TIDMITX
RNS Number : 8835T
Itaconix PLC
30 March 2021
Strictly Embargoed until 07.00, 30 March 2021
Itaconix plc
("Itaconix" or "the Company")
156% Revenue Growth for Full Year Results Ended 31 December
2020
Itaconix plc (AIM: ITX) (OTCQB: ITXXF), a leading innovator in
sustainable plant-based polymers used as essential ingredients in
everyday consumer products, announces Final Results for the year
ended 31 December 2020.
Commenting on the results, John R. Shaw, CEO of Itaconix,
said:
"We achieved 155.6% growth in revenues to $3.29 million and
reduced adjusted EBITDA losses to under $1 million from progress
with new and recurring orders in detergent, odour control, and
personal care applications. In addition, having completed a
successful fundraise, we have also substantially strengthened our
balance sheet and had healthy cash balances at the year end."
" With Polymers for Better Living(TM), Itaconix is dedicated to
decarbonisation to reduce the planet's carbon footprint and address
climate change. Our plant-based polymers are essential ingredients
in a new generation of safer, more sustainable consumer
products.
"2020 was transformational for our Company, as brands
increasingly looked to Itaconix to improve the competitive position
of their products with new performance and environmental claims.
Milestones achieved from major customer projects progressing to
launch in 2020 increased our revenues and our revenue potential in
a broadening range of home and personal care products. The
expanding foundation of formulations among our customers is
building a strong base of recurring use to underpin our continued
growth."
Financial Highlights
% difference 2020 2019
to previous
financial year $'000 $'000
Revenue +155.6% 3,292 1,288
---------------- -------- --------
Gross profit +156.4% 1,154 450
---------------- -------- --------
Gross profit margin +0.6% 35.1% 34.9%
---------------- -------- --------
Adjusted EBITDA ([1]) +59.6% (993) (2,457)
---------------- -------- --------
Cash used from operating activities +36.8% (1,157) (1,831)
---------------- -------- --------
Net cash at year-end +89.3% 1,448 765
---------------- -------- --------
(1) Adjusted for interest, tax, depreciation, amortization, and
exceptional items .
Operational Highlights
-- Grew revenues by 155.6% and gross profits by 156.4% with a
slight improvement in gross profit margins.
-- Strong growth in revenues to $3.29 million and gross profits
to $1.15 million reduced adjusted EBITDA losses by $1.5 million to
less than $1 million.
-- Completed successful $2.2 million fundraise in July 2020 via
an oversubscribed placing and subscription from existing and new
investors.
-- New Itaconix(R) TSI(TM) 322 polymer launched and is now
leading a new generation of dishwashing detergents with excellent
performance and high bio-based content, including the launch of two
new North American brands in 2020.
-- I taconix's ZINADOR(TM) polymers sold through Croda, a global
specialty chemicals leader, are seeing broader use for odour
control in homes. Demand continued to expand with wider adoption in
existing brands and initial usage by new brands.
-- Demand for Itaconix's bio-based hair fixative polymer sold
worldwide by Nouryon, a global specialty chemicals leader,
continued to grow.
-- VELAFRESH(TM) polymers gained important initial adoption as
key ingredients in specialty underarm deodorant brands.
-- Completed expansion of the executive team for a full
complement of capabilities and capacity to pursue the next phase of
revenue development.
-- Strong pipeline, with formulation activity using Itaconix(R)
TSI(TM)322 increasing in the second half of 2020.
-- Development of Itaconix's BIO*Asterix(TM) line of plant-based
functional additives presents breakthrough opportunities for
increasing the use of safer, sustainable materials through an
evolving line of plant-based functional ingredients.
Commenting on the outlook, John R. Shaw, CEO, added:
"With new urgency in consumer markets to address both
cleanliness and climate change, our years of development efforts
have propelled our commercial activities and results to a new stage
of growth. The trend towards sustainable consumer products is only
accelerating. As our current customers succeed, we are confident
that our products will be increasingly used as ingredients in major
brands. Despite some emerging operational headwinds in the supply
chain from secondary effects of the Covid-19 pandemic, we expect
the commercial momentum in 2020 to progress in 2021, particularly
as current customer products succeed in the market and major new
customer products continue to launch in 2021."
"With our strong base for continued revenue growth, we look
forward with increased confidence toward the Company's goal of
sustained profitability in the coming years."
- ends -
Enquiries:
Itaconix +1 (603) 775 4400
John R. Shaw / Laura Denner
N+1 Singer +44 (0) 207 496 3000
Peter Steel / James Moat (Corporate
Finance)
Tom Salvesen (Corporate Broking)
Belvedere Communications +44 (0) 20 3687 2756
John West / Llew Angus
This announcement contains information which, prior to its
disclosure, was inside information as stipulated under Regulation
11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310
(as amended).
Notes to Editors
Itaconix develops and produces bio-based specialty polymers that
improve the safety, performance and sustainability of consumer and
industrial products, with technology and market leading positions
in non-phosphate detergents, odour control, and hair styling.
www.itaconix.com
CHAIRMAN'S STATEMENT
Polymers for Better Living(TM)
Itaconix plc is dedicated to reducing the planet's carbon
footprint and addressing climate change with plant-based polymers
that are essential ingredients in a new generation of safer, more
sustainable consumer products.
Our principal activities are the production and sale of
proprietary plant-based specialty ingredients that satisfy
consumers' increasing awareness of how their purchases impact
climate change and the environment. Our sustainable plant-based
polymers replace fossil-based ingredients while offering
uncompromising performance and cost. Most of our efforts are
focused on home and personal care applications where consumer
interest and desires for safer and more sustainable products are
particularly high.
