Biome Technologies arrives on AIM

A CHANGE of name, a move to the AIM market and a fundraising are three of the latest initiatives designed to rehabilitate the company formerly known as Stanelco.

Shares in the biodegradable plastics firm began trading for the first time on the junior bourse earlier today as the company officially assumed its new guise of Biome Technologies, reflecting the firm’s renewed focus under boss Paul Mines.

The Stanelco name itself dates back to the mid-1940s and originally stood for the Standard Electrical Company – so it was definitely time for a change.

But the corporate makeover also ditches some ‘baggage’ from the company’s more recent history.

In the mid-noughties the business garnered a substantial and fervent private investor following impressed by the firm’s biodegradable plastics technology Greenseal and ground-breaking packaging tie-up with Asda.

 In the process the share price ran up so high the firm was valued at a nose-bleed inducing £200 million, which compares with a market cap of £4.66 million today.

However it rather lost its way and in 2006 Mines was approached by investors to take over as Chief Executive from Martin Wagner, after the group was forced to tap the market for almost £15 million.

Under Mines losses have narrowed while sales have grown to £19 million from £6 million. With £2.8 million from the May fund-raising it has enough cash to see it through to break-even in 2012, analysts say.

‘We did a fundraising two months ago. And as part of that we told shareholders we wanted to change the name of the group to reflect what we are really focused on now. And to be honest to try and shift some of the baggage that saw the valuation run up to £200 million,’ Mines told Proactiveinvestors.

‘We also wanted to move to a market where the cost and flexibility is more suitable to a business of our turnover. Hence the AIM move...’

Biome is now focused on bioplastics and radio frequency (RF) equipment used in welding, heating and sealing. Neither are complementary other than they are highly innovative, research led businesses. ‘RF is a nice little engineering business, but it hasn’t got the potential to be a large public growth engine,’ Mines said.

As Mines has whipped the business into shape, so operations such as Aquasol, a water soluble polymers consultancy and the manufacturing arm Adept have gone, which has reduced both the workforce and the company’s overheads.

 ‘We took a real heave through the costs and have generally just been adding one and two people (back to the employee roster),’ Mines explained.

A major milestone in de-risking Stanelco came in April when it won its French court battle with Italian competitor Novamont, which claimed patent infringement.

‘There is a chance they will appeal for market disruption reasons,’ Mines admitted. ‘But the court judgement was pretty emphatic,’ Mines said.  ‘I can’t rule it out and they might do it (appeal). It is part of the competitive package. I suspect all management teams say this, but we are very confident in our technical case.’

Having spent over three years whipping Stanelco into shape, the focus now is very much on developing the dominant bioplastics arm.

‘If you look at the last couple of statements it is growing at 30 to 50 per cent rate,’ the Biome CEO pointed out.
‘So it is a market with good growth levels. We have now got pretty significant traction on the sales side although we are still loss-making.’

The group is a close second in the market to Novamont, but the sector isn’t exactly bubbling over with competition.
At the moment Biome’s big products are in the horticultural sector, though the range is broadening with consumer electronics starting to figure.

It is a hallmark of the US in particular, that marketing of household gadgets is now increasingly focused on that product’s green credentials.

‘A lot of our new products are working with customers who are looking to make say a product like an electronics case and I want to launch that as a product in a couple of years to make claims about the sustainability of the product,’ Mines explained.

‘So we are asked “can you work with us so we can make those claims about the sustainability of the case?”
‘Three-quarters of our development activity is based around work like that.

‘Horticultural areas are very strong for us......so a functional use of the material such as clips used on tomato plants or the plastic that covers fields. After that it’s a mixture of paper coatings and then injection moulded parts in consumer goods. ‘

Toby Thorington, technology analyst at Edison, is positive on the company’s prospects: ‘Having successfully completed a recent funding round, Biome can now progress the development of its bioplastic polymer businesses.

‘This milestone has coincided with positive trading momentum in the year to date, with encouraging signs of new customer penetration. This has been complemented by a corporate re-branding – to emphasise the primary operational focus – and a move onto AIM.’

Mines seems even more chipper on the outlook, particularly about the 2012 break-even date set by analysts.
‘What I would say on our performance is we beat the 2009 figure. Just by a small bit but we beat it. Since then we’ve announced growth rates ahead of market expectations. We have also announced a run rate of costs that are lower than those assumed in those (broker) numbers,' he said.