Byotrol Plc

("Byotrol" or the "Group")

Interim results and Notice of Investor Presentation

Byotrol Plc (AIM: BYOT), the specialist infection prevention and control company, is pleased to announce its unaudited interim results for the six months ended 30 September 2022.

Highlights

David Traynor, Executive Chairman of Byotrol commented:

"Byotrol is well positioned to grow in post-pandemic antimicrobial markets, as we continue to focus on regulatory-approved, high performance biocide technologies. 

We are now increasing market share from product sales in animal and human health as competitors withdraw for regulatory reasons, and within those markets we are increasing margins through sharper focus of resources, greater simplification of operations and enhanced economies of scale. These returns are set to grow further, boosted by ongoing high margin licensing agreements and alliances.

We look forward to supporting Vivan Pinto in his new position of Byotrol CEO, and we sincerely thank John Langlands for his excellent contribution to our Company."

Investor Presentation

David Traynor, Executive Chairman, Vivan Pinto, CEO, and Chris Sedwell, CFO will provide a live presentation relating to these results via the Investor Meet Company platform on 14th Dec 2022 at 3:00pm GMT.

The presentation is open to all existing and potential shareholders. Questions can be submitted at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet BYOTROL PLC via:

https://www.investormeetcompany.com/byotrol-plc/register-investor

Investors who already follow BYOTROL PLC on the Investor Meet Company platform will automatically be invited.

For further information contact:

This announcement is released by Byotrol Plc and, prior to publication, the information contained herein was deemed to constitute inside information under the Market Abuse Regulations (EU) No. 596/2014. Such information is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person who arranged for the release of this announcement on behalf of Byotrol Plc was Chris Sedwell, CFO.

* Adjusted EBITDA is defined as Earnings before Interest, Tax, Depreciation and Amortisation and exceptional items, share-based payments, non-trading items such as profit or loss on disposal of assets, plus revenue recognised as interest under IFRS 15

Notes to editors

Byotrol plc (BYOT.L), quoted on AIM, is a specialist infection prevention and control company, operating globally in the Healthcare, Industrial, Food and Consumer sectors, providing low toxicity products with a broad-based and targeted efficacy across all microbial classes; bacteria, viruses (including coronavirus), fungi, moulds, mycobacteria and algae.

Byotrol's products can be used stand-alone or as ingredients within existing products, where they can significantly improve their performance, especially in personal hygiene, domestic and industrial disinfection, odour control, food production and food management.

Byotrol develops and commercialises technologies that create easier, safer and cleaner lives for everyone.

For more information, go to byotrol.com

Executive Chairman's report and financial review

The headline numbers for this report are ahead in many respects compared to the half year pre-Covid, but behind the half yearly results during the pandemic, including versus the first half of FYE March 2022. 

The Company remains very well positioned strategically, with a solid balance sheet and net cash.

The 'boom' of Covid led to a period of over-supply in our industry once demand started to normalize.  The excess stocks have now largely flowed-through but have generated consolidation as competitors and manufacturers who had over-extended themselves during the pandemic run out of cash.  This consolidation is further driven by the increasingly demanding regulatory environment which many players do not have the resources or technical ability to succeed in. 

Byotrol has long maintained a competitive technical and regulatory capability on a small cost base with high operational gearing and so is now well placed to benefit from these trends, to grow market share and to benefit from the consolidation. Our market share is now starting to grow and our financials are beginning to show the benefits of some fundamental operating changes made within the Company to maximise returns.  These include:

·     Sharp increase in focus.  We have reduced our technology platforms from seven to four, our operational segments from seven to three (animal health, specialist human health and consumer) and our SKUs by 25% so far.

·      Concomitant refocus of resources in sales and marketing, technical support and supply chain.

·   A resulting gross margin improvement of 3 percentage points despite the volatile supply chain and inflationary environment.  Gross margin on product sales in H1 exceeded 40%, versus 37% in the prior year.  Including provision releases year to date, reported gross margin for the period was 43.9%.

