For immediate release  

An amendment has been made to the RNS announcement number 0731O released on 8 June 2022 at 07:00.

The following corrections have been made to Further Highlights:

At the fifth bullet "June 2022" has been changed to "June 2021"

At the seventh bullet "December 2021" has been changed to "September 2021"

All other details remain unchanged.  The full amended text is show below.

Itaconix plc

("Itaconix" or "the Company")

Final Results

Itaconix plc (AIM: ITX) (OTCQB: ITXXF), a leading innovator in plant-based specialty polymers used as essential ingredients in everyday consumer products, announces its Final Results for the year ended 31 December 2021.

Commenting on the results, John R. Shaw, CEO of Itaconix, said:

"Itaconix has a deep, diverse IP-protected technology platform that enables new generations of consumer products which are more environmentally sustainable without compromising on performance or cost. Our core business model is to use the competitive value of our technology platform to build a broad base of recurring revenues from brands that rely on our ingredients for the success of their products. We are currently focused on three key retail areas with large and growing market potential: cleaning, hygiene, and beauty.

"We added major new customers and retained existing customers to expand our commercial base in 2021. With new successes across all applications in North American and Europe, our plant-based polymers are now essential ingredients in an estimated 130 brands around the world. Most of the largest brands that we work with are growing as they expand into more retailers. Brands that rely on our ingredients are found in many of the largest retail groups across North America and Europe.

"We are just starting to tap into the potential of our proprietary plant-based technologies to accelerate the transition of brands and consumers to a low carbon economy, with over 95% of our 2021 revenues derived from plant-based products. The London Stock Exchange's Green Economy Mark is an important recognition for our work and will support our efforts to communicate our green credentials."

Financial Highlights

^[1] Adjusted for interest, tax, depreciation, amortization, and exceptional items.

Further Highlights

·      Expanded commercial base with more uses in more brands sold in more retail outlets.

·      Revenues were lower in 2021 than in 2020 due to order cycles from the stocking and rebalancing of customer inventories in response to the Covid-19 pandemic.

·      Revenues from 2018 to 2021 grew at a compound annual growth rate of 43.4%.

·      Revenues recovered in late 2021 and are continuing to grow in H1 2022.

·      Fundraises with gross proceeds of $1.6m in June 2021 and $0.4m in April 2022.

·      In early 2021, a major North American brand launched a new dishwashing detergent containing the Itaconix® TSI™ 322 polymer that drew attention to the potential to have high bio-based content without compromising on performance.  By late 2021, we added two additional North American dishwashing detergent brands.

·      In September 2021, we announced our first European order for Itaconix® TSI™ 322 with an established and well-respected European brand that is recognized by both the dishwashing detergent industry and consumers as a leader in product innovation, performance, and sustainability.

·      We completed development of our new Itaconix® ONZ 075 product by combining the cleaning performance of our Itaconix® DSP 2K™ polymer with our odour neutralising technology.  We are launching this product in 2022 for use in laundry applications.

·      In homecare odour control, our ZINADOR™ polymers sold through Croda, a global specialty chemicals leader, continue to be used widely.

·      We are working on broadening the applications addressed by our Itaconix® DSP 2K™ polymer beyond its current use in cleaning.  An important milestone in these efforts was our first order for use in sustainable fashion, which we view as a new and potentially major application.

·      Completed a production trial and announced customer development work on VELAFRESH™ SAP 80, our plant-based superabsorbent (SAP).

·      Awarded the London Stock Exchange's Green Economy Mark in May 2021 to recognise our contributions to the global green economy.

Commenting on the outlook, John R. Shaw, CEO, added:

"Even with a growing commercial base and expanding technology platform, 2021 showed that we are not immune to the macro forces affecting consumer product industries. Customer inventory cycles accelerated as companies overstocked leading to an extended destocking period. Incoming raw materials and outgoing customer shipments had longer delivery times and higher costs. The supply of other ingredients into our customers' products had major supply disruptions that delayed the use of our products.

"The most exciting change and opportunity we face is the increased urgency that consumers, retailers, and brands place on climate change and the global low-carbon economy. The spotlight is now firmly on the need for more sustainable products, which is exactly where we stand with our plant-based ingredients."

Enquiries:

About Itaconix

Itaconix uses its proprietary plant-based polymer technology platform to produce and sell specialty ingredients that improve the safety, performance, and sustainability of consumer products. The Company's current ingredients are enabling and leading new generations of products in cleaning, hygiene, and beauty. Itaconix's contributions to the global low carbon economy are recognised by the London Stock Exchange's Green Economy Mark.

www.itaconix.com

Itaconix plc's broker, finnCap Limited, provides equity research on the Company, and the Company considers finnCap's revenue forecast to represent market expectations of $4.7m in the year ending 31 December 2022 and $7.6m in 2023.

Report & Accounts and Notice of AGM

The Company's statutory accounts, together with a Notice of Annual General Meeting, are due to be made available on the Company's website (www.itaconix.com ) on 8 June 2022 and posted to shareholders on 8 June 2022. Copies will also be available at the Company's registered office, Fieldfisher LLP, 9th Floor, Riverbank House, 2 Swan Lane, London EC4R 3TT, United Kingdom. The Annual General Meeting is due to be held at 1:00pm on 1 July 2022 at Fieldfisher LLP, 9th Floor, Riverbank House, 2 Swan Lane, London EC4R 3TT, United Kingdom.

CHAIRMAN'S STATEMENT

Polymers for Better Living™

2021 was a year of marked and important progress for Itaconix. We retained our current customers, added new customers, found new applications for our products, expanded our technology platform, and built a broader base of recurring revenues.

