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For the Annual Report and Accounts 2011 please click here

 

 

 

Chief Executive's Review

I am pleased to report the Group made further material profits in 2011, after substantially increasing investment into sales, marketing and product development.

This year’s financial performance reflects a consolidation of sales revenue with a lower profit performance. The main d2w product range saw an increase in volume which was more than offset by a further planned reduction in the lower-margin finished goods. Maiden sales and rentals for the d2Detector occurred in the second half of the year.

Investment into the key growth areas of the business was increased as stronger market indicators presented more interest and opportunities. In particular we have broadened the product range, increased R&D, and expanded the marketing and sales activities.

I am also very pleased we attained ISO14001 accreditation for Environmental Management which complements our ISO9001 status, and adds further strength to the business and its products, and at the same time places us much further ahead of many other companies in our field.

Positive legislative changes in favour of oxo-biodegradable products continued to gain momentum. In particular, in the UAE it is now a legal requirement for most disposable plastics to be made with d2w type oxo-biodegradable products. There has also been positive legislation elsewhere and the combination of d2w with the d2Detector device allows effective enforcement of these new legislative changes.

The number of distributors increased again from 61 to 67 resulting in further market potential for our products. The d2w market continues to grow in strength which is now being augmented with d2p products and the d2Detector device.

Symphony Energy is progressing with its work on tyre recycling developments and we continue with this significant investment program as there are a number of products that could come to commercial fruition.

 

Trading results

Total Group revenues were higher at £8.54 million (2010: £8.48 million). Group gross profit margins reduced from 57% to 54%. These factors resulted in a 5% decrease in the contribution from gross profit from £4.83 million in 2010 to £4.59 million in 2011. Gross margins decreased due to exchange rates and higher raw material costs.

Expenses before non-recurring items increased by 14% to £3.90 million from £3.41 million in 2010. This was primarily due to increases in R&D and marketing. Amongst the many R&D activities undertaken, the Group set up a new development facility in Telford UK to complement the work being carried out in Great Yarmouth and Borehamwood. This facility started operations in January 2012. Dedicated marketing activities took place in the USA and mainland Europe. Total staff costs were marginally lower at £2.02 million (2010: £2.08 million) and Directors’ emoluments reduced to £0.89 million from £0.99 million in 2010.

The Group made an operating profit of £0.50 million compared with £1.13 million in 2010, resulting in the Group’s profit before tax of £0.42 million compared with a profit before tax of £1.01 million in 2010.

Development costs of £0.24 million were capitalised in 2011 (2010: £0.32 million). The net book value of capitalised development costs at the end of the year amounted to £0.98 million. Further development expenditure of £0.34 million (2010: £0.21 million) was charged directly to the income statement. Capitalised development costs represent 6% of expenses as detailed above. Within the total amount of £0.98 million capitalised to date are: £0.37 million relating to Symphony Energy; £0.27 million relating to d2w products which have been developed and are being sold; and the balance of £0.34 million, relating to further environmental plastic applications still in development, and where we believe significant revenues will be generated in the foreseeable future.

As a result of the continued strong performance and in consideration of future performance, a further deferred tax credit of £0.10 million has been recognised in 2011 resulting in a carried forward recognised tax asset at the end of the year of £1.28 million.

The Group reports a profit for the year of £0.52 million with basic earnings per share of 0.42 pence (2010: 1.02 pence).

The Group’s primary selling currency is the US Dollar. The Group hedges where possible by purchasing in US Dollars and has banking facilities in place in order to secure rates going forward. As at 31 December 2011 the Group had a net balance of US Dollar assets totalling $5.14 million (2010: $3.21 million).

 

Segmental analysis

The Group operates two divisions which are classified as segments in the financial report, being the Plastics division and the Waste-to-Value division.

The Plastics division includes all revenues associated with d2w, d2p and d2Detector, be they additives or finished products. The Plastics division saw d2w additive volumes increase by 10% during the year with d2w revenues stable at £8.41 million (2010: £8.41 million). Finished product revenues fell as planned to £0.37 million in 2011 from £0.88 million in 2010. Additive revenues increased to £8.05 million in 2011 from £7.58 million in 2010.

The Plastics EBITDA for 2011 was £0.86 million from £1.47 million in 2010.

The Waste-to-Value division saw continued expenditure of £0.22 million for the year resulting in an EBITDA loss of the same amount (2010 expenditure and EBITDA loss: £0.22 million).

 

Cashflow

The Group consumed £0.19 million from operations (2010: generated £0.53 million). As with the previous year, trade was weighted strongly to the fourth quarter of 2011 which resulted in a high trade receivables balance as at 31 December 2011 leading to high cash utilisation at that point in time. The Group has a £1 million trade finance facility with HSBC Bank plc which is used to manage Group working capital.

In addition to development costs detailed above, £0.24 million was invested in plant and equipment, primarily in setting up a development centre in Telford, UK, together with other laboratory equipment and facilities. A total of £0.28 million was spent on property, plant and equipment in 2011 (2010: £0.39 million).

£1.73 million (net) was raised during the year by way of a placing. Loans totalling £0.75 million were repaid in full during the year.

 

Symphony Energy (Waste-To-Value)

The RuPERT tyre recycling project was extended during the year and is set for completion during 2012. The Group continues to invest in and is actively pursuing commercial outlets for elements within the project.

 

Current Trading and Outlook

In commercial terms, 2011 was our most successful year as more countries legislated in favour of oxo-biodegradable technology, such as d2w. The business has built strong relationships and created synergies around the world, giving Symphony access to new and upgraded technologies as they come online. Since the year end we have been seeing increased activity within the distribution network, especially where legislation is the driving force.

Having developed an extensive and far reaching distribution network, which now covers more than 90 countries worldwide the main function for the Group continues to be the expansion of products and support services as well as to enhance the d2w and d2p brands.

We are pleased with the positive progress made, and are optimistic for a substantial increase in our future growth prospects.

Michael Laurier
Chief Executive

 

 

 

Chairman's Statement

The results for the year to 31 December 2011 show increased revenues and further significant investment by the Group in key areas such as sales, marketing and product development.

d2w additives, our main product line, grew by 10% in volume, but exchange rates and higher raw material costs saw gross margins reduce during the year.

Legislative change is gaining momentum and towards the end of the year the United Arab Emirates (“UAE”) brought forward from January 2013 to January 2012 the application of laws which regulate plastic production and imports wholly in favour of oxo-biodegradable technology. As such, plastic bags not conforming to the approved specification are now prohibited from being made in or imported into the UAE. We believe this will increase the potential for other countries to follow suit.

During the year BSi published a British Standard (BS8472) for oxo-biodegradable products which is the first and only Standard in Europe for biodegradability of plastic litter in the environment. This differentiates oxo-biodegradable from other types of biodegradable products, and will allow a stronger position in respect of future marketing and legislative campaigns.

We have continued to make significant investment into Symphony Energy, and the RuPERT tyre recycling project. The project is expected to be completed during 2012.

During 2011 we strengthened the foundations for accelerated growth for both the short and longer term future of Symphony. While this meant an increase in fixed costs, the investment within Symphony and the expansion of the existing distribution network, together with the effects of legislation in late 2011 are starting to make a positive impact within our distribution network, and mean that we can be very confident of further growth in 2012 and beyond.

I would like to thank the Board, staff and distributors for all their efforts in 2011.

 

N Deva FRSA DL MEP
Chairman