These improvements reflect what Byotrol has been positioning for over many years and that we are now seeing playing out in the market across Europe.  Our lead market for products is now animal health, built on the brand equity from the acquired business and brands of Medimark Scientific, where we are substantially growing market share and are capitalizing on our first new surface sanitising technology platform launch under the 'Anigene' brand (see 'technology' section below).

Our strategy therefore remains in place and we will accelerate on the same path.  Product sales are expected to  increase steadily, especially in Professional, with the increased focus and better economies of scale leading to further improvement in margins.  Those returns should also now be boosted through commission and license royalties from IP agreements finally bearing fruit.  We now have an impressive portfolio of high-quality platform technologies, which we believe is yet to be fully recognized in the Company's valuation.    

Your team therefore remains very confident in our positioning and in upcoming returns.  This confidence was confirmed by management and team contributing over half of the funds for a £1m convertible bond financing completed in July this year, which solidifies our balance sheet, protects growth-oriented spending and protects us against further extraneous market shocks.

Results by segment

Professional

H1 revenues decreased to £1.90m from £2.61m, including £0.22m of royalty and licensing revenue compared to £0.75m in the comparable period. Gross profit on product sales (excluding license revenue) increased to £0.75m from £0.70m, reflecting the underlying improvement and simplification of the business.

Market conditions are largely back to normal in our traditional Professional market sectors, except in facilities management, where price competition is very strong and little recognition is being given to improved technology claims.  We did expect this to be the case as the effects of the pandemic wore off and the UK economic outlook worsened and we have been consequently focussing sales and marketing efforts this year on animal health markets and on specialist niches in the higher margin human health markets.  In the period under review Professional product revenue was split 52% animal health, 35% human health, 13% FM and other, versus 52%, 21% and 27% respectively in the previous half year.

The EU regulatory system is moving now in the direction that we have long been positioning for, and sales into customers with continental EU HQs have increased as a result.  The UK's now-independent system is also becoming clearer.  

Consumer

H1 revenues decreased to £0.34m from £0.56m and gross profit to £0.14m from £0.20m, with gross margin increasing to 41% from 36%, a result (as in Professional) of focussing on higher margin product areas.

We have hired new leadership into our consumer division, tasked with selling our core technologies into retail and wholesalers under our brand and third-party brands.  The opportunity here remains substantial, but given the high spend required to grow quickly, we are being very selective in the business that we pursue. 

We therefore expect Consumer to remain niche for us in product sales in the short term, but with improving profitability, and we will exit channels where the spend and opportunity cost is not matched by the profit potential.  This has led for instance to a gradual withdrawal from a well-known UK pet retailer, where we concluded that we would not be able to achieve a satisfactory return for the resources and risk required. 

Technology Portfolio

The team has recognised for many years a need to focus technical effort and regulatory spend on a smaller number of platforms as the basis for our own product sales, especially as the regulatory deadlines approach.  We are now taking the necessary decisions and have fixed on 3 core platforms that we will support through the final regulatory approvals in the EU:

·   HLD4 and its upgrade ("Cruise") for animal and human health - a high performance surface disinfectant, with broad spectrum anti-microbial activity and excellent value to customers on a per-use basis.

·     A new, natural and sustainable technology with excellent anti-microbial performance, especially against viruses, and we believe applicable in skin care and all surface care environments including humans, animals and specialist food environments.  This is a new platform that we have been developing for 3 years and that is showing real promise in all targeted markets.

·      Invirtu hand sanitisers - alcohol free skin sanitization with an upgraded and more robust formulation, but  with the same germ kill  and dermatological benefits.

We continue to invest judiciously in other technical areas where we see potential from IP agreements and alliances, notably:

·    Seaweed antivirals - which is more appropriate for pharma, OTC and consumer applications than core Byotrol biocide markets, but that we still see as a valuable asset

·      Technologies that support long-lasting anti-microbial claims (notably Byotrol24 and Actizone)

·      Quaternary-free sanitisers for food markets

The IP commercialization effort for these technologies now has a dedicated sales team.

