TIDMITX
RNS Number : 1435N
Itaconix PLC
28 September 2021
Itaconix plc
("Itaconix" or the "Company")
Half year results for the period ended 30 June 2021
Itaconix (AIM: ITX) (OTCQB: ITXXF), a leading innovator in
plant-based specialty polymers used as essential ingredients in
everyday consumer products, is pleased to announce its unaudited
interim results for the six months ended 30 June 2021.
John R. Shaw, CEO of Itaconix, commented:
"We continue to build a diverse foundation of consumer products
that rely on our ingredients to meet customer demands for
performance, price, and sustainability. Progress with new and
recurring orders from our growing customer base increased overall
revenues compared to the first half of 2020 and expanded the use of
our plant-based technology platform in the global low-carbon
economy. I am especially excited that a major brand set a new
standard for bio-based content by launching a new North American
dishwashing detergent in February based on Itaconix(R) TSI(TM)
322.
Highlights
-- First half revenues of $1.4 million were 26% higher than the
first half of 2020. Due to customer ordering patterns, these first
half revenues were 36% lower than in the second half of 2020.
-- Gross profits were $0.5 million, representing an increase of
30% over the first half of 2020 and decrease of 30% over the second
half of 2020.
-- Gross profit margin was 38% compared to 35% for the full year
of 2020, remaining in line with Company expectations for a
specialty ingredient company.
-- Adjusted EBITDA(1) was a loss of $0.7 million, compared to a
loss of $0.6 million for the same period in 2020, reflecting some
increase in investment spending on new products and
applications.
-- Loss before taxes was $0.2 million, represented a decrease of
78% from losses of $0.8 million in both the first and second halves
of 2020. Revaluation of the contingent consideration liability as a
non-cash item contributed $0.5 million to this decrease.
Forgiveness of the US PPP loan for Covid-19 government assistance
contributed another $0.2 million to this decrease.
-- Cash and cash equivalents as at 30 June 2021 was $1.4
million, compared to $1.4 million as at 31 December 2020.
-- In June 2021, the Company completed an equity raise with
gross proceeds of $1.5 million to fund general working capital
needs and new product development.
-- The Company received the London Stock Exchange's Green Economy Mark in recognition for its contributions to the global green economy.
Commenting on the outlook John R. Shaw, CEO added:
"Our revenue opportunities continue to grow in line with
increasing recognition of the role our ingredients play in meeting
demands from brands and retailers for more sustainable consumer
products. Order volumes are recovering from the disruptions we
experienced in the first half of the year, but we expect some
continuation in market volatility through to the first half of next
year. Underlying consumer demand for our products and new
application developments are generating new customers and revenue
potential for 2022."
(1) Adjusted EBITDA is defined and reconciled to Operating loss
in Note 4 of the Interim Report.
For further information please contact:
Itaconix plc +1 603 775-4400
John R. Shaw / Laura Denner
Belvedere Communications +44 (0) 20 3687 2756
John West / Llew Angus
finnCap +44 (0) 20 7220 0500
Ed Frisby / Abigail Kelly / Milesh Hindocha
(Corporate Finance)
Andrew Burdis / Sunila de Silva (ECM)
About Itaconix
Itaconix uses its proprietary plant-based polymer technology
platform to produce and sell specialty ingredients that improve the
safety, performance, and sustainability of consumer products. The
Company's current ingredients are enabling and leading new
generations of products in detergents, hygiene, and hair care.
Itaconix's contributions to the global low carbon economy are
recognised by the London Stock Exchange's Green Economy Mark.
www.itaconix.com
Chief Executive's Statement
Overview
Itaconix is using and growing its proprietary plant-based
polymer technology platform to build a large, high-gross-margin,
capital-efficient company that produces and sells key ingredients
used in everyday consumer products. From detergents and air
fresheners to shampoos and underarm deodorants, our ingredients are
adding efficacy and sustainability to a growing range of consumer
products that is creating a customer base for new and recurring
revenues. The demand for new generations of consumer products
continues to grow as the urgency to decarbonise our economies
intensifies. Brands and retailers face increasing pressures from
consumers and governments for more sustainable solutions,
particularly within the 360 million households across Europe and
North America.
Itaconix is pioneering new classes of plant-based polymers that
enable new levels of performance, value, and sustainability across
broad categories of consumer products. The first half of 2021 saw
continued development of a strong foundation for realising the
revenue potential in every household for our plant-based technology
platform. We have a diverse and growing base of customers and
products.
