TIDMREVO
RNS Number : 4990K
Revolymer PLC
22 September 2016
22 September 2016
Revolymer plc
Unaudited interim results for the 6 month period to 30 June
2016
Revolymer plc (AIM: REVO) ("Revolymer", the "Company" or the
"Group"), today announces its current business highlights and
unaudited interim results for the 6 month period to 30 June
2016.
Business Highlights
Commercial milestones in 2016, signifying the continued focus of
the business on specialty functional polymers, include:
-- As announced on 20 June 2016, Revolymer acquired the entire
issued share capital of Itaconix Corporation ("Itaconix"), a
privately-owned business based in New Hampshire, USA, for initial
consideration of $7m comprising $3m in cash and $4m in new
Revolymer ordinary shares ("Ordinary Shares"), plus further
deferred performance related consideration of up to $6m payable in
new Ordinary Shares, subject to the satisfaction of certain
business performance criteria in the period 2017 to 2020
inclusive
-- In conjunction with the acquisition of Itaconix, Revolymer
announced after the period end on 8 July 2016 the closing of a
GBP5.8m (gross) placing of 15,680,222 Ordinary Shares to existing
and new institutional investors in order to fund the combined
business and cover the cash element of the acquisition. Revolymer
welcomes the new shareholders and appreciates the support of its
existing shareholders, notably Woodford Investment Management
-- As announced after the period end on 7 September 2016, first
commercial sales of Itaconix CHT ("CHT") have been made by the
recently acquired business of Itaconix for use in a private label
automatic dish wash ("ADW") detergent marketed by a large US
retailer
-- As announced after the period end on 19 September 2016,
Revolymer executed agreements committing it to divest its nicotine
gum business to the Danish company Alkalon A/S ("Alkalon"), with
completion subject to the satisfaction of certain customary
conditions precedent including the transfer of key customer
contracts and the Canadian product licence to Alkalon. Alkalon has
EU regulatory approval for its products and an established European
customer base, which complements Revolymer's Canadian customer
base. The business combination offers the potential to grow the
combined business in its existing territories as well as to expand
in additional territories, benefiting from economies of scale in
manufacturing and marketing. At completion, the consideration to
Revolymer for the divestment of this business will be a 15% equity
holding in the combined new business, which may increase to 20% if
certain commercial milestones in the acquired Revolymer nicotine
gum business are met within nine months of completion, namely the
award of additional specific contracts in Canada
-- As announced on 25 January 2016, Revolymer renewed and
expanded the contract to supply its nicotine gum to a Canadian
retailer, and disclosed a separate contract with a distributor
supplying nicotine gum into Canadian convenience outlets.
Management believe these developments enhanced the Group's ability
subsequently to execute the transaction with Alkalon described
above.
Board, management and organisational improvements include the
following:
-- As announced after the period end on 13 September 2016,
Revolymer appointed Dr James "Jim" Barber to the board as a non
executive director with effect from 12 September 2016, representing
the interests of the previous shareholders of Itaconix as their
Revolymer board nominee, a right conveyed under the merger
agreement between Itaconix and the Company. Since 2007, Dr Barber
has run his own business consultancy practice, Barber Advisors LLC,
and has served as an advisor and a director for a number of firms.
Dr Barber has extensive business management expertise in the
specialty chemicals industry, including CEO of Metabolix Inc. and
senior management positions running businesses within the
Albermarle group. He has a PhD in organic chemistry from the
Massachusetts Institute of Technology
-- As announced on 16 March 2016, Revolymer appointed Dr Louise
Crascall as Chief Commercial Officer with effect from 1 June 2016.
Dr Crascall has over 20 years of experience in technical and
commercial roles in the specialty chemicals industry and brings
significant commercial expertise, along with a broad technical
understanding, to augment Revolymer's management team
-- John Shaw and Yvon Durant, CEO and CTO of Itaconix, were
appointed to the management team following the acquisition
-- During the period management has continued to focus the
organisation, and in particular has established a supply chain unit
capable of co-ordinating a strategic network of contract
manufacturers to make the business's products. This development is
a key step in the execution of Revolymer's product supply
strategy.
Financial Highlights
-- Cash, cash equivalents and short term investments on hand at
the period end were GBP6.1m (30 June 2015: GBP12.0m, 31 December
2015: GBP10.5m) reflecting a net utilisation of cash resources by
the business in the period of GBP4.4m (2015: GBP1.2m). The increase
in utilisation was primarily due to the upfront component of the
acquisition of Itaconix of GBP2.0m. Additionally no R&D tax
credits were received in the period (2015: GBP775k). After the
period end, the Company closed the equity placing to raise gross
proceeds of GBP5.8m
-- Whilst revenue for the period reduced slightly to GBP578k
(2015: GBP594k) being primarily sales of nicotine gum in Canada,
gross profit improved to GBP60k (2015: GBP12k), including GBP43k of
deferred income released due to the termination by the Group of a
confectionery gum licence no longer of strategic importance
-- Administrative expenses for the period increased to GBP2.1m
(2015: GBP1.7m), reflecting an increase in the non-cash share based
payment charge to GBP59k (2015: a credit of GBP370k) and also a
non-cash foreign exchange gain of GBP461k (2015: nil) related to
the acquisition of Itaconix which closed before the EU referendum
result, following which there was a significant reduction in the
GBP:USD rate. Administrative expenses before these non-cash items
were GBP2.5m (2015: GBP2.1m)
-- The loss after taxation for the period was GBP1.8m (2015:
GBP0.3m) after tax credits accrued in respect of 2016 to date of
GBP0.2m (2015: GBP1.3m, including three years of tax credit
claims)
-- The non-current assets of the Group now include a provisional
goodwill amount of GBP9.6m (2015: nil) following the acquisition of
Itaconix in June. Due to the proximity of the acquisition to the
period end, an exercise to allocate the purchase price between
goodwill and other assets is still to be performed. Once this
exercise is completed within the permitted 12 month period, the
provisional acquisition accounting will be finalised.
