26 October 2020

BiON plc

("BiON" or the "Company" or the "Group")

Interim Results

BiON (AIM: BION), an environmental engineering, wastewater treatment and renewable energy solutions company, announces its interim results for the six months ended 30 June 2020.   

Financial Summary

·    Revenue increased to RM27.2m (H1 2019: RM1.9m)

·    Gross profit of RM0.7m (H1 2019: RM0.1m loss)

·    Operating loss reduced to RM2.8m (H1 2019: RM3.7m loss)

·    Loss before tax reduced to RM2.7m (H1 2019: RM4.4m)

·    Cash and cash equivalents at 30 June 2020 were RM0.3m (31 December 2019: RM0.08m)

Operational Summary

·   Completed engineering, procurement, construction and commissioning ("EPCC") contracts for wastewater treatment and infrastructure projects despite disruption to operations caused by COVID-19 pandemic

·    Progressed upgrading and engineering works at fully-owned Kahang and Malpom biogas power plants 

·   Post period, conditionally acquired two further biogas power plants with a combined installed capacity of 3.0MW

Syed Nazim bin Syed Faisal, Chief Executive Officer, said: "I am pleased that we were able to complete our EPCC projects to ensure a significant increase in revenue over the first half of last year, despite COVID-19 and the public lockdown. We also continued to progress our Kahang and Malpom biogas power plants and, post period, acquired two further plants, bringing our installed capacity to 7.0MW. Our focus is now on commencing commercial operations at our two new plants, which, subject to receiving regulatory approval, we expect to achieve by year end. We look forward to reporting on our progress and delivering sustainable growth."

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the EU Market Abuse Regulation (596/2014).

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Operational Review

The Group is one of Malaysia's leading environmental engineering, renewable energy and green technology solutions providers. Currently, its business focus is to construct, operate and own biogas power generation plants in Malaysia, derived namely from the treatment of palm oil mill effluent (POME) and other wastes produced in the processing of palm oil at palm oil mills. The biogas generated (i.e. methane) is converted into electricity to be sold to the Malaysian national grid under a long-term renewable energy power purchase agreement. Aside from this, the Group provides similar services to third parties through EPCC contracts.

During the first half of 2020, the Group continued to source and procure EPCC projects. This included providing hydraulic and water supply-related engineering and technology services at a wastewater treatment plant in Terengganu, Malaysia. The Group also continued with the upgrading works at its fully-owned biogas power plants at Kahang and Malpom to enable full operations to recommence. However, progress was hindered during the period by the onset of the COVID-19 pandemic and associated government restrictions on the movement of goods and people as described below.

Post period end, through its subsidiary, BiON Sdn Bhd, the Group conditionally acquired two biogas power plants, at Nasarudin and Seberang Perak, from Megagreen Energy Sdn Bhd ("MGE"), an associate company of the Group. The plants, with a combined installed capacity of 3.0MW, are under the Malaysian FiT programme with 16-year power purchase agreements with Tenaga Nasional Berhad, the country's largest integrated electricity company. The construction of these plants is complete. They are now pending testing by the authorities to enable interconnection with the electricity grid and, following verification, the receipt of regulatory approval to commence commercial operations. The Group expects this to occur by year end, subject to government restrictions related to the COVID-19 pandemic.

COVID-19 Update

Following the outbreak of COVID-19, on 18 March 2020 the Government of Malaysia implemented a Movement Control Order ("MCO"), which was the lockdown and restriction of movement for all civilians and non-essential businesses, including a ban on interstate travel. This required the Group to cease its construction activities at the various project sites as supplies, materials and equipment were not transportable or obtainable.

As of 4 May 2020, the Government of Malaysia transitioned the MCO to a Conditional Movement Control Order ("CMCO"), which allowed certain business sectors and companies to resume operations within continued strict parameters regarding social distancing. Consequently, the Group commenced resuming its operations in a phased manner. However, interstate border control was still in place and so, while employees were permitted to travel to the project sites with a letter of authority from the Group, the movement of resources, materials and equipment to sites or offices progressed slowly. The CMCO subsequently transitioned to a Recovery Movement Control Order ("RMCO") on 10 June 2020, under which interstate travel was allowed and most sectors were permitted to reopen while adhering to the government's pandemic-related Standard Operating Procedures. Post period end, on 14 October, the Malaysian government introduced a new CMCO for much of the country, which is expected to last a minimum of two weeks. While permitting most business sectors to remain open, the CMCO has instated the requirement for employees to have a letter of authority to be able to travel between districts or states. 