Operations
We are gaining more customers as our current polymers are
adopted as key ingredients in breakthrough consumer products.
We are excited about the growth in our detergent customer base
as important new brands use Itaconix(R) TSI(TM) 322 to produce new
compact products with excellent consumer value and new levels of
sustainability. We are particularly pleased that a major brand
launched a dishwashing detergent in North America that set a new
standard for plant-based content. With the recent announcement of
our first order for Itaconix(R) TSI(TM) 322 in Europe, we expect
our new EU customer to set a similar standard in Europe.
The increase in the detergent customer base did not translate
into higher detergent revenues for the period. These revenues were
flat compared to the same period in 2020 and lower than the second
half of 2020 due to inventory adjustments and supply chain delays.
Many brands and retailers reduced production to recalibrate
inventories for normalized consumer demand after stockpiling
product during the initial stages of the pandemic. Customer
production levels were also reduced by limited supplies of certain
other detergent components due to emergency plant shutdowns in
Texas and Delaware and shipping delays from Asia to North America.
We believe the underlying consumer demand for these products remain
strong.
Our on-going development efforts in odour neutralisation are
generating new applications, adoption by more brands, and
increasing consumer demand from the success of leading brands.
Strong demand for our odour neutralising polymers exceeded our
expectations and resulted in revenues for the period that were
higher than the same period in 2020 and ahead of the second half of
2020.
In hair care, our styling polymer enables both sustainability
and new styling capabilities. Early success with specialty brands
is generating both recurring orders and initial use by major
brands. Hair care revenues for the period were less than the same
period in 2020 and less than the second half of 2020 as shipments
in the last part of 2020 were sufficient to meet customer needs
during the lockdowns in North America and Europe. Underlying demand
remains steady and order volumes are recovering.
On the production side, delivery costs and times for key raw
materials for our polymers are increasing as suppliers continue to
struggle with shipping delays caused by the pandemic and disruption
throughout the supply chain. We have prudent stocks of raw
materials and have worked successfully to pass on additional costs
with product price increases to most of our customers.
LSE Green Economy Mark
Itaconix is demonstrating the ability to contribute to the
decarbonisation of global economies with plant-based ingredients
without compromising on performance or price. We were delighted to
receive the London Stock Exchange's Green Economy Mark in
recognition of this important milestone. This was awarded for our
contributions to the green economy in the LSE's Advanced Materials
industry sector. With increasing awareness of climate change, we
look forward to working with our customers and other plant-based
ingredient companies to decarbonise the global economy.
.
Funding
In June 2021, we raised $1.5 million in new funding through the
placement of new ordinary shares by way of a direct subscription
with one new institutional investor and one existing institutional
shareholder, IP Group plc. The proceeds of the fundraise are being
used for working capital purposes and new product development,
including the certainty of the Company's raw material and finished
goods supply chain.
Financial Results
Revenues of $1.4 million for the first half of the year were a
26% increase over the same period in 2020. These revenues were a
36% decrease on the second half of 2020 due to normal ordering for
customer product launches in early 2021, some stockpiling in
response to the pandemic in late 2020, and the inventory
adjustments and supply delays in this period that are detailed
above.
Odour control revenues in the first half of 2021 were higher
than the same period in 2020 and the second half of 2020. Detergent
revenues for the first half of 2021 were flat compared to the first
half of 2020 and less than the second half of 2020, primarily
reflecting strong customer orders to build inventory in the second
half of 2020. Hair care revenues for the period were less than the
same period in 2020 and the second half of 2020, again, due to the
delivery of large orders into customer inventories toward the end
of 2020.
Gross profits for the period were $0.5 million, representing
gross profit margins of 38% compared to 37% for the same period in
2020 and 35% for the full year of 2020.
Adjusted EBITDA(1) was a loss of $0.7 million, compared to a
loss of $0.6 million for the same period in 2020, reflecting some
increase in investment spending on new products and
applications.
Loss before taxes was $0.2 million, representing a decrease of
78% from losses of $0.8 million in both the first and second halves
of 2020. Revaluation of the contingent consideration liability as a
non-cash item contributed $0.5 million to this decrease.
Forgiveness of the US PPP loan for Covid-19 government assistance,
as other income, contributed another $0.2 million to this
decrease.