We are continuing to advance the potential for consumer products
with near net zero carbon consumption through the plant-based
ingredients we produce and are developing, the energy-efficient
production processes we use, and more compact consumer products our
ingredients enable that use fewer natural resources and release
less chemicals into the environment.
We made great strides in 2020 towards fulfilling our potential
to make the world a better and safer place. Our polymers are key
ingredients in a growing number and range of home and personal care
products. Our progress was reflected in 155.6% revenue growth, our
leadership in next generation detergents with the launch of two new
products by major brands, and the introduction of our
Bio*Asterix(TM) plant-based functional ingredients.
We achieved this progress amid continuous uncertainty from the
Covid-19 pandemic that challenged our operations and our funding. I
greatly appreciate the unwavering dedication of our customers, our
shareholders, our employees, and our vendors to generate such a
transformative year of growth and advancement toward our
potential.
With Polymers for Better Living(TM), Itaconix is enabling new
generations of consumer products to fight climate change and
protect our environment.
James Barber
Chairman
CHIEF EXECUTIVE OFFICER'S STATEMENT
Overview
We completed a transformational year in 2020 as a leader in
sustainable plant-based polymers used as essential ingredients in
everyday consumer products. Brands increasingly looked to Itaconix
to improve the competitive position of their products with new
performance and environmental claims.
Major customer projects progressing to launch in 2020 increased
our revenues and our revenue potential in a broadening range of
home and personal care products. The expanding foundation of
formulations among our customers is building a strong base of
recurring use to underpin our continued growth.
As a result of this momentum, year on year revenues increased
and operating losses decreased from both new and recurring orders
in detergent, odour control, and personal care applications.
Having completed a successful fundraise in July 2020, we have
also substantially strengthened our balance sheet with healthy cash
balances at the year end.
Commercial progress
Our product revenues grew by 155.6% to $3.3m in 2020 compared to
$1.3m in 2019.
Revenues increased across all our home and personal care
polymers. Although aided by demand for household cleaning during
the Covid-19 pandemic, most of our increased revenues came from new
customer products entering the market after several years of
development.
Our new Itaconix(R) TSI(TM) 322 polymer is leading a new
generation of dishwashing detergents with excellent performance and
high bio-based content, including the launch of two new North
American brands in 2020 and another North American brand at the
start of 2021. New formulation activity with Itaconix(R) TSI(TM)322
increased in the second half of 2020 which we expect will lead to
additional usage in current and new brands in the second half of
2021. Although our Itaconix(R) CHT(TM) 122 polymer has established
use in the EU, the focus of formulation development during the
Covid-19 pandemic has slowed EU adoption of the added benefits
available with Itaconix(R) TSI(TM) 322.
In hair styling, we were pleased that demand for our unique
bio-based hair fixative polymer sold worldwide by Nouryon, a global
specialty chemicals leader, continued to grow despite a general
downturn in the personal care market during the Covid-19 pandemic.
This growth has come from more brands launching new products
containing the ingredient and an expansion in the applications for
the ingredient.
In homecare odour control, our ZINADOR(TM) polymers sold through
Croda, a global specialty chemicals leader, are similarly seeing
broader use. Demand continues to grow with expanding adoption in
existing brands and initial usage by new brands. We are seeing
increased focus and activity during the Covid-19 pandemic on home
odour control, which we expect to translate into continued revenue
growth.
In personal odour control, our VELAFRESH(TM) polymers are
gaining important initial adoption as key ingredients in specialty
underarm deodorant brands.
Our major new product development for 2020 was the announcement
of our BIO*Asterix(TM) line of plant-based functional additives. We
see breakthrough opportunities for reducing the carbon footprint of
consumer products and increasing the use of safer chemicals through
an evolving line of BIO*Asterix(TM) functional ingredients. Our
initial commercial work is focused on a joint development agreement
for potential use by a leading innovator in biodegradable
packaging.
Overall, active customer projects advancing or emerging out of
our sales development pipeline present multiple new revenue
opportunities as we are increasingly able to turn ingredient "wish
lists" into product sales. Growth in the second half of 2020 was
particularly strong, driven by both new orders and the increased
size of recurring orders.
Covid-19
We have experienced positive and negative effects of the
Covid-19 pandemic and continue to closely monitor emerging
issues.
The health and safety of our employees is our first and foremost
focus. We follow recommended policies and protocols for monitoring
individuals' health and mandatory social distancing measures or
remote access where possible. We operated continuously and
delivered on growing order volumes in 2020 through the
extraordinary efforts of our dedicated employees.
We implemented cost saving measures from March 2020 to August
2020 to conserve our available cash resources while receiving a US
Paycheck Protection Program loan in May and completing a fundraise
in July.
Our rapid responses allowed us to manage effectively through the
initial repercussions of the Covid-19 pandemic.
Secondary effects are starting to emerge in our and our
customers' supply chains around shipping delays, higher shipping
costs, higher raw material costs, and the availability of raw
materials that may delay the ramp up on some customer projects. We
continue to monitor these situations very closely.
Financial Performance, Funding and Cash
Revenues for the year were $3.3m, representing 155.6% growth
over 2019. As a result of the increase in revenues, adjusted EBITDA
has improved in line with management's expectations to ($1.0m).
Despite an increase in our operating expenses, which rose in the
second half to $1.6m compared to H1 2020 $1.0m, we managed to
maintain an attractive gross margin of 35.1% (2019: 34.9%). The
increase in operating expenses was mainly due to an increase in our
staff as we ramped up production volumes to meet demand.
Our operating losses decreased by 51.7% to $1.5m, highlighting
that the Company is making significant progress towards break-even
profitability.
