2023
Annual Report and Accounts
Symphony Environmental Technologies plc
Annual Report and Accounts 2023
Symphony Environmental Technologies plc
Company Number: 03676824
Symphony Environmental Technologies plc
Annual Report and Accounts 2023
Index to the Annual Report and Accounts
Company information | 2 |
Highlights | 3 |
Chairman's Statement | 3 |
Chief Executive's Review | 4 |
Strategic Report | 8 |
Section 172 Report | 9 |
Principal Risks and Uncertainties | 10 |
Board of Directors | 11 |
Chairman's Corporate Governance Statement | 12 |
Directors' Report | 19 |
Directors' Responsibilities Statement | 23 |
Audit Committee Report | 24 |
Remuneration Committee Report | 25 |
Independent Auditor's Report | 27 |
Consolidated statement of comprehensive income | 34 |
Consolidated statement of financial position | 34 |
Consolidated statement of changes in equity | 35 |
Consolidated cash flow statement | 36 |
Notes to the Annual Report and Accounts | 37 |
Company statement of financial position | 64 |
Company statement of changes in equity | 65 |
Notes to the Company statement of financial position | 66 |
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Symphony Environmental Technologies plc
Annual Report and Accounts 2023
Company Information
Company registration number | 03676824 |
Registered office | 6 Elstree Gate |
Elstree Way | |
Borehamwood | |
Hertfordshire | |
WD6 1JD | |
Directors | Michael Laurier - Chief Executive Officer |
Ian Bristow FCCA - Chief Financial Officer | |
Michael Stephen LL.M - Commercial Director & Deputy Chairman | |
Nicolas Clavel - Non-Executive Director & Chairman | |
Michael Kayser - Independent non-executive director | |
Secretary | Ian Bristow |
Nominated adviser and joint broker | Zeus Capital Limited |
125 Old Broad Street | |
London | |
EC2N 1AR | |
Bankers | HSBC Bank plc |
103 Station Road | |
Edgware | |
Middlesex | |
HA8 7JJ | |
Solicitors | Eversheds Sutherland (International) LLP |
1 Wood Street | |
London | |
EC2V 7WS | |
Auditor | Forvis Mazars LLP |
Chartered Accountants and | |
Statutory Auditor | |
The Pinnacle | |
160 Midsummer Boulevard | |
Milton Keynes | |
MK9 1FF | |
Registrars | Link Group |
Central Square | |
29 Wellington Street | |
Leeds | |
LS1 4DL |
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Symphony Environmental Technologies plc
Annual Report and Accounts 2023
Financial highlights:
- Group revenues £6.35 million (2022: £6.15 million)
- Gross profit £2.33 million (2022: £2.28 million)
- Contribution after distribution costs £2.13 million (2022: £1.87 million)
- Administrative expenses reduced to £4.12 million (2022: £4.80 million)
- Reported loss before tax £2,25 million (2022: £3.01 million)
- Basic loss per share 1.18p (2022: 1.65p)
- Cash used in operations £0.62 million (2022: £1.59 million)
- Cash raised by way of convertible loans £1.50 million
Post year end
- The conversion dates of the convertible loans with Sea Pearl Ventures Limited have been extended to 31 December 2025 with no other changes, including the Group's rights to repay in whole or in part at any time or times until 30 days before the conversion date
- On 22 March 2024 the Group raised £1.4 million of equity (before expenses) by way of a subscription and retail offer
Chairman's Statement
As indicated in the highlights section above, I am pleased to report that the year ended 31 December 2023 showed a reversal of the negative financial trend with all reported indicators being positive. Revenue for the year slightly increased to £6.35 million (2022: £6.15 million), with a 25% reduction in the operating loss.
One of the Group's focuses was to reduce cost, without causing any drag on the sales initiative. This was achieved and continues into 2024.
On 22 March 2024 the Group issued a Circular and a Notice of General Meeting, which provided information on a £1.4 million capital raise by way of a subscription and a business update that showed "progress and opportunities" in several areas of the business.
I will not repeat the information contained in the above, other than to reconfirm that the opportunities are significant and that the Board remains confident that these can develop into material commercial sales in the short to medium term.
