Symphony Environmental Technologies (LSE:SYM) — Investor Update

0:00 Good morning, and welcome to the SYMPHONY ENVIRONMENTAL TECHNOLOGIES PLC Investor Update. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll, and I would now like to hand

0:31 you over to CEO, Michael Lauria. Good morning to you. Good morning to you. Nice to be able to present this morning, an interesting morning. And the presentation that, I'm gonna present with, Ian Bristow, chief financial officer, should be interesting and, I hope, enlightening. So moving from the instruction slide to the main slide, which is the executive summary, this is an equity subscription raising 1,400,000 and a further 500,000 through primary bid. The net proceeds of this will strengthen the group's balance sheet and provide the necessary working capital that we're going to need to really scale up.

1:23 The issue price at 3.5 is a premium of 67% to the closing mid market price on the 03/21/2024. And I am in on this subscription at £105,000, 3,000,000 shares. The two largest shareholders of SYMPHONY, which is CPOL CPO and Somersen are both investing 500,000 each, making a total of 1,000,000 between those two. There's gonna be an a general meeting to get shareholders approval for the additional shares that need to be issued, and that's gonna be at 11:00 on the April 19.

2:16 So for those who don't know, we are SYMPHONY ENVIRONMENTAL TECHNOLOGIES. The business is UK based. We are developers of additives and master batches that you put into ordinary plastics that would enhance the properties of the plastics. The issue that we're working with covers the main topics that the world's particularly worried about. So this range of technologies that we've got is essentially we're in the right place at the right time. So we're dealing with the issue of plastic pollution, which is virtually every single day of the week. You're hearing it in the press.

3:03 Food preservation is critical because quality of food and preserving it is critical. The growing of crops is, again, a critical factor. Water pipe protection for the growing of crops as well as drinking waters is another aspect and human safety. So those are the main topics. And so what our technologies, our suite technologies that we have are both scalable, virtually to very, very high volumes and immediate. So you can make these changes, immediately because it's a nondisruptive upgrade to the production of an existing product.

3:49 So if you like a film producer that might produce packaging film or somebody in that might produce buckets, they don't need to change their existing supplier. They upgrade using one of our master batches or additives. So, essentially, that means no material change in cost, machinery, or the quality of the product. Nothing actually changes. It's just been improved. The product continues to be recyclable, and it can be made and recycle it. And interestingly, on the life cycle impact studies, limited c o two emissions is very, very positive there, and there is no material effect, I. Limited life cycle impact to the technologies that we present.

4:39 So SYMPHONY ENVIRONMENTAL TECHNOLOGIES PLC, established 1995. We have the London Stock Exchange Green Economy mark for sustainability on our exports in 2,019. This is a high margin business with Capital Light. We're operationally geared, and we have a global network of independent distributors, so 40 plus percent gross margin business. We have invested around 4,900,000 on r and d, and 8% of revenues invested into research since 2015. The interesting part is that we do have some very, very strong partners, multibillion dollar companies such as Group Dimbo, the world's largest bread manufacturing company, and Indorama Corporation, a very large global group, and Riverless, who are one of the largest in terms of irrigation and water pipes.

5:49 Our pipeline has multi live opportunities, and they're globally. It's a strong pipeline, which is engaging with public and private sectors. Is international, and there's many, many trials underway. So d two w, which is our core technology, and you'll see the logo at the top of my hand on the screen, which looks like a water droplet because that's really what it's intended to be. It's a technology that, our technicians will say, and it does. It's designed to work, or some people might think it to go to the water. But it's the international symbol that you'll find on thousands of tons of plastic now, to show that it has our technology inside.

6:40 So, basically, keeping it simple, this is an additive technology that is mixed into the production of ordinary plastics when it's produced, and it will make that ordinary plastic harmlessly biodegrade back into nature. It resolves the issue of persistent microplastics as it would turn that ordinary plastic at the end of its serviceable life, into, biodegradable compounds that are then bioassimilated back into nature. So, if it escapes the collection for recycling or reuse, we know that this technology will harmlessly and safely return that product back to nature. The Europeans, define this, under the Central European Normalization SEN as oxo biodegradation.

7:33 And this technology, is mandatory for short life plastics in Saudi Arabia, United Arab Emirates, Bahrain, and Yemen.

7:46 So our progress, which is interesting, in The Middle East, we have Saudi Arabia. It's a very, very large market, world's largest oil producer, but also very, very large producers of plastic. Pass their law. And they're presently in phase one of a law that requires all plastic to be made with this type of technology. And so what we are looking at is the possibility that the completed phases two and three will actually happen during 2024, and that would, of course, be quite significant. We have laws also similar based on this type of technology only in The UAE, Bahrain, and Yemen.

