TIDMITX
RNS Number : 5030A
Itaconix PLC
30 September 2020
To release at 07:00 GMT 30 September 2020
Itaconix plc ("Itaconix" or "the Company")
Full Year Results for the Year Ended 31 December 2019
Annual Report & Accounts
Itaconix (LSE: ITX) (OTCQB: ITXXF), a leading innovator in
sustainable specialty polymers, is pleased to announce its audited
results for the year ended December 2019 ("2019").
A copy of the Annual Report & Accounts is available for
download on Itaconix's website at www.itaconix.com.
2019 Financial Highlights
Financial results for 2019 show increased demand for the
Company's products, significant cost savings from the restructuring
of operations in 2018, and the full exit from the nicotine gum
business. The Company transitioned its reporting currency from UK
Sterling to US Dollars.
-- Total revenues increased by 46.2% to $1.3m from $0.9m in 2018.
-- Gross profits increased by 221.4% to $0.45m in 2019 from
$0.14m in 2018 reflecting an increase in gross profit margin to
34.9% in 2019 from 15.9% in 2018.
-- Net losses decreased by 86.2% to $1.4m in 2019 from $9.9m in 2018.
-- Losses before interest, tax and non-cash items decreased
58.8% to $2.8m in 2019 from $6.8m in 2018.
-- Cash reserves at the end of 2019 were $0.8m, down from $2.7m at the end of 2018.
-- In May 2019, Itaconix completed its divestment of its
minority interest in Alkalon for a total cash consideration of c.
GBP242,000.
2019 Operational Highlights
The Company achieved important progress and major milestones in
establishing the value of its core products and developing a broad
base of customers for continued revenue growth in its major
application areas:
-- Use of the Company's detergent polymers increased, including
new orders from customers in Europe.
-- The Company transitioned the marketing and sales of its
hairstyling polymer to Nouryon to expand global awareness and
usage.
-- The Company added a new odour control product and saw
expanded use of its products through its global marketing and sales
collaboration with Croda.
In addition, the Company continued to develop its organisation
with the appointment of Laura Denner as Chief Financial Officer.
Mike Townend stepped down as a Non-Executive Director after many
years of dedicated service to the Company.
Post Year End
-- In May 2020, Itaconix Corporation received a US Government
Paycheck Protection Program Loan for $0.2m to support the business
through the Covid-19 pandemic.
-- In July 2020, the Company provided a trading update on
unaudited revenues and revenue growth for the first six months of
2020. Full interim results are expected to be released by the end
of October.
-- In July 2020, the Company completed an equity raise with
gross proceeds of $2.2 million to fund operating losses and working
capital needs as revenues advance toward break-even
profitability.
Outlook
John R. Shaw, CEO of Itaconix, stated: "Our 2019 results show
the transformation in revenue and profit potential that we created
from our focus on sustainable specialty ingredients and the
restructuring of operations in 2018. We exited 2019 as a lean
commercial operation with a growing base of customers and recurring
revenues from our direct success in detergents and our blue-chip
collaborations with Croda and Nouryon. With product demand in the
first half of 2020 reflecting the ramp up we expected to start in
late 2019 and the proceeds from our July equity raise, we have the
commercial momentum and operations in place for continued strong
revenue growth."
For further information please contact:
Itaconix plc +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)
About Itaconix
Itaconix develops and produces bio-based functional ingredient
that improve the safety, performance or sustainability of consumer
and industrial products, with technology and market leadership
positions in non-phosphate detergents, odour control, and hair
styling.
www.itaconix.com
CHIEF EXECUTIVE OFFICER'S REPORT
Polymers for Better Living(TM)
Our sustainable polymers 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, the way we
produce them, how they are used as ingredients in consumer product
formulas, and how these formulas are packaged and delivered to
consumers can reduce the depletion of natural resources, increase
the use of safer chemicals, and reduce the release of chemicals
into the environment.
Consumers are increasingly aware of the role that their
purchases may have on the environment, natural resource use, and
climate. New buying behaviours, regulations, and product
certifications emerging from this growing awareness are driving
consumer product companies to respond and formulate new products or
reformulate existing products. Our sustainable polymers allow
product and brand managers to meet new customer needs in a growing
range of home and personal care products.