These advances continue to strengthen our ability to contribute meaningfully to the decarbonization of consumer products. Our polymers' commercial base is now well-established, and they are currently used in over 130 consumer products. Our patent-protected processes, used to produce the plant-based polymers we sell, are unique and valuable.  In simple terms: they use and sequester carbon dioxide.  Through our large technology platform, we continue to monetize our intellectual property in three core areas: cleaning, hygiene, and beauty.

Our progress on these many fronts, however, did not translate into higher revenues and our financial results did not meet our plans for 2021. As detailed in our Chief Executive Officer's statement, cleaning customer ordering patterns in late 2020 and early 2021 responded to the Covid-19 pandemic, creating high demand and overstocking, followed in the middle of 2021 by rebalancing of inventories and consequently low order volumes.  Although volumes did recover and are continuing to grow nicely, this temporary decline in cleaning revenues caused a 21.1% decline in revenues overall.

As our technology platform and polymers lead to new generations of more sustainable everyday products, our efforts are recognised by the London Stock Exchange. Itaconix was awarded the LSE's Green Economy Mark in May 2021, which identifies companies that are contributing to environmental objectives. We are very proud of this achievement, and this pride is shared by all our employees. I would like to extend special thanks to them for their valuable work and devotion to our mission of decarbonising the planet with proprietary plant-based products that enhance consumer products.

In 2021, we continued to strengthen the foundation of our business through new customers, applications, and products. This progress is already manifesting itself in the current financial year and we look forward to the rest of the year and beyond with continued confidence and optimism. Thank you to all our stakeholders for your ongoing support. Together we are making a real difference.

James Barber

Chairman

7 June 2022

CHIEF EXECUTIVE OFFICER'S STATEMENT

Overview

Itaconix has a deep, diverse IP-protected technology platform that enables new generations of consumer products which are more environmentally sustainable without compromising on performance or cost. Our core business model is to use the competitive value of our technology platform to build a broad base of recurring revenues from brands that rely on our ingredients for the success of their products. We are currently focused on three key retail areas with large and growing market potential: cleaning, hygiene, and beauty.

We added major new customers and retained existing customers to expand our commercial base in 2021. With new successes across all applications in North American and Europe, our plant-based polymers are now essential ingredients in an estimated 130 brands around the world. Most of the largest brands that we work with are growing as they expand into more retailers. Brands that rely on our ingredients are found in many of the largest retail groups across North America and Europe.

2021 was a challenging year for translating this momentum in our customer base into growth in revenues. While our hygiene revenues grew substantially, lower cleaning and beauty sales resulted in a 21.1% decline in overall revenues. While we believe underlying consumer demand grew, customers ordered substantial volumes of our cleaning polymers in late 2020 and early 2021 to ensure supply during the Covid-19 pandemic and restock depleted retail shelves, then followed with lower monthly volumes from July through October 2021 as they rebalanced their inventories.  Despite these months of lower volumes, we continued to add new customers and expand our base of recurring revenues as brands looked to us to improve the competitive position of their products with new performance and sustainability claims.

As we grow our customer base with our existing products, we are selectively reaching into and expanding our proprietary technology platform in response to new customer needs. We completed a production trial for our plant-based superabsorbent (SAP) in 2021 and supplied a customer with materials in early 2022 for an initial consumer product trial and testing. Additionally, we filed two patent applications for new plant-based ingredients. One is for a new biodegradable hair care ingredient that we expect to launch in 2022. The other is to increase the plant-based content in composites. This product is early stage and will take several years of further development and testing. We believe these initiatives increase our potential addressable market from $750 million to $2.3 billion, and that significant opportunity exists within our technology platform to further expand our addressable market.

We were extremely proud that our work at decarbonising everyday products is acknowledged by the London Stock Exchange, who awarded us its Green Economy Mark in May 2021 to recognise our contributions to the global green economy with over 95% of our 2021 revenues derived from plant-based products.  The Green Mark, first introduced in 2019, was created to highlight companies and investment funds listed on all segments of the London Stock Exchange's Main Market and AIM, that are driving the global green economy. We are just starting to tap into the potential of our proprietary plant-based technologies to accelerate the transition of brands and consumers to a low carbon economy.  The Green Economy Mark is an important recognition for our work and will support our efforts to communicate our green credentials to investors and other stakeholders. It is a real honour and achievement for Itaconix to be recognised as an early leader for the Mark in the Advanced Materials industry sector.

Funding

We continued to strengthen our balance sheet and broaden our shareholder base. In June 2021 we announced a successful placing to raise $1.6 million by way of direct subscription with a new institutional investor together with existing institutional shareholder, IP Group plc.

Recently, and after the reporting period, we announced the placement of new ordinary shares to raise approximately $0.4 million by way of a direct subscription with IP Group plc and our management. The proceeds of the fundraise are being used for general growth working capital, predominantly to strengthen finished goods inventories held in the EU to assure reliable and ready delivery times to our expanding base of EU customers.

Financial Overview

Revenues for the year were $2.6m, representing a compound annual growth rate of 43.4% over the last 4 years. These revenues were a 21.1% decrease year over year from 2020, mainly due to large stocking orders for our cleaning and beauty products in late 2020 combined with slow reorders in the middle of 2021. We believe this order pattern reflected customer and retailer uncertainty in managing inventories during the pandemic. We retained current customers and added new customers while underlying consumer demand remained strong.

Despite a rise in our operating expenses and raw material costs, we managed to maintain an overall gross margin of 27.0% (2020: 35.1%). The increase in operating expenses was mainly due to growing our executive team as we positioned the Company for broader revenue potential and growth from our proprietary technology platform. While these additional costs had a direct impact on adjusted EBITDA, we believe the operating losses of the business remain manageable and that development spending on new revenue potential will deliver attractive returns and profitability in the future.

