Carbios — Key developments and partnerships expected

Carbios (EU: ALCRB)

Last close As at 21/11/2024

36.98

−2.46 (−6.24%)

Market capitalisation

413m

More on this equity

Research: Industrials

Carbios — Key developments and partnerships expected

We expect further progress from Carbios in 2020, with the start of construction of its PET demonstration plant and the commercial launch of Evanesto by Carbiolice. Following the FY19 rights issue, raising €13.8m (net), Carbios enters 2020 in a sound financial position, with sufficient resources to finance the business over the next 12 months. Our DCF valuation remains c €13/share.

Analyst avatar placeholder

Written by

Industrials

Carbios

Key developments and partnerships expected

Outlook for the year

Industrial support services

27 March 2020

Price

€7.10

Market cap

€49m

Net cash (€m) at 31 December 2019

15.9

Shares in issue

6.9m

Free float

84%

Code

ALCRB

Primary exchange

Euronext Growth

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(12.3)

(23.8)

(10.0)

Rel (local)

10.9

1.3

5.9

52-week high/low

€9.9

€5.8

Business description

Carbios develops enzyme-based industrial processes for recycling and biodegradation of plastics, with the long-term aim of displacing current recycling and production processes.

Next events

AGM

18 June 2020

H1 results

21 September 2020

Analyst

Graeme Moyse

+44 (0)20 3077 5700

Carbios is a research client of Edison Investment Research Limited. Edison does not issue recommendations or target prices.

We expect further progress from Carbios in 2020, with the start of construction of its PET demonstration plant and the commercial launch of Evanesto by Carbiolice. Following the FY19 rights issue, raising €13.8m (net), Carbios enters 2020 in a sound financial position, with sufficient resources to finance the business over the next 12 months. Our DCF valuation remains c €13/share.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(
)

P/E
(x)

Yield
(%)

12/18

1.1

(4.3)

(0.67)

0.0

N/A

N/A

12/19

1.5

(4.6)

(0.65)

0.0

N/A

N/A

12/20e

1.7

(6.7)

(0.80)

0.0

N/A

N/A

12/21e

1.5

(7.1)

(0.84)

0.0

N/A

N/A

Note: *PBT and EPS are reported.

FY19 results meet expectations

FY19 results from Carbios were broadly in line with our expectations – slightly ahead at the operating level, slightly below at the bottom line. Revenue of €1.45m exceeded our forecast of €1.22m, despite lower than anticipated research service revenues from Carbiolice, which were more than offset by grants received from ADEME. In addition to higher than expected revenue, Carbios posted a lower than forecast operating loss of €4.54m (versus our forecasts of €4.63m), leading to a loss before tax of €4.56m, versus our forecast loss of €4.79m. However, a smaller than anticipated research tax credit of €0.80m (forecast of €1.34m) led to a slightly higher net loss of €3.75m versus our forecast of €3.45m.

Carbios enters FY20 on a sound footing

Carbios began 2020 in a strong financial position, with a net cash balance of €15.92m. Carbios will utilise its cash resources as it incurs costs related to the construction of its PET demonstration plant. Despite the projected rise in capex, Carbios believes it has sufficient cash resources to pursue current developments ‘beyond the next twelve months’. Although COVID-19 related uncertainty clouds the outlook, Carbios is not exposed to discretionary consumer expenditure and is expected to generate only a small amount of commercial revenue in FY20. In addition to strengthening its financial position in FY19, Carbios expanded the consortium it had originally founded with L’Oréal to bring its plastic recycling technology to the market to include Nestlé Waters, PepsiCo and Suntory Beverage & Food Europe. During FY19 Carbios was granted new patents in Europe, the US and Japan, and post the year end signed an agreement with Novozymes, which guarantees the production of Carbios’s proprietary PET-degrading enzymes.