Our bio-based polymers reduce the depletion of natural resources
by replacing petroleum-based chemicals as ingredients in consumer
products, by using energy-efficient production, and by enabling
more concentrated consumer products that require less chemicals and
less packaging.
Most importantly, the renewable carbon in the composition of our
polymers is captured by plants from carbon dioxide in the air. The
plants use the carbon dioxide to produce sugars that are fed to
microorganisms to yield the itaconic acid we use to make our
polymers. When one of our products replaces the function of a
petroleum-based ingredient in a formulation, the circular process
of capturing and reusing carbon dioxide in the air displaces
fossil-based carbon.
With Polymers for Better Living(TM), Itaconix meets the demands
of new formulations with the transformative potential of
sustainable ingredients from renewable sources.
Commercial Progress
From detergents to shampoos, our polymers are validated as
disruptive ingredients in a new generation of everyday products
that have the performance, cost, and sustainability to meet
emerging consumer demands. The expanding foundation of formulations
is building a strong base of recurring use and orders to accelerate
Itaconix's commercial momentum and revenue growth.
Our product revenues grew by 46.2% to $1.3m in 2019 from $0.9m
in 2018 from steady progress on a strong customer base to build
from into 2020. Financial details on the operating losses and going
concern related to our commercial progress in the Strategic
Report.
Our growth in 2019 was led by advances in the use of our
polymers in non-phosphate detergents in North America and Europe,
particularly in automatic dishwashing applications. In North
America, increased use in detergent brands found our polymers in
more products at major, discount, and ecommerce retailers. In May
2019, we announced our first order for use of Itaconix(R) CHT(TM)
122 in European detergents.
We entered 2020 with further progress in our revenue potential
in non-phosphate detergents. In January 2020, we launched our new
Itaconix(R) TSI(TM) 322 detergent polymer that offers further value
in detergents and received a patent on novel automatic dish
detergents to protect our intellectual property until at least
2037. In February 2020, we announced a new agreement with New Wave
Global Services, a leading Canadian supplier of innovative
detergents to North American retailers, to supply up to 1 million
lbs of our detergent polymers through 2021 to meet growing volumes
for its detergents from existing and new customers.
In Personal Care, we expanded our global sales effort by
transitioning from the direct sale of our RevCare NE100S product to
supplying the polymer for Nouryon to market globally as Amaze(TM)
SP within its world leading hair styling polymer product line. With
the first order delivered to Nouryon in June 2019, the polymer is
gaining greater awareness and adoption as a bio-based ingredient
with excellent curl retention, volumising, and frizz control
performance.
In odour control, we expanded our supply agreement with Croda
and the market potential for our odour control technology with the
introduction of ZINADOR(TM) 35L. While demand for the current
ZINADOR(TM) 22L continues to grow, the new polymer offers
performance and cost advantages that create broader opportunities
in home care and hygiene applications.
In May, June, and July 2020, we announced continued commercial
progress in demand for our polymers, reflecting additional
recognition and use of our polymers in a new generation of consumer
products.
We completed our transition to a sustainable specialty
ingredient company in May 2019 with the sale of our minority
interest in Alkalon A/S, a Danish nicotine gum company, for $0.3m
in cash.
Profitability
We made major steps towards profitability with Net Losses
decreasing to $1.4m in 2019 from $9.9m in 2018 based on the
positive effects of increased product volumes and the restructuring
of operations in 2018.
The higher product volumes increased gross profit margins to
34.9% in 2019 from 15.9% in 2018 to generate Gross Profits of
$0.45m in 2019 compared to $0.14m in 2018.
Decreases in operating expenses from the restructuring of
operations, reduced Losses before Interest, Tax and Non-Cash Items
to $2.8m from $6.8m in 2018.
Funding
As we progress in developing our commercial base and achieving
our strategic growth plans, we rely on access to additional funding
to meet our working capital requirements.
Cash at the end of 2019 was $0.8m, down from $2.7m at the end of
2018.
