Byotrol : Interim Report

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 its unaudited interim results for the six months ended 30 September 2022.

Highlights

Our financial performance for the half year shows the results of an increasing focus on a smaller number of higher margin market segments, with fewer technologies and skus than during the pandemic. Key financial indicators (still compared to an element of covid-inflated prior H1) are as follows:

• Total Sales of £2.2m (H1 FY22: £3.2m) of which product sales were £2.0m (H1 FY22: £2.4m)
• Gross profit £1.1m (H1 FY22: £1.7m)
• Increase in Gross Margin on product sale to 40.3% (H1 FY22: 37.4%)
• IP sales (new and existing contracts) £0.22m (H1 FY22: £0.75m)
• Adjusted EBITDA* -£0.3m (H1 FY22: £0.2m)
• Cash of £1.2m at period end

Feedback from our partners in existing IP agreements remains positive, with further regulatory approvals now being secured, especially in the US. This is yet to feed through to material royalty and commission income, but those partners continue to invest heavily in their markets so we remain confident in future returns.

David Traynor, Executive Chairman of Byotrol commented:

Byotrol is well positioned to grow in post-pandemic antimicrobial markets, as we continue to focus on regulatory-approved, high performance biocide technologies.

We are now increasing market share from product sales in animal and human health as competitors withdraw for regulatory reasons, and within those markets we are increasing margins through sharper focus of resources, greater simplification of operations and enhanced economies of scale. These returns are set to grow further, boosted by ongoing high margin licensing agreements and alliances.

We look forward to supporting Vivan Pinto in his new position of Byotrol CEO, and we sincerely thank John Langlands for his excellent contribution to our Company.

Investor Presentation

David Traynor, Executive Chairman, Vivan Pinto, CEO, and Chris Sedwell, CFO will provide a live presentation relating to these results via the Investor Meet Company platform on 14th Dec 2022 at 3:00pm 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.

For further information contact:
Byotrol Plc
David Traynor, Executive Chairman	[phone]
Vivan Pinto, Chief Executive
Chris Sedwell, Chief Financial Officer
finnCap Limited (Nominated Adviser and Broker)	[phone]
Geoff Nash - Corporate Finance
Flagstaff Strategic and Investor Communications	[phone]
Tim Thompson/Andrea Seymour/Fergus Mellon	[e-mail]

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 Chris Sedwell, CFO.

• 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.com

Executive Chairman's report and financial review

The headline numbers for this report are ahead in many respects compared to the half year pre-Covid, but behind the half yearly results during the pandemic, including versus the first half of FYE March 2022.

The Company remains very well positioned strategically, with a solid balance sheet and net cash.

The 'boom' of Covid led to a period of over-supply in our industry once demand started to normalize. The excess stocks have now largely flowed-through but have generated consolidation as competitors and manufacturers who had over-extended themselves during the pandemic run out of cash. This consolidation is further driven by the increasingly demanding regulatory environment which many players do not have the resources or technical ability to succeed in.

Byotrol has long maintained a competitive technical and regulatory capability on a small cost base with high operational gearing and so is now well placed to benefit from these trends, to grow market share and to benefit from the consolidation. Our market share is now starting to grow and our financials are beginning to show the benefits of some fundamental operating changes made within the Company to maximise returns. These include:

• Sharp increase in focus. We have reduced our technology platforms from seven to four, our operational segments from seven to three (animal health, specialist human health and consumer) and our SKUs by 25% so far.
• Concomitant refocus of resources in sales and marketing, technical support and supply chain.
• A resulting gross margin improvement of 3 percentage points despite the volatile supply chain and inflationary environment. Gross margin on product sales in H1 exceeded 40%, versus 37% in the prior year. Including provision releases year to date, reported gross margin for the period was 43.9%.

These improvements reflect what Byotrol has been positioning for over many years and that we are now seeing playing out in the market across Europe. Our lead market for products is now animal health, built on the brand equity from the acquired business and brands of Medimark Scientific, where we are substantially growing market share and are capitalizing on our first new surface sanitising technology platform launch under the 'Anigene' brand (see 'technology' section below).

Our strategy therefore remains in place and we will accelerate on the same path. Product sales are expected to increase steadily, especially in Professional, with the increased focus and better economies of scale leading to further improvement in margins. Those returns should also now be boosted through commission and license royalties from IP agreements finally bearing fruit. We now have an impressive portfolio of high-quality platform technologies, which we believe is yet to be fully recognized in the Company's valuation.

Your team therefore remains very confident in our positioning and in upcoming returns. This confidence was confirmed by management and team contributing over half of the funds for a £1m convertible bond financing completed in July this year, which solidifies our balance sheet, protects growth-oriented spending and protects us against further extraneous market shocks.