Intellectual Property Sales and Licensing

As reported in our year-end report in September (FYE March 2022), our licensing business has been held back by poor market conditions and by increasing customer focus on price and value in mass markets.  This has meant some of our licensees are currently paying us minimum guaranteed royalties only.  However, given the underlying regulatory position, we continue to see this as a core activity of Byotrol, offering 100% gross margin and broader distribution than we could achieve on our own.

The two most active IP-based projects are:

Balance sheet

Our balance sheet was considerably strengthened in July by issuing £1m in convertible notes, to existing shareholders and to the Byotrol team.   This was put in place as an insurance policy against further market shocks and to permit continued investment in sales, marketing and technology.

As with prior periods, we continue to invest in our IP and associated regulatory costs with £202k of additions into Intangible Assets in the first half of FY23 (see Note 7).  Similarly, to support our growth strategy as outlined above, including our Anigene formulation re-launch, we have invested tactically in our inventory during the period resulting in a closing stock balance of £627k.

The above movements, combined with ongoing investment in strengthening the Byotrol team, resulted in a cash balance at period end of £1.2m.

Management Changes

On 22 November 2022 October we announced that John Langlands will be retiring from business life - and hence from the Byotrol board - on January 31, 2023 and that he would step-down with immediate effect from Non Executive Chairman of Byotrol plc.  John has completed six years of service at the Company, one more year than he originally intended.  He retires with the sincere thanks of the Directors.

We also announced the immediate promotion of our Chief Growth Officer (since January 2022) Vivan Pinto to CEO.  Vivan brings many years of general management experience from multinationals such as J&J and Reckitt and has already been making a big impact upon the quality of the Company's operations.

Outlook

The new management team has concentrated much of its efforts in this half year to improving the team, systems and processes - particularly in supply chain - and making the necessary decisions to rationalize the portfolio with focus on higher margin segments.  We have made a lot of progress in this and are encouraged by the fact that gross margins are now on an upward trajectory.

Market demand is now solid in all areas except facilities management, which now accounts for only 13% of the Professional product portfolio. We will refocus in this area on niche segments with high margins and high barriers to entry as per our overall strategy.  The favourable long-term demand trends in antimicrobial markets remain firmly in place.

We are now consistently winning product business in our main areas of focus in animal and human health.  The re-launch of our animal healthcare formulation Anigene at the London Vet Show in November 2022 was very encouraging and is already leading to an upturn in orders. 

We have had to learn to be patient on IP sales as we only make money when our licensees do.  But the cash from minimum guarantees continues to boost our resources and the degree of investment by those licensees with regulators - especially in the US - remains very high. 

Byotrol remains well-resourced to deliver further commercial progress; the long-term outlook for your company remains excellent.

David Traynor

Executive Chairman

Group statement of comprehensive income

Group statement of financial position

Group statement of cash flows

Group statement of changes in equity

Notes to the Group financial statements

1          Basis of preparation

The Group has prepared its interim financial statements for the 6 months ended 30 September 2022 (the "interim results") in accordance with the recognition and measurement principles of International Financial Reporting Standards ("IFRS") as adopted by the European Union and also in accordance with the recognition and measurement principles of IFRS issued by the International Accounting Standards Board, but do not include all the disclosures that would otherwise be required. They have been prepared under the historical cost convention as modified to include the revaluation of certain non-current assets. The accounting policies adopted in the interim financial statements are consistent with those adopted in the Group's Annual Report and Financial Statements for the year ended 31 March 2022 and those which will be adopted in the preparation of the Annual Report for the year ending 31 March 2023.

As permitted, the interim results have been prepared in accordance with the AIM Rules of the London Stock Exchange and not in accordance with IAS34 Interim Financial Reporting. They do not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006 and are unaudited.

Going concern

The Directors have considered trading and cash flow forecasts prepared for the Group and based on these are satisfied that the Group will continue to be able to meet its liabilities as they fall due for at least one year from the date of these results. On this basis, they consider it appropriate to have adopted the going concern basis in the preparation of the interim results, which were approved by the Board of Directors on 9 December 2022.

