AIM-listed Byotrol delays results over revenue recognition

Shares in anti-microbial technology company Byotrol have been suspended from AIM after it failed to file an audited version of its results on time, partly because of accounting changes required under IFRS 15 Revenue from Contracts with Customers

In a regulatory announcement, the company said that while the statements released in its unaudited preliminary results are ‘close to final form’, they still remain subject to change, and it was unable to hit the 30 September deadline for filing its audited annual report and accounts for the year ended 31 March 2019, which are audited by Mazars LLP.

The statement said: ‘The accounting and audit process has been extended this year by the complexities with the accounting for the Medimark acquisition and the restatement of our 2018 results for the effects of IFRS 15. We are now in the process of finalising the audit process for the year and the accounts will be published as soon as possible.’

In more detailed information, Byotrol said headline unaudited financial results for the year have been heavily influenced by new accounting standard IFRS 15 on revenue recognition, especially as it relates to the sale of intellectual property to Solvay in late 2018.

The unaudited accounts show revenues of £5.66m for this financial year, with 2018 revenue restated at £1.82m. Gross profit is put at £3.61m, compared to 2018’s restated figure of £0.69m.  EBITDA is at £0.82m, compared with a loss of £1.47m in 2018.

Byotrol noted that if the results had been reported on the same accounting basis as the prior year, reported EBITDA would have been broadly in line with market expectations of negative £0.45m, including absorption of non-recurring costs of acquisition of Medimark of £0.12m and US costs of £0.39m.

In the 2018 annual report and accounts, Byotrol’s chairman flagged the Solvay disposal, stating: ‘……..we thought long and hard about how to best monetise the intellectual property and commercial opportunities we had established with Solvay on our Actizone project – do we wait for eventual royalty income from jointly-targeted customers, or do we restructure the deal to bring forward funds and achieve short-term targets.

‘In my view, the deal we closed at the year end was the right combination of near-term financial pragmatics and retention of future upside (commission/royalties), for negligible future investment and an excellent ongoing relationship with a worldclass polymer company.’

In its notes to the accounts, Byotrol auditor Mazars drew attention to revenue recognition in its list of key audit matter, in relation to this contract.

The auditor said ‘We identified accounting for amounts receivable under the agreement as giving rise to particularly critical management judgement around revenue recognition. In particular we identified risks around the audit assertions of cut off, completeness, presentation and disclosure. 

‘We challenged the nature, timing and quantum of the revenue arising from the agreement, both for amounts to be recognised in the year to 31 March 2018 and amounts arising from the agreement which are to be deferred to future financial years.

‘We further consider that the disclosure and presentation is appropriate.’

Dealings in Byotrol’s ordinary shares have been temporarily suspended until such time as the accounts have been duly published in compliance with AIM Rule 19.

In the latest regulatory statement, the Byotrol said: ‘As set out in the preliminary results issued earlier, the company continues to make good progress, had cash balances of £2.8m at the year end and the directors remain confident in the outlook.’

The company is audited by Mazars LLP, and according to the 2018 annual report, the auditor was paid a total fee of £36,000, made up of £34,500 for audit services and £1,500 for non-audit services.

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