Outlook
Recent transactions including the acquisition of Itaconix and
the conditional divestment of our nicotine gum business are
significant milestones in the development of Revolymer's business
towards a focused specialty chemicals company. Management are
highly focused on addressing the key commercial challenge of
getting our products to market as quickly as possible with finite
cash resources, in order to deliver revenues and progress towards
sustainable profitability in the medium term.
For further information please contact:
+44 (0) 1244 283
Revolymer plc 500
------------------------------------------------ ---------------------
Kevin Matthews / Robin Cridland
------------------------------------------------ ---------------------
Panmure Gordon (UK) Limited +44 (0) 20 7886 2500
------------------------------------------------ ---------------------
Adam James / Fabien Holler (Corporate Finance)
Charles Leigh-Pemberton (Corporate Broking)
------------------------------------------------ ---------------------
Cautionary statement
Information in this announcement is based upon unaudited
management accounts and, in addition, certain statements made are
forward looking. Such statements are based on current expectations
at the date of this announcement and are subject to a number of
risks and uncertainties that could cause actual events or results
to differ materially from any expected future events or results
referred to in these forward looking statements. The Company and
its directors undertake no obligation to update or revise forward
looking statements to reflect any change in expectations or any
change in events, conditions or circumstances.
Chief Executive's Statement
Business Overview
In our 2015 full year results we described the evolution of the
strategy of the Group, and the Board is pleased to report continued
progress in the execution, and refinement of, this strategy.
In respect of 2016 to date we have acquired and are well
progressed in the integration of Itaconix, a business highly
complementary to that of Revolymer. With its proprietary itaconic
acid polymerisation technology, existing products and customers in
similar markets to our own, and US base, the Board believes we are
well positioned to accelerate the growth of both our businesses. We
have also conditionally divested our nicotine gum operations to
Alkalon, a business with a complementary nicotine gum revenue
footprint to our own, i.e. in Europe compared to Canada. The
combined business is now well positioned to establish critical mass
and deliver on enhanced growth potential and economies of scale in
manufacturing and marketing. We retain our interest through a
minority equity participation in the combined business.
Internally we have built on the organisational changes described
in our 2015 results, and in particular have implemented a supply
chain organisation capable of managing a small network of contract
manufacturers to make our specialty materials products which
underpins the stated intention of Revolymer to commercialise its
own products as well as entering into licences when appropriate.
The business has also significantly strengthened its product
applications and commercial teams through both recruitment of key
people and the acquisition of Itaconix, which further improves the
Group's ability to deliver on its key product opportunities.
The most significant commercial challenge facing the business
currently is getting our products to their respective markets to
generate revenue as quickly as practicable with finite cash
resources. However, the developments summarised above position the
business well to address this challenge and focus further our
strategy towards becoming a leader in functional polymers that
manage the interface between different surfaces and phases to
improve the safety, performance and/or sustainability of our
customers' products.
Deal Update
Including developments after the period end, management is
pleased to report that Revolymer has continued to execute deals to
progress its strategy:
Acquisition of Itaconix Corporation - As announced on 20 June
2016, Revolymer acquired, by merger under Delaware law, the entire
issued share capital of Itaconix Corporation, a privately owned
business based in New Hampshire, USA, (the "Acquisition"). Initial
consideration was $7m (approximately GBP4.8 million at that time),
comprising $3m in cash and $4m in new Ordinary Shares, with the
potential for further deferred performance related consideration of
up to a maximum of $6m payable in new Ordinary Shares. The deferred
consideration is subject to the achievement of certain growth
targets for the calendar years 2017 to 2020, based on 50% of
incremental annual net sales of poly itaconic acid based products
above $3m in 2017 and in excess of the prior year for 2018 to 2020
inclusive. Such deferred performance related consideration shall be
satisfied annually in the form of Ordinary Shares issued at a price
equivalent to the volume-weighted average closing mid-market share
price over the 30 trading days immediately preceding the first day
on which the financial results for the prior year with reference to
which such deferred performance related consideration will be
calculated are publicly released.
Itaconix is a high growth specialty polymer business that
develops and commercialises novel polymers based on its
proprietary, commercially-proven and low production cost itaconic
acid polymerisation technology. Itaconix has worldwide expertise in
itaconic acid polymers. Its patent portfolio comprises nine patent
families covering manufacturing processes, product compositions and
applications. Management believes that Itaconix fits well within
Revolymer's stated M&A strategy, as a specialty polymer
business with a high value offering to its customers in the
Company's target markets and with technological leadership in its
field, and that the Acquisition will enable the Group to generate
faster growth based on broader customer engagement and expanded
product solutions.
In particular, the Board believes that the Acquisition provides
market synergies for the enlarged Group in the Home Care and
Personal Care sectors. The Company is developing novel encapsulated
activities for laundry and ADW which, together with its existing
products, is complementary to Itaconix's high performance polymers,
hence delivering to customers enhanced, cost effective and novel
products for laundry and ADW. In the Personal Care sector, the
Board believes that product and revenue synergies will include
customer overlap, applications expertise, and low cost production.
Management anticipates that these synergies will be created, for
example, by combining the Company's application expertise and IP in
hair fixative polymers ("HFP") with Itaconix's manufacturing
capacity and process IP for HFP, thereby strengthening the Group's
ability to penetrate the c.$360m HFP market by providing a superior
cost benefit performance over standard competitor products using a
naturally derived polymer. Management also believes that the
Acquisition improves the Group's ability to service customers'
differing application needs in different geographies.