Net cash balances as at year end were $1.4m. This was in part
due to the completion in July 2020 of a successful $2.2 million
fundraise via an oversubscribed placing and subscription from
existing and new investors. The net proceeds were used to fund
working capital requirements and invest in key staff to support our
continued growth, and are currently forecasted to provide
sufficient funding for our operations for the foreseeable future as
of the issuance of these financial statements, although there are
continuing uncertainties due to the Covid-19 pandemic as we advance
our medium-term plan for break-even net operating cash flow.
Overall, with an improved operating performance and a stronger
balance sheet, the Company has a much stronger financial position
for its next phase of growth.
People
We expanded and realigned our executive team to fulfil
increasing order volumes, create more demand for current products,
and add significant new revenue potential from our proprietary
itaconate chemistry platform.
In January 2021, after the reporting period, we appointed Helen
Cane as Vice President, Operations to manage our fulfilment
capabilities. In November 2020, we appointed Monna Manning as Vice
President, Marketing & Sales to lead our commercial
activities.
Increased experience and knowledge on our executive team offer
new opportunities for me and our Chief Technology Officer, Dr Yvon
Durant, to build our next phase of revenue development with new
products and collaborations for major unmet customer needs.
Shareholder Engagement
We have turned to virtual meetings to engage directly with
shareholders and to update the market on our progress towards
profitability as our products are more broadly adopted.
We held our first virtual investor meeting on 28 October 2020,
with access granted to all current investors, potential investors
and interested parties. We plan on continuing to use virtual
meetings to maintain open engagement with our shareholders, in
particular on our progress.
Outlook
2020 was a positive year of trading in many ways for Itaconix.
We experienced continued growth in the use of our proprietary
polymers as key ingredients in an expanding range of everyday
consumer products. Consumers and brand managers are increasingly
aware of the potential for consumer goods to reduce carbon
emissions and energy consumption and decrease the release of
harmful chemicals into the environment.
With new urgency in consumer markets to address both cleanliness
and climate change, our years of development efforts propelled our
commercial activities and results to a new stage of growth. We are
pleased that brands are recognising the role our plant-based
polymers play as sustainable materials within the decarbonisation
economy and we expect them to be increasingly adopted as core
ingredients by brands.
All indications are that our products will increasingly be taken
up by major brands and we expect the commercial momentum
experienced in 2020 to continue in 2021, particularly as current
customer products succeed in the market and major new customer
products continue to launch in 2021.
The expanding foundation of recurring revenues is creating a
strong base for continued revenue growth and progress toward the
Company's goal of sustained profitability in the coming years. We
look forward with increased optimism and confidence.
John R. Shaw
Chief Executive Officer
OUR STRATEGY
Principal Activities
Itaconix plc is a leading innovator in plant-based ingredients
for improving the safety and performance of consumer and industrial
products. Its proprietary polymer technologies generate a growing
range of new specialty ingredients with unique functionalities that
meet consumer demands for value and sustainability.
The Group's principal activities are the development of
plant-based polymers, the proprietary production of these
materials, and sales of these materials globally either directly or
through partners as ingredients in consumer product
formulations.
Most of the Group's efforts are focused on home and personal
care applications where consumer interest and desires for safer and
more sustainable products are particularly high.
Proprietary Ingredients with Unique Functionality
The Group has completed many years of exploratory research and
holds an extensive patent portfolio related to the production and
use of polymers made from itaconic acid. The commercial potential
for these materials as ingredients in consumer products stems from
the unique functionalities available through the chemical structure
of itaconic acid and from the bio-based production of itaconic acid
through fermentation using plant-based sugar sources.
Building on the Group's process of identifying a market need and
then developing a product to meet that need, initial products from
its itaconate chemistry platform have commercial momentum in
non-phosphate detergents, odour control, and hair styling. As these
products generate more revenues, Itaconix expects to identify more
opportunities for additional new products within its itaconate
chemistry platform.
Progress in 2020
The Group advanced its research and commercial activities in its
core product areas through its own efforts and commercial
collaborations with Nouryon and Croda, as detailed in the Chief
Executive Officer's Statement. Most notable was the entry of major
new customer products onto the market that drove dramatic revenue
growth, particularly in non-phosphate detergent sales. The Group is
well positioned for growth in the coming years.
The combination of dramatic revenue growth and continued costs
control in 2020 significantly advanced the Group towards its goals
of reducing cash use and reaching profitability. The Group's
efforts during the year included the elimination of the remaining
costs from the UK facility.
Key Performance Indicators (KPIs)
The three key performance indicators for the Group are:
-- Revenue
-- Adjusted EBITDA, adjusted for interest, tax, depreciation,
amortization, and exceptional items.
-- Cash
The Directors believe that revenue and adjusted EBITDA are key
performance indicators in measuring Group performance. The Group
seeks to commercialise its existing and new technologies and
generate revenues from a growing number of commercial agreements
with users of its products. Revenue performance is detailed in the
Chief Executive Officer's Statement above.
The Directors believe that a further important performance
measure is the Group's rate of cash expenditure and its effect on
cash resources. Net cash inflow for the period to 31 December 2020
was $0.7m compared to the same period in 2019 with net cash outflow
was $1.9m. Further details of cash flows in 2020 (and 2019) are set
out in the Group's Consolidated Cash Flow Statement below.
FINANCIAL REVIEW
Key performance metrics continue to improve as the Group gains
commercial momentum. Most notably, revenues for the year increased
by 155.6% from 2019. The gross profit margin remained consistently
high in 2020 at 35.1% compared to 34.9% in 2019. Cash used in
operations decreased from $1.8m in 2019 to $1.1m in 2020. This was
all complemented by the Group's successful fundraise in July 2020.
