Byotrol : Interim Report

8 December 2021

Byotrol Plc

("Byotrol" or the "Group")

Interim results and Notice of Investor Presentation

Byotrol Plc (AIM: BYOT), the specialist infection prevention and control company, is pleased to announce today its unaudited interim results for the six months ended 30 September 2021.

Highlights

Performance in the first six months showed substantial and ongoing improvements compared to our performance pre-Covid, but was below management expectations for the period, matching the experience of other companies in our markets and reflecting slower than expected and overstocked markets post the peak of the pandemic demand.

• Sales £3.2m (versus an exceptional Covid-driven £6.7m in 6m to 30 September 2020, and £2.1m* in the 6 months to 30 September 2019)
• Gross profit £1.66m (v.£2.91m and £0.91m respectively)
• Adjusted EBITDA** £0.17m (versus £1.29m and £0.34m loss respectively)
• Cash of £1.9m at period end

Strategic initiatives progressing well:

• Sale of Byotrol24 in the Americas for gross cash of $1.4m over two years, plus three years of ongoing royalty and potentially significant extra payments to be made to Byotrol contingent on the purchaser's future revenues.
• Solvay continues with its global launch of Actizone 24 hours surface sanitiser and has now received US EPA approval for long-lasting germ kill claims. This is a highly significant step and opens up global supply opportunities for Solvay, from which Byotrol will benefit through its ongoing commission arrangements
• Nearing completion of the academic programme into the mode of action behind brown seaweed's potency as an antiviral technology. The potential for this technology continues to be exciting for the Group.

During the year we have been making substantial investment in the team, including:

• new leadership of the Professional sales, marketing and business development functions, with two key hires, both with considerable experience in our core markets
• imminent appointment for the first time of a full-time CFO to the Board.

Outlook

Whilst this pandemic is far from over, we find ourselves in a much better position than we were in late 2019. We have an increasingly integrated, profitable, IP-rich and cash generative business in a much expanded market

with enhanced annualised growth. Accordingly, the Board remains highly confident in medium and long-term growth and, with the benefit of a stronger balance sheet and contractual cash flows from prior IP sales or licenses, is investing further in the team to deliver it, particularly at leadership level in sales and marketing.

After a challenging H1, particularly in hand hygiene products, sales in October and November have been ahead of the average for H1 and the order book is now building strongly, sitting currently at £850k versus an average of £300k in H1 and approximately £350k pre-Covid. Notably this demand includes a number of sizable orders from new customers in both the UK and overseas.

Market demand and gross margin, however, is likely to remain volatile in the short term and is subject to a potential negative impact of full and partial lockdowns on the demand for consumables. This is especially so at the current time with the current uncertainty introduced by the new Omicron variant of Covid.

Third party interest in our IP and related commercialisation remains strong, with a number of active client discussions under way. Such agreements can be profitable, but we cannot say with certainty which agreements will close and when. We anticipate our first material royalty income in the current financial year.

Whilst we expect to be both profitable and cash generative in the second half of the year, with these uncertainties it is difficult to predict the quantum at this juncture. At present we are expecting IP sales to offset the majority of the anticipated shortfall in profit on product sale, but projecting the timing of IP sales is even more uncertain, so we feel it prudent to now reduce market guidance for the current financial year. Regardless of the timing of our revenues and IP commercialisations over the next four months we remain very well positioned for future growth and are excited by the significant opportunities ahead of us.

Investor Presentation

David Traynor, CEO, and Nic Hellyer, CFO will provide a live presentation relating to these results via the Investor Meet Company platform on 8th Dec 2021 at 2:30pm GMT.

The presentation is open to all existing and potential shareholders. Questions can be submitted at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet BYOTROL PLC via:

https://www.investormeetcompany.com/byotrol-plc/register-investor

Investors who already follow BYOTROL PLC on the Investor Meet Company platform will automatically be invited.

John Langlands, non-executive Chairman of Byotrol commented:

"The Group remains substantially ahead of the pre-Covid period in sales and profits and we expect that performance to endure.

The team is working hard to consolidate and increase the underlying growth, and also to address the short-term challenges in market conditions. We continue to see multiple opportunities for growth in the medium term and are investing confidently to deliver medium and long-term returns."

This announcement is released by Byotrol Plc and, prior to publication, the information contained herein was deemed to constitute inside information under the Market Abuse Regulations (EU) No. 596/2014. Such information is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person who arranged for the release of this announcement on behalf of Byotrol Plc was Nic Hellyer, CFO.

• Comparative figures for H1 2020 restated for closure of US business
• Adjusted EBITDA is defined as Earnings before Interest, Tax, Depreciation and Amortisation and exceptional items, share-based payments, non-trading items such as profit or loss on disposal of assets, plus revenue recognised as interest under IFRS 15

Notes to editors

Byotrol plc (BYOT.L), quoted on AIM, is a specialist infection prevention and control company, operating globally in the Healthcare, Industrial, Food and Consumer sectors, providing low toxicity products with a broad-based and targeted efficacy across all microbial classes; bacteria, viruses (including coronavirus), fungi, moulds, mycobacteria and algae.

Byotrol's products can be used stand-alone or as ingredients within existing products, where they can significantly improve their performance, especially in personal hygiene, domestic and industrial disinfection, odour control, food production and food management.

Byotrol develops and commercialises technologies that create easier, safer and cleaner lives for everyone.