GBP5.8m Placing - As announced on 8 July 2016, Revolymer closed
a GBP5.8m (gross) private placement of a total of 15,680,222
Ordinary Shares (i.e. at a share price of 37p) to existing and new
institutional investors (the "Placing"), in order to fund the
combined business of Revolymer and Itaconix as well as cover the
cash element of the Acquisition of $3m, including a placement of
4,869,411 Ordinary Shares to Woodford Investment Management under a
dispensation from making a General Offer under Rule 9 of the
Code.
First Commercial Sales of CHT - As announced on 7 September
2016, Revolymer made its first commercial sales of CHT through the
recently acquired business of Itaconix, for use in a private label
ADW detergent marketed by a large US retailer. Itaconix has already
established use for its itaconic acid polymers in leading, private
label European and North American detergent brands for water
conditioning to replace phosphates. With new regulations scheduled
to take effect in 2017 limiting phosphate use in European ADW
detergents, the new CHT polymer represents a significant
technological advance, achieving low cost performance without
phosphates in terms of reduced spotting and filming. Revolymer sees
the commercial potential for CHT as significant in the medium term
and an important constituent of the rationale for the acquisition
of Itaconix, making first commercial sales a meaningful milestone.
Whilst limited in quantum, this forms an important step forward and
management look forward to further developments in due course.
Nicotine Gum Business Divestment - As announced after the period
end on 19 September 2016, Revolymer executed agreements committing
it to divest its nicotine gum business to the Danish company
Alkalon, with completion subject to the satisfaction of certain
customary conditions precedent including the transfer of key
customer contracts and the Canadian product licence to Alkalon.
Alkalon has EU regulatory approval for its products and an
established European customer base, which complements Revolymer's
Canadian customer base. The business combination offers the
potential to grow the combined business in its existing territories
as well as to expand in additional territories, benefiting from
economies of scale in manufacturing and marketing. At completion,
the consideration to Revolymer for the divestment of this business
will be a 15% equity holding in the combined new business, which
may increase to 20% if certain commercial milestones in the
acquired Revolymer nicotine gum business are met within nine months
of completion, namely the award of additional specific contracts in
Canada. The consideration is valued at DKK8.2m, equivalent to
GBP0.9m, and Revolymer currently expects to hold the investment in
Alkalon for the medium to long term. At completion, Revolymer will
have the right to appoint a director to the board of the combined
business, that will continue under the Alkalon name. In addition to
the Revolymer customer contracts and Canadian product licence,
additional assets to be transferred to Alkalon at completion
include stocks of finished goods (i.e. nicotine gum to be sold in
Canada), work in progress and raw materials; and certain equipment
used in the nicotine gum business and no longer required by
Revolymer.
Expansion of Nicotine Gum Business - As announced on 25 January
2016, Revolymer renewed and expanded the contract to supply its
nicotine gum to a Canadian retailer which was first announced in
July 2013. In addition, at the same time Revolymer announced a
separate contract with a distributor supplying nicotine gum into
Canadian convenience outlets. During the three years since the
initial contract was signed, the Company has seen consistent growth
in its revenue stream from this business and has been investigating
ways to improve the return. Management believe these developments
enhanced the Group's ability subsequently to execute the
transaction with Alkalon as described above.
Board, Management and Organisational Enhancement
Appointment of Jim Barber to the Board - With effect from 12
September 2016, Revolymer appointed Dr James Joseph Barber as a non
executive director, representing the interests of the previous
shareholders of Itaconix as their Revolymer board nominee, a right
conveyed under the merger agreement between Itaconix and the
Company.
Since 2007, Dr Barber has run his own business consultancy
practice, Barber Advisors LLC, and has served as an advisor and a
director for a number of firms. Prior to this, Dr. Barber served as
President and CEO of Metabolix, Inc. from January 2000 to May 2007.
During this period, he led the transformation of Metabolix from a
research boutique to a world renowned, highly regarded leader in
"clean tech" and industrial biotechnology, building the company
into a multi-disciplinary, industry leading, publicly traded
enterprise with a market capitalisation of over $500m. He
negotiated a highly attractive joint venture arrangement with
Archer Daniels Midland for commercialising Metabolix's first
product platform, Mirel natural plastics, and took the company
public on NASDAQ in November 2006.
Prior to joining Metabolix Inc., Dr Barber served as Global
Business Director for the Organometallics and Catalysts business of
Albemarle Corporation, with global P&L responsibility for a
$100m+ business, and as Representative Director of Nippon Aluminum
Alkyls, a joint venture Company between Albemarle Corporation and
Mitsui Chemicals, Inc. During his tenure with Albemarle
Corporation, he led the development and implementation of
strategies that resulted in the strong growth of its polymer
catalyst business, including its emerging single-site/metallocene
catalyst business.
Prior to his position with Albemarle Corporation, Dr. Barber
served as Director, Business Development with Ethyl Corporation,
with responsibility for acquisitions and managing Ethyl
Corporation's venture capital activities; as President of Geltech,
Inc., a venture capital backed company focused in the area of
precision moulded micro optics; and as Chief Operating Officer of
Hyperion Catalysis International, a pioneering developer and
producer of carbon nanofibers.
Dr. Barber received the American Chemical Society's Henry F.
Whalen, Jr. award for Business Development in September 2003. He
has a BS degree in Chemistry from Rensselaer Polytechnic Institute
and a PhD in Organic Chemistry from the Massachusetts Institute of
Technology. He serves on the Advancement Council of the College of
Polymer Science and Polymer Engineering at the University of Akron,
and as a non executive director of Graham Corporation and Nanocomp
Technologies, Inc.