8:36 And further in that development in 2023, we established production of this product actually in The UAE, and that actually saved us cost. So there was quite a change in 2023 into the manufacturing, of the technology. Moving across the world in Latin America, we had group Dembo in their Mexican operations, and also outside of the Mexican operations, we find that d two w is generally used in many different applications in Mexico, Costa Rica, Colombia, Peru, Brazil, and Argentina, all being distributed through local Spanish speaking, mainly Portuguese speaking in Brazil, distributors that understand their markets and that hold stock.

9:31 In North America, we we had announced a agreement with Bayer bottles that then linked into the largest supplier of bottles in The United States, Trico Bran. And that required during late last year, which we announced the market, a test by the American Plastics Association, APR, to make sure that we met with their recycling guidelines. We achieved that in December. So good progress in The United States on bottles as well as some other small progress that's ongoing there at the moment. Other markets that we're pretty active, but not limited, Far East, India, and Africa.

10:18 And the products that we cover are into, obviously, rev sheet sacks, bin liners, apparels, drinking straws, agriculture films, supplement bottles, stirrers, and other branded products. Essentially, we cover most types of single use plastics, which is the world's biggest issues to today.

10:40 Now we turn to the D2P technology, which essentially means designed to protect. We're looking to protect plastics and to enhance those properties further. And listed in front of you here, these are some of the issues. Food that might, become contaminated, spoilage, and wastage. We have this FDA approved antibacterial, which will reduce the amount of spoilage that you get by making the product that much more sterile, less potential for it to be contaminated and grow mold. So the ability to be able to reduce food waste by keeping a more sterile package as well as ethylene controllers to delay the ripening process or fruits.

11:32 That's another area that we've been quite intensely busy with. And then in the hygiene and virus transmissions, we had previously announced that we tested our product against various different viruses, including COVID, and very, very successfully and effectively. But in this illustration here, we actually refer to water pipes and tanks, which will build up biofilms and molds and algae. And by keeping those pack items sterile for the life of the item, the pipe, the water tank, stops the water becoming contaminated. It's just an upgrade to the existing, product that's, being used.

12:18 And then, of course, a massive market that we've we've, involved in is flame retardant. Plastic is a fuel. It will burst into flames. And having a range of technologies that we've defend that we've developed has been proven to meet various standards that whereby if there is fire, our product put inside ordinary plastics will stop it igniting, stop it dripping, stop it putting out toxic fumes against particular global standards. There's a lot of work going on on the flame retardants and our TDPs at the moment. And then metal deterioration, the technology that we have for this, it stops metal parts becoming rusty.

13:08 So it's an anti corrosion inhibitor that would go into packaging. Again, very, very large global market, and there's a lot of work going on with that. And then, of course, finally on this list is we're very much involved in insecticides, putting it into crop growing, either into water pipes to stop those water pipes being attacked by insects, which would increase perforation holes or stop insects from attacking plants by putting that into the plastic. So it's a very, very effective use of this technology rather than just spraying the crops with direct insecticides.

13:54 You put it into the plastic. It's far, far more efficient. A lot of work going on in in that area. So the progress, as I said, really, we've got this collaboration with Riverless, in the Eurodrip rain, range on water type in water pipes, and that's being used in a lot of farming and agriculture areas. And there is quite a lot of work going on in other countries, in relation to getting regulatory approval because when you're dealing with insecticides, there are regulations that you you need to get approved and get certification, and that's advancing pretty well on that front. So we're looking at quite a interesting increase in market activities there.

14:44 Our FDA approved bread technology that I referred to just earlier goes mainly into packaging film that goes around bread. And we announced the contract supply agreement with group Bimbo for United States Of America and some parts of Latin America to use this technology for a period of time exclusively. There are other customers in other parts of the world that have started to use small volumes, and we expect that to gradually increase. The flame retardant business mainly insofar as the commercial elements of what we're doing is in The Middle East and in the construction markets where there are very, high standards following some major issues with fire.

