0.84m (2005: £1.77m)• Administrative expenses (excluding exceptional) down 13% to £2.21m (2005: £2.55m)• Operating loss (after exceptional costs) up 87% to £2.34m (2005: £1.25m)• Loss per share up 59% to 3.62 pence from 2.28 pence• Name changed to "Symphony Environmental Technologies Plc" reflecting the fact that Symphony is no longer just a plastics company Michael Laurier, Chief Executive said: "This was a challenging year for Symphony but also a year of significant changeas the business moves toward higher margin licensing sales from the high volumeproduct sales. The management structure has now changed to give more control tothe core management team and significant progress has been made by the corebusiness and also by our new pyrolysis technologies. We have been encouraged by the progress we have made so far in 2007 and we lookforward to the future with confidence." For further information, please contact: Symphony Tel: 020 8207 5900Michael Laurier, CEOIan Bristow, FD Citigate Dewe Rogerson Tel: 020 7638 9571Freida MooreGed Brumby Further information on the Symphony Group can be found atwww.symphonyplastics.com and www.degradable.net. CHAIRMAN'S REPORT Symphony has been going through difficult and changing times. The market foroxo-biodegradable technologies since we entered this field has not been easy,and potential customers have been subjected to a determined campaign againstoxo-biodegradable by the hydro-biodegradable (starch-based) industry. However,we can now see that the market is beginning to realise the benefits ofoxo-biodegradable and the limitations of hydro-biodegradable, and this is beingreflected in enquiries and sales of additives. In addition, Symphony is no longer just a plastics company. Symphony EnergyResources has commenced the expansion of Symphony into a waste-to-energy Groupas well. This division of the business is still in its infancy, but it has wontwo UK government grants, and is working with Imperial College and others toproduce commercially viable machines to convert waste tyres and plasticsefficiently into valuable products. This technology answers two of the most important questions I hear when I meetGovernment Ministers and officials in many parts of the world - "What do we dowith waste tyres and plastics? And how do we reduce dependence on imported oil?"Legislation in the EU and elsewhere is demanding reductions in waste going tolandfill and is promoting recycling. I believe that the potential for thisbusiness could be even greater than for oxo-biodegradable plastic. Since 3 April 2007 the Board has taken decisive action to improve operatingperformance by reducing overheads, to re-deploy resources where they can be moreeffective, and to drive higher-margin sales forward. We are already seeing thebenefit of this revised strategy and look forward to a more positive future forthe Company Nirj Deva DL, FRSA, MEPChairman CHIEF EXECUTIVE'S REVIEW Operating performance in 2006 was very disappointing, ending with continuedlosses. There were a number of setbacks in the Caribbean region. An exceptionalwrite off of £830,000 was made in respect to our previous distributor followinga restructuring. In addition, order take up in the region following therestructure was not at the levels anticipated. Most of these setbacks have now been overcome. The Board has changed themanagement team removing the posts of COO and Group MD from the managementstructure, and a competent manager now heads each operating department.Overheads have been cut, and margins are improving. On the oxo-biodegradable plastics side of the business, the Group's change instrategic direction continued throughout 2006, with a move away from sellinghigh-volume/low margin commodity products in mature markets towards markets forsuch products where we have identified more profitable opportunities. Inaddition Symphony has been licensing higher margin/lower volume d2w(R) additivetechnology instead of plastic products. Significant progress has been made withinternational sales, and d2w(R) is now sold and/or represented in more than 50countries. FINANCIAL REVIEW Total group sales decreased by 54% to £4.20m, group gross profits decreased by53% from £1.77m to £0.84m. Sales of additives, however, grew 100% in 2006. Thefall in total sales was due to the change in strategic direction away fromnon-degradable sales and sales in high volume commodity products. Non-exceptional administrative expenses decreased by 13% to £2.21m in 2006, from£2.55 in 2005. The change in direction has started to have a positive impact oncosts, primarily staff costs where the move away from high volume commodityproducts has allowed the group to operate effectively with fewer support staff. The operating loss in 2006 increased to £2.34m from £1.25m in 2005. Thisincluded exceptional costs of £830,000 relating to writing off the debt owed byour distributor in the Caribbean. (2005: exceptional costs of £0.19m related tolegal cost provisions). Research and development tax credits totalling £37,334 were received during 2006and these are included in tax on loss on ordinary activities in