New Management Team Members - On 16 March 2016, Revolymer
appointed Dr Louise Crascall as Chief Commercial Officer with
effect from 1 June 2016. Dr Crascall has over 20 years of
experience in technical and commercial roles in the specialty
chemicals industry and brings significant commercial expertise,
along with a broad technical understanding, to augment Revolymer's
management team. Dr Crascall joined Revolymer from Vivimed Labs
Europe Ltd, the European operation of Vivimed Labs whose specialty
chemicals business makes actives for the personal care industry,
where she served as Commercial Operations Director and Chief
Marketing Officer. Prior to that, Dr Crascall had senior commercial
and technical sales roles at James Robinson Ltd (acquired by
Vivimed Labs) and Uniquema (part of the ICI group, and acquired by
Croda). She has a BSc in Chemistry from the University of Bristol
and an MSc and PhD in Chemistry from the University of Salford.
Following the acquisition of Itaconix, Itaconix's former CEO,
John Shaw, was appointed to the management team in the role of
President of Revolymer's US subsidiary and will take responsibility
for the growth of the Itaconix business. Itaconix's former CTO Yvon
Durant was also appointed to the management team.
Other Organisational Enhancement - As first described in the
2015 annual report, Revolymer's technical group has been organised
into an externally focused opportunity identification team, a
polymer development team and two customer and market focused
application teams (Homecare and Industrial; and Personal and
Consumer Health Care). In order to commercialise Revolymer's
products successfully with customers, it is vital to have a deep
understanding of how our products perform in their end use
formulations and the generation of this application data is the
priority for these application teams. During the year management
has continued to focus the organisation and built on these
foundations, and in particular has established a supply chain unit
capable of co ordinating a strategic network of contract
manufacturers to make the business's products. Along with the
integration of Itaconix, this development is a key step in the
progression of Revolymer's product supply strategy.
Financial Overview
Cash, cash equivalents and short term investments on hand at the
period end were GBP6.1m (30 June 2015: GBP12.0m, 31 December 2015:
GBP10.5m), reflecting a net consumption by the business for the six
month period of GBP4.4m (2015: GBP1.2m). This "cash burn" was
greater than in the prior period primarily because it included the
upfront component of the acquisition of Itaconix of GBP2.0m, and
additionally no R&D tax credits were received in the period
(2015: GBP775k, in respect of 2012 and 2013). After the period end,
the Company closed an equity placing to raise gross proceeds of
GBP5.8m.
Whilst revenue for the period reduced slightly to GBP578k (2015:
GBP594k) (being primarily sales of nicotine gum in Canada), gross
profit improved to GBP60k (2015: GBP12k). The Group terminated a
confectionery gum licence agreement in the period, and accordingly
released the upfront payment of EUR50k, previously provided for as
deferred income, to the profit and loss account. This amount,
equating to GBP43k, is included in revenue and gross profit.
Administrative expenses for the period increased to GBP2.1m
(2015: GBP1.7m), and are after the non-cash items of share based
payment charges of GBP59k (2015: a credit of GBP370k) and a gain on
foreign exchange relating to the acquisition of Itaconix of GBP461k
(2015: nil). This non-cash gain arises since the acquisition closed
on 20 June and the GBP:USD exchange rate was significantly lower at
the period end after the EU referendum vote in the UK.
Administrative expenses before these non-cash items were GBP2.5m
(2015: GBP2.1m). Accordingly the loss before taxation for the
period increased to GBP2.0m (2015: GBP1.6m).
The loss after taxation for the period was GBP1.8m (2015:
GBP0.3m) after tax credits accrued in respect of 2016 to date of
GBP0.2m (2015: GBP1.3m, including three years of claims). This loss
for the period is also after crediting finance income of GBP35k
(2015: GBP48k) relating to the cash, cash equivalents and short
term deposits on hand.
The non-current assets of the Group now include a provisional
estimate of goodwill of GBP9.6m (2015: nil) following the
acquisition of Itaconix in June. The goodwill arising on
consolidation is the difference between the purchase price ($4m in
Ordinary shares, $3m in cash and up to $6m in deferred
consideration payable in Ordinary Shares, and which has been
recognised in full based on management's assessment of the
likelihood of payment) and the net assets acquired. Due to the
proximity of the acquisition to the period end, an exercise to
allocate the purchase price between goodwill and other assets is
still to be performed. Once this exercise is completed within the
permitted 12 month period, the provisional acquisition accounting
will be finalised. Further analysis will be provided in the 2016
annual report.
Outlook
Recent transactions including the acquisition of Itaconix and
the conditional divestment of our nicotine gum business are
significant milestones in the development of Revolymer's business
towards a focused specialty chemicals company. In the immediate
term, management are working to generate the maximum value from the
acquisition of Itaconix through carefully planned and executed
integration of the businesses. In parallel, the Board intends to
continue on its existing direction of travel, exploring organic and
other selective M&A based growth opportunities, and will update
the market as appropriate in due course. Management are highly
focused on addressing the key commercial challenge of getting our
products to market as quickly as possible with finite cash
resources, in order to deliver revenues and progress towards
sustainable profitability in the medium term.
