17:00 Mon 23 Sep 2019
Iofina PLC - Interim Results
D
("Iofina", the "Company" or the "Group")
(LSE AIM: IOF)
INTERIM RESULTS
EBITDA up 172%; Construction of IO#8 underway
During the Period the Group significantly strengthened its financial performance, with revenue up 29% to
The Group's four IOsorb® iodine production plants produced a total of 286.7 metric tonnes ("MT") of crystalline iodine, an 8.6% increase from the prior year (H1 2018: 264.1 MT). The Group is pleased to confirm that a fifth IOsorb® plant, IO#8, is now in the first phase of construction and the new partner in IO#8 is anticipated to provide opportunities for future plants at future sites.
KEY FINANCIAL POINTS:
· Revenue increased by 29% to
· Gross profit increased by 53% to
· EBITDA increased by 172% to
· Operating profit was
· Loss before and after tax was
· Basic loss per share was
· Cash balances were
· Equity increased by
· Debt was restructured by extending term and removing convertibility, and reduced by
KEY OPERATIONAL AND MARKET HIGHLIGHTS:
· IO#8 is in the first phase of construction;
· Production of crystalline iodine up 8.6% to 286.7 metric tonnes ("MT") (H1 2018: 264.1 MT)
· Iodine prices have continued to rise with the current spot price at or near
· Launch of IofinaEX, licensed in Kentucky to process and develop products derived from hemp such as CBD
· Incorporation of IofinaEX Global, a specialist division focused on the production of hemp derived products in Central America and the Caribbean
· Iofina Chemical continues strong performance with a diverse portfolio of iodine and other halogen products and has increased capacity of some key products to meet demand.
OUTLOOK
· Iodine market remains tight, with iodine prices likely to move higher with Chilean supply being squeezed
· Iodine expansion remains on track, with the new partner at IO#8 providing opportunities for future plants at future sites.
Commenting on today's results, Dr. Tom Becker, President and CEO stated: "It has been an exceptionally strong first half for Iofina, with the Group having achieved a record revenue of
"The Company has been working diligently to expand its iodine production capabilities further and is delighted to confirm that IO#8 is currently in its first phase of construction. Whilst iodine expansion remains on track, the Group has also successfully launched IofinaEX and IofinaEx Global, entities that are designed to directly benefit from the profitable and rapidly growing hemp market.
"The strengthening iodine market, coupled with our timely execution of iodine expansion and product development, will ensure that Iofina expands in line with its growth strategy and achieves a record profit in 2019 and future years to come."
Enquiries:
Dr. Tom Becker, CEO & President
Tel: +44 (0)20 3006 3135
finnCap Ltd
Christopher Raggett/Matthew Radley/Camille Gochez
Tel: +44 (0)20 7220 0500
Media Contact:
Yellow Jersey
Charles Goodwin/Harriet Jackson
Tel: +44 (0)7544 275 882
Overview
Financial Review
Highlights
The most notable features of the period under review were the 172%
Sales
Total sales increased by
Operational expense
Iofina Resources' IOsorb® plant average production costs per kilogram for the period were 2.5% higher than for H1 2018. Manufacturing and fulfilment costs at the Iofina Chemical plant were overall 1% higher than for H1 2018. Administrative expenses were up by 5% on 2018, this reflecting
Interest payable
Interest payable of
Finance expense accounting
The
If one discounts the non-cash net conversion rights expense of
Fundraise and cash flow
The equity fundraise completed in
Debt
The debt restructuring that was completed at the end of
Iofina Resources
During H1 2019 (the "Period") Iofina Resources produced a total of 286.7 metric tonnes ("MT") of crystalline iodine from its four Oklahoma IOsorb® iodine production plants, an 8.6% increase from the prior year (H1 2018: 264.1 MT).