Valuation: DCF valuation remains €13/share

We have lowered our forecasts for FY20 to reflect higher costs associated with the PET demonstration plant but have made no significant revisions to our longer-term assumptions. Our DCF valuation remains unchanged at €13/share.

Commercial revenues to commence in FY20

Significant advances made in FY19

Carbios made notable scientific, commercial and financial advances in FY19. In April Carbios announced that Nestlé Waters, PepsiCo and Suntory Beverage & Food Europe had joined the consortium it had originally founded with L’Oréal, to bring its plastic recycling technology to the market on an industrial scale. During the year Carbios was also granted new patents in Europe, the US and Japan, and now holds six patents that protect its recycling process and a further seven related to PET-degrading enzymes. In June Carbios raised €14.5m via an equity raise and in December announced that it had received €1.4m from ADEME from the Investment for The Future Program (PIA) following the achievement of a key milestone of its CE-PET project.

Post balance sheet events

Additional advances were also made post the year end, most notably the signing of an agreement with Novozymes that guarantees the production of Carbios’s proprietary PET-degrading enzymes at both a demonstration level and on an industrial scale. Novozymes already supplies Carbiolice, a subsidiary of Carbios, with enzymes for its industrial processes. Carbios is also seeking to bolster its relationship with its French academic partners and recently (see Exhibit 1, 17 January 2020) entered a strategic alliance with INSA Toulouse through the Toulouse Biotechnology Institute (TBI), a mixed research unit involving INSA Toulouse, INRA and CNRS. Together, Carbios and TBI established a research centre for enzymatic engineering focused on plastic recycling and biosynthesis.

Exhibit 1: Post balance sheet announcements

Date

Comment

17 January 2020

Strategic alliance with National Institute of Applied Science (INSA)

30 January 2020

Joint Development Agreement signed with Novozymes

6 March 2020

Carbios joins European Plastics Pact

Date

17 January 2020

30 January 2020

6 March 2020

Comment

Strategic alliance with National Institute of Applied Science (INSA)

Joint Development Agreement signed with Novozymes

Carbios joins European Plastics Pact

Source: Carbios, Edison Investment Research

COVID-19 and other expected developments in FY20

We expect Carbios to begin construction of its PET demonstration plant in H220 (see below) and for Carbiolice to start generating commercial revenues during the year. We also expect Carbios will attempt to strengthen its position in the PET recycling market by forging partnerships with collectors and producers of plastic.

In response to the COVID-19 virus, Carbios has focused primarily on the safety of its staff, with over 80% now working from home and R&D activities suspended. Carbios is not directly exposed to discretionary consumer expenditure and receives a significant proportion of its revenue in the form of grants and loans, so its revenue stream appears relatively resilient. Construction has yet to start on its PET demonstration plant and this constitutes the most significant capital expenditure-related risk. We think the secular trend towards the minimisation of plastic waste is well established and will survive the current pandemic. Although Carbios has sufficient cash to fund its operations for the next 12 months, a prolonged slump in global equity markets would make raising fresh equity more challenging.

Forecast changes

Following the publication of the FY19 results we have updated our forecasts for FY20 and introduce numbers for FY21. The principal change to our forecasts is an assumption of a higher cost base as Carbios begins to construct and operate its PET demonstration plant. Our longer-term assumptions remain broadly unchanged.

Exhibit 2: Principal changes to 2020 forecasts

EPS (€)

PBT (€m)

EBITDA (€m)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

2020e

(0.42)

(0.80)

90%

(4.0)

(6.7)

68%

(3.6)

(6.4)

78%

2021e

N/A

(0.84)

N/A

N/A

(7.1)

N/A

N/A

(6.8)

N/A

Source: Edison Investment Research

Exhibit 3: Financial summary

€m

2014

2015

2016

2017

2018

2019

2020e

2021e

Year end December 31st

 

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

 

 

 

 

 

 

 

 

 

Revenue

 

0.66

0.84

8.87

0.98

1.08

1.45

1.66

1.48

Operating Expenses

 