Condensed consolidated income statement and statement of
comprehensive income
For the six months ended 30 June 2016
Unaudited Unaudited Audited
6 Months 6 Months Year to
to 30 June to 30 June 31 December
2016 2015 2015
Notes GBP000 GBP000 GBP000
Revenue 7 578 594 1,249
Cost of sales 5 (518) (582) (1,162)
----------- ----------- ------------
Gross profit 60 12 87
Other operating income 5 11 16 26
Administrative expenses 5 (2,106) (1,722) (3,786)
----------- ----------- ------------
Operating loss 5 (2,035) (1,694) (3,673)
Finance income 35 48 88
----------- ----------- ------------
Loss for the period before
tax (2,000) (1,646) (3,585)
Taxation 6 232 1,343 1,793
----------- ----------- ------------
Loss for the period (1,768) (303) (1,792)
Other comprehensive income,
net of income tax
Items that may be reclassified
subsequently to profit or
loss:
Exchange differences on translated
foreign operations (1) - -
----------- ----------- ------------
Total comprehensive income
for the period (1,769) (303) (1,792)
=========== =========== ============
Basic and Diluted loss per
share 12 3.1p 0.5p 3.2p
=========== =========== ============
All amounts relate to continuing activities as at the period
end. Whilst an agreement relating to the conditional disposal of
the Group's nicotine gum business was signed after the period end,
with completion subject to certain conditions precedent, this is
not disclosed as a discontinued business or held-for-sale because
(i) although the Board had resolved (and previously announced) an
intent to seek to address the poor margins of the nicotine gum
business, an active sale process was not underway at the period
end; and (ii) the inherent uncertainty associated with such
transactions meant classifying a sale as highly probable was not
possible.
Condensed consolidated statement of financial position
As at 30 June 2016
Unaudited Unaudited Audited
As at As at As at
30 June 30 June 31 December
2016 2015 2015
Notes GBP000 GBP000 GBP000
Non-current assets
Property, plant and equipment 8 563 274 340
Goodwill 11 9,575 - -
--------- --------- -----------
10,138 274 340
Current assets
Inventories 544 92 164
Trade and other receivables 1,267 978 1,017
Investments 4 6,000 9,000 7,000
Cash and cash equivalents 4 97 3,047 3,514
--------- --------- -----------
7,908 13,117 11,695
--------- --------- -----------
Total assets 18,046 13,391 12,035
========= ========= ===========
Financed by
Equity shareholders' funds
Equity share capital 630 566 567
Equity share premium 25,904 23,203 23,220
Own shares reserve (5) (5) (5)
Merger reserve 17,626 17,626 17,626
Share based payment reserve 6,143 6,004 6,084
Foreign translation reserve (1) - -
Retained earnings (38,936) (35,679) (37,168)
--------- --------- -----------
Total equity 11,361 11,715 10,324
Current liabilities
Trade and other payables 2,158 1,676 1,711
Non-current liabilities
Trade and other payables 9 4,527 - -
--------- --------- -----------
Total liabilities 6,685 1,676 1,711
Total equity and liabilities 18,046 13,391 12,035
========= ========= ===========
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2016
Consolidated statement of changes in equity
Share Foreign
Equity Equity Own based translation
share share shares Merger payment Reserve Retained
capital premium reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ------- ---------------------- -------- -------- -------- ------------ --------- ---------
At 30 June 2015 566 23,203 (5) 17,626 6,004 - (35,679) 11,715
Retained loss for
the period - - - - - - (1,489) (1,489)
Exercise of share
options 1 17 - - - - - 18
Share based
payments - - - - 80 - - 80
------------------- ------- ---------------------- -------- -------- -------- ------------ --------- ---------
At 31 December 2015 567 23,220 (5) 17,626 6,084 - (37,168) 10,324
Retained loss for
the period - - - - - - (1,768) (1,768)
Other comprehensive
income - - - - - (1) - (1)
Share issues 63 2,684 - - - - - 2,747
Share based
payments - - - - 59 - - 59
------------------- ------- ---------------------- -------- -------- -------- ------------ --------- ---------
At 30 June 2016 630 25,904 (5) 17,626 6,143 (1) (38,936) 11,361
------------------- ------- ---------------------- -------- -------- -------- ------------ --------- ---------
The reserves described above have the purposes described
below:
Own shares reserve
This reserve records the nominal value of shares purchased and
held by the Employee Benefit Trust to satisfy the future exercise
of options under the Group's share option schemes.
Merger reserve
This reserve arose as a result of a common control business
combination on the formation of the Group.
Share based payment reserve
This reserve records the credit to equity in respect of the
share based payment cost.
Foreign translation reserve
This reserve records the adjustment to equity in respect of the
retranslation of foreign subsidiary's financial statements into a
presentation currency.
Interim condensed consolidated statement of cash flows
For the six months ended 30 June 2016
Unaudited Unaudited Audited
6 Months 6 Months Year to
to 30 June to 30 June 31 December
2016 2015 2015
GBP000 GBP000 GBP000
Cash flows from operating
activities
Operating loss (2,035) (1,694) (3,673)
Adjustments for:
Depreciation of property,
plant and equipment 105 83 170
Share option charge / (credit) 59 (370) (290)
Gain on foreign exchange (461) - -
Taxation - 775 1,343
(Increase) / decrease in
inventories (380) 116 43
(increase) / decrease in
receivables (14) 83 (90)
Increase / (decrease) in
payables 447 (139) (104)
----------- ----------- ------------
Net cash (outflow) from operating
activities (2,279) (1,146) (2,601)
----------- ----------- ------------
Cash flows from investing
activities
Interest received 31 51 107
Funds withdrawn from term
deposits 1,000 2,500 4,500
Acquisition of subsidiary
undertaking 10 (2,043) - -
Purchase of property, plant
and equipment 8 (128) (44) (196)
----------- ----------- ------------
Net cash (outflow) / inflow
from investing activities (1,140) 2,507 4,411
----------- ----------- ------------
Cash flows from financing
activities
Cash received from issue
of shares 2 - 18
----------- ----------- ------------
Net cash inflow from financing
activities 2 - 18
----------- ----------- ------------
Net (outflow) / inflow in
cash and cash equivalents (3,417) 1,361 1,828
Cash and cash equivalents
at beginning of the period 3,514 1,686 1,686
----------- ----------- ------------
Cash and cash equivalents
at end of the period 97 3,047 3,514
=========== =========== ============
Notes to the interim condensed consolidated financial
statements
1. General information
These unaudited interim condensed financial statements of
Revolymer plc for the six months ended 30 June 2016 were authorised
for issue in accordance with a resolution of the Board on 21
September 2016. Revolymer plc is a public limited company
incorporated in the United Kingdom whose shares are traded on the
AIM Market of the London Stock Exchange.
