When we wrote about AIM-listed Biome Technologies recently it concerned a pre-close trading statement ahead of the interim results. We commented then that if there would be an award for companies based on the frequency of their trading updates and results releases, Biome would surely win it. In the past nineteen months there have been three pre-close trading updates, one set of final results and another set of interim results plus an AGM.

Not every small AIM company gives regular trading updates ahead of results announcements, save if they are profit warnings. So why does Biome do it? This is clearly a laudatory practice in that it keeps shareholders smack up to date with what is going on.

Yet at the same time we said there seemed to be something unusual about the frequent updates. One gets the feeling that this practice somehow suggests that everything has not quite gone according to plan. Also, the management might feel that having raised expectations once they did not want to repeat the exercise and became cautious about profitability. There appears to be a seam of hesitancy running through their releases.

A word of explanation: Scroll back to the pre-close trading statement for the financial year ended 31 December 2017, issued late in 2017. It said there would 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 group’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.

Biome creates a fully compostable coffee cup

Despite this, commenting on the final results for 2017 early in 2018 Chairman John Standen 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”.

Biome has two divisions, bioplastics and radio frequency technology. Here Standen was clearly referring to hopes that developments in the bioplastics part of the company. would prove transformational for the group

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 of advanced radio frequency systems.

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 was envisaging was still to come. 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 revenue for the first three months of the year was £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. The shares were down 5.3 per cent on the day the update was released.

Another trading update for the six months ended 30 June 2018 was issued in late July well ahead of the unaudited interim results. These presaged that total group revenues for the first half would be substantially higher at £4.3m — a 47 per cent increase.

Significantly they also indicated that there not only would be a maiden operating profit, but also that the lion’s share of revenue had come from the company’s second and older division, the Stanelco ((RF) technologies which as its name suggests, is engaged in the manufacture of advanced radio frequency technology.

The unaudited interim results when published on 7 September more or less confirmed the trading update’s forward- looking projections. Total group profits were up 47 per cent at £4.4m (the update forecast £4.3m) against £3m in 2017. The revenue split for the period shows that Stanelco (RF)’s revenues 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 this time? Not really. In its comments on the first half interim results, the company said: “In 2018 the Board has adopted the following key performance indicators (KPIs) for the next three years: Compound revenue growth of 25 per cent across the Group and 40 per cent growth in the Bioplastics division.

The price share reflects this optimism about the £13.82m market cap company. Last evening the share price was riding high at 585p off the 52-week high of 655p but well above the low of 185p.