Interim Results
Symphony Plastic Technologies PLC
25 September 2006
SYMPHONY PLASTIC TECHNOLOGIES PLC
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2006
NEW WASTE-TO-ENERGY BUSINESS LAUNCHED
Symphony Plastic Technologies plc ('Symphony' or 'the Group'), the degradable
plastics company, announces its interim results for the six months ended 30 June
2006. The Group also announces diversification into waste-to-energy with the
formation of Symphony Energy Resources Limited ('SER').
HIGHLIGHTS
• Sales £2.35 million (2005 H1: £4.95 million including Somerfield £2.73m)
• Gross profit margins increase to 22% (2005 H1: 20%)
• Loss before tax of £0.87m (2005 H1: loss £0.33m)
• Exceptional cost provisions of £0.30m (2005 H1: £nil )
• d2w(R) sales in export markets increase 89% to £0.53m (2005 H1: £0.28m)
After period end
• Matthew Turner appointed as Managing Director
• New waste-to-energy business formed to focus on energy reprocessing
technology systems
• New Structure in Caribbean and US$1 million licence fee
Commenting on the results, Nirj Deva, Chairman of Symphony, said:
'Symphony is recognised for its global leadership in oxo-biodegradable plastic
technology and I am pleased to report that the Group has entered into a high
number of agreements with customers across a broad spectrum of markets and
products. The growth of the market for environmentally responsible solutions
for plastic waste management, propelled by developments in legislation, provides
the Group with many significant opportunities and we are actively investing in
new personnel, systems and resources to take advantage of these.
We are excited to be entering a new phase for the Group with the launch of our
waste-to-energy business which offers many opportunities to accelerate revenues
in the medium to longer term.
Based on the levels of current interest, orders, agreements and projects, the
Board believes that the Group will move forward positively and we look forward
to the future with confidence.'
For further information, please contact:
Symphony
Michael Laurier, CEO Tel: 020 8207 5900
Matthew Turner, MD
Ian Bristow, FD
Citigate Dewe Rogerson
Freida Moore Tel: 020 7638 9571
Ged Brumby
Notes to Editors
Symphony develops and supplies environmentally responsible pro-degradent
additives as well as plastic packaging products. The Group's main technology,
marketed under the d2w(R) registered trademark, causes plastic to degrade,
leaving only water, a minimal amount of carbon dioxide and trace amounts of
non-toxic biomass over a short time period. The d2w(R) product range includes
pro-degradent additives developed for an increasing variety of applications as
well as a range of finished flexible plastic products.
Symphony has a diverse and growing customer base in the UK and has successfully
established itself as an international business after signing distribution
agreements with companies in Argentina, Brazil, Canada & USA, Chile, Colombia,
India, Mexico, New Zealand, Peru, Portugal, South Africa, the Caribbean, Saudi
Arabia, and Qatar. d2w(R) products can already be found in more than 40
countries.
Symphony is now marketing and developing innovative waste-to-energy technology
processing plants and is exploring various opportunities where there is a demand
to increase recycling of waste plastics, tyres and other waste streams by cost
effective processes.
Further information on Symphony can be found at www.symphonyplastics.com and
www.degradable.net.
CHIEF EXECUTIVE'S REVIEW
The six month period under review showed the financial effects of the transition
from a high volume low margin commodity business to a much leaner higher margin
environmental technology business. The process of change has led to a review of
all our direct costs with a particular emphasis of expanding the d2w(R) brand
into new product areas and a greater focus on developing the larger overseas
markets. This new strategic direction was first announced in September 2005 and
further reported on at the Preliminary Results of 27 April 2006.
I am able to report that for the first half of this year gross margins have
improved from 20% to 22% and export sales for our d2w(R) products and additives
increasing by 89% to £0.53m. Some operating costs have been reduced such as
warehousing by closing fixed overhead facilities in favour of outsourced and
more flexible arrangements.
A provision of £300K has been made for the Caribbean restructure program as
detailed later in this report.
The Group has therefore spent the first six months of this year consolidating
its new position.
During the period and because of continuing demand for a wider additive product
range the Group continued to invest in research and development, legislative
support and the development of our international sales team.
Trading Results
Sales reduced by 53% to £2.35 million (2005 H1 £4.95m). Somerfield sales for the
first half of 2005 were £2.73m. Like for like sales excluding Somerfield
increased to £2.35m (2005 H1 £2.22m)
Gross profits revenues decreased to £0.53 million (2005 H1: £1 million). Gross
margins have increased to 22% reflecting the gradual change in sales mix away
from commodity products to technology. Administrative expenses before
exceptional costs decreased by 13% to £1.00 million from £1.15 million reducing
in areas such as staff costs and finance charges.
