If there would be an award for companies because of the frequency of their trading updates Biome Technologies, the London AIM-listed bioplastics and radio frequency technology business, would definitely be a contender for a prize.
A pre-close trading statement for the financial year ended 31 December 2017, issued late in 2017 said there be a substantial increase in group revenues for 2017 to £6.2 million against £4.8m in 2016. The company thus entered the first quarter of 2018 on a roll and the company’s share price hit a 52-week high of 365 pence in late January 2018, even though a small pre –tax loss (£100,000) had been registered for 2017.
On 24 April 2018 Biome gave out, ahead of its AGM, a new trading update for the three months ended 31 March 2018; The update stated that group revenues for the first three months of the year were £2.1m, 37 per cent ahead of the same quarter last year (Q1 2017: £1.5m.) But the update did not give much detail about underlying profitability or the revenue split and the shares were down 5.3per on the day the update was released.
We now have another trading update for the six months ended 30 June 30 2018. This was released on 23 July 2018, well ahead of the unaudited interim results which are expected to be announced on 3 September 2018. Yet again the update said that total group revenues for the first half of the year were substantially higher at £4.3m—a 43 per cent increase.
The company was a little clearer on profitability this time, but not that much clearer. It said only that the Group expects to report an increased EBITDA profit for the first half of 2018 compared to the first half of 2017, reflecting an increase in revenues (based on unaudited management accounts).
Biome gains traction in the US market with its fully compostible coffee cup
Not every small AIM company gives regular trading updates ahead of results announcements. So why does Biome do it? Maybe the company feels that regular updates are in keeping with good corporate governance. Also investors are presumably happy to receive regular bulletins on the upward curve in revenues.
Yet one cannot help but feel there has been something missing here when it comes to reporting profitability. Commenting on the final results for 2017 early in 2018 Chairman John Standen’s said: “The results show some improvement in profitability over the previous year, albeit they do not demonstrate the step-change in underlying performance we expected earlier in the year”. Here Standen was clearly referring to hopes that developments in the Bioplastics part of the company, could prove transformational for the company.
Biome Bioplastics aim has been to formulate and supply a range of innovative bioplastics technology that replace existing oil-based materials, particularly those relating to disposable coffee cup lids and single serve coffee capsules. With this main goal of producing a totally disposable coffee cup, Bioplastics seemed like the flagship division – the one that could possibly produce the step change in underlying performance for the group.
The materials for the outer packaging, had been fully commercial for years but early in 2017 the ring of the pod and non-woven for the filter were in the development stage. In the latter part of 2017, however, the BiomeMesh biodegradable non-woven filter material became commercialised. This meant a fully compostable coffee cup was created. But the step-change in profitability the company yearns for has yet to happen.
The company’s second and older division, the Stanelco RF Technologies, which as its name suggests, is engaged in the design and manufacture of electronic electrical systems based on advanced radio frequency technology. The trading update issued on 23 July 2018 shows that it was this division that drove most of the group’s revenue increase. Revenues here were double that of those in 2017 at £3.4m against £1.7m. Bioplastics on the other hand came in at £900,000 compared to £1.2m in the comparable period in 2017.
Does it matter that the RF division accounted for the lion’s share of revenue? Not really. The day of the fully compostable coffee cup will surely come. The company said: “The shifting perception of plastic waste both in public opinion and policy makers particularly in the UK, provides encouragement for future growth in the use of bioplastic products.”
The price share reflects this optimism about the £9.8m market cap. Last evening it was riding high at 413.50p slightly off the 52 week high of 421p but well above the low of 185p.
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