Net cash balances as at year end were $0.7m. As noted above, the Group successfully completed a placing of $1.6m during the year.

Although the Company did not experience overall revenue growth in 2021, the Group is well positioned for its next phase of growth with an expanded customer base, a sizeable pipeline of customer projects, and key personnel in place.

Operating Review

Growing our customer base and developing new applications for our technology platform were essential in 2021. We were successful at retaining our current customers, adding significant new customers, and increasing our addressable market with new products and applications. This expansion in our customer base did not immediately translate into overall revenue growth due to the specific order cycle conditions described above. Overall revenues were $2.6m in 2021 compared to $3.3m in 2020 and $1.3m in 2019.

Cleaning

Cleaning revenues were $1.8 million in 2021 compared to $2.6 million in 2020, representing a 29.5% decline.

As previously discussed, orders were strong in late 2020 and early 2021 to ensure supply and build customer and retailer inventories. Volumes declined from July through October as customers and retailers adjusted their inventories as previous uncertainties around the Covid-19 pandemic receded. In addition, some customers delayed deliveries on their orders while they overcame supply disruptions for other needed detergent ingredients, such as surfactants.

We did add new brands to our profitable base of recurring revenues and made significant progress in establishing Itaconix® TSI™ 322 polymer as the new standard for performance, cost, and sustainability in non-phosphate dishwashing detergents.  In early 2021, a major North American brand launched a new dishwashing detergent that drew attention to the potential to have high bio-based content without compromising on performance. By late 2021, we added two additional North American dishwashing detergent brands.  We expect this momentum to continue into Europe in 2022.  In September, we announced our first European order for Itaconix® TSI™ 322 with an established and well-respected European brand that is recognized by both the dishwashing detergent industry and consumers as a leader in product innovation, performance, and sustainability. The new product is expected to be on retail shelves in H2 2022.

We completed development of our new Itaconix® ONZ 075 product by combining the cleaning performance of our Itaconix® DSP 2K™ polymer with our odour neutralising technology. We are launching this product in 2022 for use in laundry applications.

Order volumes for our cleaning polymers recovered in late 2021 and have continued to grow in the first half of 2022.

Hygiene

Hygiene revenues were $0.5 million in 2021 compared to $0.3 million in 2020, representing a 70.2% increase.

Order volumes were particularly strong and ahead of expectations from new odour control customers and applications in North America, Europe, and Asia.  We have placed an emphasis on expanding usage into new applications, including development work with a major North American pulp and paper company.

In homecare odour control, our ZINADOR™ polymers, sold through Croda the global specialty chemicals leader, continue to be used widely. Building on the progress we reported last year, demand for this product has continued to grow with expanding adoption in existing brands and initial usage by new brands. We continue to see increased focus on home odour control and growing demand.

In personal odour control, our VELAFRESH™ polymers are also continuing to gain important initial adoption as key ingredients in personal care and pet care.  While volumes are not yet substantial, the ground is set for meaningful growth in the coming years. 

As described above, we expanded our addressable market in hygiene applications with our new plant-based superabsorbent polymer (SAP), VELAFRESH® SAP80.  The worldwide market for superabsorbent polymers was estimated at $9.0 billion in 2020 and is supplied almost entirely by fossil-based polymers due to the high cost or poor performance of current plant-based polymers. We believe that VELAFRESH® SAP80 offers a superior level of performance, cost, and availability for consumers that are seeking more sustainable hygiene products.

Although VELAFRESH® SAP80 revenues are not expected until 2023, we are achieving important milestones. We completed an initial trial to produce the polymer in 2021.  In February this year, post the reporting period, we announced that we had supplied product from this first production trial for testing by a potential customer for possible use in baby diapers, feminine hygiene products, adult diapers, and industrial absorption products. 

Beauty

Beauty revenues were $0.2 million in 2021 compared to $0.4 million in 2020, representing a 48.2% decline.

Year-to-year revenues for the Company's hair styling ingredient sold through Nouryon were skewed by a large re-stocking order delivered in late 2020 that met a significant portion of Nouryon's needs for much of 2021. Orders began to recover in late 2021 and early 2022. 

Pressure from consumers for more sustainable products continues to grow and create opportunities for our ingredients. As described above, we see an attractive market in hair care for our technology platform and have filed a patent application for new plant-based hair care technology that we plan to launch as VELASOFT® BR 300 later in 2022.

Intermediates

We did not have any meaningful revenues in 2021 from our intermediates.

We do see opportunities to develop our BIO*Asterix™ line of functional additives into sizable new revenue potential based on new bio-based chemistries derived from itaconic acid. These additives address a wide range of applications, from composites to additives in biodegradable plastics. We expect the potential from our technology platform to grow in line with the need for more sustainable solutions across many consumer markets, but expect that we will need several years and collaboration partners to realise major revenues.

After the reporting period, we announced a major new patent filing in composite applications. Market and materials research led by Dr. Yvon Durant, Itaconix's CTO, have created a path to making certain composite materials that may allow a safer process for products that also have higher plant-based content. If granted, the patent will protect a new family of intellectual property for Itaconix. The review process for the filing is expected to take at least two years and the next steps would be to ensure product safety and efficacy.

We continue to develop and test potential additives for biodegradable packaging. Although we see some specific opportunities emerging, we expect that progress will remain slow without any revenue expectation to at least 2024.

