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Biome Technologies’ Paul Mines discusses their November trading update, growth drivers, compostable plastics, and progress in their RF Technologies division in this exclusive interview with DirectorsTalk.

Biome Technologies plc (LON:BIOM) Chief Executive Officer Paul Mines caught up with DirectorsTalk for an exclusive interview to discuss the key highlights from their trading update, growth drivers, progress of both divisions, outlook for the rest of the year and bio-based products’ role in abating climate change.

Q1: Paul, you’ve announced a trading update for the six months ended 30^th June with an almost 50% increase in revenues over the same period last year. Could you just talk us through the highlights from the results?

A1: Group revenues in the first half were £3.6 million versus £2.4 million last year, an increase of £1.2 million or 47% on the previous year. This was been driven by the continuation from the last half of last year of robust demand for bioplastics for existing and new customers in North America in film and filtration applications, which I’ll talk about in a bit. Also revenues in our RF division were up 25% in the first half on the same period last year.

So, clearly this is a mid-year trading update and the full unaudited results will be out around 27^th September this year.

Q2: It’s an impressive first half, and I know you’ve just touched on this but what is driving the growth for Biome Technologies?

A2: Let’s talk about the bioplastics division for of all, and there the divisions revenues in the first half of this year were £3 million to £2 million last year so a 50% increase. We continue to see high level of demand for our products in North America from a variety of applications and from new customers coming on board in North America, customers that we’ve been working on for the last 2-3 years.

These are into applications for coffee pod packaging, packaging of biscuits, cakes, where our materials are used to provide a barrier to keep those products safe as they get to the consumer. You can then take the packaging and compost it at the end of its life.

Most of this growth, as I’ve described, has come in North America in the first half, and that comes on the back of us opening two new businesses there, one in the USA and one in Canada. One of the senior members of our team responsible for business development relocating to Canada to spearhead that charge, we talked a little bit about that in our last discussion. We’ve also opened additional stock points in North America as well.

All that has helped get that momentum going in the US portion of our business.

Q3: I know you have great hopes for future growth of the bioplastics division, what steps are taking to drive that?

A3: The first thing to point out is that it’s an interesting space.

The environmental awareness that pervades the thought process of consumers and brands at the moment is driving an increasing environmental awareness both in the source of products i.e. where they come from, and also their end of life. So, particularly in a number of applications we serve, it’s very difficult to imagine recycling, burning, or landfilling being the right route for those products. Often composting is, and so, we’re designing products that have a low carbon footprint at the beginning of their life and then can be composted at the end of their lives so we’re in a good, in interested, growing space.

We’ve got a great team, it’s based down at Southampton, generating new products, patenting them where appropriate, and then getting them to market.

I think the other part we focus on particularly is really working with our customer set to understand their needs and support their journey. They’ve often been working with fossil fuel-based plastics for many, many years so they need their hands holding and support from our understanding as they make that transition from fossil plastics to bioplastics.

Q4: What do you expect from Biome Bioplastics in terms of growth in the balance of 2023?

A4: We expect really the demand for the division’s products in the second half to continue and reach similar levels to that we’ve experienced in the last few months. I think there’s further growth that we would hope for and we believe will come in time, that remains linked to our customers launching new products and they their demand from us lifting.

It remains difficult to actually predict the timing exactly when those launches are so I think I’m comfortable saying we see the background level of demand we’ve grown to in this year continuing in bioplastics and then further growth will come in due course, when some of those launches take place.

Q5: How is the other side of the business doing? How is the RF Technologies division?

A5: They had revenues in the first half of £500,000, and that’s an increase of 25% compared to the same period last year. We’re pleased that that growth is coming from both existing; spares, service support of our existing large customer set, and some of that growth is coming in novel market sectors which we’re starting to broaden the business to.

This business has traditionally served the fibre optic market, and it still does, but we’re working on other application areas. Your listeners/viewers will probably have seen that on 22^nd June, we announced a significant contract with revenue to the value of £450,000 for the supply of our kit into a market for global scientific glass products. So, that’s a really new exciting space for us and we see the potential of further sales to this area in due course.

We’ve highlighted in the announcement that the revenue associated with that contract will either fall in ’23 or ’24 as we’ve got into the design phase and understood the availability of components etc. We believe it’s now more likely that the revenue from that item will be recognised in ’24.

Importantly, it indicates the growth of the pipeline that the business is getting, and we’ve got a number of other contracts under discussion for the back half of this year and into ’24 that will help build the revenue pipeline for the division.

Q6: Just looking at the future, and turning back to the trading statement, what’s your view on the outlook for the rest of the year and into 2024 for Biome Technologies?

