27th Apr 2006 07:00
Symphony Plastic Technologies PLC27 April 2006 SYMPHONY PLASTIC TECHNOLOGIES PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 Symphony Plastic Technologies plc, the degradable plastics company, todayannounces its preliminary results for the year ended 31 December 2005. HIGHLIGHTS • Turnover up 3% to £9.11m (2004: £8.86m) • Operating loss after exceptional costs of £1.25m (2004: £0.60m) • Gross profits decreased 4% to £1.77m (2004: £1.84m) • Loss per share increased to 2.28 pence from 1.31 pence • Legal case won and no further challenges to Symphony's d2w(R) technology • Strategic review completed and implemented. • The Co-op confirms it will be using Symphony's d2w(R) additives in all its degradable plastic bags • New orders in the Caribbean in excess of US$3m Commenting on the results, Nirj Deva, Chairman of Symphony, said: "This has been a year of several material changes and events. The legalchallenge on our core technology and business was successfully defended with asubstantial cost award in our favour. Raw material prices continued to outpaceour efforts to pass the cost on to our customers and our largest carrier bagcontract came to an end. However, the new brand has been launched and theglobal coverage for d2w(R) continues to expand in terms of customers andvolumes. With substantial reductions in operational costs and a new focus inselling d2w(R) and higher value technology and products we are confident thatthe business is well placed to move forward into profitability." For further information, please contact: Symphony Tel: 020 8207 5900Michael Laurier, CEO Ian Bristow, FD Panmure Gordon & Co Tel: 020 7614 8385Andrew Godber Citigate Dewe Rogerson Tel: 020 7638 9571Patrick Toyne-Sewell Ged Brumby Further information on Symphony Plastic Technologies plc Symphony develops and supplies environmentally responsible plastic packagingproducts and additives, which are distributed primarily to the retail, localauthority and health related sectors. The Group's main technology, d2w(R),allows plastic to degrade, leaving only water, a minimal amount of carbondioxide and trace amounts of non-toxic biomass over a short time period. The d2w(R) product range now includes additives, carrier bags, refuse sacks, mailingwrap, stretch film, and packaging films. Symphony has a diverse customer base in the UK and has successfully establisheditself as an international business after signing distribution agreements withcompanies in Brazil, Canada & USA, New Zealand, South Africa, the Caribbean,Saudi Arabia, Colombia and Qatar. Symphony's products can now be found in morethan 37 countries. Further information on Symphony can be found atwww.symphonyplastics.com and www.degradable.net. CHIEF EXECUTIVE'S REVIEW The year under review was probably the most significant in the Company'shistory, being marked, amongst other events, by three noteworthy developments: areview of the Company's activities and strategic direction; the successfulconclusion of the long-running and disruptive legal case; and a significant movein sentiment towards greater environmental responsibility. Review of activities During the year the Board undertook a fundamental and thorough review of all theGroup's activities and has adopted what we are confident will prove to be aneffective new corporate strategy to take advantage of the changed circumstancesof the business and opportunities within our market place. Successful conclusion of legal case During the period the Group also successfully concluded the long period of legalchallenge against our core technology, brand and business by EnvironmentalProducts Inc (EPI). Symphony was awarded its full Appeal costs and, inaddition, an interim award of £600,000 was ordered for immediate settlement fromfunds previously lodged by EPI with the Court as security for Symphony's costs.Although the legal process was disruptive and costly, the end result isextremely positive as it successfully moves Symphony from being a companyreliant on a limited and restricted licence to one which owns and can developits own intellectual property and brand. Environmental responsibility There were also clear signs of a step change in activity surroundingenvironmentally responsible plastics: from a significant increase in Governmentaction in many countries to the emergence of more technologies and companiescompeting in this field, and a far greater awareness and interest fromretailers, manufacturers and other businesses around the world. New strategy Consequently, since the start of 2006 the Board has pursued a new strategicdirection for the Group with a focus on developing sales of the Group'stechnology through the sale of higher margin additives rather than trying tocompete for the sale of high volume, low price, commodity finished products.Having redefined the Group's focus we have reorganised and restructured ouroperations, which has involved