IR continues to execute its strategy of minimising production costs and process improvements resulting in a 5% increase in iodine recovery efficiencies year-over-year. Efficiency improvements, particularly at IO#4 and IO#6, were achieved within H1 2019. The Company placed a greater emphasis on the small details of operations of its WET® IOsorb® process by reviewing everything from sampling and testing procedures to data collection and input and all steps in the IOsorb® process. The team continues to execute other process improvement projects at its other current sites.
During the Period the Company ramped up its exploration program. IR increased its area of focus and the frequency of sampling and testing in specific areas. This has resulted in the identification of additional locations for future IOsorb® plants. The Company recently announced an agreement and start of construction of IO#8, an important continuation of its corporate growth policy. This plant is expected to be online in H1 2020 and will significantly increase iodine production. Iofina has partnered with a new company for the source of the brine water raw material for IO#8. The new location is outside of the Company's current core area, but is located in a rapidly expanding portion of oil and gas drilling in western Oklahoma. This is in-line with the Company's iodine production expansion strategy, which was re-launched in 2018 with the development of the very successful IO#7 plant. IR continues to identify possibilities for future sites with various partners and the Iofina team is committed to continue to grow its iodine production operation in the ever-expanding worldwide iodine market. Diversity and increasing the number of plants it operates gives Iofina's customers additional comfort in the reliability of Iofina's iodine supply. The Company is currently assessing the future use of IO#5 which is currently not in operation.
Iofina Chemical
All of the Group's products are currently sold through Iofina Chemical, a specialty chemical enterprise that has been in operation for over 35 years and is well respected and known globally in the specialty iodine product market. IC continues to develop sales channels for IR's produced crystalline iodine and IC's specialty chemical products. IC prides itself as a dynamic organisation, which can quickly meet customers' needs and develop new chemistries to continue to grow the Company's portfolio of specialty chemical products.
IofinaEX
IofinaEX is a new endeavour for the Group, investigating hemp derived products such as CBD. The Group has specialty chemical experience and expertise in extraction, distillation, analytical chemistry, scale-up and other knowledge which, the Board believes, provides a strong base for IofinaEX to be successful in this rapidly growing area. The Group is continuing R&D efforts in the state of Kentucky, where it holds a Hemp Processor/Handler License, and is constantly evaluating its R&D efforts as well as the rapidly changing cannabinoid/CBD market to determine the best path forward.
Currently IofinaEx is extracting full spectrum cannabinoid products and evaluating their composition. The next phase will be distilling and isolating additional products. The Group intends to update the market on its progress as appropriate. To that, the Group is also working to develop this business outside of the USA with its announced subsidiary IofinaEX Global. This Company has started to explore non-USA prospects with its initial focus in Central America. Whilst the Directors are excited about the prospects of the specialty hemp derived products, the Group remains fully focused on its core iodine businesses.
Iodine Outlook
Iodine prices in H1 2019 have moved higher, faster than expected and have continued to rise in H2 2019. End of H1 year-on-year pricing for iodine rose approximately 20%. From the Company's observations of the iodine market and sales of its produced iodine, current iodine prices on the spot market are generally in the low
Current pricing levels for large iodine purchases are now similar to levels in 2011 before the supply disruption caused by the tragic tsunami in Japan and factors in Chilean production. The Directors believe that our strategy of prudent growth will place Iofina in a positive position without disrupting the market dynamics. Our ability to develop IOsorb® plants quickly, with relatively low Capex per kg of iodine produced at these plants, differentiates Iofina from its competition. Based on observations in the market we forecast iodine global consumption to grow ~3-4% in 2019. Pricing of iodine derivatives has slightly lagged behind the current iodine price. As iodine derivative producers consume iodine purchased at lower prices, we expect iodine derivative prices and margins to rise going forward.
Outlook
Iofina has never been better positioned and the Directors are excited about the Group's future prospects. The recent oversubscribed fundraise and debt reduction has allowed the Group to fast-track growth and new prospects and we are expanding our iodine production with the construction of IO#8. Exploration and plans for future iodine production sites are moving forward and iodine prices are rising and are likely to move higher. New specialty chemical products through Iofina Chemical and IofinaEX are exciting opportunities for the Group and its shareholders. Safety, regulatory compliance, exceeding customer expectations, and focusing on employee satisfaction are key elements to the success of Iofina.