N Clavel
Interim Chairman
6 June 2024
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Symphony Environmental Technologies plc
Annual Report and Accounts 2023
Chief Executive's Review
As reported in the Chairman's statement above, a recent business update was issued on 22 March 2024.
d2w - progress and opportunities
The update focused on the opportunities in our main markets, the Middle East and Latin America which represent the Group's largest volume for d2w. Our business model targets several global markets, through 76 distributors. Entry into any of these markets can be rapid, as d2w technology does not disrupt the existing supply chain or products. It is an upgrade process that requires virtually no change to the manufacturing process, machinery or distribution. ESG compliance requirements and continual changes to legislation are encouraging customers to consider alternatives to ordinary plastics.
I am pleased to report that sales of d2w products increased from £4.8 million in 2022 to £5.2 million in 2023. However, our distributors report via their market intelligence that the sales volumes should have been considerably higher. While we have regular customers buying our products, volumes will increase with the introduction of local enforcement policies which, at this time, are nearly non-existent and have been delayed in various markets. Specifically, Saudi Arabia had expected to complete a biodegradable technical evaluation process before 31 December 2023, with the view of more widely enforcing Phase 1 of the legislation (which requires a range of products to be oxo-biodegradable and progressing to Phases 2 and 3 which include an even wider range of products. Yemen has also legislated to make oxo-biodegradable plastic compulsory, but implementation has been delayed by logistical issues, mainly caused by the intense political situation that disrupted product movements. The combined effect of these delays has pushed sales into the 2024 trading year.
In Latin America the market opportunity is mainly driven by a growing demand for ESG compliance, with concerns that changes to legislation will force customers to substitute ordinary plastics for paper, compostable plastics or a biodegradable alternative. In some markets, certain plastic products have been banned and paper alternatives for drinking straws are an example of these continual changes. We are drawing attention to the fact that these changes make matters worse for the environment, and that the problem of plastic litter would be solved if d2w were more widely adopted.
Globally we have seen increased activity indicating near-term, genuine interest in parts of Africa, such as Kenya, Ghana and South Africa, as well as in Far East markets which include China, Vietnam, Thailand, Indonesia and South Korea.
d2p - progress and opportunities
The Group has continued to invest in strengthening its portfolio with a large range of d2p formulations which are being used and commercially trialled in many different applications.
- d2p anti insecticide in agricultural products
A large proportion of current d2p revenues were generated from sales of d2p anti-insect technology ("d2p AI"), the majority of which being to Rivulis. They have incorporated d2p AI technology into their Eurodrip product ranges, sold under the trade name Rivulis Defend. Symphony anticipates further adoption of its d2p AI technology for other applications and in other markets.
- d2p and FDA approval for bread packaging
Sales of d2p antimicrobial ("d2p AM") for bread applications have grown slowly to date, with the technology currently being used in small volumes in specialised brands in Mexico and Peru. We expect these markets to expand steadily into more mainstream locations and brands, as well as into other parts of Latin America on completion of their commercial trials.
Apart from the markets where Grupo Bimbo have exclusivity, our d2p AM technology is currently at different stages of development with a number of other customers. Some customers are in pre-commercial trials and others are at early stages of development.
- d2p flame retardant
The d2p flame retardant range of technologies has trials being carried out in many different applications globally. Currently. the Middle Eastern construction market is a particularly active area, and recent reports indicate that we are near completion of an important certification process, which if successful should lead to significant sales in a very large market.
- Other technologies
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Symphony Environmental Technologies plc
Annual Report and Accounts 2023
The Group has also developed other technologies including corrosion inhibitors for various metals, ethylene and moisture adsorbers for food packaging, as well as antimicrobials for pipes and tanks.
Joint venture in India with Indorama Corporation - Symphony Environmental India Pvt Ltd ("Symphony India")
Symphony India is a joint venture company established in 2022 between Symphony and Indorama India Pvt. Limited, a wholly owned subsidiary of Indorama Corporation. Symphony India is owned 46.5% by Symphony Environmental Limited, 46.5% by Indorama, and 7% by Mr. Arjun Aggarwal, an Indian citizen, who is its Managing Director.
The Government of India has published guidelines to reduce plastic pollution. The product offered by
Symphony India, falls within the standard IS 17899 T:2022 Assessment of Biodegradability of Plastics in Varied Conditions.
If this standard is satisfied, the opportunities in India could be substantial. Symphony India has identified more than 500 prospective companies for which d2w could provide a material benefit. Active discussions are underway with the majority of these target customers who have already been directly corresponded with, but the Board believe the prospects of Symphony India extend far beyond the initial 500 companies.