cost reductions and staff reorganisation as wellas a review of our logistics and warehousing needs. The changes implementedwill lead to significant improvement in operating margins as we start to achievea fundamental change towards being driven by margin instead of sales. The benefits to sales from these changes will not be instantly effective but theinitial response from prospective customers to our changed strategy has beenvery positive indeed; for example Co-operative Retail, the first majorsupermarket in the UK to use degradable technology, has confirmed that it isswitching to using our additive and d2w(R) brand on all their degradable plasticbags from a rival product. Symphony's d2w(R) brand and trade mark remains by far the best established andmost widely recognised world-wide symbol for plastics degradability and this iskey in our current and future marketing strategy. Our internationaldistribution network continues to grow; our additives and d2w(R) brand can nowbe found in more than 37 countries. Our current priority, however, is to buildsales rapidly through our existing network of distributors before furtherexpanding our global coverage. Historically, we have disclosed the location oridentity of important prospects or opportunities before sales were achieved butbelieve that now it is more prudent to withhold such commercially sensitivedisclosure until actual sales or higher volumes have been established. Our North American business activities are getting back on track having beendelayed throughout the period under review by potential customer and investorconcerns over the legal challenge the Group was facing. I am very pleased toreport we are now aggressively pursuing the business opportunity in what is oneof the world's largest markets. New sales of finished products were establishedin the year under review. Many Governments are taking more active steps towards dealing with the problemsof waste and litter. Whilst there are too many to warrant inclusion in thisreview, it is useful to note, as an example, the decision of the FrenchGovernment to require all plastic carrier bags to be bio-degradable by 2010. Itis clearly important for Symphony to continue to take a very proactive part ininfluencing decision makers in this area, despite the cost in cash andmanagement time and despite the absence of any immediate return for thatinvestment. Financial review Total group sales increased by 3% to £9.11m. Group gross profits decreased by 4%from £1.84m to £1.77m. The Group completed the Somerfield contract in November2005 which brought to an end a satisfactory three year contract. The turnover toSomerfield in 2005 was £4.60m. During 2005 costs were increased, primarily staffrelated, to augment activities relating to the Somerfield contract andfurthering commodity product sales in the UK. The other factors affecting Groupprofits during this period were oil prices, currency exchange rates and polymerraw material prices. The operating loss in 2005 increased to £1.25m from £0.60m in 2004. Included in the operating loss are exceptional legal costs of £191,000 relatingto the EPI case. Although the director's are confident that a significant amountof this is recoverable and indeed £270,000 is held in Court, the complicatedprocess of recovery has led to this provision. Since the year end £600,000 hasbeen awarded and received as an interim settlement. The gross legal costs of thecase and subsequent appeal were in excess of £1.15m. Research and development tax credits totalling £40,000 were received during 2005and these are included in tax on loss on ordinary activities in the profit andloss account. The loss per share increased to 2.28 pence from 1.31 pence. We raised approximately £1.8 million in the year under review through shareplacings which was used to support cost for the EPI legal challenge, workingcapital, new projects, staff and re-branding. I am pleased to report that our North American distributor recently paidUS$100,000 as a commitment fee, and has confirmed, subject to market conditions,to make a further payment of US$550,000 before the end of this financial yearfor the exclusive distribution licence in North America. We have continued to support the development of the Caribbean markets throughour exclusive distributor in the region. The investment made to date has beenthrough product supply credit to the value of around £800,000 and is partlysecured by assets under debenture in the Group's favour. We anticipate that theoperations in the territory will require less financial commitment from theGroup going forward as the new orders received are cash positive. Outlook The d2w(R) brand appears as a droplet style logo and is developing into arecognised symbol for Symphony's oxo-biodegradable plastic technology in anexpanding range of applications. Market awareness is growing as a result of manynew interlinked websites and sales and