15:35 So the market is big, very big, $625,000,000,000 in terms of the the market that we're looking at. In terms of actual weight, 400,000,000 tons near about and and growing. And the plastic pollution residue around the world has quoted as something like 10% is is turning into materials that end up in oceans. So the statistics there are quite horrifying, and what our technology would do is help to resolve some of these pressing issues. A lot of you would know about the EU case. There were issues in Europe. We took legal action against the European Parliament for financial damages because they passed under their single use plastic directive laws that ban certain types of plastics. And within that was a description, of a product called oxydegradable,

16:39 which a lot of people confuse as being our technology. But because of confusion, we took a legal challenge on it, which didn't succeed. But our position remains the same, in that, we can sell our product into EU, but it's not our focus market. Pleasingly, we announced very recently, which was pretty significant, that the EPA, that's the EU US Environmental Protection Agency, had actually tested, this technology where the EU never tested anything. They were looking at literature reviews, but The United States did actually test this technology, and came to a conclusion that it actually did work. And that's those findings actually correlated to the studies that we've done in Oxnard, a global study in the oceans to prove that technology really did work and Queen Mary University.

17:38 So what was found in The United States is very, very pleasing because it is the first, major government that actually did had done their own actual study on the technology. And then SYMPHONY ENVIRONMENTAL India is a fascinating, part of our business because India is a massive market opportunity. And, we created a joint venture with the Indorama Corporation and have a very, very good team in place. And, at the moment, as in every country around the world, there seems to be regulations and laws that are restricting the use of ordinary plastics. And in India, what we're seeing here is there is an exemption from severe restrictions if you have a product that, is biodegradable and that, conforms to an Indian standard, which we quote here seventeen eight nine nine.

18:37 So far, in, our own tests, we've got to 74%, by degradation. We need to get to 90%. We don't think it's gonna be that long before we hit 90%. We then get certification, and I think the entire business moves forward quite quickly from that point. As we're showing in this PowerPoint, there there is something in the order of more than 500 prospective customers wanting this technology. And then the reason behind it is is financial because if they don't have a biodegradable technology, their cost is likely to increase or, in fact, has increased by two to three times. And so far, using our technology, there's been a producer of laminated cups, that's paper laminated in plastic that's reached to 90%.

19:29 I think they're they're applying for their certification at the moment. And on the D2P technology, the good designed to protect, we seem to be making good progress now on, semi commercial trials for the preservation of bread. Moving this PowerPoint on, the convertible loan is more or less as we have on this PowerPoint. So I I won't go into too much detail other than the 1,500,000 outstanding has now been extended to the 12/31/2025 from September this year 2024. I will hand over to my colleague, Ian Bristow, on the, financials.

20:19 Yeah. Hi. Good morning. Thank you, Michael. The most recent financials we've published were the half one for 2023, a year end of December. So these would have been to June, released in September. Really, what I the point I wanna make on this particular slide is, you know, we're a high margin operationally geared business,

20:39 international sales. What we mean by that is we have a distribution network, and they really handle most of the communications and and and local, local selling processes for us, which, again, helps to be operationally geared model. And also the manufacturing as well of our business is is manufacturing the license in a number of countries. It means with CapEx light, basically. And also capacity isn't really an issue for us at this stage of our business. Also, for working capital as well, it enables us to really sort of maximize the working capital cycle, especially with our high margins as well as a business. So this particular table here is really showing the contribution. And, up we had, during COVID, there was particular issues with with costs and with distribution, etcetera. And and you can see into June there that our gross profit margin is 42%, and our contribution after distribution cost is 39 percent, which is a, you know, a 10%, point increase, if you like, from the from the previous accounting periods. They're quite significant for us. And I think, you know, if we can apply that going forward, which we we believe we will, with revenue growth, we can see how that can sort of quite easily fall help contribute towards profitability going forward.

22:02 What we're showing now, what I'm not showing here, is is the overhead base cost base. We invested a lot in costs over previous years, and started to reduce those costs, during 2023. Really, those costs have helped achieve a more focused business for us. Some really good systems to put in place, allowed us to rationalize what we're doing and how we're doing it, and therefore, will enable us to also sort of, reduce our costs going forward, but not harm harm the business. And you would have seen the cost reduction to June, and they they're gonna you you will see those going into this year as well as I present numbers going forward. So current trading and outlook. So we've announced our revenue for last year. The audit is still ongoing, so I can't give you too much more information other than revenue of 6.4. I think 6,200,000 last year.

22:57 Just an update on just the the first few months of the year. Can't really read too much into that. We really sort of work on a quarterly basis or six monthly basis of business. A lot of our business is quite blocky. You know, most of our main regions, the the the sales individually can be quite high and could fall in particular months or not depending on on their their own particular needs over a period. As we reiterate in there, a lower cost structure and not consistent high margins going forward. We've been in a net borrowing position for a while now, other than our convertible loan position, which Marco just just just briefly explained there. We do, borrow. We have been borrowing from HSBC with our unbilling finance facility.