The figures shown above for the six months ended 30 June 2016
and 30 June 2015, and for the year ended 31 December 2015, are not
statutory accounts. A copy of the statutory accounts for each year
has been delivered to the Registrar of Companies. The auditor
reported on those statutory accounts and their reports were
unqualified, did not draw attention to any matters by way of
emphasis and did not contain an adverse statement under sections
498 (2) or 498 (3) of the Companies Act 2006.
Sections of this interim report, including but not limited to
the Interim Management Report, may contain forward-looking
statements with respect to certain of the plans and current goals
and expectations relating to the future financial condition,
business performance and results of the Group. These have been made
by the directors in good faith using information available up to
the date on which they approved this report. By their nature, all
forward-looking statements involve risk and uncertainty because
they relate to future events and circumstances that are beyond the
control of the Group and depend upon circumstances that may or may
not occur in the future. There are a number of factors that could
cause actual future financial conditions, business performance,
results or developments to differ materially from the plans, goals
and expectations expressed or implied by these forward-looking
statements and forecasts. Nothing in this document should be
construed as a profit forecast.
This half-yearly financial report is available on the Group's
website at www.revolymer.com.
2. Accounting policies
The unaudited condensed financial statements are presented in
accordance with the requirements of International Accounting
Standard 34 - 'Interim Financial Reporting'.
The Group prepares its annual financial statements in accordance
with International Financial Reporting Standards as endorsed by the
European Union. Except as noted below, the condensed financial
statements have been prepared on the basis of the accounting
policies set out in the Annual Report and Accounts of the Group for
the year ended 31 December 2015, which are expected to be used in
the preparation of the financial statements of the Group for the
year ending 31 December 2016.
The interim condensed consolidated financial statements are
presented in sterling and all values are rounded to the nearest
thousand (GBP'000), except when otherwise indicated, and are
prepared on the historical cost basis.
New accounting standards
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 31 December
2015, except for the adoption of new standards and interpretations
effective as of 1 January 2016, where applicable. The Group does
not early adopt other standards, interpretations or amendments that
have been issued but are not yet effective. In the six months ended
30 June 2016, no new accounting standards were adopted.
Going concern
The financial statements have been prepared on a going concern
basis which the Directors believe continues to be appropriate. The
Company meets its costs and working capital requirements through
existing cash resources and short term investments which, at 30
June 2016, amounted to GBP6.1m (31 December 2015: GBP10.5m, 30 June
2015: GBP12.0m). Furthermore, the Company issued 15,680,222
ordinary shares on the London AIM stock market on 11 July 2016, the
GBP5.5m net funds from this share issue being received by the
Company on 11 July 2016.
Business combinations and goodwill
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, measured at the acquisition date
fair value, and the amount of any non-controlling interest in the
acquiree. For each business combination, the Group elects whether
to measure the non-controlling interest in the acquiree at fair
value or at the proportionate share of the acquiree's identifiable
net assets. Acquisition related costs are expensed as incurred and
included in administrative expenses.
When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date.
This includes the separation of embedded derivatives in host
contracts by the acquiree.
Any contingent consideration to be transferred by the acquirer
is recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration which is
deemed to be an asset or liability, is recognised in accordance
with IAS 39 either in profit or loss or as a change to other
comprehensive income.
The fair value of contingent consideration is determined by
reference to the projected financial performance in relation to the
specific contingent consideration criteria for each
acquisition.
Goodwill is initially measured at cost being the excess of the
aggregate of the acquisition-date fair value of the consideration
transferred over the net identifiable amounts of the assets
acquired and the liabilities assumed in exchange for the business
combination. Assets acquired and liabilities assumed in
transactions separate to the business combinations, such as the
settlement of pre-existing relationships or post-acquisition
remuneration arrangements are accounted for separately from the
business combination in accordance with their nature and applicable
IFRSs. Identifiable intangible assets, meeting either the
contractual-legal or separability criterion are recognised
separately from goodwill. Contingent liabilities representing a
present obligation are recognised if the acquisition-date fair
value can be measured reliably.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group's cash-generating
units that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the acquiree
are assigned to those units. Each unit or group of units to which
goodwill is allocated shall represent the lowest level within the
entity at which the goodwill is monitored for internal management
purposes and not be larger than an operating segment before
aggregation.
3. Risks and uncertainties
Revolymer plc's approach to managing the risks and uncertainties
of its business was reported in the Annual Report and Financial
Statements for the year ended 31 December 2015 and is
unchanged.
4. Cash, cash equivalents and investments
Unaudited Unaudited Audited
As at As at As at
30 June 30 June 31 December
2016 2015 2015
GBP000 GBP000 GBP000
Term deposits maturing within
one year 6,000 9,000 7,000
Cash at bank and in hand 97 3,047 3,514
--------- --------- -----------
6,097 12,047 10,514
========= ========= ===========
5. Operating Loss
For the purpose of comparison with prior periods the table below
shows the calculation of operating loss with the inventory write
downs and share based payment charges separately identified.