the profit andloss account. Development costs of £64,000 (2005: £nil) were capitalised duringthe year. These costs relate to continued work carried out in developing new andimproved formulations of our d2w(R) range of additives. The loss per share increased to 3.62 pence from 2.28 pence. Approximately £630,000 was raised in the year under review through a shareplacing, and a further £254,000 net, by a convertible loan. Net cash outflowfrom operating activities was £0.35m (2005: cash outflow £1.55m). CURRENT TRADING AND OUTLOOK Encouragingly sales of Symphony's d2w(R) additives doubled during the year, withmany new markets opening up. In South America, for example, legislation ischanging in favour of oxo-biodegradable plastic. We are seeing a lot more exposure in global television and the press with recentcoverage of d2w(R) on television in Brazil, Argentina, and Portugal, and a frontpage article in Tunisia. The UK has, perhaps surprisingly, been one of our more difficult markets.However, Symphony's oxo-biodegradable products are back in the Co-op, and othermajor UK retailers are beginning to realise the benefits of oxo-biodegradableand have started to demand oxo-biodegradable products. Their suppliers aroundthe world are now contacting us and some are already buying d2w(R). The market is also beginning to realise the limitations of starch-basedplastics, in particular their high cost and the fact that they emit methane,which is a potent greenhouse gas. In addition, polylactose acid (PLA) basedproducts are not compatible with most recycling schemes and concern is growingthat making fuels and plastics from crops is driving up food prices anddestroying rain forests. In Portugal the country's largest retail group, Sonae, has adopted d2w(R) in alltheir carrier bags for their Continente, Mondelo and Mondelo Bonjour supermarketchains, which are estimated to account for more than 500 million bags per year.This is significant not in terms of absolute value, but for the breakthroughwhich it represents. This builds on the current portfolio which includesMarriott and Royal Caribbean Cruise Lines, and leading UK supermarkets are nowusing d2w(R) finished products or our additive technology. The world's largestsupermarket, Wal-Mart, is now using d2w(R) in its Argentinian stores after amajor media-launch. In France and Belgium, products made with d2w(R) are beingsold throughout Europe by Retif; the B-to-B leader in specialised distributionof retail equipment and supplies. Further improvements are being made to the growing range of d2w(R) additives,which could open new product applications. Stretch film using d2w(R) additive isbeing supplied on a regular basis to New Zealand. Trials of agriculturalmulching film and protective sleeves are ongoing. The group's strategy into 2007 primarily incorporates the sale of high marginadditive products which enable a lower cost base and significantly improvedworking capital cycle. After review of the current performance of the Group, thenew strategy has shown a marked improvement in gross profit margins. Since April2007 significant cost reductions have also been made in areas without causingdetriment to developing business going forward. The balance sheet was also strengthened in February 2007 with a placing whichnetted the group £1,100,000 after associated costs. MANAGEMENT CHANGES Matthew Turner joined the main Board on 29 August 2006 and left the Company on27 April 2007. We were pleased to report that Michael F. Stephens rejoined the main Board on 13November 2006 as Technical Director. Keith Frener left the main Board on 25 September 2006 and now focuses on theoxo-biodegradable side of the business mainly in the UK, as a Director ofSymphony Environmental Limited. On 3 April 2007 the Chairman appointed Mr. Michael Stephen, an experiencedBarrister and former Member of Parliament, (no relation to the TechnicalDirector) to make recommendations for the improvement of operating proceduresand corporate governance within the Company. These recommendations have beenendorsed by the Board and are being implemented. STANDARDS One of the problems experienced by oxo-biodegradable plastic has been EuropeanStandard EN 13432, which unfairly discriminates against oxo-biodegradabletechnology. Matters are now moving in the right direction, as the BritishStandards Institute is working on a new standard, which is capable of testingoxo-biodegradable. The French BNPP is also working on a draft standard foroxo-biodegradable plastic in agricultural applications. WASTE-TO-ENERGY(Symphony Energy Resources Limited ("SER")) THERMAL PYROLYSIS Following Cabinet approval in Sri Lanka we are now preparing the way to draw upformal contracts. It must be stressed that no contract is yet in place, but iscurrently estimated that the programme will commence in the final quarter of2007 for installation and commissioning of a plant to convert waste plastics tooil and gas in the second half of 2008. MICROWAVE PYROLYSIS SER successfully competed at a national level with 57 other companies for a DTIgrant of £50,000 towards a feasibility study into