Net cash was $1.4 million at 30 June 2021 compared to $0.5
million at 30 June 2020 and $1.4 million at 31 December 2020.
Current Trading and Outlook
Itaconix is building a strong business base of recurring
revenues from existing customers and new recurring revenues from
new customers. Our revenue opportunities are growing in line with
the increasing recognition of the role our ingredients play in
meeting demands from brands and retailers for more sustainable
consumer products. We expect continued success at turning our
pipeline of customer projects into sizable new revenues,
particularly in detergents and odour neutralisation.
Revenues for full year 2021 will depend on the timing of initial
orders from new customers and applications launching in early 2022,
and on the continued recovery in detergent and hair care volumes
from the inventory adjustments and supply delays detailed
above.
In summary, we are extremely pleased at the rate at which our
ingredients are being incorporated into our customers' brands and
expect significant further success in the next twelve months. We
are seeing more opportunities to engage with customers and
potential collaboration partners on new generations of consumer
products using both current and new potential ingredients from our
proprietary plant-based technology platform. Our emerging work on
additional new products and applications is expected to further
grow our customer base and revenue potential.
John R. Shaw
Chief Executive Officer
27 September 2021
Condensed consolidated income statement and statement of
comprehensive income
For the six months ended 30 June 2021
Unaudited Unaudited
6 Months 6 Months
to to
30 June 30 June
2021 2020
Notes $000 $000
Revenue 5 1,366 1,086
Cost of sales (842) (683)
--------- ---------
Gross profit 524 403
Other income 4 183 71
Administrative expenses (1,399) (1,287)
--------- ---------
Group operating loss (692) (813)
Exceptional income on movement of
contingent consideration 6 514 -
--------- ---------
Loss before tax (178) (813)
Taxation credit (1) (1)
--------- ---------
Loss for the period (179) (814)
Other comprehensive income, net
of income tax
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translated
foreign operations (93) 110
--------- ---------
Total comprehensive loss for the
period (272) (704)
========= =========
Basic and diluted loss per share 7 (0.04p) (0.30p)
========= =========
Condensed consolidated statement of financial position
As at 30 June 2021
Unaudited Audited
As at As at
30 June 31 December
2021 2020
Notes $000 $000
Non-current assets
Property, plant and equipment 457 501
Right-of-use asset 645 746
--------- -----------
1,102 1,247
Current assets
Inventories 1,358 1,361
Trade and other receivables 274 463
Cash and cash equivalents 3 1,378 1,448
--------- -----------
3,010 3,272
--------- -----------
Total assets 4,112 4,519
========= ===========
Financed by
Equity shareholders' funds
Equity share capital 5,873 5,718
Equity share premium 47,633 46,135
Own shares reserve (5) (5)
Merger reserve 31,343 31,343
Share based payment reserve 10,366 10,335
Foreign translation reserve (304) (211)
Retained losses (94,119) (93,940)
--------- -----------
Total equity / (deficit) 787 (625)
Non-current liabilities
Contingent consideration 6 2,078 2,707
Note payable - 51
Long-term lease liability 395 476
--------- -----------
2,473 3,234
--------- -----------
Current liabilities
Trade and other payables 499 1,404
Notes payable - 132
Contingent consideration 151 146
Short-term lease liability 202 228
--------- -------------
852 1,910
--------- -------------
Total liabilities 3,325 5,144
--------- -------------
Total equity and liabilities 4,112 4,519
========= =============
Interim condensed consolidated statement of cash flows
For the six months ended 30 June 2021
Unaudited Unaudited
6 Months 6 Months
to to
30 June 30 June
2021 2020
$000 $000
Cash flows from operating activities
Operating loss before tax (178) (813)
Adjustments for:
Depreciation of property, plant and
equipment 86 108
Depreciation of right-of-use asset 101 99
Gain on disposal of equipment - (15)
Share option charge 31 8
Revaluation of deferred consideration (478) -
Gain on foreign exchange (93) (57)
Taxation (1) (1)
Decrease / (increase) in inventories 4 (202)
Decrease in receivables 189 40
(Decrease) / increase in payables (1,091) 496
--------- ---------
Net cash (outflow) from operating
activities (1,430) (337)
--------- ---------
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment - 20
Purchase of property, plant and equipment (42) -
--------- ---------
Net cash (outflow) / inflow from investing
activities (42) 20
--------- ---------
Cash flows from financing activities
Cash received from issuing share of
stock, net 1,509 -
Proceeds from government secured debt - 183
Lease payments (88) (183)
Interest expense on lease payments (19) 11
--------- ---------
Net cash inflow from financing activities 1,402 11
--------- ---------
Net (outflow) in cash and cash equivalents (70) (306)
Cash and cash equivalents at beginning
of the period 1,448 765
--------- ---------
Cash and cash equivalents at end of
the period 1,378 459
========= =========
Notes of non-cash items
In April 2021, the Company issued 1,923,389 shares of stock to
satisfy the 2020 contingent consideration payment of $146k.