(3.95)

(4.73)

(5.11)

(5.39)

(5.02)

(5.74)

(8.04)

(8.24)

EBITDA (norm)

 

(3.28)

(3.90)

3.76

(4.41)

(3.94)

(4.29)

(6.38)

(6.76)

Depreciation

 

(0.08)

(0.17)

(0.21)

(0.24)

(0.30)

(0.25)

(0.25)

(0.26)

Reported Operating Profit

 

(3.36)

(4.06)

3.55

(4.65)

(4.24)

(4.54)

(6.63)

(7.02)

Net Interest

 

0.05

0.08

0.08

0.02

(0.03)

(0.03)

(0.04)

(0.05)

Profit before tax (reported)

 

(3.32)

(3.98)

3.63

(4.63)

(4.26)

(4.56)

(6.68)

(7.07)

Reported tax

 

1.09

0.94

1.32

0.70

1.19

0.80

1.17

1.24

Profit after tax (reported)

 

(2.23)

(3.05)

4.95

(3.93)

(3.07)

(3.76)

(5.51)

(5.83)

Extraordinary gain or loss

 

0.02

(0.02)

(0.03)

(0.01)

(0.04)

0.02

0.00

0.00

Net income (reported)

 

(2.21)

(3.07)

4.92

(3.94)

(3.11)

(3.75)

(5.51)

(5.83)

 

 

 

 

 

 

 

 

Basic average number of shares outstanding (m) 

3.75

3.78

3.85

4.57

4.62

5.78

6.90

6.90

EPS - basic reported (€)

 

(0.59)

(0.81)

1.28

(0.86)

(0.67)

(0.65)

(0.80)

(0.84)

Dividend (c)

 

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

 

 

 

 

 

 

 

 

 

 

Revenue growth (%)

 

-26.2%

26.1%

959.7%

-88.9%

10.2%

33.9%

14.3%

-10.5%

Normalised EBITDA Margin (%)

 

N/A

N/A

42.4%

N/A

N/A

N/A

N/A

N/A

Normalised operating margin (%)

 

N/A

N/A

40.0%

N/A

N/A

N/A

N/A

N/A

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

Total Current Liabilities

 

0.67

0.91

1.17

2.26

3.40

6.13

8.90

8.90

Accounts payable

 

0.20

0.34

0.49

1.43

1.06

1.39

2.17

2.17

Other current liabilities

 

0.47

0.57

0.67

0.83

2.34

4.74

6.74

6.74

Total Non-Current Liabilities

 

1.95

3.01

3.15

3.71

3.71

4.25

9.25

14.25

Debt/Repayable advances

 

1.95

3.01

3.15

3.71

3.71

4.25

9.25

14.25

Total Liabilities

 

2.62

3.92

4.32

5.97

7.11

10.38

18.15

23.15

 

 

 

 

 

 

 

 

 

 

Total Shareholders’ Equity

 

11.12

8.13

13.11

14.55

12.04

22.00

16.50

10.67

Common stock/Capital

 

2.63

2.65

2.68

3.20

3.26

4.83

4.83

4.83

Additional paid-in capital/Share premium

 

13.65

13.70

13.74

18.59

19.13

31.28

31.28

31.28

Retained earnings

 

(2.96)

(5.17)

(8.24)

(3.32)

(7.26)

(10.37)

(14.12)

(19.62)

Other reserves and surplus

 

(2.21)

(3.05)

4.94

(3.94)

(3.10)

(3.74)

(5.49)

(5.82)

Total liabilities and equity

 

13.73

12.04

17.44

20.52

19.15

32.39

34.65

33.82

Total assets

 

13.73

12.04

17.44

20.52

19.15

32.39

34.65

33.82

Total current assets

 

12.64

10.38

6.16

9.17

6.69

17.09

9.46

8.02

Cash and cash equivalents

 

