In its final results for the year to 31 December 2021, Biome Technologies (BIOM ) said it has seen “a strong recovery” of its order book which the company says bodes well for the year ahead.
The technology-focused company acknowledged that 2021 had been “a challenging year” with delays to anticipated growth as the company contended with a number of third-party operating issues. As a result, the company had to reduce its expectations during the year.
The period proved particularly challenging for the bioplastics division which saw revenue decline by 3% as it contended with various logistics and development issues; however, Biome said the division continues to show strength in its current pipeline of commercial opportunities. As a result, it maintains its KPI target of 40% revenue growth through 31 December 2023.
Over the period, RF Technologies division revenues increased by 23.4% to £0.9m, up from £0.8m in FY21 (after elimination of intra-group trade) as its markets started to recover in 2H.
Biome said significant contracts from the fibre-optic, medical and food packaging industries have now been secured and help underpin the Board’s expectations for the division in 2022.
Biome reported a loss before interest, depreciation, taxation and amortisation (LBITDA) in line with market expectations at £0.6m, and with an operating loss of £1.1m from £1.6m in FY20.
An increased focus on cost and working capital management during the year ensured that the year-end cash position was better than anticipated at £1.0m (FY20: £1.7m) ‘with more identified improvements underway to provide for further anticipated growth,’ it told investors.
Despite a challenging 2021, Biome said it believes it has good opportunities for growth in the current year. The company expects the Bioplastics division to continue to benefit from the move to more sustainable materials and, as it continues to broaden its product and customer portfolio and the logistics issues ease, we expect growth to return in the second half of 2022.
Commenting, Paul Mines, Chief Executive Officer said: “The Group has good opportunities for growth in 2022. In 2021, the Bioplastics division continued to develop its strong product base but sales growth was frustrated by third party delays. Towards the end of 2021, the RF Technologies division saw a strong recovery in its order book which bodes well for 2022".
The Group said it is also encouraged by the improvement in the outlook for RF Technologies, which has been successful in winning some good contracts to underpin expectations for 2022.
“Trading in the first quarter of 2022 has been in line with our expectations and the outlook for the year remains unchanged. We continue to manage our cash resources to ensure that we can support further growth and achieve sustainability for the Group,” the company concluded.
In a morning research note, analysts at the investment firm, Allenby Capital, said they expect momentum within the Bioplastics divisions to return in FY22, weighted most likely in 2H, and that the outlook for RF Technologies “is also looking brighter than it has done since 2018.”
Analysts acknowledged that both divisions have “encouraging order books” and that enquiry levels remain high. “While visibility is limited, and supply chains still an issue (although management has taken steps to alleviate the pressures where possible), all indications suggest that Biome is well placed to move forward strongly in 2022 and 2023,” it said.
Analysts anticipate a year of strong recovery and as a result, are introducing new forecasts for 2023 which, while prudent at this early stage, indicate the achievement of a positive EBITDA.
“Given previous volatility, much outside of the Group’s control, our forecasts remain prudent. 2022 forecasts are unchanged but we introduce new forecasts for 2023 which anticipate a continuation of growth in both divisions but a decline in cash to £0.4m by December 2023.
We have reduced fair value from 750p to 500p to reflect recent headwinds and the increasing geopolitical tensions which have impacted valuations generally,” Allenby Capital concluded.
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