In July 2020, we completed a new placement of ordinary shares
with gross proceeds of $2.2m.
Covid-19
The Group has maintained operations as an essential business
throughout the Covid-19 pandemic. Efforts to conserve available
cash were taken in March 2020 until the new funding in July 2020.
While some customer formulation activities have slowed, the surge
in demand for household detergents has significantly increased
order volumes for the Group's detergent polymers. Effective
customer engagement has continued without travel through adaptation
and innovation in customer communication and engagement.
In May 2020, the Group's US subsidiary received a $0.2m loan
through the US Paychecks Protection Program to support its
operations and employees during the Covid-19 pandemic, as further
detailed in the Annual Report.
People
Effective September 2019, Laura Denner was promoted from Group
Director, Finance and Operations to Chief Financial Officer. I
appreciate the efforts of our former Interim Chief Financial
Officer Michael Norris in managing and facilitating this
transition.
I wish to thank our former Non-Executive Director, Mike Townend,
for his guidance and valuable contributions from the Group's
earliest days through becoming a leading innovator in sustainable
specialty ingredients.
Further details of the development of the Executive Team and
Board of Directors in 2019 are detailed in the Annual Report.
As of February 2019, the Group completed the closing of its
former headquarters and operations in Deeside, Wales and had no
employees at the facility. As of September 2020, the Group
completed the surrender of its lease for the facility.
Share Trading
Itaconix shares commenced cross-trading publicly on the US OTCQB
Market under the symbol ITXXF on 18 December 2019. Cross-trading on
the OTCQB Market simplifies the trading process for US investors,
enabling them to trade in the Group's shares on the AIM Market, in
US dollars and during US trading hours.
Shareholders at the 2019 AGM authorized the Board to undertake a
50:1 share consolidation subject to certain share trading
conditions. The Board did not pursue this consolidation and is not
seeking to renew the authorisation at the 2020 AGM.
Shareholder Engagement
The Notice of Annual General Meeting ("AGM") that accompanies
the Annual Report sets out the business for our forthcoming AGM on
23 October 2020. I encourage all shareholders to cast votes by
proxy either via mail or electronically by 21 October 2020. Due to
Covid-19, we cannot have shareholders attend the meeting in person,
but we will have an open-access corporate presentation immediately
following the AGM.
John R. Shaw
Chief Executive Officer
STRATEGIC REPORT
Principal Activities
Itaconix plc is a leading innovator in bio-based functional
ingredients for improving the safety and performance of homecare,
personal care, and industrial products. Its proprietar y polymer
technology generates a growing range of new ingredients with unique
functionalities that meet consumer demands for value and
sustainability.
The principal activities of the Group are the production and
sale of proprietary specialty polymers that meet significant
customer needs, with a strategy of direct selling efforts to
establish initial use of new polymers, and then partner development
to scale global demand.
Most of the Group's efforts are focused on homecare 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 ingredients stems from the unique functionalities
available through the chemical structure of itaconic acid and its
derived polymers, and from the bio-based production of itaconic
acid through fermentation using renewable 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 2019
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 increase in
non-phosphate detergent sales, which drove significant growth in
top line revenues. The Group is well positioned for growth in the
coming years.
The focus on revenue growth and costs control in 2019 has
progressed the Group towards its goals of reducing cash use and
reaching profitability sooner. The Group's efforts during the year
to eliminate the remaining costs from the UK facility and the
nicotine gum business (Alkalon) will continue to streamline the
business in the near term.
Board and Executive Changes
There were continued developments to the Executive Team and
Board of Directors in 2019.
Mike Townend stepped down as a Non-Executive Director in May
2019.
Michael Norris stepped down as Interim Chief Financial Officer
in August 2019.
Laura Denner was appointed as Chief Financial Officer and
Company Secretary in September 2019.
Financial Review
Results and Dividends
The Group results are stated in the Consolidated Income
Statement and are reviewed below. The Directors do not recommend
the payment of a dividend (2018: nil).