11.10

9.01

3.99

7.55

5.15

15.92

8.22

6.82

Accounts receivable

 

1.40

1.22

1.95

1.46

1.48

1.07

1.13

1.07

Inventories

 

0.02

0.01

0.02

0.01

0.02

0.02

0.03

0.03

Prepaid expenses

 

0.12

0.13

0.22

0.15

0.04

0.09

0.09

0.09

Total Non-Current Assets

 

1.09

1.67

11.28

11.35

12.46

15.30

25.19

25.80

Property Plant and equipment, net

 

0.74

1.25

1.21

1.11

0.97

2.42

9.90

10.39

Other intangible assets

 

0.13

0.23

0.37

0.57

0.69

0.86

0.96

1.09

Other non-current assets

 

0.22

0.19

9.70

9.68

10.80

12.03

14.33

14.33

 

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

 

Cash Flow from Operations

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(2.21)

(3.07)

4.92

(3.94)

(3.11)

(3.749)

(5.51)

(5.83)

Depreciation and Amortization

 

0.07

0.17

0.22

0.23

0.33

0.325

0.25

0.26

Other items

 

(1.36)

0.39

(0.51)

1.49

(0.29)

0.995

2.70

0.05

 Cash Flow from Operations

 

(3.50)

(2.52)

4.64

(2.22)

(3.08)

(2.429)

(2.56)

(5.52)

Cash Flow from Investing

 

 

 

 

 

 

 

 

 

Purchases of fixed assets

 

(0.85)

(0.79)

(0.30)

(0.33)

(0.30)

(3.772)

(7.84)

(0.87)

Other Investing Activities

 

(0.02)

0.00

(9.53)

0.02

(1.14)

0.759

(2.30)

0.00

Cash Flow from Investing

 

(0.87)

(0.79)

(9.83)

(0.31)

(1.44)

(3.013)

(10.14)

(0.87)

Cash Flow from Financing

 

 

 

 

 

 

 

 

 

Change in Debt

 

0.15

0.07

(0.04)

(0.05)

1.52

2.423

5.00

5.00

Change in Capital Stock

 

0.17

0.06

0.07

5.38

0.60

13.786

0.00

0.00

Other Financing Activities

 

0.55

1.08

0.14

0.77

0.00

0.000

0.00

0.00

 Cash Flow From Financing

 

0.87

1.22

0.17

6.09

2.12

16.209

5.00

5.00

Net Changes in Cash and Cash Equivalent

 

(3.50)

(2.09)

(5.02)

3.56

(2.40)

10.77

(7.70)

(1.39)

Effect of Exchange Rates On Cash

 

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Cash and Cash Equivalents - Beginning

 

14.60

11.10

9.01

3.99

7.55

5.15

15.92

8.22

Cash and Cash Equivalents - End

 

11.10

9.01

3.99

7.55

5.15

15.92

8.22

6.82

Source: Company accounts, Edison Investment Research. Note: Carbios has reported only P&L, balance sheet and abbreviated cash flow figures for FY19. Some of the FY19 cash flow figures therefore remain our estimates.


General disclaimer and copyright

This report has been commissioned by Carbios and prepared and issued by Edison, in consideration of a fee payable by Carbios. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Carbios

View All

Industrials

Carbios — A productive and active H119

Industrials

Carbios — Commercial revenues in 2020

Industrials

Carbios — Commercial revenues in 2020

Latest from the Industrials sector

View All Industrials content

Research: TMT

TXT e-solutions — Well-funded to ride out the crisis

TXT e-solutions reported exceptional growth in 2019, with organic growth of 24% and normalised EBIT growth of 90%. Recent acquisitions have put the Fintech division in a stronger position and the company continues to search for new acquisition targets. Measures to contain coronavirus are likely to have an impact on the business, particularly as it is exposed to the airline industry (6% of revenues), but a net cash position of €41m provides more than adequate liquidity for the company to manage its way through the crisis.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free