There have been great achievements in the past six months and the direction of the iodine market continues to work in Iofina's favour. The successful support of new and current investors has allowed Iofina to embark on its next phase of growth in iodine and other specialty chemicals. Iofina has a new partner in IO#8 which provides opportunities for future plants at future sites. The Directors believe that the Group's cost of iodine production is one of the lowest in the industry and that its ability to build plants quickly, with minimal Capex relative to its competition, puts the Group at a competitive advantage in the market. Construction of IO#9 is expected to commence in 2020 and the Board will continue to assess its options for utilising the assets of IOsorb® plant IO#5.
The specialty chemical divisions Iofina Chemical and IofinaEX are working hard to continue to grow the Group's current products and develop new specialty chemical products. Specifically, the Group's focus to develop products derived from hemp is a bold new step utilising the Group's specialty chemical expertise. We will provide the market updates on the progress of IofinaEX during H2 2019.
The Company's management team continues to nimbly adjust to global changes in areas such as tariffs, currency, and others to mitigate any risk. The Company, in conjunction with its debt holders, has significantly reduced its debt in H1 2019. The Directors are conscious that ongoing debt must be managed effectively whilst having the proper capital available to meet growth targets. The Directors believe the business strategies it has executed, combined with the recovery of the iodine market, have positioned the Company well for the future to achieve record profits in 2019 and beyond.
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
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FOR THE PERIOD ENDED |
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Unaudited |
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Audited |
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Six months ended |
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Year ended |
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30 June |
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30 June |
|
31 December |
||||
|
|
2019 |
|
2018 |
|
2018 |
||||
|
Note |
$ |
|
$ |
|
$ |
||||
Continuing operations |
|
|
|
|
|
|
||||
Revenue |
|
14,527,110 |
|
11,302,914 |
|
23,958,289 |
||||
Cost of sales |
|
(10,631,843) |
|
(8,749,925) |
|
(17,651,387) |
||||
Gross profit |
|
3,895,267 |
|
2,552,989 |
|
6,306,902 |
||||
|
|
|
|
|
|
|
||||
Administrative expenses |
|
(1,924,696) |
|
(1,828,142) |
|
(3,664,716) |
||||
|
|
|
|
|
|
|
||||
EBITDA - Earnings before interest, tax, depreciation and amortisation |
|
1,970,571 |
|
724,847 |
|
2,642,186 |
||||
|
|
|
|
|
|
|
||||
Depreciation and amortisation |
|
(755,966) |
|
(771,774) |
|
(1,576,317) |
||||
Operating profit/(loss) |
|
1,214,605 |
|
(46,927) |
|
1,065,869 |
||||
|
|
|
|
|
|
|
||||
Impairment expense |
|
- |
|
- |
|
(2,592,276) |
||||
Finance income |
|
162 |
|
573 |
|
974 |
||||
Interest payable |
|
(1,086,313) |
|
(623,251) |
|
(1,273,178) |
||||
Amortisation of convertible loan notes |
5 |
(821,649) |
|
(887,546) |
|
(1,789,804) |
||||
Revaluation of derivative liability |
5 |
392,835 |
|
806,722 |
|
3,214,166 |
||||
Loss before taxation |
|
(300,360) |
|
(750,429) |
|
(1,374,249) |
||||
|
|
|
|
|
|
|
||||
Taxation |
7 |
- |
|
- |
|
231,233 |
||||
|