New Accounting Standard
Included in administrative charges is a charge of £26,000 (2005 H1: £25,000)
made under Financial Reporting Standard 20 (being adopted in 2006) in respect of
share options granted by the Company. The Standard has also had an impact on the
2005 results and a prior year adjustment of £50,000 has been made. The attached
profit and loss account and balance sheet has been restated to reflect this
charge. The charge has been credited to Other Reserves.
Operating losses increased to £0.87m from £0.33 million. Exceptional items of
£0.30m (2005 H1: £nil) are included in this figure.
The loss per share increased to 1.36 pence (2005 H1: loss per share of 0.56
pence).
Management Changes
As part of the new strategic direction of the Company and to ensure that we kept
pace with the evolution of the industry, we felt that it was important to evolve
our management team to meet the developing needs of the business, customers and
shareholders alike. We were pleased to announce the significant strengthening
of our Board with the appointment of Matthew Turner as Managing Director on 29
August. Matthew brings Symphony extensive commercial and leadership skills and
has considerable experience operating in an environmental technology sector.
In addition to this, we have strengthened the senior management team further
with the appointment of John James as Head of International Sales. John's
specific role will be to develop and expand the established overseas
distribution network for the d2w(R) range of products and additives which can
now be found in more than 40 countries.
As part of this management reorganisation, we announced that Allan Blacher left
his position of Chief Operating Officer and the Company. We also announce today
that Keith Frener, Operations Director, has stepped down from the Board to focus
on the development of other areas within Symphony.
Diversification of Business
In line with our new business model, Symphony is pleased to announce a
diversification to its core business into waste-to-energy technology. A new
wholly owned subsidiary, Symphony Energy Resources Limited ('SER'), has been
formed to focus on the development of Symphony's waste-to-energy business.
Robert Nash, 56, has been appointed Managing Director of SER and heads a
specialised team of experts in the field of Thermal and Microwave Pyrolysis
technology. Symphony has been investigating the development and marketing of
waste energy for the past two years and has in the last year increased its
investment in this area.
SER is working with two unique waste-to-energy reprocessing technology systems.
Thermal Pyrolysis System
Thermal Pyrolysis is a process that applies heat to plastics in the absence of
oxygen to break the chemical bonds. The thermal Pyrolysis system converts waste
plastics into Plastic Derived Oil ('PDO'). It is designed to recycle mixed
plastic waste streams into valuable and easily marketable products. The process
provides an alternative route to conventional and more costly recycling systems
and can use most types of plastic/rubber waste that currently go to landfill.
The system itself uses very little energy and is self-propelling with virtually
zero waste generated from the process. PDO output per operating unit is in the
region of 18,000 tonnes per annum which represents a revenue value on today's
oil prices of approximately US $9 million.
In 2005 Symphony signed a Memorandum of Understanding with a US corporation
which allows exclusive marketing rights in most territories excluding the USA
and is also subject to certain performance conditions. This agreement has been
extended in part and is valid until the end of 2007 with further extension
provisions. Symphony is currently in advance negotiations in one territory in
relation to the use of a Thermal Pyrolysis System and is also in discussions
with other interested parties. It is anticipated that revenue for Symphony will
be generated from management fees, licence fees and royalties.
Microwave Pyrolysis System
In July 2006 Symphony acquired the intellectual property and future patent
rights to a British innovative Microwave Pyrolysis process. A 16 week design
study to examine and prove the commerciality of the project by a reputable UK
based global engineering company has been commissioned. The Company has actively
started developing new areas to apply this waste-to-energy technology. In
particular operations that are looking for sustainable solutions to reduce
energy cost have shown an interest in the Technology.
Main Market Review
United Kingdom
Sales of additives are increasing in line with the new business focus of
replacing finished products which are now gradually reducing. An example of this
was first referred to in the Preliminary results issued on 27 April 2006 were we
announced that Co-op had confirmed that it will be using d2w(R) additives in all
its degradable plastic bags. The supply of these degradable finished products
using d2w(R) additives has commenced through their incumbent supplier.
Much of the work in the UK and indeed in other markets remains commercially
sensitive and therefore no specific information can be provided in this review
other than in general terms.
We are actively developing the market and are in discussions, negotiations and
trials with some of UK's highest profile companies and specific references to
some of these were made in our earlier update to the Market of 15 June 2006.
The need for a cost effective, credible solution to plastic packaging waste is
gaining momentum with recent announcements in the press and broadcast on
national television and radio. Further, some large retail groups are now
actively campaigning for biodegradable packaging creating increased levels of
interest for products made with d2w(R) additives.