Financial Performance
Revenue
Total revenues for the 12-month period ended 31 December 2019
were $1.3m, representing a 46.2% increase over 2018 revenues of
$0.9m. Revenues grew primarily from increased demand for the
Group's detergent and personal care products.
Gross Profit and Loss after Tax
Gross profit margins have improved as expected due to increased
plant utilization and a reduced overhead cost structure. As the
Group continued to focus efforts on fulfilment and
commercialisation of the current itaconate polymer technologies,
gross profit increased from $140k in 2018 to $450k, in 2019, an
increase of 221.4%. Gross profit margin more than doubled from
15.9% in 2018 to 34.9% in 2019.
The Operating Loss before Exceptional Items decreased from $5.7m
2018 to $2.8m for 2019, based heavily on administrative expenses
declining from $5.9m in 2018 to $3.4m in 2019. This 42.9% decrease
derived mainly from the full-year realization of the reorganization
of the Group in 2018, consolidating all research and administrative
activities into the New Hampshire, USA operations.
Costs and Available Cash
The Group's increasing revenues and overall cost reductions
resulted in Net Cash Outflow from Operations of $1.8m, which
represents a significant decrease from 2018 when Net Cash Outflow
from Operations was $7.0m. As at 31 December 2019, the Group held
cash of $0.8m. These reduction in cash flows were partially offset
by proceeds of $0.3m from the sale of the Group's minority interest
in Alkalon. Subsequent to the year end, the Group completed a fund
raise of $2.2m and received $0.2m from the US Government Paycheck
Protection Program.
Financial Position
At 31 December 2019, the Group had equity of ($1.0m) as compared
to $0.3m in 2018, this was due to significant unwinding of the
deferred consideration net of stronger operating results.
As required under IFRS 16, the Group recognized a right-of-use
asset and a lease liability of $1.4m on implementation of the new
accounting standard on 1 January 2019. Included in the calculation
was a lease extension, executed in 2019 that extends the lease of
the Group's primary operating facility and headquarters by 5 years.
In respect of the Group's former headquarters in the UK, the group
has applied practical expedient to retain the IAS 17 valuation of
this onerous lease of $0.3m, this being set off against the
right-of-use asset at 1 January 2019. See Note 5.
Inventory increased from $0.4m to $0.5m in 2019 to support
increased growth in customer demand.
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 income of $1.5m in 2019, which offset the
exceptional non-cash expense of $3.3m (excluding foreign exchange)
from 2018 that resulted from the renegotiated terms of the deferred
consideration as part of the 2018 fundraise.
Financial Reporting
In the financial year commencing 1 January 2019, the Group
changed the reporting currency from the UK Sterling to the US
Dollar and applied a new accounting standard for leases (IFRS
16).
Change in Group's reporting currency
In this period, the Directors decided to change the reporting
currency due to the growing exposure to the US dollar in our
operating activities, including the majority of customer
transactions, raw material purchases, payroll, and operating
expenses.
IFRS 16 "Leases"
The Group adopted IFRS 16: Leases and has replaced IAS 17:
Leases. The Group has elected to apply the modified retrospective
method. Following the adoption of IFRS 16, right-of-use assets of
$1.1m and lease liabilities of $1.4m were recognized at the date of
transition. Lease costs have been replaced by depreciation of the
right-of-use asset and interest arising on the lease liability in
this reporting period.
Key Performance Indicators (KPI's)
The Group considers its three key performance indicators to
be:
-- Revenue
-- Profits before interest, taxes, and non-cash expenses
-- Cash
The Directors believe that revenue and profits are KPI's 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 the products. Revenue
performance is detailed in the Chief Executive Officer's
Statement.
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 outflow for the period to 31 December 2019
was $1.9m (2018: $2.2m). Further details of cash flows in 2019 (and
2018) are set out in the Group's Consolidated Cash Flow
Statement.
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 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 to our customers.
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. Subsequent to year end, the Group successfully raised funds
of $2,246k.
Shareholdings and Earnings per Share
Itaconix had 269,130,071 shares in issue as at 31 December 2019.
The undiluted weighted average number of shares for the period to
31 December 2019 was 269,130,071. The undiluted weighted average
number of shares was used to calculate the loss per share.