microwave pyrolysis of wastetyres, to convert them into useful products. The second stage of this grantaward scheme takes place in the autumn and we could secure a further substantialgrant toward the design and construction of a commercial scale microwavepyrolysis plant. Following our success in the first grant award, we again competed nationally ina separate award scheme for a research studentship grant to study microwaveprocessing of waste plastic. In May this year we were one of only threecompanies out of over 100 who were successful, and we were awarded £62,000 instudentship grants. Microwave pyrolysis of scrap tyres has been the subject of an intense academicstudy programme, and we have now received the report from the lead universityconducting the study. Further academic work is ongoing to quantify and qualifythe end products of microwave pyrolysis of tyres. CONCLUSION During the past twelve months Symphony has been transformed from a commodityplastics company into an environmental technologies Group, delivering solutionsto some of the world's most pressing environmental problems. Major changes have taken place, and the Company is now in a much better positionto face the future. We are investing in R&D for both oxo-biodegradableapplications and for waste-to-energy. We are expanding our network ofdistributors, we are improving efficiency, and we are evaluating othertechnologies where synergies exist. As indicated earlier, of the 192 countries in the world Symphony is now in morethan 50 and d2w(R) continues to progress. Though 2006 was a tough year forSymphony we have been encouraged by the progress we have made so far in 2007 andwe look forward to the future with confidence. Michael LaurierChief Executive Officer CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 December 2006 Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 £'000 £'000 Turnover 4,200 9,109 Cost of sales (3,362) (7,342) Gross profit 838 1,767 Distribution costs (143) (272) Administrative expenses - other (2,207) (2,552)Administrative expenses - exceptional item (830) (191)Administrative expenses (3,037) (2,743) Operating loss (2,342) (1,248) Net interest (37) (166) Loss on ordinary activities before taxation (2,379) (1,414) Tax on loss on ordinary activities 37 40 Loss for the financial year (2,342) (1,374) Basic and diluted loss per share in pence (3.62)p (2.28)p There were no recognised gains or losses other than the loss for the financialyear. CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2006 2006 2005 £'000 £'000Fixed assetsIntangible assets 70 18Tangible assets 222 247Investments 531 16 823 281 Current assetsStocks 545 304Debtors 897 2,773Cash at bank and in hand 215 1 1,657 3,078 Creditors: amounts falling due within one year (1,945) (1,607) Net current (liabilities)/assets (288) 1,471 Total assets less current liabilities 535 1,752 Creditors: amounts falling due after more than one year (509) (89) 26 1,663 Capital and reservesCalled up share capital 697 634Share premium account 11,392 10,824Other reserves 822 822Profit and loss account (12,885) (10,617) Shareholders' funds 26 1,663 CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2006 2006 2005 £'000 £'000 Net cash outflow from operating activities (355) (1,546) Returns on investments and servicing of financeInterest received - 2Interest paid (29) (157)Interest element of finance leases and hire purchase (8) (11) Net cash outflow from returns on investments and servicing of finance (37) (166) Taxation 37 40 Capital expenditure and financial investmentPayments to acquire intangible fixed assets (64) (6)Payments to acquire tangible fixed assets (12) (26)Receipts from sale of fixed assets 7 44 Net cash outflow from capital expenditure and financial investment (69) 12Cash outflow before financing (424) (1,660) FinancingIssue of equity share capital 63 121Share premium on issue of equity share capital 567 1,718Share issue expenses - (10)Proceeds from convertible loan 254 -Capital element of finance leases and hire purchase (34) (61) Net cash inflow from financing 850 1,768 Increase/(decrease) in cash 426 (108) NOTES TO THE PRELIMINARY STATEMENT Preliminary Results for year ended 31 December 2006 1 BASIS OF PREPARATION The preliminary announcement has been prepared on the basis of accountingpolicies consistent with the audited financial statements for the year ended 31December 2006. 2 LOSS PER SHARE The calculation of basic loss per share is based on a loss for the year of£2,342,000 (2005: £1,374,000) divided by the weighted average number of sharesin issue during the year of 64,743,108 (2005: 60,327,090). 3 PUBLICATION OF NON-STATUTORY ACCOUNTS The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The balance sheet at 31 December 2006 and the profit and loss account for theyear then ended have been extracted from the Group's financial statements uponwhich the auditors' opinion is unqualified. The 2005 financial statements have been filed with the Registrar of Companies,but the 2006 financial statements are not yet filed. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Symphony Env.