Below is a table showing the Group's key performance metrics:
2020 2019 2018
$'000 $'000 $'000
------------------------------------ ------- ------- -------
Revenue 3,292 1,288 881
Gross profit 1,154 450 140
Gross profit margin 35.1% 34.9% 15.9%
Adjusted EBITDA [2] (993) (2,457) (5,370)
Cash used from operating activities (1,157) (1,831) (6,973)
Net cash at year-end 1,448 765 2,655
Financial Performance
Revenue
Total revenues for the 12-month period ended 31 December 2020
were $3.3m, representing a 155.6% increase over 2019 revenues of
$1.3m. Revenues grew across all major product lines from detergent
polymers, hair styling polymers, and odour control. Detergent
polymers represented the largest area of growth with several new
end user products launched in 2020.
Revenues in all geographical regions increased. North America
represents 87.2% of the Group's revenue and grew by 154.3%. North
America revenue growth was due largely to the increased product
launches that used the Group's detergent polymers. Europe
represents 12.8% of the Group's revenue and grew by 164.4%.
European revenue growth is due to increased demand for the Group's
hair styling polymers supplied through Nouryon.
Gross Profit and Adjusted EBITDA(2)
Gross profit margin remained consistent between 34.9% in 2019
and 35.1% in 2020. As the Group continued to focus efforts on
fulfilment and commercialisation of the current itaconate polymer
technologies, gross profit increased from $450k in 2019 to $1,154k
in 2020, an increase of 156.4%.
Adjusted EBITDA is a non-IFRS measure but is widely recognised
in financial markets and it is used within the Group as a key
performance indicator. Adjusted EBITDA improved from a loss of
$2.5m in 2019 to a loss of $1.0m in 2020. The improvement in EBITDA
was due to the Group's gain in commercial momentum, improved gross
profit margin and the reduced cost structure from the 2018 Group
reorganization.
(2) Adjusted for interest, tax, depreciation, amortization, and
exceptional items.
Below is a reconciliation of Loss for the Year to Adjusted
EBITDA:
2020 2019 2018
$'000 $'000 $'000
-------------------------------------------- ------- ------- -------
Loss for the year (1,646) (1,358) (9,868)
------- ------- -------
Taxation 7 1 (187)
Depreciation 200 223 296
Amortization 198 198 -
Exceptional revaluation of contingent
consideration 339 (1,474) 3,323
Exceptional organizational restructuring (91) - 1,190
Finance income - (1) (4)
Movement on investment in associate - (46) (120)
------- ------- -------
Adjusted EBITDA (993) (2,457) (5,370)
Administrative Expenses
Administrative expenses consist of sales, marketing, operations,
research and development, and public company costs such as legal,
finance and the Group Board. These expenses were $2.6m in 2020 down
from $3.4m in 2019. The reduction in administrative expense was
largely due to cost cutting efforts to conserve cash through the
Covid-19 pandemic.
Costs and Available Cash
The Group's increasing revenues and overall cost reductions
resulted in Net Cash Outflow from Operations of $1.1m, which
represents an improvement from 2019 when Net Cash Outflow from
Operations was $1.8m. As at 31 December 2020, the Group held cash
of $1.4m. In addition to the improved operating cash flow, the
Group's cash at year end was higher than the prior year because the
Group completed a fund raise of $2.2m and received $0.2m from the
US Government Paycheck Protection Program.
Working capital
At year end, overall carrying value of inventory, trade and
other receivables, and trade and other payables had increased.
However, the working capital as a per cent of revenues had
decreased from 69.3% in 2019 to 56.7% in 2020. The most significant
increase in the working capital were the inventories and accounts
payable. Inventories increased from $0.5m in 2019 to $1.4m in 2020
to address growing customer demand and volume. The accounts payable
were increased at year end in relation to the inventory increase.
Trade and other payables increased from $0.7m in 2019 to $1.4 m in
2020.
Financial Position
At 31 December 2020, the Group had equity of ($0.6m) as compared
to ($1.0m) in 2019. This primarily resulted from a revaluation of
the deferred consideration net of the equity raise and stronger
operating results.
Revaluation of Deferred Consideration
As a result of revaluing deferred consideration with respect to
the acquisition of Itaconix Corporation in 2016, there is an
exceptional non-cash expense of $0.3m in 2020, which offsets the
exceptional non-cash income of $1.5m (excluding foreign exchange)
from 2019. Subsequent to year end, the Group is expecting to issue
shares to certain Sellers of Itaconix Corporation in the amount of
$0.1m by 31 March 2021.
Exceptional Expense on Reorganization
As part of the Group reorganization in 2018, certain costs to
close the UK facility were accrued. The former corporate
headquarters in Deeside, UK was leased through July 2021 and the
full value remaining on the lease was accrued. In September 2020,
the Group was able to surrender the lease to the landlord. This
relieved the remaining liability associated with the lease and the
Group recognized an income of $91k.
Financial Reporting
There were no new reporting standards adopted for the year end
31 December 2020 that have a material impact on the financial
statements.
Going Concern
The financial statements have been prepared on a going concern
basis. The Directors have reviewed the Company's and the Group's
going concern position taking account its current business
activities, budgeted performance and the factors likely to affect
its future development, set out in the Annual Report, and including
the Group's objectives, policies and processes for managing its
working capital, its financial risk management objectives and its
exposure to credit and liquidity risks.
The Directors have also taken into consideration the impact of
the Covid-19 pandemic on the Group's revenues and supply chain.
While there has not been a significant negative impact through the
report date on the Group revenues or supply chain due to the
pandemic, the Directors have applied sensitivities to the timing,
quantum, and growth of new customer projects in revenue models and
have assessed alternate supply chains that have been developed by
the Group to mitigate any issues in deliveries to our
customers.
As further detailed in the Directors' Report on page 29 and note
2 to the Annual Report available to view on the Company's website,
the Directors have reviewed the Group's cash flow forecasts
covering a period of at least 12 months from the date of approval
of the financial statements, which foresee that the Group will be
able to meet its liabilities as they fall due. However, the success
of the business is dependent on customer adoption of our products
in order to increase revenue and profit growth. Inability to
deliver this could result in the requirement to raise additional
funds.
