Biome Technologies LON:BIOM, the AIM-listed, Southampton-based plastics and radio frequency (RF) equipment manufacturer will publish its interim results on Friday (20th September).
The company has a lot of ground to make up and the market isn’t expecting a great deal. In its unaudited edition of its interim results, Biome announced group revenues for 1H24 of GBP2.3m, down 36% year-on-year. Management warned the market that its falling revenue was a result of production and regulatory difficulties at two of Biome’s bioplastics division’s end customers as well as the phasing of revenue into 2H24 from four of its RF projects, which is currently undergoing design and build.
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The company has also been working through its cash pile, falling by GBP300,000 y-o-y to GBP600,000, but the company is debt-free although had a GBP1.25, outstanding amount outstanding on a Convertible Loan note.
Biome behind expectations but still positive
Although Biome’s bioplastics division saw revenue fall by GBP1m y-o-y to GBP2m as a result of its clients’ issues, subduing revenues and seeing it fall behind management’s expectations. However, the company is expecting increased revenues from this division in the second half of the year.
Catching the spirit of the age, Biome is in manufacture and R&D of home compostable plastics – a move away from single-use plastics that need industrial composting, and the company is making thicker materials, including mesh.
Biome’s plastics division is split into three units: Mesh, which makes fibres for woven and non-woven filtration applications. Part of the group’s issues originated from this division because of one of its North American coffee companies had production difficulties. Biome worked with its American customer to establish the issue with the product, and the company should start ordering Biome’s products once again in the second half of the year and into 2025.
It also manufactures rigid plastics in its Rigids division, using polymers to produce rigid parts, including through injection moulding and extrusion. It is developing home compostable products in this division. This division also caused a drag on group revenues with its tree guard products as it took longer for Biome to complete the product validation process. The company again expects trade to pick up, especially in tree guards, as a new horticultural planting season commences.
Finally in the plastics division is Biome’s Film unit than manufactures wrapping film for the food packaging industry. Again, home compostable is one of Biome’s unique selling points. This unit faced regulatory issues in its customer’s markets. The company feels that most of these regulatory issues are behind it and product orders should start to increase in the second half of the year.
Biome’s strong RF performance
Away from plastics, Biome manufactures RF equipment and secured three significant contracts in this division with strong sales in its Scientific Glass unit. However, these contracts are set to be completed by the end of the year, so revenue will be booked in the second half of the year. Management has a number of enquiries that could convert to other significant contracts, as well as smaller orders for spares and service.
Biome’s management expects improved operational performance in the rest of 2024 with better performance from bioplastics and delivering its RF contracts on time. The big hope is that Biome’s home compostable plastics will catch the imagination of consumers and drive future growth.
The company also had something of a working capital crisis. Last month it issued nineteen million new shares, raising GBP950,000 before expenses. The company also converted its convertible loan notes of GBP1.3m into 25.6 million shares as well as switching around GBP63,000 of CLNs into a convertible loan. The company also made a separate retail share offer of GBP80,000, increased to GBP160,000 making the whole fundraise exceed GBP1m.
Biome share performance down from heady Stanelco days
Biome’s shares have suffered on the back of its first half performance. Shares opened the week (17th September) at 6.215p, down 96% over one-year and down 94% year-to-date with Biome’s shares ranging between 5p and 170p. The company has a market capitalisation of GBP3.6m.
Although revenues were behind where Biome’s management expected them to be, the company is confident that the remainder of the year would more than make up the poor first half that the company experienced. Biome’s share price has never been as low as it is now.
The company debuted on AIM in July 2013 but has a longer history going back to the 1930 as Stanelco, or the Standard Electric Telephone and Cables Limited in Kent, which became Biome’s RF division, with the Bioplastics (which makes plastics from biological sources, such as sugarcane, potato starch or the cellulose from trees and straw) having a 20-year history.
Under the Stanelco listing, shares were trading hands at GBP559 at their highest point in May 2005. Although it is fair to say that Biome’s shares will never reach these heights again, its products and anticipated better second half might make this company a value investment that could show good recovery in the medium term.