Innovation

We are working on broadening the applications addressed by our Itaconix® DSP 2K™ polymer beyond its current use in cleaning. An important milestone in these efforts was our first order for use in sustainable fashion, which we view as a new and potentially major application. The customer is a leading European supplier to companies that produce materials for the fashion and related industries. As a plant-based alternative to fossil-based polymers currently used in the production process, Itaconix® DSP 2K™ is expected to create new opportunities for consumers to buy more sustainable products. Although the initial order in 2021 was small and intended only for consumer sampling, we have already received a large reorder in early 2022. We expect to set new standards for performance and sustainability in other new generations of consumer products.

Intellectual Property

We have increased our addressable market for our current and new products from $750 million to $2.3 billion.  VELAFRESH® SAP80 is our new plant-based SAP for more sustainable hygiene applications. We filed new patent applications for plant-based composites in 2021 and for plant-based hair care in early 2022.

Covid-19

The broad effects of the Covid-19 pandemic continue to be a factor in our operations. We have maintained our production capabilities and customer deliveries but have faced extended transport times for incoming raw materials and outgoing customer shipments.  We work closely with our customers to overcome Covid-related disruptions. 

Ukraine

In March 2022, we reviewed all activity with the Russian Federation and Republic of Belarus. We do not have direct customers in these regions nor in Ukraine, and do not expect the war to have a direct impact on our business. As with all manufacturers, we do expect and are closely monitoring secondary effects of the war on energy prices, other commodity prices, supply chains, capital markets, and overall economic activity.  

Shareholder Engagement

We work closely with our advisers to update current and potential shareholders regularly on our commercial progress and potential, including through virtual meeting providers. We resumed direct meetings in March 2022, but plan to continue to also use virtual meetings for ready access and engagement with our shareholders.  

A significant portion of our shares are held by US-based investors. Despite our listing on the US OTC market, US securities regulations and practices create obstacles for the free trading of low-priced shares such as ours. We are working to improve access to share trading in the US, which we believe will benefit all shareholders.  

Outlook

Even with a growing commercial base and expanding technology platform, 2021 showed that we are not immune to the macro forces affecting consumer product industries. Customer inventory cycles accelerated as companies overstocked leading to an extended destocking period. Incoming raw materials and outgoing customer shipments had longer delivery times and higher costs. The supply of other ingredients into our customers' products had major supply disruptions that delayed the use of our products.

We worked hard in 2021 to mitigate these factors and entered 2022 in a much better position to succeed in this new environment. We prepared our major customers for price increases needed as a result of the higher raw material costs, whilst also assisting them to maintain strong competitive positions. We have implemented these increases and plan to continue to do so should our costs continue to increase. We also prepared our customers for the lead times needed to ensure supply of their products.  As supply chain disruptions persist, availability of consumer products on the actual or virtual retail shelf is a key emerging competitive advantage. 

The most exciting change and opportunity we face is the increased urgency that consumers, retailers, and brands place on climate change and the global low-carbon economy. The spotlight is now firmly on the need for more sustainable products, which is exactly where we stand with our plant-based ingredients.

Our current products are winning new customers that are in turn expanding our base of recurring revenues. Our success with new customers is also generating interest in our ingredients from other brands that is improving the size and quality of our customer pipeline. At the same time, continued innovation within our technology platform is expanding our revenue horizons into new larger applications that have pushed our current addressable market to over $2.3 billion.

Although market volatility will continue in 2022, our achievements on major customer projects in 2021, are generating substantial commercial progress in 2022 that will add to our expanding base of recurring revenues.

We look forward to continued success at commercialising the Itaconix technology platform.

John R. Shaw

Chief Executive Officer

7 June 2022

OUR STRATEGY

Principal Activities

Itaconix plc is a leading innovator in plant-based ingredients for improving the safety and performance of consumer and industrial products. Its proprietary polymer technologies generate a growing range of new specialty ingredients with unique functionalities that meet consumer demands for value and sustainability.

The Group's principal activities are the development of plant-based polymers and the production and sale of these materials globally, both directly and through partners as ingredients in product formulations.   

Most of the Group's efforts are focused on home and personal care applications where consumer interest and desires for safer and more sustainable products are particularly high.

Proprietary Ingredients with Unique Functionality

The Group has conducted many years of exploratory research and holds an extensive patent portfolio related to the production and use of polymers made from itaconic acid. The commercial potential for these materials as ingredients in consumer products stems from the unique functionalities available through the chemical structure of itaconic acid and from the production of itaconic acid through fermentation using plant-based sugar.

The Group's technology platform has commercial momentum in cleaning, hygiene, and beauty as a result of the process of identifying a market need and then developing a product to meet that need.  As these products gain success, Itaconix is working on new products to emerge from its technology platform.

Progress in 2021

The Group advanced its development and commercial activities in its core cleaning, beauty, and hygiene applications, as detailed in the Chief Executive Officer's Statement.

The Group's products are formulated as key ingredients in a growing range of consumer product. They are now used in over 130 brands worldwide across a widening variety of uses and sold in more retailers.  This increase in use, however, did not translate into higher revenues in 2021. Hygiene revenues increased but revenues in cleaning and beauty declined. The most significant issue was in the cleaning segment, where the impact of pandemic-driven inventory stocking by customers in late 2020 and early 2021 was followed by rebalancing of inventories later in 2021. These actions created low monthly volumes in the middle of 2021, which have since recovered as more regular order patterns have returned.

While revenues lagged for the year, the Group continued to add important new brands and new uses to its commercial base. A major North American consumer brand launched a new dishwashing detergent that set a new level for sustainability and performance. A leading European sustainable dishwashing detergent brand is using Itaconix® TSI™ 322 in its new formulation that will launch in 2022. New uses for Itaconix polymers include initial orders in a sustainable fashion application to replace fossil-based polymers. Although 2021 revenues were down, the Group is well positioned for growth in the coming years.