Principal Risks and Uncertainties
Commercialisation Activities
Significant progress was made in 2019 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 has a share incentive agreement as
disclosed in Annual Report, and service contracts in place for John
R. Shaw as Chief Executive Officer and Dr. Yvon Durant as Chief
Technology Officer. In addition, the Group use an Equity Incentive
Plan for share option grants to other key personnel at its New
Hampshire, US operations.
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, operations of its production facility, and supply of raw
materials due to the Covid-19 pandemic.
Management of risk: The Group has not experienced any
significant disruptions to date. The US operations are designated
as an "essential business" for continued operations under any
government orders. Management closely monitors Covid-19 regulatory
developments, expected demand from customers, and the reliability
of its raw materials supply chain.
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, subsequent to year end,
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 2019, there
were no significant credit risk balances.
Foreign Exchange Risk
Itaconix has operations in the UK and US, and trades with
customers 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.
The Group has potential risks under Brexit to lack of alignment
in chemical regulations that may emerge over time between the UK
and the European Community.
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.
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 four decisions taken
during the year fall into this category, and engaged with internal
and external stakeholders on these decisions:
-- Change in reporting currency - The decision to change the
Group's reporting currency mitigates the effects of translating the
reporting currency from the functional currency. As approximately
90% of the Group's activities are transacted in the US Dollar; this
presentation will be beneficial to shareholders, suppliers, and
customers as it eliminates the need for consideration of hedging or
translation differences.
-- Sale of Alkalon - The Group sold its minority holding in the
nicotine gum business during the year. The decision to sell the
Group's investment in Alkalon concludes a 2016 divestment in the
Group's gum technology. This decision allows the Group to focus on
its itaconate polymers and reduce potential exposure to contingent
liabilities that existed as part of the agreement in the sale of
this technology. This will benefit shareholders as all resources
are now committed to the Group's primary business of itaconate
products.
-- Listing on OTCQB Market - As discussed in the Chief
Executive's Statement, the cross-listing of the Company's stock on
the OTCQB Market provides additional access to the US equity market
that has developed as the US investor base continues to grow.
Shareholders in the US were historically limited in their ability
to trade shares on the AIM market without a UK broker. Cross
trading on the US OTCQB market allows the US shareholders direct
access to real time trading.
-- 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 Market. The fundraise was
completed in July 2020.
James Barber John R. Shaw
Chairman Chief Executive Officer
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2019
2019 2018
(Restated)
Notes $'000 $'000
--------------------------------------------- ----- ------- -----------
Continuing operations
Revenue 3 1,288 881
Cost of sales (838) (741)
--------------------------------------------- ----- ------- -----------
Gross profit 450 140
Other operating income 62 129
Administrative expenses (3,390) (5,935)
--------------------------------------------- ----- ------- -----------
Group operating loss before exceptional
items (2,878) (5,666)
Exceptional income/ (expense) on revaluation
of contingent consideration 1,474 (3,323)
Exceptional expense on organizational
restructuring - (1,190)
Finance income 1 4
Gain on sale of associate 84 -
Share of (loss) / profit of associate (38) 120
--------------------------------------------- ----- ------- -----------
Operating Loss before tax from operations (1,357) (10,055)
Taxation (charge)/credit (1) 187
--------------------------------------------- ----- ------- -----------
Loss for the year from operations (1,358) (9,868)
Loss for the year (1,358) (9,868)
--------------------------------------------- ----- ------- -----------
Basic and diluted loss per share 4 (0.5) (6.3)
--------------------------------------------- ----- ------- -----------
Diluted loss per share 4 (0.5) (6.3)
--------------------------------------------- ----- ------- -----------
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2019
2019 2018
(Restated)
Notes $'000 $'000
--------------------------------------------- ------ ------- -----------
Loss for the year (1,358) (9,868)
Items that will be reclassified subsequently
to profit or loss
Exchange gains / (losses) in translation
of foreign operations 48 (193)
----------------------------------------------------- ------- -----------