Shareholdings and Earnings per Share
Itaconix had 432,448,253 shares in issue as at 31 December 2020.
The undiluted weighted average number of shares for the period to
31 December 2020 was 344,970,117. The difference in the two numbers
is the result of the issuance of new shares in July 2020. The
undiluted weighted average number of shares was used to calculate
the loss per share presented in note 3.
PRINCIPAL RISKS AND UNCERTAINTIES
Effective risk management is a priority for the Group to sustain
the future success of the business. Therefore, the Directors have
overall responsibility for the Group's risk management process but
have delegated responsibility for its implementation, the system of
controls which reduce risk and for reviewing their effectiveness to
the management team. The risk of uncertainties that the Group face
evolve over time, therefore the management team review and monitor
the emerging risks and update mitigation effort. The results are
reported to the Board.
Commercialisation Activities
Significant progress was made in 2020 toward achieving
profitability by increasing revenues and reducing costs.
Ultimately, it is uncertain whether the success of Itaconix
products will be in sufficient quantities for the Group to generate
an overall profit.
Management of risk: The Group has sought to manage this
commercialisation risk by partnering with market leaders for the
worldwide promotion of our leading products, continued development
of end-user formulas to provide customers with packaged solutions,
and continuous review of the market needs for Itaconix
products.
Dependence on Key Personnel
The Group depends on its ability to attract and retain a limited
number of highly qualified managerial and scientific personnel, the
competition for whom is intense. While the Group has conventional
employment arrangements with key personnel aimed at securing their
services for minimum terms, their retention cannot be
guaranteed.
Management of risk: The Group expanded its management team with
the hiring of two executives and has service contracts in place for
John R. Shaw as Chief Executive Officer and Dr. Yvon Durant as
Chief Technology Officer. In addition, the Group seeks to retain
key personnel in the US using an Equity Incentive Plan for share
option grants.
Customer Retention
The ability to retain key customers is critical to maintaining
revenue streams. The loss of key customers could impact business
results adversely.
Management of risk: Acceptance of our products in our customers'
end-product formulations is closely monitored and managed. Our
customer service includes regular engagement on the performance of
both our products and the end-products to ensure our ingredients
are delivering the desired value to our customers and
end-users.
Regulatory and Legislation
Regulatory bans on the use of phosphates as ingredients in
detergents have transformed the consumer detergent markets in
Europe and North America over the last ten years. Phosphates are
known to enter waterways through detergent effluent and act as a
nutrient for algae growth that subsequently cuts oxygen levels in
water and harms aquatic life. We believe that phosphates are likely
to be phased out in other jurisdictions around the world over time.
Itaconix polymers can act as effective replacements for phosphates
in detergent formulations and are used in numerous detergent
products in North America and Europe for this purpose.
Management of risk: The Group closely monitors regulatory
developments in the use of ingredients in consumer and industrial
products to assure compliance and find new revenue potential for
Itaconix polymers. Further, the Group regularly assesses the
relative performance and cost efficacy of Itaconix polymers to
current and emerging phosphate replacements to identify revenue
risks and opportunities.
Competition and Technology
The production and use of Itaconix polymers are subject to
technological change over time. There can be no assurance that
developments by others will not render the Group's product
offerings and research activities obsolete or otherwise
uncompetitive.
Management of risk: The Group employs experienced and
highly-trained polymer chemists to develop and protect the Group's
intellectual property. These efforts include continuous work on the
performance and cost advantages of Itaconix polymers. In addition,
the staff monitors technologies and patents through publications,
scientific conferences, and collaborations with other organisations
to identify new risks and opportunities.
Covid-19 Risk
The Group faces potential disruption to the demand for its
products, the operations of its production facility, the supply of
raw materials, and the supply of other ingredients going into
customer products due to the Covid-19 pandemic. The US operations
continued to operate while implementing recommended CDC guidance to
protect our employees and provide a safe work environment. Delayed
supply chain issues are emerging in early 2021 from extended
shipping times and the availability of other ingredients going into
customer products.
Management of risk: Management closely monitors Covid-19
regulatory developments and expected demand from customers.
Management and staff actively communicate with all major suppliers
and customers about upcoming demand and reliability of the supply
chain. The US operations also hold significant stock of long lead
raw materials from Asia.
Liquidity Risk
Itaconix seeks to manage financial risk by ensuring adequate
liquidity is available to meet foreseeable needs and to invest cash
assets safely and profitably. In July 2020, the Group completed a
$2.2m fundraise to support working capital and revenue growth. In
addition, short-term flexibility is achieved by holding significant
cash balances in Itaconix's functional currencies, notably UK
Sterling and US Dollars.
Credit Risk
The principal credit risk for Itaconix arises from its trade
receivables. To manage credit risk, new customers are subject to
credit review and all customer accounts are regularly reviewed for
debt aging and collection history. As at 31 December 2020, there
were no significant credit risk balances.
Foreign Exchange Risk
Itaconix Plc is a publicly traded holding company on the London
Stock Exchange. The Group's primary operations are in the US. These
US based operations transact trades with customers in North America
and internationally. Revenue and costs are exposed to variations in
exchange rates and therefore reported losses. In 2019, the Group
elected to convert the reporting currency from UK Sterling to US
Dollars. The US Dollar transactions represent a significant portion
of the functional currency transactions and therefore reduces the
Group's overall exposure to translation exchange risk.
Government Risk
The Group has potential exposure to government activities
related to Covid-19, Brexit, and US-China trade relations. Risks
related to Covid-19 are detailed above.
Brexit has created potential risks to the Group as the UK is no
longer part of the European Union. These risks include alignment of
various chemical regulations and trade relations between the UK and
US.