A number of d2p trials are also ongoing in India including d2p AM for bread bags, of which one has completed successful small trials and is now conducting semi commercial trials, which could lead to full commercial orders during 2024.
Trading results
Group revenue was £6.35 million (2022: £6.15 million) and is analysed in the table below. d2w revenues increased in 2023, primarily due to the new Middle East factory while d2p revenues fell in 2023. This was due to timing differences with expected 2023 orders being received in early 2024. Finished product sales were in line with last year thanks to a reliable primary market in the UK.
2023 | 2022 | ||
£'000 | £'000 | ||
d2w masterbatch revenues | 5,221 | 4,768 | |
d2p masterbatch revenues | 512 | 793 | |
Finished products and sundry revenues | 618 | 593 | |
Total revenues | 6,351 | 6,154 | |
Gross profit | 2,333 | 2,280 | |
- | Gross profit margin | 37% | 37% |
Distribution costs | (203) | (408) | |
- | Percentage of revenues | 3% | 7% |
Contribution after distribution costs | 2,130 | 1,872 | |
- | Percentage of revenues | 34% | 30% |
Gross profit margins were stable at 37% (2022: 37%). Gross profit increased slightly to £2.33 million from
£2.28 million in 2022. Distribution costs reduced by 50% to £0.20 million (2022: £0.41 million) mainly due to the UAE market being supplied with locally made product and also shipping rates having generally softened since the end of Covid.
The board decided to increase the inventory impairment provision profile. The resultant value was calculated based on net proceeds fairly achievable over the short to medium term and were based on specific items where saleability is in doubt, and the dates of the last movements of each stock item as an indicator to future value except for certain raw material items which are known to be required in the short term. The inventory provision was £235,000 (2022: £252,000 due to glove stock provisions in which the Group no longer trade). Adding back this provision gives an underlying gross profit margin of 41% (2022: 41%) and contribution after distribution costs over revenues of 37% (2022: 35%).
Administrative expenses reduced by £0.68 million to £4.12 million (2022: £4.80 million). Staff costs reduced by £0.22 million to £2.22 million. Further reductions were made in respect to professional fees and
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Symphony Environmental Technologies plc
Annual Report and Accounts 2023
consultancy costs. Equity-settledshare-based charges of £0.08 million were included in the year (2022: £0.12 million). One-off legal costs in relation to the EU case of £0.18 million were incurred in 2023.
The Group expensed R&D costs of £0.21 million in 2023 (2022: £0.51 million). In addition, there were intangible asset development cost additions of £0.25 million during the year in respect of the Group's d2p bread technology (2022: £0.17 million). An R&D tax credit of £0.10 million (2022: £0.12 million) was received during 2023 relating to the previous period. A further R&D tax credit will be receivable in 2024 with respect to 2023.
The share of loss in respect to the joint venture in India was £73,000 (2022: £nil). This loss was incurred while Symphony India was working on satisfying the standard in relation to biodegradable plastic, as descried above, as well as developing d2p opportunities.
The reported operating loss was £1.99 million (2022: £2.93 million) and loss after tax of £2.18 million (2022:
£2.89 million) with basic loss per share of 1.17 pence (2022: loss per share 1.65 pence).
The Group self-hedges its US Dollar foreign exchange exposure by purchasing goods where possible in US Dollars and utilises, when deemed appropriate, bank forward currency contract agreements to minimise exchange risk. As at 31 December 2023, the Group had a net balance of US Dollar assets (US Dollar cash balances and receivables less overdrafts and payables) totalling $1.40 million (2022: $1.46 million).
Convertible Loan
The Company has entered into two Convertible Loan Agreements ("CLAs") with Sea Pearl, who are also an existing 17.4% shareholder of the Company. Details announced to the market were:
First CLA: | 13 March 2023: £1.0 million facility - £1.0 million drawn down |
Second CLA: | 18 October 2023: £1.0 million facility - £0.5 million drawn down |
On 13 March 2024, Sea Pearl and the Company announced extensions to the repayment date of the CLAs by 15 months to 31 December 2025. This substantially improves the working capital requirements and balance sheet profile of the Group.
Other key terms remain unchanged. The full terms are as follows:
- CLAs total drawn principal: £1.5 million (unsecured)
- If not repaid on or before 31 December 2025, conversion on that date
- Conversion price: 80% of the volume-weighted average share price for the 3 months prior to 31 December 2025
- Interest: 7% per annum, payable as accrued on repayment and/or conversion
- Repayment of the CLAs, in full or in part solely at Symphony's discretion
As at the date of this document, the Company has not drawn down the remaining £0.5 million of the second £1.0 million CLA facility. Following Sea Pearl's investment of £0.5 million pursuant to the subscription in March 2024, the Board has confirmed to Sea Pearl that it will not draw down on this remaining £0.5 million under the CLA.
