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Biome Technologies, an AIM-listed technology group, has seen a significant shift in its operational focus and financials, as revealed in its 2023 final results. The company, which operates through two main divisions - Bioplastics and RF Technologies - has reported a mixed financial year with substantial growth in its Bioplastics division, offset by weaker performance in RF Technologies.

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The group’s revenue increased by 12.7% to £7.0 million in 2023 from £6.2 million in 2022. This growth was largely driven by a 36.9% increase in Bioplastics division revenues, amounting to £6.0 million, up from £4.4 million. The division has benefitted significantly from the rising demand for sustainable and home compostable products. Conversely, the RF Technologies division saw a revenue decline of 46.4%, from £1.8 million to £1.0 million, attributed to delays in contract closures.

Despite revenue growth, Biome reported a widened group adjusted loss before interest, depreciation, taxation, and amortisation (LBITDA) of £0.8 million, compared to a loss of £0.4 million in 2022. The company also faced increased operating losses, up from £0.8 million in 2022 to £1.2 million in 2023.

Risk Factors

Biome faces several risks, including market adoption rates for bioplastics, raw material supply chain disruptions, and fluctuating demand in the RF Technologies sector. The geopolitical tensions impacting shipping routes and the ongoing economic instability pose additional operational and financial risks.

CEO Paul Mines emphasized the strong performance of the Bioplastics division and acknowledged the challenges faced by the RF Technologies division. Management is focused on diversifying the latter’s revenue streams and mitigating the delayed contract closures that impacted the 2023 financials.

Investment Highlights

Biome Technologies stands out for its commitment to sustainability and innovation in bioplastics. The company’s strategic focus on developing market-led products that cater to a growing demand for eco-friendly solutions presents a long-term growth opportunity, particularly in North American markets.

Historical Performance Review

Over the past years, Biome has shown a pattern of robust growth in its Bioplastics division, consistently outperforming the RF Technologies division. The strategic shift towards bioplastics appears to be aligned with global market trends towards sustainability.

Liquidity and Capital Resources

The group’s liquidity position is tight, with a closing cash balance of £0.6 million in 2023, down from £0.8 million in 2022. The issuance of convertible loan notes in the year has been a crucial step in securing additional capital to support ongoing operations.

In 2023, Biome’s significant events included the continued expansion of its product range, particularly in the Bioplastics division, and securing key contracts in new market segments for RF Technologies.

Outlook and Future Projections

Looking ahead, Biome is cautiously optimistic about 2024. The company expects continued growth in the Bioplastics division but at a more modest rate. The recent contract wins for RF Technologies are likely to bolster performance in this division.

Key Takeaways for Investors

Investors should note Biome’s strategic orientation towards high-growth, sustainable technologies which might offer long-term returns. However, the ongoing challenges in RF Technologies and broader economic uncertainties could affect near-term performance.

Biome Technologies’ journey towards a sustainable future appears promising but requires careful monitoring of operational challenges and market conditions to ensure ongoing viability and profitability.