Europe (France)
Most of our European effort is being focused in France as a result of the
impending 2010 legislation in connection with plastic carrier bags and also the
defensive actions by the plastics industry to protect their position by
supporting a move to create a new standard for oxo-biodegradable technology. The
new standard could become effective before the end of the year and thereafter is
expected to harmonise throughout Europe and internationally thereafter.
Our focus has been to work with the French plastic producers in arguing the case
for oxo-biodegradable packaging as the alternative could result in a ban for the
traditional polymer based alternative thus causing financial harm for the
industry.
The d2w(R) business in France as a result of these efforts has converted some
1500 tonnes of normal finished products to d2w(R) oxo-degradable ones as against
virtually zero sales last year. Our expectations, based on current negotiations,
and trials for France alone, and in the coming year are to achieve sales of
several times this volume in a plastics market that is larger than the UK.
Like in other markets and through our Distributor, Alternative Plastics
(http://www.symphonyplastics.fr/) we are working with some of the highest profile
companies in virtually all the main market sectors.
USA
In line with the earlier announcement of 27 April 2006, our US distributor
Degradable Polymer Products Inc continues to make satisfactory progress toward
completing the arrangements for payment to Symphony under the Distribution
Agreement of US$550,000. A commencement fee of US$100,000 was paid to Symphony
within the period under review.
As part of the consideration for the Agreement, Degradable Polymer Products Inc
has issued to Symphony five million, six hundred thousand (5,600,000) fully paid
common shares from its treasury at a price of US0.15 per share. The value of
these shares has not been recognised in our accounts as Degradable Polymer
Products Inc fund raising program is not due to be completed until the end of
this financial year.
We are advised that sales and marketing are progressing in a satisfactory way
with several new trial orders secured.
The sales arrangement between Symphony, DePoly and Rand International, as
announced on 21 August 2006, incentivises the parties to secure some significant
sales objectives and developments. Taking into account current activities we are
confident that the parties are making positive progress towards achieving their
objectives.
Caribbean Business
On 27 April 2006 we announced that an investment of around £800,000 had been
made to date in this region and that orders in the territory exceeded US$3
million subject to local bank approval. On 22 May 2006 we announced that initial
banking facilities had been approved and that orders for the region were
expected to exceed US$4 million in the full financial year. Subsequent to that
orders and payments started to flow albeit at a rate far lower than anticipated.
Following a recent visit to the region by Matthew Turner, it was decided to
restructure the current arrangements. We believe the new structure offers better
security and sales prospects for d2w(R) than the previous arrangement Therefore
we have terminated the license agreement with our distributor (CEPI) Caribbean
Environmental Protection Inc., and Loramark Marketing Inc. As a result of this
termination a provision of £300K is being made while we go through a process of
recovering our investment and ensuring improved returns.
The restructure of the business albeit at an initial financial cost, opens the
opportunity to expand at a much faster and more profitable rate than previous.
Moreover, the restructure will strengthened cash-flows in the short to medium
term.
Symphony is very pleased to announce that it has appointed A S Bryden (an
investment grade company) as distributor for Barbados with immediate effect. A
US$1 million license fee has been agreed for payment against future sales.
Sales for the region based on current order levels, commitments and negotiations
are expected to exceed earlier projections which were announced to the Market on
the 22 May 2006.
Middle East
In line with our new business strategy the joint venture product manufacturing
arrangement with Bin Hilal Enterprises of Abu Dhabi has been brought to an end.
The remaining equipment will either be paid for by Bin Hilal or sold to another
facility in due course. We continue to hold our investment in the Company which
is actively trading.
Through our distributor, Interplast of Dubai, a substantial amount of marketing
work for d2w(R) additives has been ongoing in the region and recent reports
indicate a substantial increase in business over the coming months. Products
made with d2w(R) additives can be found in Dubai, Jordan and Qatar with new
applications beyond refuse and carrier bags being developed.
Outlook
Symphony is recognised for its global leadership of oxo-biodegradable plastic
technology and is visible by the d2w(R) droplet brand. The plastics market is
rapidly changing in terms of a growing demand for cost effective environmentally
responsible solutions to the problem of plastic waste management. This momentum
is further propelled by many new developments in legislation that are focused on
making compulsory changes to packaging, waste and recycling.
The group has entered into a large number of agreements for the evaluation,
development and marketing of its range of d2w(R) pro-degradent additives. These
agreements cover a broad spectrum of markets and products and if ultimately
successful will deliver substantial value for the Group.
To maximise these exciting opportunities and as part of the ongoing management
review process we are investing actively in new personnel, systems and resources
to help implement this next phase.
The launch of the new waste-to-energy business offers many opportunities to
accelerate revenues in the medium to longer term.