Statement of financial position and cash flow
The Group had net borrowings (excluding convertible loans and lease liabilities) of £0.58 million as at 31 December 2023 (2022: net borrowings (excluding convertible loans and lease liabilities) of £0.84 million). The Group used cash of £0.70 million from operations (2022: £1.59 million) primarily as a result of the loss incurred but mitigated by favourable movements in receivables.
During the year the Group received £1.5 million from the issue of convertible loans, of which conversion has since the year end been extended from 30 September 2024 to 31 December 2025, and post year end raised £1.4 million of equity by subscription and retail offer.
Eranova
As announced in October 2020, the Group made an investment representing 1.6% of the enlarged capital of Eranova SAS (at £130,000 including costs) as part of a €6.00 million pre-industrial plant project. The pilot plant was completed on schedule during October 2021 and was operational and processing small volume commercial orders during 2022 which continued into 2023.
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Symphony Environmental Technologies plc
Annual Report and Accounts 2023
Eranova is in receipt of pledged government grants and loans to further expand the early-stage production facility in Marseille, France. They anticipate completing this process in 2024. They have finished products made using Eranova technology in the French retail sector and in particular listed in Casino, Carrefour, Intermarche and Franprix.
In 2023 Eranova signed its first €2.10 million pre-production licencing agreement to build a facility in Indonesia and is currently producing trial materials. Symphony, as a strategic shareholder of Eranova has an agreement to market Eranova's biobased green algae product derived from green algae.
Our d2w and d2p technologies are fully compatible with Eranova's biobased product and we expect this will become a major growth area for Symphony in the longer term.
Current trading and outlook
Good progress continues to be made on cost reductions and increasing sales. As previously indicated several product trials and regularity applications are still in process. Our expectations based on current information is that we will start to see completion and commercial starts during H2 2024.
We continue to rely on our network of 76 distributors (2022: 79) for managing their markets and hence are sustaining and creating many opportunities for the Group.
The opportunities for Symphony are significant, and whilst taking considerably longer to convert than originally anticipated, a combination of more positive conversations, trials and other factors give the Board confidence that these can and will be converted in the short to medium term.
In the meantime, with the lower cost structure and higher gross margins, the 2024 outlook shows a much more positive commercial position for the Group compared to recent years.
- Laurier Chief Executive 6 June 2024
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Symphony Environmental Technologies plc
Annual Report and Accounts 2023
Strategic Report
Principal activities, business review and future developments
The primary business activities of the Group are the development and supply of environmental plastic additives and masterbatches, together with the development and supply of environmental plastic and rubber finished products to a global market.
A review of the business is given in the Chairman's Statement on page 3 together with the Chief Executive's Review on pages 4 to 7. Future developments are summarised in the Current Trading and Outlook section of the Chief Executive's Review on page 7.
Key performance indicators
The Directors have monitored the progress of the overall Group strategy by reference to certain financial and non-financial key performance indicators.
Key performance indicator | 2023 | 2022 | Method of calculation |
Revenue (£'000) | 6,351 | 6,154 | Revenues for the Group |
Gross profit margin (%) | 36.8% | 37.0% | The ratio of gross profit to sales |
Number of distributors | 76 | 79 | Number of distribution agreements |
These are discussed within the Chairman's Statement and Chief Executive's Review.
Research and development
The Group invests in research and development expenditure and an amount of £210,000 (2022: £510,000)
are included in the operating loss for the year. Development expenditure of £250,000 (2022: £168,000) has been incurred during the year as an addition to intangible fixed assets. See note 12.
The Group makes claims under the Government's R&D tax credit scheme. The Group received £97,000 in the year relating to the 2022 claim. A claim will be made for 2023. See note 8.
Section 172 report
The Section 172 Report is shown on page 9.
Principal risks and uncertainties
The Principal Risks and Uncertainties of the Group are shown on page 10.
Approval
The Strategic Report was approved on behalf of the Board on 6 June 2024.
- Laurier Chief Executive 6 June 2024
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Symphony Environmental Technologies plc published this content on 06 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 June 2024 14:51:04 UTC.