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|
|
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Loss for the period attributable to owners of the parent |
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||||
|
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|
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|
||||
Other comprehensive income |
|
|
|
|
|
|
||||
Foreign currency differences |
|
- |
|
(534) |
|
(9,516) |
||||
Total comprehensive income for the period |
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Basic and diluted loss per share |
4 |
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CONSOLIDATED BALANCE SHEET |
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Unaudited |
|
Unaudited |
|
Audited |
|
|
30 June |
|
30 June |
|
31 December |
|
|
2019 |
|
2018 |
|
2018 |
|
Note |
$ |
|
$ |
|
$ |
|
|
|
|
|
|
|
Intangible assets |
|
965,651 |
|
1,843,456 |
|
1,064,642 |
Goodwill |
|
3,087,251 |
|
3,087,251 |
|
3,087,251 |
Property, plant & equipment |
|
17,171,120 |
|
19,431,841 |
|
17,351,258 |
Total non-current assets |
|
21,224,022 |
|
24,362,548 |
|
21,503,151 |
|
|
|
|
|
|
|
Inventories |
|
5,299,785 |
|
5,410,222 |
|
5,674,168 |
Trade and other receivables |
|
5,748,542 |
|
4,488,620 |
|
4,428,004 |
Cash and cash equivalents |
|
10,257,607 |
|
3,018,948 |
|
4,519,895 |
Total current assets |
|
21,305,934 |
|
12,917,790 |
|
14,622,067 |
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
5,740,793 |
|
4,760,840 |
|
4,970,843 |
Lease liabilities |
|
130,252 |
|
- |
|
- |
Convertible loan notes |
5 |
- |
|
20,094,629 |
|
- |
Term loan |
5 |
- |
|
3,167,014 |
|
- |
Derivative liability |
5 |
- |
|
2,800,279 |
|
- |
Total current liabilities |
|
5,871,045 |
|
30,822,762 |
|
4,970,843 |
|
|
|
|
|
|
|
Term loans |
5 |
18,177,207 |
|
- |
|
3,263,529 |
Lease liabilities |
|
211,927 |
|
- |
|
- |
Convertible loan notes |
5 |
- |
|
- |
|
21,550,297 |
Derivative liability |
5 |
- |
|
- |
|
392,835 |
Deferred tax liability |
|
- |
|
231,233 |
|
- |
Total non-current liabilities |
|
18,389,134 |
|
231,233 |
|
25,206,661 |
Total liabilities |
|
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|
|
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|
|
|
|
|
Issued share capital |
6 |
3,112,078 |
|
2,292,683 |
|
2,292,683 |
Share premium |
|
60,681,312 |
|
48,991,647 |
|
48,991,647 |
Share-based payment reserve |
|
1,882,056 |
|
1,645,753 |
|
1,768,693 |
Retained earnings |
|
(41,461,347) |
|
(40,768,400) |
|
(41,160,987) |
Foreign currency reserve |
|
(5,944,322) |
|
(5,935,340) |
|
(5,944,322) |
Total equity |
|
18,269,777 |
|
6,226,343 |
|
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Total equity and liabilities |
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CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY |
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Share |
Share |
Share-based |
Retained |
Foreign |
Total |
|
capital |
Premium |
payment |
earnings |
currency |
equity |
|
|
|
reserve |
|
reserve |
|
|
$ |
$ |
$ |
$ |
$ |
$ |
|
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Balance at |
2,292,683 |
48,991,647 |
1,634,390 |
(40,017,971) |
(5,934,806) |
6,965,943 |
|
|
|
|
|
|
|
Share-based expense |
- |
- |
134,303 |
- |
- |
134,303 |
Total transactions with owners |
- |
- |
134,303 |
- |
- |
134,303 |
|
|
|
|
|
|
|
Loss for the year attributable to owners of the parent |
- |
- |
- |
(1,143,016) |
- |
(1,143,016) |
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
Exchange differences on translating foreign operations |