US trade tariffs with China have caused increases to certain raw
material costs and may continue to create volatility. These
increases have not caused any major issues with profitability to
date. Itaconix has assessed alternative supply sourcing from India
and other countries which are not affected by increased tariffs.
However, if an alternate supply is not available the Group is
prepared to pass cost increases through to customers if needed.
SUSTAINABILITY
Polymers for Better Living(TM)
Our polymers are advanced sustainable materials that can make
the world a better and safer place to live as essential ingredients
in the next generation of consumer products.
The composition of our polymers, our patented process to produce
them, their performance as ingredients in consumer product
formulas, and how these formulas are packaged and delivered to
consumers contribute to the fight against climate change with
plant-based carbon, sequestering carbon, energy efficiency, and
lighter consumer products.
Itaconix Ingredient Benefits as Advanced Sustainable
Materials
Product Plant-Based Decarbonisation Energy Lighter
Carbon Efficiency Products
Detergents
Itaconix(R) DSP
2K(TM) 100%
Itaconix(R) TSI(TM) >75%
Itaconix(R) CHT(TM) >80%
VELASOFT(TM) 100%
Odour Control
ZINADOR(TM) (Croda) 80-100%
VELAFRESH(TM) 80-100%
Hair & Skin Care
Amaze(TM) SP (Nouryon) 100%
======================== ================= ===================== ================= ===============
Plant-based carbon
The renewable carbon in the itaconic acid we use to make
Itaconix products is captured as carbon dioxide by plants. Corn
plants convert carbon dioxide into carbon in sugars that are used
to produce itaconic acid via fermentation. We bring this itaconic
acid into our patented process at our US operations to produce
polymers that have 75-100% plant-based carbon.
Decarbonisation
The increase of carbon dioxide as a greenhouse gas in our
atmosphere is a major cause of climate change. Carbon dioxide is
sequestered as carbon in Itaconix products for a period of time
until, depending on the circumstances, they degrade. During this
period, the amount of carbon held contributes to a reduction of
carbon dioxide in the atmosphere.
Energy efficiency
Improving energy consumption is a major sustainability goal for
Itaconix and within the chemical industry.
Itaconix's efforts start with its patented polymer production
process, which is efficient in its use of energy and capital
equipment. Less energy use translates into less direct and indirect
GHG emissions.
Itaconix is working to extend its energy efficiency efforts
across all of its operations and practices with the development of
reporting under the Streamlined Energy & Carbon Reporting
(SECR) framework. We began in 2020 with the direct and indirect
emissions from the purchase of electricity and natural gas. The
table below shows the energy consumption and estimated GHG
emissions at our US operations for the 12-month period ending 31
December 2020 from these activities.
Energy consumption GHG Emissions
(kWh) (tCO2e)
Direct and indirect emissions 162,840 44.59
------------------------ -------------------
Intensity ratio: tCO2e per
$m Net Revenue 13.51
------------------------ -------------------
We have selected an intensity metric based on tonnes of carbon
dioxide emissions (tCO2e) per $m Net Revenue. We will use this
ratio to monitor and extend our energy efficiency efforts further
into our operations and practices.
Lighter products
The multifunctional performance of Itaconix ingredients offers
the potential for more compact consumer products, particularly in
detergents. Compact products are lighter and can reduce greenhouse
gas emissions by using less chemicals, less packaging, and more
efficient transportation.
A study by a leading third-party sustainability research firm
estimated the potential for dishwashing detergents using Itaconix
ingredients to reduce greenhouse gas emissions.
Revenues from Advanced Sustainable Materials
Itaconix plc is dedicated to reducing the planet's carbon
footprint and addressing climate change with plant-based polymers
that are essential ingredients in a new generation of safer, more
sustainable consumer products.
Our financial results demonstrate that commercial and
environmental progress can advance equally through the value and
adoption of our ingredients. We are pleased to announce that 96%
percent of our 2020 revenues were derived from advanced sustainable
materials. This means that 96% of our revenues are related
specifically to the design, development, and manufacture of
materials that during their manufacture or through their use allow
for considerable increases in the efficiency of resource usage.
SECTION 172 STATEMENT
Statement of Compliance with Section 172 of the Companies Act
2006
The Directors are required to include a separate statement in
the Annual Report that explains how they have considered broader
stakeholder needs when performing their duty under Section 172(1)
of the Companies Act 2006. This duty requires that a director of a
company must act in the way he or she considers, in good faith,
would be most likely to promote the success of the company for the
benefit of its members as a whole, and in doing so have regard
(amongst other matters) to:
-- the likely consequences of any decision in the long term;
-- the interests of the company's employees;
-- the need to foster the company's business relationships with
suppliers, customers, and others;
-- the impact of the company's operations on the community and the environment;
-- the desirability of the company to maintain a reputation for
high standards of business conduct; and
-- the need to act fairly between members of the company.
In connection with its statement, the Board describes in general
terms how key stakeholders, as well as issues relevant to key
decisions are identified, and also the processes for engaging with
key stakeholders including employees and suppliers, and
understanding those issues. It is the board's view that these
requirements are predominantly addressed in the corporate
governance disclosures we have made in the directors' report, which
are themselves discussed more extensively on the company's
website.
A more detailed description is limited to matters that are of
strategic importance in order to remain meaningful and informative
for shareholders. The Board believes that two decisions taken
during the year fall into this category, and engaged with internal
and external stakeholders on these decisions:
-- 2020 Fundraise - The Directors, along with the Group's NOMAD
and broker, assessed the market for its appetite to support the
Group's fundraising efforts. Strategy and work were completed to
launch a fundraise in early 2020. This was determined to be the
optimal time to execute a fundraise as the 2019 revenue numbers
reflected the growth in polymer sales that shareholders were
expecting. These efforts in March 2020 were unsuccessful due to the
impact of Covid-19 on the London Stock Exchange. The fundraise was
completed in July 2020.