Key Performance Indicators (KPIs)

The Directors believe that the key performance indicators for the Group are:

·      Revenues

·      Adjusted EBITDA, the earnings before interest, tax, depreciation, amortization, and exceptional items

·      Cash

The Group seeks to monetise its technology platform through revenues generated by a growing number of commercial products. Revenue performance is detailed above in the Chief Executive Officer's Statement.

The Directors measure these commercial activities against the Group's rate of cash expenditure and its effect on cash resources. Cash used for operating activities in 2021 was $2.0m compared to $1.2m in 2020. Details of cash flows are set out in the Group's Consolidated Cash Flow Statement on page 46 and note 21 on page 67 to the Annual Report.

FINANCIAL REVIEW

Key performance metrics were impacted by temporary interruption in revenues due to short-term external issues in consumer supply chains, as noted above. Revenues for the year decreased by 21.1% from 2020. The gross profit margin was 27.0% in 2021 compared to 35.1% in 2020 as cost of goods sold was affected by higher production overhead costs from lower volumes and some increases in raw material costs that were not passed through to customers until early 2022. Cash used in operations increased from $1.2m in 2020 to $2.0m in 2021, with approximately $0.7m of the increase for current year operations and approximately $0.2m for working capital. This was supported by the Group's successful fundraise in June 2021. Below is a table showing the Group's key performance metrics:

Financial Performance

Revenue

Total revenues for the 12-month period ended 31 December 2021 were $2.6m, representing a 21.1% decrease from 2020 revenues of $3.3m. Although there was a decrease year over year, revenues over the last four years have a compounding annual growth rate of 43.4%. Revenues lagged across cleaning and beauty, while hygiene experienced considerable growth. Cleaning decreased by 29.5% from 2020, the decrease being due to exceptionally large orders in late 2020 and early 2021 to build customer stocks and rebalancing of customer and retailer inventories in the middle of 2021. While this reduction in orders caused lower cleaning revenues in the second half of 2021, the base of customers and brands using Itaconix ingredients continued to grow, and cleaning polymers remain the largest area for near-term growth potential.    

Beauty decreased by 48.2% from 2020, which was due to a large stocking order fulfilled in November 2020.

Hygiene increased by 70.2% from 2020, due to both recurring orders and new orders in new uses and new brands. New brands in Europe and Asia used Itaconix ingredients in odour neutralization products. New uses included fabric refreshers and pet care.

Revenues in all geographical regions decreased. North America represents 92.8% of the Group's revenue and decreased by 16.0%. North America revenue contracted largely due to the external issues of customer supply chains. Europe represents 7.2% of the Group's revenue and decreased by 56.0%. European revenue suffered largely due to the large stocking order placed in November 2020 for the Group's hair styling polymers.

Gross Profit and Adjusted EBITDA¹

Gross profit margin was 27.0% in 2021 compared to 35.1% in 2020. There were significant increases in the raw material costs due to inflation, increased shipping costs, prices of corn stock in China, and energy restrictions placed on Chinese companies. These global factors affected many companies including Itaconix. The Group was able to implement pricing increases to offset these factors and protect the Group's gross margins while selectively supporting initial uses in new applications and the competitive position of a major cleaning customer to gain future volumes.

Adjusted EBITDA is a non-IFRS measure but is widely recognised in financial markets and it is used within the Group as a key performance indicator.   Adjusted EBITDA was a loss of $1.6m in 2021 (2020: loss $1.0m) which was worse by 65.2%. Since the 2018 Group reorganization, the Group's EBITDA trajectory has improved.

Below is a reconciliation of Loss for the Year to Adjusted EBITDA:

Administrative Expenses

Administrative expenses consist of sales, marketing, operations, research and development, and public company costs such as legal, finance and the Group Board. These expenses were $2.9m in 2021 up from $2.6m in 2020. The increase in administrative expense was largely due to increased staffing to support the Group's growth plans.

Costs and Available Cash

As at 31 December 2021, the Group held cash of $0.7m. Net Cash outflows from operating activities of $2.0m in 2021 were used to add key personnel and support working capital needs compared to $1.2m in 2020 as the Group built inventories to support new customer product volumes. The Group successfully completed a $1.6m placing with a large shareholder, IP Group entities and a new institutional investor in June 2021.  

Working capital

At year end, working capital had decreased and the most significant change in working capital was trade and other payables. Trade and other payables decreased to $1.0m in 2021 from $1.4m in 2020. Inventories remained flat at $1.4m in 2021 and 2020 to support current customer demand. Working capital as a per cent of revenues decreased to 50.5% in 2021 from 56.7% in 2020. 

Financial Position

At 31 December 2021, the Group had equity of $0.6m as compared to ($0.6m) in 2020, primarily as a result of a revaluation of the deferred consideration (note 17) net of the equity raise.

Revaluation of Deferred Consideration

As a result of revaluing deferred consideration related to the acquisition of Itaconix Corporation in 2016, per note 17, there was an exceptional non-cash income of $1.6m in 2021, which offsets the exceptional non-cash expense of $0.3m (excluding foreign exchange) from 2020. In addition to the revaluation of the liability the Group issued 1,923,389 shares to certain Sellers of Itaconix Corporation on 12 April 2021 in settlement of the contingent consideration payment for 2020.

Financial Reporting

There were no new reporting standards adopted for the year end 31 December 2021 that have a material impact on the financial statements.