23:43 Revenue is a lot higher, obviously, than what we're borrowing. It's a very good facility. The extra borrowings are against insured insured amounts from various locations around the world, various good quality quality customers. So really going forward, just summarizing here are the opportunities, which, which we believe are significant. The ongoing theme, which has been seen, we've been reading about for the last few years, these trials, regulatory approvals, we're really time scale dependent on that, and and most of these are outside of our control. Obviously, with us and our distributors, we work with very, very hard. But, you know, but they are they they do have an impact, but they're still there. And on these particular trials and and and regulatory approval processes, they're ongoing, and we are progressing them.

24:30 And in particular, we've got the FDA approved, DGP for bread We've been buying others. The improvements are in place. It's the trials. The trials are semi commercial commercial trials. They just take a long time to conduct. With the ripeness, ripeness is already a major contributor to our d two p. We're looking at other markets. We mentioned two main markets that we're looking for regulation clearance. Again, we're not quite sure on timing there. We're hoping that'd be this year. Michael mentioned the flame retardant, to The Middle East and also b two w. So it's a big market for us, Middle East. With the b two w in phase one, as Michael mentioned, of a of a three phase enforcement program and subject to a particular testing and testing regime that's been going on for a couple of years now. We're hoping to get results of that during this year.

25:18 We hope, subject to that, we should go to phase two and three. And then with the flame retardant, again, this first test going on at the moment. Timing could be fairly soon, or they could become mid midterm. Again, it depends on how those trials go. And we mentioned we have the trigger bond in India. Michael mentioned those above. So we've got an expectation in. We've just put in what we call as a as a reasonable expectation for this year for d two p, 1,200,000 that gets 500,000. We're looking at growth there on the AI, and also with the bread part of the business coming in and growing, from from from the small area that is at the moment growing into the second half of the year. And then for d two w, six and a half, and we get 5.2, really driven by The Middle East, as a primary driver. But, all of our all of our markets, Far East and The Americas in particular, we've got lots of pockets there, which which can which will we hope will lead to to growth in revenues this year and beyond.

26:17 So, overall, we're looking at a positive commercial position for the group. Michael? Very good. Thank you, Ian. So in summary, what we're looking here is a successful 1,400,000 subscription, and I I was delighted to come in on that. I think 3.5 p was incredible value. And I know that buying into the market prior to today, one could have bought cheaper than that. But in fact, we're currently at 3.5 on on the offer. So delighted to come in on that 1,400,000. Of course, it's subject to the acceptance of the general meeting, which I believe it will be accepted, and available up to 500,000 via the primary bid.

27:14 We wanted to open it up to existing as well as new shareholders. And I think this is a great, great story. It's very, very topical. Anyone that's reading about plastic pollution and food preservation and the items I was referring to in the beginning, you can get connected by seeing what we're doing. We're very, very active in this space. And is that a time that the world actually does need to resolve these issues? So the proceeds from all this will be used to deliver, what we expect to be good revenue growth, and it will be used, of course, to strengthen the balance sheet. General meeting, as I said in the beginning, is on the 04/19/2024.

28:01 So this is a high margin business. It's actually operationally geared. The cost has been reduced because it's less we've needed to invest into r and d. We're coming to the end of a lot of the the pipelines that we've been working. So, therefore, the cost has, come down, become more efficient. The global opportunities, which I try and cover within this communication are significant, and and it's not just been handled by us. We have some very seriously large partners that are invested in SYMPHONY or that are distributors of SYMPHONY. So our reach is quite efficient. And within that, of course, we're communicating with some very, very large blue chip targets as well as having those blue chip partners.

28:58 I think, in terms of the final slide, this basically is the core team here. It it's, far board, but it's the actual core team. We've got a very, very experienced team that's driving this thing forward. And that actually concludes the presentation. And just to move on to the questions Mike. Will be happy to take. Perfect. Michael, Ian, thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via our investor dashboard.

29:49 Michael, Ian, as you can see, we have received a number of questions throughout today's presentation. And if I may now hand back to you and kindly ask you to read out the questions, give responses where appropriate to do so, and I'll pick up from you both at the end. Thank you. Great. Thank thank you very much. And just, moving straight into an interesting question. Is the 20 mid billion US bread market figure for bread products or for bread packaging, you're actually talking about the bread itself. So you're talking about a very, very large market because with it within that, we estimate that we could be looking at certainly a billion in terms of packaging, not so far as our own technology.