-- Covid-19 - The Group continually assesses the impact Covid-19
has on customer orders, supply chain and employees. Efforts have
been put in place to support customer demand, ensure safety stock,
and safeguard employees' wellness during these unprecedented
times.
James Barber John R. Shaw
Chairman Chief Executive Officer
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2020
2020 2019
Notes $'000 $'000
---------------------------------------------- ----- ------- -------
Revenue 2 3,292 1,288
Cost of sales (2,138) (838)
---------------------------------------------- ----- ------- -------
Gross profit 1,154 450
Other operating income 50 62
Administrative expenses (2,595) (3,390)
---------------------------------------------- ----- ------- -------
Group operating loss before exceptional
items (1,391) (2,878)
Exceptional (expense) / income on revaluation
of contingent consideration (339) 1,474
Exceptional income on organizational
restructuring 91 -
Finance income - 1
Gain on sale of associate - 84
Share of loss of associate - (38)
---------------------------------------------- ----- ------- -------
Operating Loss before tax from operations (1,639) (1,357)
---------------------------------------------- ----- ------- -------
Taxation (7) (1)
---------------------------------------------- ----- ------- -------
Loss for the year from operations (1,646) (1,358)
Loss for the year (1,646) (1,358)
---------------------------------------------- ----- ------- -------
Basic and diluted loss per share 3 (0.5) (0.5)
---------------------------------------------- ----- ------- -------
Diluted loss per share 3 (0.5) (0.5)
---------------------------------------------- ----- ------- -------
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2020
2020 2019
$'000 $'000
-------------------------------- ---- ------- -------
Loss for the year (1,646) (1,358)
Items that will be reclassified
subsequently to profit or loss
Exchange gains in translation
of foreign operations 8 48
-------------------------------------- ------- -------
Total comprehensive loss for
the year, net of tax (1,638) (1,310)
-------------------------------------- ------- -------
Attributable to:
Equity holders of parent (1,638) (1,310)
-------------------------------------- ------- -------
CONSOLIDATED BALANCE SHEET
At 31 December 2020
31 Dec 31 Dec
2020 2019
$'000 $'000
Non-current assets
Property, plant and equipment 501 701
Right-of-use assets 746 920
Investment in subsidiary
undertakings - -
1,247 1,621
------------------------------ -------- --------
Current assets
Inventories 1,361 504
Trade and other receivables 463 331
Cash and cash equivalents 1,448 765
------------------------------- -------- --------
3,272 1,600
------------------------------ -------- --------
Total assets 4,519 3,221
------------------------------- -------- --------
Financed by
Equity shareholders'
funds
Equity share capital 5,718 3,677
Equity share premium 46,135 46,135
Own shares reserve (5) (5)
Merger reserve 31,343 31,343
Share based payment reserve 10,335 10,317
Foreign translation reserve (211) (219)
Retained deficit (93,940) (92,245)
Total equity (625) (997)
------------------------------- -------- --------
Non-current liabilities
Contingent consideration 2,707 2,441
Note payable 51 -
Lease liabilities 476 750
------------------------------- -------- --------
3,234 3,191
------------------------------ -------- --------
Current liabilities
Trade and other payables 1,404 707
Notes payable 132 -
Contingent consideration 146 -
Lease liabilities 228 320
------------------------------- -------- --------
1,910 1,027
------------------------------ -------- --------
Total liabilities 5,144 4,218
------------------------------- -------- --------
Total equity and liabilities 4,519 3,221
------------------------------- -------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
At 31 December 2020
Equity Equity Own Merger Share Foreign Retained Total
share share shares reserve based translation deficit
capital premium reserve payment reserve
reserve
------------------------- --------- --------- --------- --------- --------- ------------- --------- --------
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January 2019 3,677 46,135 (5) 31,343 10,293 (267) (90,887) 289
Loss for the year - - - - - - (1,358) (1,358)
Exchange differences
on translation of
foreign operations - - - - - 48 - 48
Share based payments - - - - 24 - - 24
------------------------- --------- --------- --------- --------- --------- ------------- --------- --------
At 31 December 2019 3,677 46,135 (5) 31,343 10,317 (219) (92,245) (997)
------------------------- --------- --------- --------- --------- --------- ------------- --------- --------
Loss for the year - - - - - - (1,646) (1,646)
Share issuance proceeds 2,041 205 - - - - - 2,246
Share issuance expenses 2,041 205 - - - - - 2,246
Exchange differences
on translation of
foreign operations - - - - - 8 - 8
Share based payments - - - - 18 - - 18
------------------------- --------- --------- --------- --------- --------- ------------- --------- --------
At 31 December 2020 5,718 46,135 (5) 31,343 10,335 (211) (93,940) (625)
------------------------- --------- --------- --------- --------- --------- ------------- --------- --------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2020
2019
2020 (Restated)
$'000 $'000
--------------------------------------- ----- ------- -----------
Net cash outflow from operating
activities (1,157) (1,831)
---------------------------------------------- ------- -----------
Proceeds from sale of property,
plant and equipment 20 40
Purchase of property, plant and
equipment - (39)
Proceeds from sales of associate
investment, net of transaction
costs - 211
Repayment on the loan to associate - 57
Interest received - loan to associate - 6
Cash loaned to subsidiary undertakings - -
Net cash inflow from investing
activities 20 275
---------------------------------------------- ------- -----------
Cash received from issue of shares 2,246 -
Transactions costs paid on the
issue of shares (254) -
Proceeds from government secured
debt 183 -
Repayment of lease liability (327) (320)
Interest paid - leases (28) (14)
Net cash inflow / (outflow) from
financing activities 1,820 (334)
---------------------------------------------- ------- -----------
Net inflow / (outflow) in cash
and cash equivalents 683 (1,890)
Cash and cash equivalents at
beginning of year 765 2,655
---------------------------------------------- ------- -----------
Cash and cash equivalents at
end of year 1,448 765
---------------------------------------------- ------- -----------
NOTES TO THE FINANCIAL INFORMATION
1. Accounting policies
Basis of presentation
The financial information set out in this document does not
constitute the Group's statutory accounts for the years ended 31
