Q1: Symphony Environmental Technologies, what can you tell us about the company and its products?
A1: The company develops and sells innovative compounds which make plastics smarter. It has two products, the core d2w oxo-biodegradable products facilitates rapid and safe reduction of plastics into harmless residuals and then there’s the second product, the newer d2p product which is a protective technology which has many applications. The most commercially advanced d2p product prevents microbial growth on plastic so that’s very useful in food and non-food settings. That market for protective plastics is worth around $30 billion globally and, as you can imagine, in this COVID-19 health and hygiene environment, demand is likely to be very strong for those kinds of products.
Q2: What is the outlook like then for earnings and cash generation?
A2: The company has just reported their interim numbers and those were very strong so they reported revenue up 17%, gross profit up 10%, this is a small company and it’s now reporting a profit against a loss this time last year.
We think the outlook for earnings will strengthen very considerably over the next two years. The company is emerging from a long R&D phase to fully roll out these products, particularly the d2p protective technology product.
So, we think profits could rise almost 5 times over the next 18 months as they commercialise these products.
Q3: So, why would anyone invest in Symphony Environmental Technologies now?
A3: As I say, they are emerging from a long R&D phase, I think the demand environment is now very positive for both of their products. I think COVID-19 has shown the importance of good health and hygiene and this products match that requirement.
I think the oxo-biodegradable product, the d2w product, will help better manage plastic waste in future because one of the impacts of COVID-19 is that single-use plastic bans have actually been halted in many countries and therefore new methods of coping or dealing with this plastic waste will be required.
I should also say that the company has very good ESG credentials so the company holds the prestigious London Stock Exchange Green Economy Mark classification.