Going Concern

The financial statements have been prepared on a going concern basis. The Directors have reviewed the Parent Company's and the Group's going concern position taking account its current business activities, budgeted performance and the factors likely to affect its future development, set out in the Annual Report, and including the Group's objectives, policies and processes for managing its working capital, its financial risk management objectives and its exposure to credit and liquidity risks.

The Directors have also taken into consideration the impact of the Covid-19 pandemic and the war in Ukraine on the Group's revenues and supply chain. While there has not been a significant negative impact through the report date on the Group revenues or supply chain due to the pandemic, the Directors have applied sensitivities to the timing, quantum, and growth of new customer projects in revenue models and have assessed alternate supply chains that have been developed by the Group to mitigate any issues in deliveries to our customers.

As further detailed in the Directors' Report on page 29 and note 2 to the Annual Report, the Directors have reviewed the Group's cash flow forecasts covering a period of at least 12 months from the date of approval of the financial statements, which foresee that the Group will be able to meet its liabilities as they fall due. However, the success of the business is dependent on customer adoption of our products to increase revenues and profits. Inability to deliver this could result in the requirement to raise additional funds.

Shareholdings and Earnings per Share

Itaconix had 443,462,757 shares in issue as at 31 December 2021.  The undiluted weighted average number of shares for the period to 31 December 2021 was 438,808,097. The difference in the two numbers is the result of an issuance of new shares in satisfaction of the contingent consideration in April 2021 (see note 17) and an issuance of new shares in June 2021. The undiluted weighted average number of shares was used to calculate the loss per share presented in note 3.

PRINCIPAL RISKS AND UNCERTAINTIES

Effective risk management is a priority for the Group to sustain the future success of the business. Therefore, the Directors have overall responsibility for the Group's risk management process but have delegated responsibility for its implementation, the system of controls which reduce risk and for reviewing their effectiveness to the management team. The risk of uncertainties that the Group face evolve over time, therefore the management team review and monitor the emerging risks and update mitigation effort. The results are reported to the Board.

Commercialisation Activities

There were some challenges due to the lingering pandemic that affect the Group's commercial activities. These included over stocked supply chains of consumer goods, limited supplies of certain other detergent components due to emergency plant shutdowns in Texas and Delaware, and shipping delays from Asia to North America. These challenges were temporary and ultimately the success of the business relies upon Itaconix products reaching sufficient quantities for the Group to generate an overall profit.

Management of risk: The Group has sought to manage this commercialisation risk by partnering with market leaders for the worldwide promotion of our leading products, continued development of end-user formulas to provide customers with packaged solutions, and continuous review of the market needs for Itaconix products.

Dependence on Key Personnel

The Group depends on its ability to retain highly qualified managerial and scientific personnel. There are a limited number of candidates with the experience and skills to replace these key personnel. Attracting the best candidates can be highly competitive. While the Group has conventional employment arrangements with key personnel aimed at securing their services for minimum terms, their retention cannot be guaranteed.

Management of risk: The Group expanded its management team to support operations and has service contracts in place for John R. Shaw as Chief Executive Officer and Dr. Yvon Durant as Chief Technology Officer.  In addition, the Group seeks to retain key personnel in the US using an Equity Incentive Plan for share option grants.  

Customer Retention

The ability to retain key customers is critical to maintaining revenue streams. The loss of key customers could impact business results adversely.

Management of risk: Acceptance of our products in our customers' end-product formulations is monitored and managed. Our customer service includes regular engagement on the performance of both our products and the end-products to ensure our ingredients are delivering the desired value to our customers and end-users.

Regulatory and Legislation

Regulatory bans on the use of phosphates as ingredients in detergents have transformed the consumer detergent markets in Europe and North America over the last ten years. Phosphates are known to enter waterways through detergent effluent and act as a nutrient for algae growth that subsequently cuts oxygen levels in water and harms aquatic life. We believe that phosphates are likely to be phased out in other jurisdictions around the world over time. Itaconix polymers are effective replacements for phosphates in detergents and are used in numerous detergent products in North America and Europe for this purpose.

Management of risk: The Group closely monitors regulatory developments in the use of ingredients in consumer and industrial products to assure compliance and find new revenue potential for Itaconix polymers. Further, the Group regularly assesses the relative performance and cost efficacy of Itaconix polymers to current and emerging phosphate replacements to identify revenue risks and opportunities.

Competition and Technology

The production and use of Itaconix polymers are subject to technological change over time. There can be no assurance that developments by others will not render the Group's product offerings and research activities obsolete or otherwise uncompetitive.

Management of risk: The Group employs experienced and highly-trained polymer chemists to develop and protect the Group's intellectual property. These efforts include continuous work on the performance and cost advantages of Itaconix polymers. In addition, the staff monitors technologies and patents through publications, scientific conferences, and collaborations with other organisations to identify new risks and opportunities.

Covid-19 Risk

The Group faces continued volatility due to Covid-19 related disruptions in the demand for its products, the supply of raw materials, and the supply of other ingredients going into customer products. Our operations continued to operate while implementing recommended CDC guidance to protect our employees and provide a safe work environment. Supply chain issues emerged in early 2021 due to extended shipping times and the availability of other ingredients going into customer products.

Management of risk: Management closely monitors Covid-19 regulatory developments and expected demand from customers. Management and staff actively communicate with all major suppliers and customers about upcoming demand and reliability of the supply chain. We also hold significant stock of long lead time raw materials from Asia.

Liquidity Risk

Itaconix seeks to manage financial risk by ensuring adequate liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably.  In June 2021, the Group completed a $1.5m fundraise to support general working capital and new product development to further the Company's commercial progress. In addition, short-term flexibility is achieved by holding significant cash balances in Itaconix's functional currencies, notably UK Sterling and US Dollars.