Unaudited Unaudited Audited
6 Months 6 Months Year to
to 30 June to 30 June 31 December
2016 2015 2015
GBP000 GBP000 GBP000
Revenue 578 594 1,249
Cost of sales before inventory
provision (518) (582) (1,172)
----------- ----------- ------------
Gross profit before inventory
provision 60 12 77
Inventory provision - - 10
----------- ----------- ------------
Gross profit 60 12 87
Other operating income 11 16 26
Administrative expenses before
non-cash gain on foreign
exchange and share-based
payments (charges) / credits (2,508) (2,092) (4,076)
Gain on foreign exchange 461 - -
Share-based payments (charge)
/ credit (59) 370 290
----------- ----------- ------------
Operating loss (2,035) (1,694) (3,673)
=========== =========== ============
6. Taxation
During the six months ended 30 June 2016, the company had a
taxation credit of GBP232k, being a provision for the current
period tax credit of GBP200k and an under provision for the
taxation credit for the year ended 31 December 2015 of GBP32k (30
June 2015: GBP1,343k) (year ended 31 December 2015: GBP1,793k).
7. Segmental analysis
Revenue by business segment:
For management purposes the Company is organised into business
units based on its products and services, and has two reportable
segments.
The Consumer Specialties segment designs, develops and
formulates novel polymer-based solutions for improving the
performance of existing consumer products in various market
segments including personal care, household products and coatings
and adhesives.
The Chewing Gum segment includes the development and
commercialisation of medicated chewing gum (which includes nicotine
gum).
Net assets of the Group are attributable solely to the UK and
US.
Unaudited
6 months
Chewing Consumer to 30 June
Six months ended 30 June 2016 Gum Specialties 2016
GBP000 GBP000 GBP000
Revenue
Sale of goods 510 25 535
Release of deferred sales income* 43 - 43
------- ------------ -----------
Segment revenue 553 25 578
------- ------------ -----------
Results
Depreciation & amortisation 5 100 105
Segment loss (418) (1,582) (2,000)
------- ------------ -----------
Operating assets 592 17,454 18,046
------- ------------ -----------
Operating liabilities - 6,685 6,685
------- ------------ -----------
Other disclosure:
Capital expenditure** - 328 328
Unaudited
6 months
Chewing Consumer to 30 June
Six months ended 30 June 2015 Gum Specialties 2015
GBP000 GBP000 GBP000
Revenue
Sale of goods 594 - 594
Release of deferral for potential
sales returns - - -
------- ------------ -----------
Segment revenue 594 - 594
------- ------------ -----------
Results
Depreciation & amortisation 5 78 83
Segment loss (631) (1,015) (1,646)
------- ------------ -----------
Operating assets 345 13,046 13,391
------- ------------ -----------
Operating liabilities - 1,676 1,676
------- ------------ -----------
Other disclosure:
Capital expenditure** - 44 44
Audited
Year to
Chewing Consumer 31 December
Year ended 31 December 2015 Gum Specialties 2015
GBP000 GBP000 GBP000
Revenue
Sale of goods 1,249 - 1,249
Release of deferral for potential
sales returns - - -
------- ------------ ------------
Segment revenue 1,249 - 1,249
------- ------------ ------------
Results
Depreciation & amortisation 10 160 170
Segment loss (1,028) (2,557) (3,585)
------- ------------ ------------
Operating assets 524 11,511 12,035
------- ------------ ------------
Operating liabilities - 1,711 1,711
------- ------------ ------------
Other disclosure:
Capital expenditure** - 196 196
The differences between the segment losses above and operating
losses in note 5. are accounted for by finance income.
*The Group terminated a confectionery gum licence agreement in
the period, and accordingly released the upfront payment of EUR50k
previously provided for as deferred income to the profit and loss
account.
**Capital expenditure consists of additions of property, plant
and equipment, intangible assets and investment properties
including assets from the acquisition of subsidiaries.
Geographical information
Revenue from external customers Non-current assets
Unaudited Unaudited Audited Unaudited Unaudited Audited
Six Months Six Months Year to Six Months Six Months Year to
to 30 June to 30 June 31 December to 30 June to 30 June 31 December
2016 2015 2015 2016 2015 2015
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Canada 510 591 1,219 - - -
Denmark 21 - - - - -
Italy - 3 3 - - -
Netherlands 43 - - - - -
United Kingdom - - 7 363 274 340
United States 4 - 20 9,775 - -
578 594 1,249 10,138 274 340
=========== =========== ============ =========== =========== ============
The revenue information above is based on the location of the
customer.
Non-current assets for this purpose consist of property plant
and equipment, and goodwill.
8. Property, plant and equipment
During the six months ended 30 June 2016, the Company acquired
plant and equipment with a cost of GBP328k, (30 June 2015: GBP44k)
(year ended 31 December 2015: GBP196k), including GBP181k from the
acquisition of Itaconix.
9. Non-current liabilities
The non-current payables relate to up $6m of deferred
performance consideration payable to the former owners of Itaconix
as part of the acquisition price. This consideration is payable in
new ordinary shares in Revolymer Plc, subject to the satisfaction
of certain business performance criteria in the period 2017 to 2020
inclusive. Management currently believe that all of the
consideration will become payable and therefore it has been
recognised in full.
10. Acquisition
On 20 June 2016 Revolymer acquired the entire issued share
capital of Itaconix, a privately-owned business based in New
Hampshire, US, for an initial consideration of $7 million,
comprising $3 million in cash and $4 million in new Revolymer plc
ordinary shares, plus further deferred performance related
consideration of up to $6 million in new Revolymer plc ordinary
shares (recognised in full as explained above), all payable to the
former owners of Itaconix Corporation as part of the acquisition
price. Accordingly goodwill arises as a result of the consolidation
of this transaction as summarised in the table below.