In April 2021, the Group received forgiveness from the US Small
Business Administration in the amount of $183k for the Covid-19
relief loan to support US employees.
Notes to the interim condensed consolidated financial
statements
1. General information
These unaudited interim condensed financial statements of
Itaconix plc for the six months ended 30 June 2021 were approved
for issue in accordance with a resolution of the Board on 27
September 2021. Itaconix plc is a public limited company
incorporated in the United Kingdom whose shares are traded on the
AIM Market of the London Stock Exchange.
This half-yearly financial report is also available on the
Group's website at https://itaconix.com/investor/reports-documents/
.
2. Accounting policies
These interim consolidated financial statements have been
prepared in accordance with UK adopted International Accounting
Standards (collectively "IFRS") . They do not include all
disclosures that would otherwise be required in a complete set of
financial statements and should be read in conjunction with the 31
December 2020 ('2020') Annual Report. The financial information for
the half years ended 30 June 2021 and 30 June 2020 does not
constitute statutory accounts within the meaning of Section 434 (3)
of the Companies Act 2006 and both periods are unaudited.
The annual financial statements of Itaconix Plc ('the Group')
are prepared in accordance with IFRS . The comparative financial
information for the year ended 31 December 2020 included within
this report does not constitute the full statutory Annual Report
for that period. The statutory Annual Report and Financial
Statements for 2020 have been filed with the Registrar of
Companies. The Independent Auditors' Report on the Annual Report
and Financial Statements for the year ended 31 December 2020 was
unqualified, did draw attention to a matter by way of emphasis,
being going concern, and did not contain a statement under 498(2) -
(3) of the Companies Act 2006.
The interim condensed consolidated financial statements are
presented in US dollars and all values are rounded to the nearest
thousand ($'000) except when otherwise indicated. The interim
condensed consolidated financial statements are prepared on the
historical cost basis except for contingent consideration which
have been measured at fair value.
The Group has applied the same accounting policies and methods
of computation in its interim consolidated financial statements as
in its 31 December 2020 annual financial statements, except for
those that relate to new standards and interpretations effective
for the first time for periods beginning on (or after) 1 January
2021 and will be adopted in the 2021 financial statements. There
are deemed to be no new and amended standards and/or
interpretations that will apply for the first time in the next
annual financial statements that are expected to have a material
impact on the Group.
Going concern
This Interim Report has been prepared on the assumption that the
business is a going concern. In reaching their assessment, the
Directors have considered a period extending at least 12 months
from the date of approval of this half-yearly financial report.
This assessment has included consideration of the forecast
performance of the business for the foreseeable future and the cash
available to the Group. As such, the Directors have concluded that
there exists a material uncertainty which may cast doubt as to the
Group's ability to continue as a going concern. However, taking
account of the Group's working capital at the date of this report,
the Group's current revenues, and current shareholder authority to
raise capital if needed, the Directors believe the Group will
continue as a going concern for the foreseeable future. The interim
financial statements do not include the adjustments that would be
required if the Group were unable to continue as a going
concern.
Risks and uncertainties
The principal risks and uncertainties facing the Group remain
broadly consistent with the Principal Risks and Uncertainties
reported in Itaconix plc's 31 December 2020 Annual Report.
3. Cash and cash equivalents
Unaudited Audited
As at As at
30 June 31 December
2021 2020
$000 $000
Cash at bank and in hand 1,378 1,448
--------- -----------
1,378 1,448
========= ===========
4. Reconciliation of Operating Loss to Adjusted EBITDA
The detail below shows the reconciliation of operating loss to
earnings before change in value of contingent consideration,
government loan forgiveness for Covid-19 relief, interest, taxes,
depreciation and amortisation (Adjusted EBITDA).