As a result of recent events that have been referred to in this review the Group
continues to operate in a cash-flow neutral position. The Board is considering
further investments as referred to in the earlier paragraphs although timing and
values have yet to be determined.
Based on the levels of current interest, orders, agreements and projects, we
believe that the Group will move forward positively over the ensuing period.
We look forward to the future with confidence.
Michael Laurier
Chief Executive
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 30 June 2006
Six months to Year ended Six months to
30 June 2006 31 December 2005 30 June 2005
Restated Restated
£'000 £'000 £'000 £'000 £'000 £'000
Turnover 2,347 9,109 4,946
Cost of sales (1,821) (7,342) (3,949)
Gross profit 526 1,767 997
Distribution costs (68) (272) (130)
Administrative expenses - other (1,002) (2,602) (1,153)
Administrative expenses - exceptional items (300) (191) -
Administrative expenses (1,302) (2,793) (1,153)
Operating loss (844) (1,298) (286)
Net interest (24) (166) (39)
Loss on ordinary activities before taxation (868) (1,464) (325)
Tax on loss on ordinary activities - 40 -
Loss for the financial year transferred from (868) (1,424) (325)
reserves
Basic and diluted earnings per share in pence (1.36)p (2.36)p (0.56)p
There were no recognised gains or losses other than the loss for the period.
CONSOLIDATED BALANCE SHEET
As at 30 June 2006
30 June 31 December 30 June
2006 2005 2005
Restated Restated
£'000 £'000 £'000
Fixed assets
Intangible assets 17 18 20
Tangible assets 227 247 258
Investments 16 16 16
260 281 294
Current assets
Stock 169 304 616
Debtors 2,061 2,773 3,886
Cash at bank and in hand 91 1 453
2,321 3,078 4,955
Creditors: amounts falling due within one year (1,689) (1,607) (2,444)
Net current assets 632 1,471 2,511
Total assets less current liabilities 892 1,752 2,805
Creditors: amounts falling due after more than one (71) (89) (83)
year
821 1,663 2,722
Capital and reserves
Called up share capital 634 634 634
Share premium account 10,824 10,824 10,809
Other reserves 898 872 848
Profit and loss account (11,535) (10,667) (9,569)
821 1,663 2,722
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2006
Six months Year Six months
to ended to
30 June 31 December 30 June
2006 2005 2005
Restated Restated
£'000 £'000 £'000
Net cash inflow/(outflow) from operating activities 9 (1,547) (1,083)
Returns on investments and servicing of finance
Interest received - 2 1
Interest paid (20) (157) (37)
Finance lease interest paid (5) (11) (3)
Net cash outflow from returns on investments and (25) (166) (39)
servicing of finance
Taxation - 40 -
Capital expenditure and financial investment
Purchase of tangible fixed assets 3 (6) (85)
Purchase of intangible fixed assets - (26) (6)
Receipts from sale of fixed assets - 44 11
Net cash outflow from capital expenditure and financial 3 12 (80)
investment
Financing
Issues of equity share capital - 121 121
Share premium on issue of equity share capital - 1,718 1,718
Share issue expenses - (10) (25)
Capital element of finance lease rentals (17) (61) (13)
Inception of finance leases 61
Net cash (outflow)/inflow from financing (17) 1,768 1,862
(Decrease)/increase in cash (30) 108 660
Net cash outflow from operating activities
£'000 £'000 £'000
Operating loss (844) (1,298) (286)
Non cash item - FRS20 26 50 25
Depreciation and amortisation 24 50 20
Loss on disposal of fixed assets - 8 (1)
Decrease/(increase) in stocks 135 76 (236)
Decrease/(increase) in debtors 712 624 (488)
(Decrease)/increase in creditors (44) (1058) (117)
Net cash outflow from operating activities 9 (1,547) (1,083)
NOTES TO THE INTERIM ACCOUNTS
1. BASIS OF PREPARATION
The interim financial statements have been prepared on the basis of the
accounting policies set out on pages 8 and 9 of the 2005 Annual Report, and are
unaudited. The accounting policies have been amended for this interim statement
to include Financial Reporting Standard 20, share based payments. This change in
accounting policy has resulted in a prior year adjustment charge to the profit
and loss account of £50,000 (£25,000 H1 2005). The comparative figures for the
year ended 31 December 2005, which have been amended by the prior year
adjustment, have been extracted from the group's latest published accounts which
contain an unqualified audit report and which have been filed with the Registrar
of Companies.
2. LOSS PER SHARE
The calculation of basic loss per share is based on a loss for the period
divided by the weighted average number of shares in issue during the period of
63,379,547 (2005 FY 60,327,090; 2005 H1: 57,481,867).
This information is provided by RNS
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