Total comprehensive loss for the year,
net of tax (1,310) (10,061)
----------------------------------------------------- ------- -----------
Attributable to:
Equity holders of parent (1,310) (10,061)
----------------------------------------------------- ------- -----------
CONSOLIDATED BALANCE SHEET
At 31 December 2019
31 Dec 31 Dec 1 Jan
2019 2018 2018
(Restated) (Restated)
Notes $'000 $'000 $'000
Non-current assets
Property, plant and equipment 701 972 1,323
Right-of-use assets 5 920 - -
Trade and other receivables - - -
Investment in subsidiary undertakings - - -
Investment in associate undertakings - 167 -
-------------------------------------- ----- -------- ---------- ----------
1,621 1,139 1,323
-------------------------------------- ----- -------- ---------- ----------
Current assets
Inventories 504 387 366
Trade and other receivables 331 907 953
Cash and cash equivalents 765 2,655 4,869
-------------------------------------- ----- -------- ---------- ----------
1,600 3,949 6,188
-------------------------------------- ----- -------- ---------- ----------
Total assets 3,221 5,088 7,511
-------------------------------------- ----- -------- ---------- ----------
Financed by
Equity shareholders' funds
Equity share capital 3,677 3,677 1,205
Equity share premium 46,135 46,135 43,923
Own shares reserve (5) (5) (7)
Merger reserve 31,343 31,343 31,343
Share based payment reserve 10,317 10,293 9,989
Foreign translation reserve (219) (267) (74)
Retained earnings (92,245) (90,887) (81,019)
Total equity (997) 289 5,360
-------------------------------------- ----- -------- ---------- ----------
Non-current liabilities
Contingent consideration 2,441 3,891 819
Lease liabilities 5 750 - -
-------------------------------------- ----- -------- ---------- ----------
3,191 3,891 819
-------------------------------------- ----- -------- ---------- ----------
Current liabilities
Trade and other payables 707 908 1,332
Lease liabilities 5 320 - -
-------------------------------------- ----- -------- ---------- ----------
1,027 908 1,332
-------------------------------------- ----- -------- ---------- ----------
Total liabilities 4,218 4,799 2,151
-------------------------------------- ----- -------- ---------- ----------
Total equity and liabilities 3,221 5,088 7,511
-------------------------------------- ----- -------- ---------- ----------
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
At 31 December 2019
Share
Equity Equity based Foreign
share share Own shares Merger payment translation Retained
capital premium reserve reserve reserve reserve deficit Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
----------------------------- -------- -------- ---------- -------- -------- ------------ -------- -------
At 1 January 2018 (Restated) 1,205 43,923 (7) 31,343 9,989 (74) (81,019) 5,360
Loss for the year - - - - - - (9,868) (9,868)
Share issuance, net
of expenses 2,472 2,212 - - - - - 4,684
Exchange differences
on translation of foreign
operations - - - - - (193) - (193)
Exercise of share options - _ 2 - - - - 2
Share based payments - - - - 304 - - 304
----------------------------- -------- -------- ---------- -------- -------- ------------ -------- -------
At 31 December 2018
(Restated) 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)
----------------------------- -------- -------- ---------- -------- -------- ------------ -------- -------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2019
2019 2018
(Restated)
Notes $'000 $'000
--------------------------------------------- ------ ------- ----------
Net cash (outflow) / inflow from operating
activities (1,831) (6,973)
----------------------------------------------------- ------- ----------
Proceeds from sale of property, plant
and equipment 40 74
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 / (outflow) from investing
activities 275 74
----------------------------------------------------- ------- ----------
Cash received from issue of shares - 4,946
Transactions costs paid on the issue
of shares - (261)
Repayment of lease liability (320) -
Interest paid - leases (14)
Net cash (outflow) / inflow from financing
activities (334) 4,685
----------------------------------------------------- ------- ----------
Net (outflow) in cash and cash equivalents (1,890) (2,214)
Cash and cash equivalents at beginning
of year 2,655 4,869
----------------------------------------------------- ------- ----------
Cash and cash equivalents at end of
year 765 2,655
----------------------------------------------------- ------- ----------
NOTES TO THE FINANCIAL INFORMATION
1. Accounting Basis
The financial information set out in this document does not
constitute the Group's statutory accounts for the years ended 31
December 2018 or 31 December 2019. Statutory accounts for the years
ended 31 December 2018 and 31 December 2019, which were approved by
the directors on 29 September 2020, have been reported on by the
Independent Auditors. The Independent Auditor's report on the
Annual Report and Financial Statements for years ended 31 December
2018 and 31 December 2019 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.