Unaudited Unaudited
6 Months 6 Months
to to
30 June 30 June
2021 2020
$000 $000
Loss for the period (179) (814)
Revaluation of contingent consideration (514) -
Other Income - government loan forgiveness (183) -
Taxes 1 1
Depreciation and amortisation 187 207
--------- ---------
Adjusted EBITDA (688) (606)
========= =========
5. Segmental analysis
Revenue by business segment:
The Group has one segment, the Specialty Ingredients segment,
which designs and manufactures proprietary specialty polymers to
meet customers' needs in the personal and consumer health care,
homecare and industrial sectors. This segment makes up the
continuing operations above.
Net assets of the Group are attributable solely to the UK and
US.
Unaudited Unaudited
6 months 6 months
to to
30 June 2021 30 June 2020
$000 $000
Revenue
Sale of goods 1,366 1,086
------------- -------------
Segment revenue 1,366 1,086
------------- -------------
Results
Depreciation and amortisation 187 207
Segment loss (210) (822)
------------- -------------
Operating assets 4,112 2,865
------------- -------------
Operating liabilities 3,325 4,588
------------- -------------
Other disclosure:
Capital expenditure* 42 Nil
------------- -------------
*Capital expenditure consists of additions of property, plant
and equipment, and intangible assets.
Geographical information
Revenues Net assets
Unaudited Unaudited Unaudited Audited
Six Months Six Months Six Months Year to
to to to 31 December
30 June 2021 30 June 2020 30 June 2021 2020
$000 $000 $000 $000
Europe 64 93 (635) (1,557)
North America 1,302 993 1,422 932
1,366 1,086 787 (625)
============= ============= ============= ============
The revenue information above is based on the location of the
customer.
6. Contingent consideration
$'000
As at 31 December 2020 (Audited) 2,853
Movement in fair value and discounting unwind (514)
Share issuance for contingent consideration 2020 (146)
Movement in foreign exchange 36
-----
As at 30 June 2021 (Unaudited) 2,229
=====
During 2018, in conjunction with the fund raise, a restructuring
of the contingent consideration was executed. The contingent
consideration was restructured into two components:
-- A one-time issue of 15 million new Itaconix plc shares to the Sellers.
-- The continuation of the previous contingent consideration
mechanism (i.e. up to $6m in shares), but with the window of time
for potential achievement expanded to the end of 2022 (from the end
of 2020) and including all the revenues of the Group (which are
primarily from products based on the acquired technology in any
event).
It should also be noted that the second component summarised
above was intended to serve as an incentive programme for the two
members of management (John Shaw and Yvon Durant) who were also
Sellers and are entitled to 63% of the total contingent
consideration. Accordingly, they were not eligible for any cash
bonus or other share incentive programme until the end of 2020.
Simultaneously, the merger agreement with the former shareholders
of Itaconix Corporation and related agreements were amended to
remove various restrictive clauses, including minimum funding
requirements and employment terms.
Based on the share price at the execution of the restructuring
agreement in 2018, the 15m shares had a value of GBP0.3m which was
expensed immediately.
In respect of 2021, the deferred consideration for the period
was valued using a discounted cash flow-based assessment of the
expected sales of the relevant products extracted from a recent
management prepared forecast, consistent with the approach in prior
years. A discount rate of 10.9% was used. The valuation includes
elements which are unobservable and which have a significant impact
on the fair value. Accordingly, contingent consideration is
classified as Level 3 fair value measurement.
The value of the adjusted contingent component using a recent
management prepared forecast and assumptions as above is $2.2m (31
December 2021 - $2.9m)
As a result of the changed revenue forecasts, earn out period,
and discount rate from the original value assessments, the
contingent consideration at 30 June 2021 was reduced to $2.2m.
Sensitivity analysis was also performed, summarised as follows:
-- If the sales in the period 2021 to 2022 were reduced by
$1.0m, the fair value would be reduced by approximately $0.4m
-- A 1% increase in the discount rate would reduce the fair value by $44k
Since the forecasts used were a conservative base case, the
computed fair value was deemed appropriate.
7. Weighted-average number of ordinary shares
Unaudited Unaudited
6 Months 6 Months
to to
30 June 30 June
2021 2020
Weighted average number of ordinary shares
for the
purposes of basic and diluted loss per
share ('000) 434,050 269,130
========= =========
8. Events after the reporting period
There were no material post balance sheet events .
9. Cautionary statement
This document contains certain forward-looking statements
relating to Itaconix plc. The Company 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 Company 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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