- |
- |
- |
- |
(9,516) |
(9,516) |
Total comprehensive income attributable to owners of the parent |
- |
- |
- |
(1,143,016) |
(9,516) |
(1,152,532) |
|
|
|
|
|
|
|
Balance at |
2,292,683 |
48,991,647 |
1,768,693 |
(41,160,987) |
(5,944,322) |
5,947,714 |
|
|
|
|
|
|
|
Issue of shares |
814,112 |
11,694,948 |
- |
- |
- |
12,509,060 |
Share-based expense |
- |
- |
113,363 |
- |
- |
113,363 |
Prior year options adjustment |
5,283 |
(5,283) |
- |
- |
- |
- |
Total transactions with owners |
819,395 |
11,689,665 |
113,363 |
- |
- |
12,622,423 |
|
|
|
|
|
|
|
Loss for the period attributable to owners of the parent |
- |
- |
- |
(300,360) |
- |
(300,360) |
|
|
|
|
|
|
|
Total comprehensive income attributable to owners of the parent |
- |
- |
- |
(300,360) |
- |
(300,360) |
|
|
|
|
|
|
|
Balance at |
3,112,078 |
60,681,312 |
1,882,056 |
(41,461,347) |
(5,944,322) |
18,269,777 |
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CONSOLIDATED CASH FLOW STATEMENT |
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||
FOR THE PERIOD ENDED |
|
|
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|
|
Unaudited |
|
Audited |
||
|
Six months ended |
|
Year ended |
||
|
30 June |
|
30 June |
|
31 December |
|
2019 |
|
2018 |
|
2018 |
|
$ |
|
$ |
|
$ |
Cash flows from operating activities |
|
|
|
|
|
EBITDA - Earnings before interest, tax, depreciation and amortisation |
1,970,571 |
|
724,847 |
|
2,642,186 |
Share options expense |
113,363 |
|
11,359 |
|
134,303 |
Impairment adjustments |
- |
|
- |
|
(378,944) |
|
2,083,934 |
|
736,206 |
|
2,397,545 |
Changes in working capital |
|
|
|
|
|
Trade receivables (increase)/decrease |
(1,320,537) |
|
133,061 |
|
193,677 |
Inventories decrease/(increase) |
374,382 |
|
(1,096,722) |
|
(1,360,668) |
Trade and other payables increase |
633,462 |
|
546,261 |
|
756,263 |
|
|
|
|
|
|
Net cash inflow from operating activities |
1,771,241 |
|
318,806 |
|
1,986,817 |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Interest received |
163 |
|
573 |
|
974 |
Acquisition of intangible assets |
(23,512) |
|
- |
|
- |
Acquisition of property, plant & equipment |
(98,677) |
|
(749,578) |
|
(908,056) |
Net cash outflow from investing activities |
(122,026) |
|
(749,005) |
|
(907,082) |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
Issue of shares |
8,314,320 |
|
- |
|
- |
Term loan repaid |
(3,263,529) |
|
- |
|
- |
Interest paid |
(949,826) |
|
- |
|
- |
Lease payments |
(12,468) |
|
|
|
|
Net cash inflow from financing activities |
4,088,497 |
|
- |
|
- |
|
|
|
|
|
|
Net increase/(decrease) in cash |
5,737,712 |
|
(430,199) |
|
1,079,735 |
|
|
|
|
|
|
Effects of foreign exchange |
- |
|
(534) |
|
(9,521) |
|
|
|
|
|
|
Cash and equivalents at beginning of period |
4,519,895 |
|
3,449,681 |
|
3,449,681 |
|
|
|
|
|
|
Cash and equivalents at end of period |
|
|
|
|
|
1. Nature of operations and general information
The address of
Iofina's consolidated financial statements are presented in US Dollars, which is the functional currency of the operating subsidiaries.
The figures for the six months ended
2. Accounting policies
The basis of preparation and accounting policies set out in the Annual Report and Accounts for the year ended
3. Segment reporting
(a) Business segments
The Group's operations during the period comprised the exploration and production of iodine with complete vertical integration into its specialty chemical halogen derivatives business, and are therefore considered to fall within one business segment.