The statutory accounts for the year ended 31 December 2019 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, and International Financial
Reporting Standards and Interpretations adopted for use in the
European Union (collectively Adopted IFRSs). The Group has applied
the same accounting policies and methods of computation in its
financial statements as in its 2018 annual financial statements,
except for the change in the Group's reporting currency and those
that relate to new standards and interpretations effective for the
first time for periods beginning on (or after) 1 January 2019,
which have been adopted in the current year's financial statements.
The new standard that has impacted the Group for the year ended 31
December 2019 is IFRS 16 Leases (see Note 5).
Presentational currency
In this period, the Board decided to change the reporting
currency due to the growing exposure to the US Dollar (USD), as all
major contracts and most of the new agreements for the Company are
denominated in this currency. The Board therefore believes that USD
financial reporting provides a reliable and more relevant
presentation of the Group's financial position, funding and
treasury functions, financial performance, and its cash flows.
Coupled with the evolution of the business, the Group's shareholder
base is now largely comprised of foreign investors to whom
financial reporting in GBP is of limited relevance. Internally, the
Board also bases its performance evaluation and many investment
decisions on USD financial information.
It should be noted that the functional currencies of the Group's
underlying businesses - functional currencies referring to the
currencies of the primary economic environments in which underlying
businesses operate - remain unchanged and that foreign exchange
exposures will therefore be unaffected by the change, albeit that
the effects of such exposures are presented in USD.
To assist investors in understanding the change in accounting
policy, restated statements of financial position have been
presented, providing restated USD financial information for the
financial years ended 31 December 2018 and 2017.
A change in reporting currency represents a change in an
accounting policy in terms of IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors requiring the restatement of
comparative information. In accordance with IAS 21 The Effects of
Changes in Foreign Exchange Rates, the following methodology was
followed in restating historical financial information from GBP
into USD:
-- Non-USD assets and liabilities were translated at the
relevant closing exchange rate at the end of the reporting period.
Non-USD items of income and expenditure and cash flows were
translated at average exchange rates for the reporting period
disclosed;
-- Share capital, premium, and other reserves, as appropriate,
were translated at the historic rates prevailing at the dates of
underlying transactions, and
-- The effects of translating the group's financial results and
financial position into USD were recognised in the foreign currency
translation reserve.
2. 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
$2,878k, had Net Current Assets at the period end of $573k and a
Net Cash Outflow from Operating Activities of $1,831k. 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 $765k (2018:
$2,655k).
Subsequent to year end, the Group 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.
3. Revenue and Segment Information
Revenue recognised in the Group income statement is analysed as
follows:
2019 2018
$'000 $'000
Sale of goods 1,288 881
1,288 881
----- -----
Geographical information
2019 2018
$'000 $'000
Europe 1,128 650
North America 160 222
Asia - 9
----- -----
1,288 881
----- -----
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.
Net assets of the Group are attributable to geographical
location as at 31 December 2019.
2019 2018
$'000 $'000
Europe (2,248) 115
North America 1,251 174
(997) 289
------- -----
4. 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.
2019 2018
Loss $'000 $'000
Loss for the purposes of basic and diluted
loss per share (1,358 ) (9,868)
-------- -------
Weighted average number of ordinary shares
for the purposes of basic and diluted loss
per share ('000) 269,130 156,971
-------- -------
Basic and diluted loss per share (0.5) (6.3)
-------- -------
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 2019 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 .
5. Leases
The Group leases all its facilities from which it operates. The
headquarters, production, and main offices are located in Stratham,
NH, USA. The facility is approximately 31,000 square feet and the
lease expired in September 2019. Management renewed the lease for a
5-year extension, through to September 2024. Lease payments to
September 2024 have been included in the initial recognition of the
lease liability. There is another office facility in Deeside,
Flintshire, UK that expires in July 2021. At 31 December 2018 and
under IAS 17, the Group recognized this lease as an onerous
lease.