For more information, go to byotrol.co.uk

Chief Executive's report and financial review

The first six months of this financial year have followed the pattern expected by management since last year end, with improvement in all financial indicators compared to pre-Covid, but below the extraordinary results during the peak of the pandemic, and indeed a little below management expectations, particularly in product sales and especially in hand hygiene products.

Most market participants have been projecting sales growth in infection control at around 10% across the recent cycle (compared to the 5% normally quoted pre-Covid), which we have exceeded in our own results compared to the first half of our 2020 financial year, and low double digit earnings growth, which we have also exceeded substantially.

In line with our strategy, we continued to make progress on the IP side of our business. Larger customers look to us to provide them with future-proofed technologies with the correct regulatory support via licenses or outright sales. This is very solid business once secured, building a long-term cash flow stream, but it is also lumpy revenue-wise and can lead to volatile profitability. Pre pandemic we invested into increasing product sales via the acquisition of Medimark, but Covid has had the perverse effect of making that side of the business volatile too, at least as the current market conditions persist.

That said, we remain very confident in our positioning and in market recovery and have used the extra resources created during the previous financial year to invest in the business:

• in the team, especially in sales, marketing and business development. We have invested in new, market- proven leadership in 4 of the 6 operating board positions, including
  o 2 senior sales and marketing professionals with prior national leadership positions at Diversey and Gojo, and at Zoono respectively
  o a new, full-time CFO;
• in R&D, we have restructured our technical team to concentrate on innovation rather than testing, to take advantage of the myriad of new opportunities available to us, particularly in the fields of virology and sustainable and natural antimicrobial technologies; and
• in systems, especially in integrating the management, HR and supply chain systems of the Group

Many of these incremental costs have been offset through a restructuring in the period, which we estimate will result in an exceptional charge of c. £0.2m. Net of this, the investment will result in an increase of c.10% in annualised full year cash costs, which will start paying back in mid/late calendar 2022 as the resulting operational efficiencies feed through.

The new team is now working on a more focussed strategy, where we can get the best return for our sales and marketing spend. Byotrol has traditionally (and by necessity given its historical resource constraints) offered its technologies into many different market segments with many different commercials, sold on the basis of its outstanding product performance. This has kept the business growing satisfactorily, but we must now become masters in fewer, discrete segments, talking to clients knowledgably about their businesses and solving their problems where we can. This is a natural and correct evolution of the business and will not result in withdrawing from any current activities, but it will likely mean a shift in how we position ourselves publicly. It should also allow us to deliver a higher net margin as we develop a much more targeted and client focused approach.

Results by segment

Professional

H1 revenues decreased to £2.61m from £5.66m, including £0.75m of royalty and licensing revenue compared to £0.59m in the comparable period. Gross profit on product sales (excluding license revenue) decreased to £0.70m from £1.86m.

As reported in September the first half of the year has been a challenge for product sales due to unexpectedly extended lockdowns and office closures and by too much product in our markets chasing too little business consumption. Brexit has not helped either, increasing the amount of administration required to sell our product into the EU and the UK government decision to move away from much of the EU regulatory regime on chemicals. We are now, for instance, increasingly having to re-do regulatory approvals for the UK, based on a new, slightly different to expectations, regime. The good news is that supply chains seem to have stabilised now, and we are now finally starting to reap some benefits from combining the supply chain effort of Byotrol and Medimark.

Product mix remained broadly consistent with previous comparable periods, although hand hygiene sales have been some way behind expectations due to overstocking and heavy price discounting by alcohol-based hand sanitiser producers. Of the Professional segments, facilities management and environmental (laboratory supplies) has been much weaker than expected, but human and animal health has been steady, with the latter picking up rapidly as veterinary practices re-open.

Consumer

H1 revenues decreased to £0.56m from £0.98m, all of which were product sales. Gross profit on products decreased consequently to £0.20m from £0.45m.

Given the recent history of the Group, we remain substantially underinvested in consumer product sales and are now taking steps to address this, particularly as we see increasing sales of our anti-viralalcohol-free hand sanitiser sales into Boots. Recent new hires into the Byotrol leadership team should help here.

Intellectual Property Sales and Licensing

We continue to make progress in monetizing our IP. Of the current activities in place, the three most notable progressions are:

• Solvay has now launched Actizone globally, the long-lasting antimicrobial surface sanitiser that Byotrol co- developed and that will pay Byotrol an ongoing commission on all Solvay sales. We are aware of two global company clients of Solvay and two regional companies already launching 24 hour germ kill products into consumer and business markets and are still expecting to report our first sales-based income from this relationship in FY22. Very excitingly, we understand that Solvay has now achieved US EPA approval for long lasting germ kill sanitisers, thus opening up the important US domestic market; we anticipate sizeable demand from global customers seeking global supply chains.
• On 30 September we agreed to convert the existing US license agreement on Byotrol24 with Integrated Resources Inc (IRI) into a sale of the formulation in the Americas to IRI, with payments over 2 years. The agreement secured cash payments to Byotrol amounting to US$1.4m in total, with a residual royalty to Byotrol being paid over 3 years, which will ratchet-up further in the event of IRI re-selling the formulation within two years. Simultaneous with this sale, Byotrol entered into a preliminary three-way agreement with
  IRI and a significant US distribution company ("USCo") to register with EPA and then sell the Formulation into US Professional markets. Should formal registration be achieved, sales by IRI to USCo will accrue further additional royalties to Byotrol.