Provisional estimate of goodwill on consolidation of Itaconix
Corporation
20 June
2016
GBP000
Fair value of consideration
Cash consideration 2,043
Revolymer Plc shares (6,305,050 shares @ 44.38p) 2,724
-------
4,767
Deferred consideration: Revolymer Plc shares 4,086
8,853
=======
Fair value of assets and liabilities acquired
Non-current assets
Property, plant and equipment 181
Current assets
Inventories 150
Accounts receivable 46
Other current assets 60
Cash 1
-------
257
Current liabilities
Trade and other payables (227)
211
-------
Goodwill arising (consideration less net assets
acquired) 8,641
=======
The analysis provided above is provisional. Due to the proximity
of the acquisition to the period end, an exercise to allocate the
purchase price between goodwill and other assets is still to be
performed. Once this exercise is completed within the permitted 12
month period, the provisional acquisition accounting will be
finalised.
The primary rationale for the acquisition of Itaconix is that it
is a complementary specialty polymer business with a high value
offering to its customers in the Company's target markets and with
technological leadership in its field, offering the potential for
the Group to generate faster growth based on broader customer
engagement and expanded product solutions. This potential value is
represented by the goodwill.
The total amount of goodwill expected to be deductable for tax
purposes is nil.
The amount of acquisition related costs to date is GBP185k.
The amount of revenue since the acquisition date was GBP25k and
the loss for that period was GBP10k. The amount of revenue of the
subsidiary for the current period assuming the acquisition had
taken place at the start of the accounting period was GBP250k and
the loss for the same period was GBP447k.
11. Goodwill
Unaudited Unaudited Audited
Six Months Six Months Year to
to 30 June to 30 June 31 December
2016 2015 2015
GBP000 GBP000 GBP000
As at start of period - - -
Goodwill on acquisition 8,641 - -
Foreign exchange on translation of
subsidiary 934 - -
As at end of period 9,575 - -
=========== =========== ============
12. Loss per share
Unaudited Unaudited Audited
6 Months 6 Months Year to
to 30 June to 30 June 31 December
2016 2015 2015
GBP000 GBP000 GBP000
Weighted average number of ordinary
shares for the
purposes of basic and diluted loss
per share ('000) 57,878 56,572 56,603
=========== =========== ============
13. Share based payments
The charge for share based payments for the period to 30 June
2016 was GBP59k (30 June 2015: credit of (GBP370k)) (31 December
2015: credit of (GBP290k)). During the six months to 30 June 2016
no share options (30 June 2015: 1,710,992) (31 December 2015:
1,810,992) were granted under the Revolymer LTIP 2012 scheme as
either approved options (under the HMRC approved EMI scheme) or
unapproved options. The charge for share based payments for the
period therefore relates to options granted in prior periods.
Credits were taken in 2015 as a result of a change in valuation
methodology in respect of market facing options granted to
management, as explained in earlier reports.
14. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation.
Remuneration of key management personnel
The remuneration of the directors, who are considered to be the
key management personnel of the Company, is set out below in
aggregate for each of the categories specified in IAS 24 'Related
Party Disclosures'.
Unaudited Unaudited Audited
Six Months Six Months Year to
to 30 June to 30 June 31 December
2016 2015 2015
GBP000 GBP000 GBP000
Wages and salaries 338 287 860
Directors' fees invoiced by third
parties 8 8 15
Post-employment benefits 21 20 40
Equity settled share based payment
expense/(credit) 25 (303) (278)
392 12 637
=========== =========== ============
Other related party transactions
The Company was invoiced during the period by IP2IPO Limited, a
company of which Mr M Townend is a director, for consultancy fees
and other expenses in respect of Mr Townend's services. Mr M
Townend is a related party by virtue of his position as a director
of the Company.
Amounts Amounts
Receipts Payments due to due from
from related to related related related
parties parties parties parties
GBP000 GBP000 GBP000 GBP000
6 months to 30 June 2016
IP2IPO Services Limited - 8 4 -
6 months to 30 June 2015
IP2IPO Services Limited -84-
Year to 31 December 2015
IP2IPO Services Limited -15 4-
All related party transactions were made on terms equivalent to
those that prevail in arm's length transactions. There have been no
write-offs of related party balances during the period and there
are no provisions against any related party balances. The terms and
conditions of related party transactions are the same as those for
other debtors and creditors.
15. Events after the reporting period
On 11 July 2016 the Company issued 15,680,222 new ordinary
shares on London Stock Exchange AIM market for net proceeds after
expenses of GBP5.5m. These shares were allotted and issued,
credited as fully paid and are identical to and rank pari passu in
all respects with the existing ordinary shares.
On 19 September 2016, Revolymer announced the execution of
agreements committing it to divest its nicotine gum business to the
Danish company Alkalon, which is a marketer of nicotine gums across
Europe, with completion subject to the satisfaction of certain
customary conditions precedent. At completion the consideration due
to Revolymer will be a 15% stake in the combined new business, to
operate under the Alkalon corporate entity, which may increase to
20% if certain commercial milestones in the acquired Revolymer
nicotine gum business are met within nine months.
INDEPENDENT REVIEW REPORT TO REVOLYMER PLC
Introduction
We have been engaged by Revolymer plc (the "Company") to review
the condensed set of financial statements in the interim results
for the six months ended 30 June 2016 which comprises Condensed
Consolidated Income Statement and Statement of Comprehensive
Income, Condensed Consolidated Statement of Financial Position,
Condensed Consolidated Statement of Changes in Equity, Condensed
consolidated statement of cash flows and the notes 1 to 15 to the
interim financial statements. We have read the other information
contained in the interim results and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The interim results are the responsibility of, and have been
approved by, the directors of the Company. The directors are
responsible for preparing the interim results in accordance with
International Accounting Standards 34, "Interim Financial
Reporting," as adopted by the European Union.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in the interim results has been prepared in accordance with
International Accounting Standards 34, "Interim Financial
Reporting," as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the interim results
based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim results report for the six months ended 30 June 2016
is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union.
Ernst & Young LLP
Manchester
21 September 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
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