30:41 But our own technology, if we were putting it into a billion, let's say, of packaging film, will come to a seriously interesting number. And keep in mind that every bread manufacturer, in The United States, in fact, around the world are looking to reduce preservatives, reduce waste. They will want to do one or the other. So the technology is financially very, very good in order to achieve that. So there is a huge drive to move away from chemical preserve preservatives by these food products. The food becomes more more natural. Making the plastic intelligent using our D2P technology is definitely a viable. We're we're pretty excited about this. And as we put in our information, we are actually the only company to have an FDA clearance for use in bread packaging, in the world.

31:37 It doesn't mean we can use it in Europe. It does mean that we can use it in markets that will accept a US FDA clearance, which is all North America, South America, India, and some other interesting parts of world. So our bread initiative here is pretty pretty enormous. But sadly, like all these things, it takes time. These things are not overnight. It took us years and years and years, to get the FDA clearance. There was a substantial amount of testing ongoing in order to get that clearance to to prove food safety, to prove efficacy. And then, the ongoing scenario at the moment is to ensure that the users are getting value and that they are understanding it. And it's part of a long process, and we're well into that pipeline.

32:30 So a good question on the, DDP side. Looking at some of the other questions that we have here, one question is you have some great relationships in global names. The conversations to purchase conversions to purchase orders seem to have been slow. How confident are you that the pace will pick up? A great question. And when you deal with large corporations, in the world, there's nothing quick about them. It takes a long, long time, but we're well into that pipeline. And we're very, very confident because, if you just look at India as a good example, by law, they either pay up to two or three times more for their packaging, or they use a susceptible biodegradable product.

33:29 So, of course, they're interested in what we have to say. But what they need from us before they can start, say, in India is a certificate which the government will issue when we hit the required 90%, c o two evolution mark. But if you move that then across to Saudi Arabia that's presently in phase one of the three phase program, when they get to phase three, it has a global effect. So it's not just companies that operate in Saudi Arabia that's using packaging that will be effective. It will be companies from Australia to The United Kingdom to to everywhere. So there's a push from the regulatory side as well as the cost side to use, our technology. And then we're seeing very recently, a much, much stronger interest as a result of ESG. How do you improve your ESG credentials to your stakeholders, to your shareholders, to all of that without increasing cost?

34:36 So we are seeing light towards the end of this very, very long tunnel where a lot of these large corporates are moving in the right direction. Ian, would you like to take any further on? I'm not sure. There's I know there's one on the on the what they I think, can you please try an update on the supply chain? I think I did that on the on one of my my first slide I discussed. So we're seeing a normalization there. Margins over 40% and and much, much lower distribution costs. The Steven DY's revenue from Bimbo and DTP Solo, as we try to explain in the presentation, the start up's quite small.

35:22 It's we're looking at that these they should increase. So we're looking for them and others to increase the brands and the the brand application of these products going to. That's what we're working with them on. There's various trials that are going on with that. How much of the EU's court case the company liable for? We can't comment on that. All I can say is that it's it's not an area that we have a concern over, in terms of the court case costs just because of the way the EU, EU do it. It's a it's a question on revenue generation. Obviously, we can't comment on any forecast at the moment, I'm afraid, so I can't give you any updates on that.

36:17 And there's a question just from Raymond. What is The UK sales approval doing? You seem to be concentrating on foreign countries. Well, that that's correct. They've been established for many, many years now as as an international player using distributors. We did sell into The UK about 400 to £500,000 per annum, primarily finished products into various various UK retailers and other other types of other types of organizations there. It's not it's not an area that we're looking to push at the moment, purely because we've got so so much footprint globally. We feel that's a much better area for us to concentrate on going forward. I have no more no more questions I can answer.

37:04 Perfect. That's great, Michael. Ian, thank you very much indeed for addressing those questions for investors today. And, of course, the company can review all questions submitted today, and we will publish those responses on the Investor Me company platform. But before redirecting investors to provide you with their feedback, which one is particularly important to the company, Ian, could I please ask you for a few closing comments? Yes. We've, yeah, we've got some very exciting times going ahead. We've got a very large international footprint, a fundraise, successful subscription of 1,400,000, showing very, very good support from our current shareholders. And, yeah, we're very excited with this business and where we are and the opportunities available. Perfect. Michael, Ian, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback order that the board can better understand your views and expectations.

38:00 This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of SYMPHONY ENVIRONMENTAL TECHNOLOGIES PLC, I'd like to thank you for attending today's presentation, and good afternoon to you all. Thank you.