(b) Geographical segments
The Group reports by geographical segment. All the Group's activities during the period were related to exploration for, and development of, iodine in certain areas of the USA and the manufacturing of specialty chemicals in the USA with support provided by the UK office. In presenting information on the basis of geographical segments, segment assets and the cost of acquiring them are based on the geographical location of the assets.
|
Unaudited |
|
Audited |
||
|
Six months ended 30 June |
|
31 December |
||
|
2019 |
|
2018 |
|
2018 |
Total assets |
$ |
|
$ |
|
$ |
UK |
1,013,401 |
|
185,183 |
|
124,847 |
USA |
41,516,555 |
|
37,095,155 |
|
36,000,371 |
Total |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
UK |
18,191,877 |
|
26,468,486 |
|
25,393,479 |
USA |
6,068,302 |
|
4,585,509 |
|
4,784,025 |
Total |
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
UK |
- |
|
- |
|
- |
USA |
476,837 |
|
749,578 |
|
908,056 |
Total |
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4. Loss per share
The calculation of loss per ordinary share is based on losses of
5. Term loans, convertible loan notes and derivative liability
|
Term loans |
|
Convertible loan notes |
|
Derivative liability (share conversion rights) |
|
$ |
|
$ |
|
$ |
At |
|
|
|
|
|
|
|
|
|
|
|
Debt restructure |
|
|
|
|
|
Revaluation of derivative liability |
- |
|
- |
|
(392,835) |
Amortisation of discount |
- |
|
821,649 |
|
- |
Loan notes restructured as term loans |
22,371,946 |
|
(22,371,946) |
|
|
|
25,635,475 |
|
- |
|
- |
|
|
|
|
|
|
Debt for equity conversion |
(4,194,739) |
|
- |
|
- |
Term loan repaid |
(3,263,529) |
|
- |
|
- |
|
|
|
|
|
|
At |
|
|
- |
|
- |
|
|
|
|
|
|
As of
Under the terms of the debt restructure interest is payable quarterly on the term loans at the rate of 7.5% per annum with effect from
On
The other principal terms applying to the term loans are:
a) Repayment is due on
b) An arrangement fee of 1% on the total loan balances outstanding at
on
c) The loans are secured against the assets of the Group, by a share pledge and a debenture granted
by the Company, and by further pledges, a security agreement and guarantees granted by certain
subsidiaries of the Group.
6. Share capital
|
|
Unaudited |
|
Unaudited |
|
Audited |
||
|
|
30 June |
|
30 June |
|
31 December |
||
|
|
2019 |
|
2018 |
|
2018 |
||
Authorised: |
|
|
|
|
|
|
||
Ordinary shares of |
|
|
|
|
|
|||
-number of shares |
|
1,000,000,000 |
|
1,000,000,000 |
|
1,000,000,000 |
||
-nominal value |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Allotted, called up and fully paid: |
|
|
||||||
Ordinary shares of |
|
|
|
|
|
|||
-number of shares |
191,858,408 |
|
127,569,398 |
|
127,569,398 |
|||
-nominal value |
|
|
|
|
|
|
||
Details of shares issued during the six months ended
|
Shares issued |
|
Nominal value |
|
Share premium |
|
|
|
$ |
|
$ |
At |
127,569,398 |
|
|
|
|
Issue of shares: |
|
|
|
|
|
- for cash |
43,839,655 |
|
551,941 |
|
8,279,119 |
-on conversion of loan notes |
20,449,355 |
|
262,171 |
|
3,932,569 |
Expenses of issue |
- |
|
- |
|
(516,740) |
Adjustment re options |
- |
|
5,283 |
|
(5,283) |
At |
191,858,408 |
|
|
|
|
On
On
7. Income tax
No income tax expense was recognised for the period due to the loss during the period of the Group as well as the carried forward losses of the Group. A deferred tax asset has not been recognised due to uncertainty over the timing of the recovery of these tax losses.
8. Post balance sheet events
There were no material events arising after the balance sheet date that need to be reflected in these interim financial statements.
9. Cautionary Statement
This report contains certain forward-looking statements with respect to the financial condition, results of operations and businesses of
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