Credit Risk

The principal credit risk for Itaconix arises from its trade receivables. To manage credit risk, new customers are subject to credit review and all customer accounts are regularly reviewed for debt aging and collection history. As at 31 December 2021, there were no significant credit risk balances.

Inflation Risk

Global economies have experienced significant inflation during 2021. The cost of raw materials increased as costs for shipping, energy and ingredients increased. These increases were partially recovered in selling price increases to customers.

Foreign Exchange Risk

Itaconix Plc is a publicly traded holding company on the London Stock Exchange. The Group's primary operations are in the US. These US based operations transact trades with customers in North America and internationally. Revenue and costs are exposed to variations in exchange rates and therefore reported losses. In 2019, the Group elected to convert the reporting currency from UK Sterling to US Dollars. The US Dollar transactions represent a significant portion of the functional currency transactions and therefore reduces the Group's overall exposure to translation exchange risk.

Government Risk

The Group has potential exposure to government activities related to Covid-19, the war in Ukraine, and US-China trade relations. Risks related to Covid-19 are detailed above.

Regarding the war in Ukraine, we reviewed all activity with the Russian Federation and Republic of Belarus. We have no direct customers in these regions nor in Ukraine and do not expect the war to have a material direct impact on our business other than the overall supply chain and economic effects experienced by manufacturers.

Limited availability and extended delivery times have combined to trigger major increases to certain raw material costs and may continue to cause volatility. These disruptions have created a steady need to monitor raw material sourcing, assess alternative suppliers, and adjust the pricing of the Group's products.

SUSTAINABILITY

Polymers for Better Living™

Our polymers are advanced sustainable materials that can make the world a better and safer place to live as essential ingredients in the next generation of consumer products.

The composition of our polymers, our patented process to produce them, their performance as ingredients in consumer product formulas, and how these formulas are packaged and delivered to consumers contribute to the fight against climate change with plant-based carbon, sequestering carbon, energy efficiency, and lighter consumer products.

Itaconix Ingredient Benefits as Advanced Sustainable Materials

Plant-based carbon

The renewable carbon in the itaconic acid we use to make Itaconix products is captured as carbon dioxide by plants. Corn plants convert carbon dioxide into carbon in sugars that are used to produce itaconic acid via fermentation. We bring this itaconic acid into our patented process at our US operations to produce polymers that have 75-100% plant-based carbon.    

Decarbonisation

The increase of carbon dioxide as a greenhouse gas in our atmosphere is a major cause of climate change. Carbon dioxide is sequestered as carbon in Itaconix products for a period of time until, depending on the circumstances, they degrade.  During this period, the amount of carbon held contributes to a reduction of carbon dioxide in the atmosphere.

Energy efficiency

Improving energy consumption is a major sustainability goal for Itaconix and within the chemical industry.

Itaconix's efforts start with its patented polymer production process, which is efficient in its use of energy and capital equipment. Less energy use translates into less direct and indirect GHG emissions.    

Itaconix is working to extend its energy efficiency efforts across all of its operations and practices with the development of reporting under the Streamlined Energy & Carbon Reporting (SECR) framework. We began in 2020 with the direct and indirect emissions from the purchase of electricity and natural gas. The table below shows the energy consumption and estimated GHG emissions at our US operations for the 12-month period ending 31 December 2020 from these activities.  

We have selected an intensity metric based on tonnes of carbon dioxide emissions (tCO2e) per $m Net Revenue. We will use this ratio to monitor and extend our energy efficiency efforts further into our operations and practices. Although our estimated direct and indirect GHG emissions declined in 2021, the intensity ratio increased due to lower overall production levels.

Water efficiency

Improving water consumption is a major sustainability goal for Itaconix and within the chemical industry. Itaconix was able to reduce its water consumption in production through re-engineering its facilities cooling operations in early 2021, saving over half the annual usage from the prior year.

Lighter products

The multifunctional performance of Itaconix ingredients offers the potential for more compact consumer products, particularly in detergents. Compact products are lighter and can reduce greenhouse gas emissions by using less chemicals, less packaging, and more efficient transportation.

Revenues from Advanced Sustainable Materials

Itaconix plc is dedicated to reducing the planet's carbon footprint and addressing climate change with plant-based polymers that are essential ingredients in a new generation of safer, more sustainable consumer products.

Our financial results demonstrate that commercial and environmental progress can advance equally through the value and adoption of our ingredients. We are pleased to announce that 95% of our 2021 revenues (2020: 96%) were derived from advanced sustainable materials. This means that 95% of our revenues are related specifically to the design, development, and manufacture of materials that during their manufacture or through their use allow for considerable increases in the efficiency of resource usage.

SECTION 172 STATEMENT

Statement of Compliance with Section 172 of the Companies Act 2006

The Directors are required to include a separate statement in the Annual Report that explains how they have considered broader stakeholder needs when performing their duty under Section 172(1) of the Companies Act 2006. This duty requires that a director of a company must act in the way he or she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:

·      the likely consequences of any decision in the long term;

·      the interests of the company's employees;

·      the need to foster the company's business relationships with suppliers, customers, and others;

·      the impact of the company's operations on the community and the environment;

·      the desirability of the company to maintain a reputation for high standards of business conduct; and

·      the need to act fairly between members of the company.

In connection with its statement, the Board describes in general terms how key stakeholders, as well as issues relevant to key decisions are identified, and also the processes for engaging with key stakeholders including employees and suppliers, and understanding those issues. It is the board's view that these requirements are predominantly addressed in the corporate governance disclosures we have made in the directors' report, which are themselves discussed more extensively on the company's website.