marketing activities. These connectingsites that are managed through our global distribution network can be found atwww.degradable. net. The re-branding program is now complete and a new range of retail products areavailable for marketing and distribution. Work continues on product development,testing and lobbying for changes to legislation. We are also continuing ourefforts to make changes to the European Standards as these are essential beforethe French legislation comes into effect in 2010. As the new strategy and business model develops we believe that cash-flow willstrengthen as our need to hold stocks and large debtors diminishes. Salesturnover for this year is expected to be lower but operating marginssignificantly higher. Costs have now reduced as we have a smaller supply chainrequirement and our main sales drive is led by independent externaldistributors. The North American business has got off to a good start with new orders andcommitments for d2w(R) additives and products. Furthermore, a substantial numberof product trials are on-going for a range of new applications. The Caribbean business is increasing with confirmed orders for the territoryexceeding US$3 million. We are currently waiting for final approval in theregion for bank facilities to fund these orders. With a larger distribution network, strong brand, lower cost and a developingglobal need to resolve the issues of plastic pollution we believe that 2006 willmark the year of positive change and substantial improvement in operatingperformance. CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 December 2005 Year ended Year ended 31 December 2005 31 December 2004 £'000 £'000 £'000 £'000 Turnover 9,109 8,855 Cost of sales (7,342) (7,013) Gross profit 1,767 1,842 Distribution costs (272) (283) Administrative expenses - other (2,552) (2,054)Administrative expenses - exceptional item (191) (100)Administrative expenses (2,743) (2,154) Operating loss (1,248) (595) Net interest (166) (132) Loss on ordinary activities before taxation (1,414) (727) Tax on loss on ordinary activities 40 105 Loss for the financial year transferred from (1,374) (622)reserves Basic and diluted loss per share in pence (2.28)p (1.31)p There were no recognised gains or losses other than the loss for the financialyear. CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2005 2005 2004 £'000 £'000Fixed assetsIntangible assets 18 15Tangible assets 247 203Investments 16 16 281 234 Current assetsStocks 304 380Debtors 2,773 3,397Cash at bank and in hand 1 1 3,078 3,778 Creditors: amounts falling due within one year (1,607) (2,763) Net current assets 1,471 1,015 Total assets less current liabilities 1,752 1,249 Creditors: amounts falling due after more than one year (89) (41) 1,663 1,208 Capital and reservesCalled up share capital 634 513Share premium account 10,824 9,116Other reserves 822 822Profit and loss account (10,617) (9,243) Shareholders' funds 1,663 1,208 CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2005 2005 2004 £'000 £'000Net cash outflow from operating activities (1,546) (1,049) Returns on investments and servicing of financeInterest received 2 -Interest paid (157) (128)Interest element of finance leases and hire purchase (11) (5) Net cash outflow from returns on investments and servicing of finance (166) (133) Taxation 40 105 Capital expenditure and financial investmentPayments to acquire intangible fixed assets (6) (15)Payments to acquire tangible fixed assets (26) (8)Receipts from sale of fixed assets 44 4 Net cash outflow from capital expenditure and financial investment 12 (19)Cash outflow before financing (1,660) (1,096) FinancingIssue of equity share capital 121 60Share premium on issue of equity share capital 1,718 565Share issue expenses (10) (42)Capital element of finance leases and hire purchase (61) (22) Net cash inflow from financing 1,768 561 (Decrease)/increase in cash (108) (535) NOTES TO THE PRELIMINARY STATEMENT Preliminary Results for year ended 31 December 2005 1 BASIS OF PREPARATION The preliminary announcement has been prepared on the basis of accounting policies consistent with the audited financial statements for the year ended 31 December 2005. 2 LOSS PER SHARE The calculation of basic loss per share is based on a loss for the year of £1,374,000 (2004: £622,000) divided by the weighted average number of shares in issue during the year of 60,327,090 (2004: 47,526,432). 3 PUBLICATION OF NON-STATUTORY ACCOUNTS The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The balance sheet at 31 December 2005 and the profit and loss account for the year then ended have been extracted from the Group's financial statements upon which the auditors opinion is unqualified. The 2004 financial statements have been filed with the Registrar of Companies, but the 2005 financial statements are not yet filed. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Symphony Env.