Results by segment

Professional

H1 revenues decreased to £1.90m from £2.61m, including £0.22m of royalty and licensing revenue compared to £0.75m in the comparable period. Gross profit on product sales (excluding license revenue) increased to £0.75m from £0.70m, reflecting the underlying improvement and simplification of the business.

Market conditions are largely back to normal in our traditional Professional market sectors, except in facilities management, where price competition is very strong and little recognition is being given to improved technology claims. We did expect this to be the case as the effects of the pandemic wore off and the UK economic outlook worsened and we have been consequently focussing sales and marketing efforts this year on animal health markets and on specialist niches in the higher margin human health markets. In the period under review Professional product revenue was split 52% animal health, 35% human health, 13% FM and other, versus 52%, 21% and 27% respectively in the previous half year.

The EU regulatory system is moving now in the direction that we have long been positioning for, and sales into customers with continental EU HQs have increased as a result. The UK's now-independent system is also becoming clearer.

Consumer

H1 revenues decreased to £0.34m from £0.56m and gross profit to £0.14m from £0.20m, with gross margin increasing to 41% from 36%, a result (as in Professional) of focussing on higher margin product areas.

We have hired new leadership into our consumer division, tasked with selling our core technologies into retail and wholesalers under our brand and third-party brands. The opportunity here remains substantial, but given the high spend required to grow quickly, we are being very selective in the business that we pursue.

We therefore expect Consumer to remain niche for us in product sales in the short term, but with improving profitability, and we will exit channels where the spend and opportunity cost is not matched by the profit potential. This has led for instance to a gradual withdrawal from a well-known UK pet retailer, where we concluded that we would not be able to achieve a satisfactory return for the resources and risk required.

Technology Portfolio

The team has recognised for many years a need to focus technical effort and regulatory spend on a smaller number of platforms as the basis for our own product sales, especially as the regulatory deadlines approach. We are now taking the necessary decisions and have fixed on 3 core platforms that we will support through the final regulatory approvals in the EU:

• HLD4 and its upgrade ("Cruise") for animal and human health - a high performance surface disinfectant, with broad spectrum anti-microbial activity and excellent value to customers on a per-use basis.
• A new, natural and sustainable technology with excellent anti-microbial performance, especially against viruses, and we believe applicable in skin care and all surface care environments including humans, animals and specialist food environments. This is a new platform that we have been developing for 3 years and that is showing real promise in all targeted markets.

• Invirtu hand sanitisers - alcohol free skin sanitization with an upgraded and more robust formulation, but with the same germ kill and dermatological benefits.

We continue to invest judiciously in other technical areas where we see potential from IP agreements and alliances, notably:

• Seaweed antivirals - which is more appropriate for pharma, OTC and consumer applications than core Byotrol biocide markets, but that we still see as a valuable asset
• Technologies that support long-lastinganti-microbial claims (notably Byotrol24 and Actizone)
• Quaternary-freesanitisers for food markets

The IP commercialization effort for these technologies now has a dedicated sales team.

Intellectual Property Sales and Licensing

As reported in our year-end report in September (FYE March 2022), our licensing business has been held back by poor market conditions and by increasing customer focus on price and value in mass markets. This has meant some of our licensees are currently paying us minimum guaranteed royalties only. However, given the underlying regulatory position, we continue to see this as a core activity of Byotrol, offering 100% gross margin and broader distribution than we could achieve on our own.

The two most active IP-based projects 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. In October 2022 Solvay finally achieved US EPA and individual state approvals for Actizone, meaning that it is now the only globally available product of its type, applicable across consumer and professional markets worldwide. We await with interest new product launches (US and globally) and our first sizeable commission payments. We remain very limited by NDAs in what we can report on Solvay activity, as is Solvay with its own customers, but from publicly available sources we understand there are upcoming launches by household names in both consumer and business markets in the US, Europe and Asia.
• IRI and the Company are facilitating a new EPA registration of the Byotrol 24 formulation in the US under a globally recognized business hygiene brand. We expect this to go into a test market in mid-2023, with a full launch in the US to follow should market testing prove successful.

Balance sheet

Our balance sheet was considerably strengthened in July by issuing £1m in convertible notes, to existing shareholders and to the Byotrol team. This was put in place as an insurance policy against further market shocks and to permit continued investment in sales, marketing and technology.

As with prior periods, we continue to invest in our IP and associated regulatory costs with £202k of additions into Intangible Assets in the first half of FY23 (see Note 7). Similarly, to support our growth strategy as outlined above, including our Anigene formulation re-launch, we have invested tactically in our inventory during the period resulting in a closing stock balance of £627k.