CHIEF EXECUTIVE OFFICER'S STATEMENT

Dear Shareholder

Now that the world is returning to a degree of normality following the covid pandemic, Byotrol has returned to its steady pre-covid progress, but with added excitement about the many increased opportunities in our markets and our positioning within them.

Our sales for the year were below that of the covid-inflated years but were still solid (albeit stop-start) across product sales and intellectual property.  We are seeing underlying longer term demand in our markets steadily increasing and we subscribe to market analyst projections of 10% future market growth, double that of pre-covid.

That underlying growth is obscured in our results by the vestiges of oversupply as covid-related demand dissipates, and as international supply chain challenges persist.  There remains an element of excess stock in the system with overstocked competitors cost-cutting but these pressures are now beginning to subside. 

Having run a very lean business pre-covid, we have utilised the extra resources generated during the pandemic to upgrade the quality of our systems and teams and will now gradually return to our lean approach, but with increased investment in sales and marketing, and team.

Financial highlights of the year, compared to the fully covid-driven FY 2021 and partially covid-driven FY 2020 are;

·      Sales £6.3m (versus £11.2m in 12m to 31 March 2021, and £6.0m in 12m to 31 March 2020)

·      Gross profit pre-exceptional charges £3.0m (versus £4.9m and £2.9m respectively)

·      Operating costs from continued business: £3.3m (versus £3.5m and £2.7m respectively)

·      Adjusted EBITDA: £0.04m (versus £1.78m and £0.47m respectively)

·      Cash at year end; £1.1m (versus £1.6m and £1.7m respectively)

·      Debt free

Operational highlights:

·      Restructuring of team and concentration of activities in Chester, including

o  Recruited our first full time CFO and our first full time CGO, both with blue-chip backgrounds and experience

o  Reorganised our technical team to concentrate on innovation rather than testing, under a new CTO

o  Consolidated the Byotrol and Medimark sales and marketing functions, under the new CGO

o  Post year end, closed the Sevenoaks office, previously the HQ of Medimark, with staff now based at Byotrol's head offices in Chester and trading activity similarly transferring across to Byotrol.

·      Increased investment in systems, including upgraded reporting and accounting, IT and HR systems and processes

·      Launched a programme to reduce inefficiencies in the business, including reducing skus from over 200 to 170, and substantially concentrating our proactively-served customer base.

We are currently projecting costs for the new financial year to increase by around 4% but we expect payback on this through increased gross margin and other operational gains.

Strategy

We continue to focus on technologies and chemical formats that satisfy infection prevention needs and that have the innovation and uniqueness that should generate sustainable and high returns.  Our products have to date been exclusively biocidal-based chemistries in a variety of formats.

Our longer-term positioning has always been based on offering technologies that require regulatory approval from the relevant national regulators via a complex process that weaker competitors cannot support.  We continue in that vein and are pleased to see this is now working for us with competitors now focussing on fewer and fewer markets.  This has been complicated a little by the UK now choosing to diverge from the EU biocide regulations and introducing its own regime, but the strategy remains in place and we are busy securing approvals for our core chemistries in both EU and UK markets, plus other international markets on a case-by-case basis. 

Markets

Professional

We report full year revenues in Professional of £5.1m, compared to £9.4m in the covid-inflated prior year, and £5.2m in the previous year, itself inflated by 3 months of covid.  Gross profit amounted to £2.6m, compared to £4.1m and £2.5m respectively

Within this, IP sales (including royalties from licensing) were £1.1m, split £0.2m in actual cash received and the balance recognised in revenue as discounted future guaranteed payments.

The gross margin from product sales in this segment in the year was 37.1% versus 36.8% in the prior year, reflecting good management of supply chain relationships despite the turmoil

Licensing and IP Sales

·      We are pleased to report that we have now invoiced our first commission from Solvay SA on its sales of Actizone 24 hours surface sanitiser.  This was a modest sum, but an important first step.  Solvay continues with its global launches of Actizone - both in its own right and via global FMCGs - boosted by receiving full approval from the US EPA for long-lasting germ kill claims.

·      In October and March this year we sold our own long-lasting germ kill product (Byotrol24) in the US to Integrated Resources Inc ("IRI") for gross cash of $1.4m over four years, plus ongoing royalty payments and a share of upside if the formulation is sold on. Post year-end we signed, in conjunction with IRI, a sub-licence over Byotrol24 to an internationally-recognised brand in US institutional markets

·      Other existing licensees across Professional and Consumer (Tristel, SC Johnson, Tutlewax, Byoworks), largely performed to our reduced expectations given the unusual post-pandemic market environment. 

·      Our alcohol-free hand-sanitiser licensee Advanced Hygienics LLC ("AH") in the US has struggled over recent years with competition from alcohol-based sanitisers, and no support from US regulators.  We feel it prudent to write down the value of that license from US$0.15m to zero, although we will keep the agreement open as AH restructures. 

Consumer

We report full year revenues in Consumer of £1.2m, compared to £1.8m in the covid-inflated prior year, and £0.8m in the previous year, itself inflated by 3 months of covid.  Gross profit amounted to £0.4m, compared to £0.7m and £0.4m respectively

The gross margin from product sales in this segment in the year was 36.6% versus 39.4% in the prior year, reflecting some challenges with our consumer manufacturing base in China.

Consumer is still under-resourced within the Company and  consumer-oriented marketing relatively limited.  However all core customers have remained solid in performance and we have had some success in new listings for  floor care sanitisers (dispensed by Swan and RK Wholesale branded domestic cleaning machines) and on-line listings for Hycolin24 surface sanitiser at Amazon and Ocado.