A6: Well, we’re really pleased at the moment that both divisions are performing well. The bioplastics business is substantially ahead of last year, and despite that challenge of being able to recognise revenue in RF, the division is continuing to grow its business and confident to winning further business of a similar nature.

So, we still remain a bit cautious, the world economy is still a precarious place I would  say, that macro environment is quite difficult so our expectations at this point we’ve decided to really keep the same for the rest of the year, and in line with forecasts out there in the market.

Q7: Just looking at current news, everybody has seen the fires in Europe, how do you think bio-based plastics have a role in abating climate change?

A7: I think often the focus for climate change is on energy, be it electric cars or heat pumps for homes, but 10-14% of the oil and gas that we dig up goes into the making of products, and a lot of that goes into plastic products. In the end, a lot of that carbon from that oil and gas for making plastics ends up in the atmosphere in the form of CO2, whereas bioplastics are made from plants which have captured the CO2 in their manufacture.

So, there is a significant place for lower carbon bioplastics to help that climate change abatement over time, as we really get to focus on not just energy but the embodied carbon in products. In the end, we have to keep the oil and gas in the ground if we’re going to stop putting it in to the atmosphere and so, I see bio-based plastics at the leading age of that change of our products to more climate-friendly items.

Biome Technologies plc (LON:BIOM) Chief Executive Officer Paul Mines caught up with DirectorsTalk to discuss highlights from the results, drivers for growth, future growth in the Bioplastics division, changing the way they operate in North America and when investors will know whether this work has been a success.

Q1: Last week, you announced a pre-close trading update giving unaudited results for the financial year ended 31st December 2022. Can you give us a bit more background on these results?

A1: Group revenues for the year ended in line the market expectations at £6.2 million, we were quite pleased, these were 10% ahead of the previous year which was at £5.7 million. So, 10% growth, not as much as we would have liked but in line with the expectations that we had given the market.

We expect that, subject to audit, we’ll generate a loss for the year ended 2022 that’s in line with current market expectations and pleasingly, the cash position was slightly ahead of expectations at year end, at £0.8million.

Q2: What was it that drove the 10% growth in revenues for the group?

A2:  As a quick reminder we’ve got the two divisions within Biome, one of which is the Bioplastics division which manufactures and sells bio-based and biodegradable plastics, and then we have the equipment making division called Stanelco RF Technologies that makes our fibreoptic cables and heating for the general industrial space using radiofrequency technology. So, there’s two very different divisions.

The revenues from Bioplastics were just behind those of 2021 which was caused by a slight reduction in demand from one of our large customers and delays to some launches with some of the new customers we’re working with.

Fortunately, RF continued its post pandemic recovery as the capex gates were opened again by a number of our customers and it delivered a flurry of orders to our new customers through the year, helping the group to grow.

Q3: I know you have great hopes for future growth for the Bioplastics division, what are you doing to drive that?

A3:  I guess there are three or four things I’d mention, one of which is the market itself for an alternative to fossil-based plastics is growing so there’s a growing and vital market for both bio-based and compostable materials that we have a good understanding on and got a good selection of materials.

Number two is that we have a great product set that comes now out of 13/14 years of research, we’ve got a good team doing that development, based at Southampton with some offshoots in Nottingham, so we continue to create great product with differentiation from some of our competitors in the market.

Perhaps, most importantly, we work closely with our customers, brands and convertors, to understand their needs and support their journey as they transition from fossil-based across to bioplastics. It’s a transition that they can do with their own equipment but needs some learning and adaption of processing as they go.

So, I think that a growing market, a great product set and working closely with our customers is really important and why we expect to grow going forward.

Q4: You have recently announced changing the way you operate in North America, what have you done in North America, and why?

A4: Our current revenues for Bioplastics over 75% of them come from America so it’s already a very important market for us. One of our senior team members has recently, in December in fact, relocated to Canada, that’s Alexandra Busnel, she is now picking up the responsibility for really spearheading our growth in the region. Whilst we’ve had technical support permanently on the ground for some time, this is the first commercial businessperson we’ve had in the US and I think  it reflects both our growth and our need to be close to the customers, as I mentioned before, as they grow.

Alongside Alexandra going to Canada, we’ve also established business entities in thew USA and Canada and we’ve opened a further stock point in the region in Canada. We’ve also upgraded our own local systems so that we can take orders and provide a really rapid logistics turnaround in that region rather than having to come back via the UK.

So, it’s a great opportunity set there in the US and we’re just adapting our business model slightly so we’re more present in the country. I think this action really reinforces our commitment to the market and to raise our customer service even further, something that really differentiates us from others.

Q5: It all sounds really exciting, when will investors know whether this work has been a success?