Comparative financial information

The comparative financial information presented herein for the year ended 31 March 2022 does not constitute full statutory accounts for that period. The statutory accounts for the year ended 31 March 2022 carried an unqualified Auditor's Report, did not draw attention to any matters by way of emphasis and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006.

2          Segmental analysis

Revenue and gross profit by segment

Revenue by geography

The Group recognises revenue in three geographical regions based on the location of customers, as follows:

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

License revenue and finance income

License 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 period on the credit deemed to be extended to the customer (on a reducing balance basis). For the 6 months to 30 September 2022 this figure amounts to license revenue of £0.175m and notional interest income of £49,000.

3          Non-GAAP profit measures and exceptional items

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

The criterion for adjusting items in the calculation of adjusted EBITDA is operating income or expenses that are material and either (i) arise from an irregular and significant event or (ii) are such that the income/cost is recognised in a pattern that is unrelated to the resulting operational performance. Materiality is defined as an amount which, to a user, would influence decision-making based on, and understandability of, the financial statements. Adjustment for share-based payment expense is made because, once the cost has been calculated, the Directors cannot influence the share based payment charge incurred in subsequent years, and the value of the share option to the employee differs considerably in value and timing from the actual cash cost to the Group.

Exceptional items are treated as exceptional by reason of their size or nature and are excluded from the calculation of adjusted EBITDA (and adjusted earnings per ordinary share) to allow a better understanding of comparable year-on-year trading and thereby an assessment of the underlying trends in the Group's financial performance. These measures also provide consistency with the Group's internal management reporting.

Adjusted EPS

The calculation of adjusted EPS is shown in Note 6.

4          Finance income

5          Finance expense

6          Earnings per share

The following sets out the earnings and share data used in the basic and diluted earnings per share computations:

Denominator for earnings per share ("EPS") calculations

The Group has two categories of potentially dilutive ordinary share.  The first is share options granted to employees where the exercise price (plus the remaining expected charge to profit under IFRS 2 per option) is less than the average price of the Company's ordinary shares during the period. The weighted average number of shares for the calculation of diluted earnings per share is computed using the treasury share method.

The second relates to the Convertible Bond.  The Group issued a Convertible Bond for £1m in July 2022 to new and existing investors in the Company, including Board directors.  The Loan Notes have a term of five years, are senior in ranking, unsecured and convertible at investors' option into ordinary shares in the capital of the Company ("Ordinary Shares") at a price of 3.25 pence per Ordinary Share, representing a 30% premium to the mid-price of the Company's share price at close of business on 26 July 2022. The Loan Notes carry a coupon of 9% per annum, payable quarterly in arrears. Based on the issue size of £1,000,000, the Loan Notes would, if converted, represent approximately 30,769,230 Ordinary Shares, amounting to 6.8% of the current issued share capital of the Company.  However, as the average Byotrol share price since the issue of the Convertible Bond has been below the 3.25p conversion price, these are currently classed as non-dilutive and do not feature in the Denominator calculation above.

Numerator for EPS calculations

The criteria for inclusion of adjusting items in the calculation of adjusted EPS are the same as those relating to the calculation of adjusted EBITDA as set out in Note 3. Amortisation of acquisition-related intangibles (and the associated tax credit) relates to the amortisation of intangible assets in respect of customer relationships and brands which are recognised on a business combination and are non-cash in nature.

EPS - reported

EPS - adjusted

7          Intangible assets

Intangible assets comprise capitalised development costs, acquired software, customer relationships and goodwill.

Other Intangible Assets comprise:

8          Right-of-use assets

Right-of-use assets comprise leases over office buildings and vehicles.

9          Lease liabilities

Lease liabilities comprise liabilities arising from the committed and expected payments on leases over office buildings and vehicles.

10         Post balance sheet events

There have been no events subsequent to the reporting date which would have a material impact on these interim financial results

 [END]