With effect from 1 January 2019, the Group has adopted IFRS 16
Leases, which specifies how to recognize, measure, and present
leases liabilities and the associated right-of-use assets. The
Group has not restated comparatives for the 2018 reporting period,
as permitted under the specific transitional provisions in the
standard. The reclassifications and the adjustments arising from
the new accounting standard are therefore recognized in the opening
balance sheet on 1 January 2019 and comparatives have not been
restated. In respect of the Group's former headquarters in the UK,
the group has applied practical expedient to retain the IAS 17
valuation of this onerous lease of $0.3m, this being set off
against the right-of-use asset at 1 January 2019.
On initial application, the Group recognized lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17: Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's weighted average
incremental borrowing rate as at 1 January 2019 of 7.75%. The Group
has elected to record right-of-use assets as equal to the
corresponding lease liabilities as the impact of potential
additional costs or deductions to the assets are immaterial.
In applying IFRS 16 for the first time, the Group used practical
expedients permitted by the standard:
-- reliance on previous assessments on whether leases are onerous;
-- the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract is
or contains a lease at the date of initial application. Instead,
for contracts entered into before the application date, the Group
has relied on its assessment made applying IAS 17 and IFRIC 4 in
determining whether an arrangement is or contains a lease.
Right-of-use asset
Leased Building
$'000
At 1 January 2019 1,118
Amortisation (198)
Exchange differences -
----------------
At 31 December 2019 920
----------------
Lease liability
Leased Building
$'000
At 1 January 2019 1,384
Additions in year -
Interest expense 14
Lease payments (334)
Exchange differences 6
----------------
At 31 December 2019 1,070
----------------
The above table also provides an evaluation of the material
changes in the Group's liabilities arising from financial
activities, as noted in the Group's Cashflow.
At 31 December 2019, the maturity of the lease liability is as
follows:
Between 3 months One to two Two to five
Up to 3 months and 12 months years years
$'000 $'000 $'000 $'000
------------------ ---------------- ------------------ ------------ -------------
Leased building 82 238 274 476
The following table sets out the impact of adopting IFRS 16 on
the financial position of the Group at 1 January 2019:
As presented IFRS 16 Adjustments At 1 January
at 31 December 2019
2018
Asset
Right-of-use asset
(a) - 1,384 1,384
Accrual - IAS 17
(c) - (266) (266)
---------------- -------------------- -------------
- 1,118 1,118
Liability
Lease liability (b) - (1,384) (1,384)
Accrual - IAS 17(c) (266) 266 -
(266) (1,118) (1,384)
Equity
Retained earnings (90,887) - (90,887)
(a) The adjustment to right-of-use asset is related to all
operating type lease assets
(b) The table below reconciles the minimum lease commitments
disclosed in the Group's 31 December 2019 annual financial
statements to the amount of the lease liabilities recognized on 1
January 2019.
(c) The adjustment to provisions related to an onerous lease
provision reclassified to the right-of-use asset on the adoption of
IFRS 16.
The following table sets out the impact of adopting IFRS 16 on
the financial position of the Group at 1 January 2019:
Leased Building
$'000
Minimum operating lease commitment at
31 December 2019 441
Effect of extension options reasonably
likely exercised 1,235
Undiscounted lease payments (292)
Effect of discounted at Group's incremental -
borrowing rate
----------------
Lease liabilities recognized at 1 January
2019 1,384
----------------
6. Cautionary Statement
Itaconix has made forward-looking statements in this press
release, including statements about the market for and benefits of
its products and services; financial results; product development
plans; the potential benefits of business relationships with third
parties and business strategies. These statements about future
events are subject to risks and uncertainties that could cause
Itaconix's actual results to differ materially from those that
might be inferred from the forward-looking statements, Itaconix can
make no assurance that any forward-looking statements will prove
correct.
This information is provided by RNS, the news service of the
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