December 2019 or 2020. Statutory accounts for the years ended 31
December 2019 and 31 December 2020, which were approved by the
directors on 29 March 2021, have been reported on by the
Independent Auditors. The Independent Auditor's Reports on the
Annual Report and Financial Statements for each of 2019 and 2020
were unqualified, did draw attention to a matter by way of
emphasis, being going concern and did not contain a statement under
498(2) or 498(3) of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2019 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2020 will be delivered to the Registrar
of Companies in due course and will be posted to shareholders
shortly, and thereafter will be available from the Group's
registered office at Fieldfisher Riverbank House, 2 Swan Lane,
London, United Kingdom, EC4R 3TT and from the Group's website
https://itaconix.com/investor/reports-documents/
The financial information set out in these results has been
prepared using the recognition and measurement principles of
International Accounting Standards, International Financial
Reporting Standards and Interpretations in conformity with the
requirements of the Companies Act 2006. The accounting policies
adopted in these results have been consistently applied to all the
years presented and are consistent with the policies used in the
preparation of the financial statements for the year ended 31
December 2019, except for those that relate to new standards and
interpretations effective for the first time for periods beginning
on (or after) 1 January 2019. There are deemed to be no new
standards, amendments and interpretations to existing standards,
which have been adopted by the Group, that have had a material
impact on the financial statements.
The Group's financial information has been presented in US
Dollars (USD).
Going concern
The financial statements have been prepared on a going concern
basis. The Directors have reviewed the Company's and the Group's
going concern position taking account its current business
activities, budgeted performance and the factors likely to affect
its future development, set out in the Annual Report, and including
the Group's objectives, policies and processes for managing its
working capital, its financial risk management objectives and its
exposure to credit and liquidity risks.
The Group made a loss before exceptional items for the year of
$1,391k, had Net Current Assets at the period end of $1,308k and a
Net Cash Outflow from Operating Activities of $1,157k. Primarily,
the Group meets its day to day working capital requirements through
existing cash resources and had on hand cash, cash equivalents and
short-term deposits at the balance sheet date of $1,448k.
During the year, the Group reduced its expenditures and
successfully raised funds of $2,246k.
The Directors have reviewed the Group's cash flow forecasts
covering a period of at least 12 months from the date of approval
of the financial statements, which foresee that the Group will be
able to meet its liabilities as they fall due. However, the success
of the business is dependent on customer adoption of our products
in order to increase revenue and profit growth. Inability to
deliver this could result in the requirement to raise additional
funds.
The Directors have also taken into consideration the impact of
the Covid-19 pandemic on the Group's revenues and supply chain.
While there has not been a negative impact through the report date
on the Group revenues or supply chain due to the pandemic, the
Directors have applied sensitivities to the revenue models and have
assessed alternate supply chains that have been developed by the
Group to mitigate any issues to our customers.
The Directors have concluded that the circumstances set forth
above represent a material uncertainty, which may cast significant
doubt about the Company and Group's ability to continue as a going
concern. However, they believe that, taken as a whole, the factors
described above enable the Company and Group to continue as a going
concern for the foreseeable future. The financial statements do not
include the adjustments that would be required if the Company and
the Group were unable to continue as a going concern.
2. Revenue
Revenue recognised in the Group income statement is analysed as
follows:
2020 2019
$'000 $'000
Sale of goods 3,292 1,288
3,292 1,288
----- -----
Geographical information
2020 2019
$'000 $'000
North America 2,869 1,128
Europe 423 160
3,292 1,288
----- -----
The revenue information is based on the location
of the customer.
Segmental information
The revenue information above is derived from the continuing
operations. The Group therefore has one segment, the Specialty
Chemicals segment, which designs and manufactures proprietary
specialty polymers to meet customers' needs in the home care and
industrial markets and in personal care being the Group's principal
activities.
Net assets of the Group (being total assets less total
liabilities) are attributable to geographical locations as at 31
December 2020 as follows:
2020 2019
$'000 $'000
North America 932 1,251
Europe (1,557) (2,248)
(625) (997)
------- -------
3. Loss per share
Basic loss per share is calculated by dividing the loss
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the year.
2020 2019
Loss $'000 $'000
Loss for the purposes of basic and diluted
loss per share (1,646) (1,358)
------- -------
Weighted average number of ordinary shares
for the purposes of basic and diluted loss
per share ('000) 344,970 269,130
------- -------
Basic and diluted loss per share (0.5)c (0.5) c
------- -------
The loss for the period and the weighted average number of
ordinary shares for calculating the diluted earnings per share for
the period to 31 December 2020 are identical to those used for the
basic earnings per share. This is because the outstanding share
options would have the effect of reducing the loss per ordinary
share and would therefore not be dilutive.
4. Cautionary Statement
This document contains certain forward-looking statements
relating to Itaconix plc (the "Group"). The Group considers any
statements that are not historical facts as "forward-looking
statements". They relate to events and trends that are subject to
risk and uncertainty that may cause actual results and the
financial performance of the Group to differ materially from those
contained in any forward-looking statement. These statements are
made by the Directors in good faith based on information available
to them and such statements should be treated with caution due to
the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
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END
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March 30, 2021 02:00 ET (06:00 GMT)
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