A more detailed description is limited to matters that are of strategic importance in order to remain meaningful and informative for shareholders. The Board believes that three decisions taken during the year fall into this category, and engaged with internal and external stakeholders on these decisions:

·      2021 Fundraise - The Directors, along with the Group's NOMAD and broker, assessed the placement by direct subscription with a new institutional shareholder together with existing institutional shareholder IP Group entities, to support the Group's fundraising efforts. The proceeds of the fundraise were used for general working capital purposes and new product development to further the Company's commercial progress.

·      Appointment of New Nominated Advisor and Broker - The Directors continually assess the evolving needs of the Group. The Group interviewed several NOMAD and brokers to determine the best fit for the Group and made the ultimate decision to change to a new NOMAD and broker in August 2021.

·      Covid-19 - The Group continually assesses the impact Covid-19 has on customer orders, supply chain and employees. Efforts have been put in place to support customer demand, ensure safety stock, and safeguard employees' wellness as the pandemic continues and perhaps is entering an endemic stage.

The Strategic Report encompassed on pages 8 through 15 was approved by the Board of Directors on 7 June 2022 and signed on behalf of the Board of Directors by:

James Barber                                                                                        John R. Shaw

Chairman                                                                                               Chief Executive Officer

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2021

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2021

CONSOLIDATED BALANCE SHEET

At 31 December 2021

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

At 31 December 2021

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2021

NOTES TO THE FINANCIAL INFORMATION

1.         Accounting policies

Basis of presentation

The financial information set out in this document does not constitute the Group's statutory accounts for the years ended 31 December 2020 or 2021.  Statutory accounts for the years ended 31 December 2020 and 31 December 2021, which were approved by the directors on 7 June 2022, have been reported on by the Independent Auditors.  The Independent Auditor's Reports on the Annual Report and Financial Statements for each of 2020 and 2021 were unqualified, did draw attention to a matter by way of emphasis, being going concern and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 31 December 2020 have been filed with the Registrar of Companies.  The statutory accounts for the year ended 31 December 2021 will be delivered to the Registrar of Companies in due course and will be posted to shareholders on 8 June 2022, and thereafter will be available from the Group's registered office at Fieldfisher Riverbank House, 2 Swan Lane, London, United Kingdom, EC4R 3TT and from the Group's website https://itaconix.com/investor/reports-documents/

The financial information set out in these results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations in accordance of UK adopted International Accounting Standards ('IFRS'). The accounting policies adopted in these results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the financial statements for the year ended 31 December 2020, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2021. There are deemed to be no new standards, amendments and interpretations to existing standards, which have been adopted by the Group, that have had a material impact on the financial statements. 

The Group's financial information has been presented in US Dollars (USD). 

Going concern

The financial statements have been prepared on a going concern basis. The Directors have reviewed the Company's and the Group's going concern position taking account its current business activities, budgeted performance and the factors likely to affect its future development, set out in the Annual Report, and including the Group's objectives, policies and processes for managing its working capital, its financial risk management objectives and its exposure to credit and liquidity risks.

The Group made a loss before exceptional items for the year of $2,008k, had Net Current Assets at the period end of $1,262k and a Net Cash Outflow from Operating Activities of $2,023k. Primarily, the Group meets its day to day working capital requirements through existing cash resources and had on hand cash, cash equivalents and short-term deposits at the balance sheet date of $683k.

During the year, the Group maintain a flat cost base of expenditures and successfully raised funds of $1.5m. Post year end, the Group successfully raised funds of $0.4m to support European inventories.

The Directors have reviewed the Group's cash flow forecasts covering a period of at least 12 months from the date of approval of the financial statements, which foresee that the Group will be able to meet its liabilities as they fall due. However, the success of the business is dependent on customer adoption of our products in order to increase revenue and profit growth and continuing to control the Group and Parent Company's cost base. Inability to deliver this could result in the requirement to raise additional and external working capital. 

The Directors have also taken into consideration the continued impact of the Covid-19 pandemic and the war in Ukraine on the Group's revenues and supply chain. While the Group experienced some temporary negative impacts on revenues in 2021 due to the pandemic, these issues are not expected to persist in the near-term. The Directors have applied sensitivities to the revenue and cost models and have assessed alternate supply chains that have been developed by the Group to mitigate any issues to our customers.

The Directors have concluded that the circumstances set forth above represent a material uncertainty, which may cast significant doubt about the Parent Company and Group's ability to continue as a going concern. However, they believe that, taken as a whole, the factors described above enable the Parent Company and Group to continue as a going concern for the foreseeable future. The financial statements do not include the adjustments that would be required if the Parent Company and the Group were unable to continue as a going concern.

2.         Revenue

Revenue recognised in the Group income statement is analysed as follows:

Segmental information

Net assets of the Group (being total assets less total liabilities) are attributable to geographical locations as at 31 December 2021 as follows:

3.         Loss per share

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.

The loss for the period and the weighted average number of ordinary shares for calculating the diluted earnings per share for the period to 31 December 2021 are identical to those used for the basic earnings per share. This is because the outstanding share options would have the effect of reducing the loss per ordinary share and would therefore not be dilutive.

4.         Cautionary Statement

This document contains certain forward-looking statements relating to Itaconix plc (the "Group"). The Group considers any statements that are not historical facts as "forward-looking statements". They relate to events and trends that are subject to risk and uncertainty that may cause actual results and the financial performance of the Company to differ materially from those contained in any forward-looking statement. These statements are made by the Directors in good faith based on information available to them and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.