A5: It is exciting, if you look at the Allenby forecast in the market, that’s Biome Technologies’ broker, you can see that there’s clear expectations for growth in our Bioplastics division in 2023. We do report quarterly to the market so investors should see that action through into delivery, and in the subsequent quarters as we go forward, in our revenue numbers.

Q6: Turning back to your trading statement, you said that you’re being cautious in expectations for the RF division, particularly in the current economic environment. The team is working hard to convert its prospect pipeline into firm orders and the Bioplastics division has started 2023 really in an encouraging manner.

A6: Yes, that’s, I guess, unpacking that statement in our trading statement. The RF business really does rely on chunky large capex orders from its customer base and we’ve got a good pipeline. I think we just need to be cognisant in this time that with the world still in turmoil, getting some of those orders over the line from prospect to order with capex being looked at by firms globally, it might take a little bit more time than we expect.

So, as we entered this year, we decided just to be a bit more cautious on the rate that those large orders might land but we’ll obviously update the market as those prospects turn into firm orders.

Bioplastics has had a really encouraging start to the year with good order flow. It’s early days, we’re one month in, we have seen the major uplifts that we got at the back end of last year carry through into Q1 of 2023 and some of our other customers look a little bit firmer than they did last year. So, as I said an encouraging start for the Bioplastics business.

We will provide a further update with our audited results which are out later in April so I hope that gives investors some view of where we are.

Biome Technologies plc (LON:BIOM) Chief Executive Officer Paul Mines caught up with DirectorsTalk for an exclusive interview to discuss their latest trading update, expectations for significant growth in Bioplastics, trading in the Stanelco RF division and his confidence in the business.

Q1: This week you announced that whilst up on last year Biome Technologies revenues were slightly lower than management expectations at the end of the second quarter. Why was that?

A1: Just to remind the audience  that Biome Technologies has 2 divisions, one of which is our Bioplastics division and that makes bio-based and biodegradable plastics that go into often packaging and composting applications. We also have an equipment manufacturing division called Stanelco RF Technologies.

Looking back at the second quarter, in both cases, these divisions received orders to meet our expectations but, in both cases, they were unable to secure the raw materials required to complete the necessary manufacturing and shipments.

For RF, this was a hold up in specific electronic parts required to build our systems and for Bioplastics, it was one particular raw material that was delivered very late and prevented a planned manufacturing run in June.

Both divisions are suffering these post-pandemic issues around supply chains and getting hold of parts or materials to complete their manufacturing operations.

Q2: Can you be sure that this is only a revenue delay and not lost revenues?

A2: Very much so, the required parts and materials have arrived post period end and manufacturing is either underway or the goods have been delivered now.

Q3: In your statement you mentioned expectations for significant growth for the Bioplastics division in the second half. What’s driving that?

A3: In the case of Bioplastics, this growth that’s expected is very much underpinned by a number of our customers preparing their supply chain for launches at the beginning of the first half of 2023. The launches that they’re planning are based on Biome’s new ‘home compostable’ products that are bio-based and biodegradable  and subject to a patent. So, we know with these customers are very much preparing these launches and they’re preparing to fill the supply chains with our materials.

These home compostable materials is a trend in the market that perhaps I’ve not spoken about before but it’s towards materials that can be both composted in industrial facilities, in controlled conditions, but you can also put in your home, backyard compost bin. Our team has been working for the last 3 years ago building a portfolio for these home compostable products and we’re now starting to deliver them to our customers.

Q4: How is trading in the Stanelco RF division?

A4: This year started very strongly and we’ve got a strong orderbook, we had expected to convert that to higher revenue levels in Q but the component shortages I spoke about hindered that. We very much expect those delayed revenues to be recovered in H2 and meanwhile, we’re working very hard to re-position the business to reduce its reliance on the fibre optic markets and build positions in aerospace, pharma and general industrial markets. That process is going very well and that activity is showing the benefits and we’ve got a good pipeline of orders and enquiries from a broader set of customers now as we look into H2.

Q5: You mentioned in your RNS that Biome Technologies has entered into a receivables financing agreement with Accelerated Payments Limited. Why is that?

A5: We are very aware that the growth that we expect in the back half of this year and into the following year will require further working capital support, particularly in our  extended global supply chain. This facility very much gives us flexible access to additional cash should we need it during that big ramp up coming.

Q6: You have been quite confident in this discussion despite the headwinds in the global economies. What is it that’s giving you that confidence?

A6: In the case of the RF division, we continue to see a good order flow coming in diversified non-traditional markets, outside optical fibre, and for Bioplastics, although our customers do continue to face supply chain challenges as they deploy new products, the enquiries in the space are buoyant. That move away from fossil-based to non-traditional bio-based plastics just isn’t stopping and is continuing to build.