The Group implemented a number of mitigating measures to support cash flows during this period of reduced trading. This included participating in the Social Security Organisation's Wage Subsidy Programme, which was introduced under the Government of Malaysia's Prihatin Rakyat Economic Stimulus package to help businesses affected by the COVID-19 outbreak by paying towards employees' wages. The Group is working with its creditors or suppliers to revise and renegotiate payment terms, in a manner acceptable to all parties, either through postponing payments, devising a staggered payment plan or revising the existing payment plan. The Group is also engaging with its customers to address any issues regarding payment procedures. The Group has continued financial support from Serba Dinamik Sdn Bhd ("Serba"), which will be called upon if required to continue to meet its liabilities.

Financial Review

Revenue for the six months ended 30 June 2020 significantly increased to RM27.2m (H1 2019: RM1.9m), which was generated by the provision of EPCC services. Gross profit was RM0.7m compared with a gross loss of RM0.1m for the same period of the prior year, which reflects the higher revenue for the first half of 2020. 

Operating loss for the period was reduced to RM2.8m (H1 2019: RM3.7m loss) due to the greater revenue. The Group recognised a net finance income of RM0.08m (H1 2019: net finance costs of RM0.8m). As a result, loss before tax was reduced to RM2.7m (H1 2019: RM4.4m loss). The Group was not subject to tax due to it being lossmaking and, therefore, loss after tax was also RM2.7m (H1 2019: RM4.4m loss).  

On a consolidated level, basic loss per share for the six months ended 30 June 2020 was RM0.006 (H1 2019: RM0.012 loss per share) based on the weighted number of ordinary shares.

Cash and cash equivalents at 30 June 2020 were RM0.3m (31 December 2019: RM0.08m; 30 June 2019: RM0.06m).

On 24 January 2020, the Group converted a loan of approximately RM8.40m into ordinary shares of BiON plc. The loan had been procured during 2019, for working capital purposes, from a director of the Company, Syed Nazim Syed Faisal.  

During the period, the Group continued to maintain its repayment arrangements that were structured with MGE and Concord Green Energy Sdn Bhd ("CGE"). However, the amounts outstanding from both accounts have remained long overdue. Discussions are taking place with CGE to re-negotiate the terms of repayment and in the meantime, Serba and one of the executive directors have guaranteed the value of the debt. The amount due from MGE was partly recovered from the Group's purchase of two biogas power plants from the Company as announced on 22 September 2020. The Group's management continue to be in talks with both parties to arrive at an amicable settlement for the remaining amounts.

Outlook

For the second half of the year, BiON is focused on progressing the two recently acquired biogas power plants, which it expects to commence commercial operations by year end subject to the receipt of the required regulatory approvals and COVID-19 disruption. The Group has completed a further EPCC project during the second half and anticipates delivering another contract before the end of the year. BiON also intends to continue work on its Kahang and Malpom plants, which, following the reinstatement of certain lockdown restrictions, the Group expects to complete early next year.     

Looking further ahead, while continuing to develop POME-based biogas power plants, the Board intends to expand its business activities into complementary renewable energy sectors. The Board believes in creating waste-to-value and that there are abundant opportunities in eco-friendly sustainable ventures such as biomass, solar, industrial and wastewater treatment, landfill biogas, livestock waste and more. The Group intends to target these opportunities by leveraging its significant experience and track record in waste-to-energy and environmental engineering as well as by pursuing strategic partnerships, joint ventures and acquisitions, including expanding its EPCC offer to other countries in Southeast Asia.

As a result, and with the ongoing financial support from Serba, the Board continues to look to the future with confidence and to delivering sustainable growth.