Since year end we have hired new leadership for our consumer business, both at strategy and national account manager level, and also within group marketing, which supports our consumer marketing efforts.

Research and Development

Our R&D team remains at the core of Byotrol's positioning and we continue to invest heavily in its activities. 

The team performed a largely support role during the pandemic, solidifying and validating product claims against coronavirus, testing and approving new formulations and formats where supply chain conditions demanded.  In the past year, the team under the new leadership of Dr Chris Plummer, has shifted its focus to:

·      Developing and validating the performance of next generation surface sanitiser, approved for EU and UK animal health markets.  This will form the basis of Byorol's biggest ever product launch, planned for November 2022

·      Developing and validating the performance of a fogging disinfection technology for large indoor spaces, with product claims of 30 day efficacy.  This is particuarly targeted to overseas facilites management markets

·      Developing natural based sanitisers for surfaces and human skin, seeking sustainable technologies that either meet the performance of non-naturals or exceed the performance of currently used naturals.

·      Securing partners for the commercialistion of the anti-viral properties of seaweed, where we now have a data-supported explanation for the mode of action underlying the extraordinary performance characteristics. Securing partners is a slow process, but progress is encouraging with two analytical programmes already underway with globally-recognised names in FMCG  and pharmaceuticals.

All of these projects are proceeding in a very encouraging manner.

Balance Sheet

Our balance sheet remains healthy, with cash at year end of £1.1m (£1.6m) and stock, post provisions, at £0.4m (£1.1m), the latter reflecting the exceptional provision of £0.2m against slow moving inventory dating back to the height of the pandemic.  Both indicators are below the previous year as a result of post covid adjustments but are still both ahead of historical norms for our business.

As annnounced on 28 July, post year-end we raised £1m by way of convertible loan notes, from directors and their families and from existing significant shareholders.  This extra cash allows for continued investment in the business without increasing our risk profile and without being reliant on future capital markets health, especially in the event of more external economic and political shocks.

In the year we added a further £0.5m to capitalised development costs to reflect ongoing investment in regulatory, IP and patent assets.  This should underpin the Company's valuation as the regulatory environment continues to tighten.

Outlook

We expected product sales and income from royalties to fall this year relative to the pandemic period.  We also expected a difficult trading environment as overstocking across the industry worked through.  These expectations became reality and our results show the impact of those pressures.

Nevertheless we remain completely confident in our products and our future performance and have been investing hard to secure future growth and profits in the rapidly changing industry environment we operate in.  We have therefore been reviewing strategy and processes across product and customer concentration, core versus non core technology platforms, sector focus, export opportunities and of course our teams across all levels.  We have introduced a lot of change and believe there are many efficiencies to accrue.  Extra resources generated from sales during the pandemic have given us a one-off opportunity to upgrade and solidify our business for long-term gain.

The opportunity remains vast in this market and the profit potential substantial.  We continue to be very excited about our future and look forward to further progress in the year ahead.

David Traynor

Chief Executive Officer

GROUP STATEMENT OF FINANCIAL POSITION

For the year ended 31 March 2022

GROUP STATEMENT OF CASH FLOWS

For the year ended 31 March 2022

GROUP STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2022

1              Revenue and segmental analysis

The Chief Operating Decision Maker monitors the operating results of segments separately in order to allocate resources between segments and to assess performance. Segment performance is predominantly evaluated based on gross profit as operating costs, net finance costs and income tax are managed on a centralised basis; therefore, these items are not allocated between operating segments for the purposes of the information presented to the Chief Operating Decision Maker and are accordingly omitted from the segmental information below.

Discontinued operations comprise the entirety of the Group's US operations which sold a range of biocidal products primarily to consumers via major retailers.   This operation was discontinued in the Prior Year.

For the year ended 31 March 2022, there was one customer that represented more than 10% of the Group's revenue, amounting to £1.1m, included within Royalty and licencing income.

An analysis of revenue (and the related gross profit) by product or service and by geography is given below. The comparative amounts for profit and loss information have been reclassified in line with the requirements of IFRS 5: Non-current assets held for sale and discontinued operations.

Revenue by type

Gross profit by type

Revenue by geography

The Group recognises revenue in three geographical regions based on the location of customers, as set out in the following table:

* this represents revenue other than that arising from discontinued operations

Management makes no allocation of costs, assets or liabilities between these segments since all trading activities are operated as a single business unit.

Customer concentration

The Group has no customers representing individually over 10% of revenue each (2021: nil), apart from within the Royalty and licensing income segment as previously noted.

Licence revenue and finance income

Licence contracts (and certain other contracts relating to the sale of IP) typically provide for fixed payments to be made by customers over a given term (typically between three and five years but which may extend longer). Under IFRS 15, in order to reflect the time value of money, such contracts are recognised as the capitalised value of the income stream plus notional interest accruing for the year on the credit deemed to be extended to the customer (on a reducing balance basis). For the financial year 2022 this figure amounts to licence revenue of £1.11m and related notional interest income of £36,000 (2021: £1.08m and £53,000).

2              Reconciliation of Operating Profit to Adjusted EBITDA

Reconciliation of operating profit to EBITDA (earnings before interest, taxation, depreciation and amortisation) and Adjusted EBITDA:

3              Annual Report & Accounts

The full Annual Report & Accounts for the year ended 31 March 2022, including Accounting Policies and Notes to the Financial Statements, will be available today on our website www.byotrolplc.com, along with Notice of the AGM, to be held at finnCap's offices in London at 11am on 22^nd September 2022.