Symphony Environmental’s partnership with Meditech bodes very well for both parties says Hybridan (LON:SYM)

Symphony Environmental Technologies plc (LON:SYM) is the topic of conversation when Hybridan LLP’s Director of Corporate Broking Niall Pearson caught up with DirectorsTalk for an exclusive interview.

Q1: Just briefly, could you give us a reminder of what Symphony Environmental do?

A1: So, as you mentioned, they’re a specialist in providing technologies that really make plastic products safer and more sustainable. What that means is that they have a very diverse portfolio of technologies, anything from making plastic totally biodegradable to the other end, really enhancing plastics, such as giving them either antimicrobial or antiviral properties. As you can imagine, they’ve got a number of applications in there, spanning from food packaging to PPE and finished products.

They’ve been doing that for a number of years, they’re just shy of £50 million market cap, last year they reported revenues of £9.67 million in revenues and about £400k of loss but that’s looking to change this year as they’re looking to get their revenues closer or just shy of £12 million and a returned to profitability £400k.

Q2: How did the company react to COVID?

A2: 2020 was really a pivotal year for them and I think it was very much a year of scientific and commercial validation across their portfolio and COVID-19 certainly had a lot to do with that really shining a light around the skewed narrative around plastics, I think generally being viewed incorrectly, as you know, as the devil’s material of choice.

The reality of it couldn’t be further from the truth and the industry and medical hygiene standards would absolutely be in the gutter without plastic and the irony is all the organic cotton sacks that we’ve been told to buy from high-end supermarkets are hotbed for bacteria. Coincidently, the carbon footprint is a lot greater with a paper bag than it is with a plastic one so the rhetoric has been all wrong.

I think now the market and the general public is starting to wake up a bit to changing the narrative about making plastics smarter and safe for the environment, rather than completely eradicating them from society, which is just not plausible at all.

That’s what the company has been doing for a long time, they’ve got a longstanding reputation for their technology in making plastics completely biodegradable and now we’re starting to see other applications starting to come through and largely as a result of COVID. They had a lot of research and studies produced last year that shows their technology kills Coronavirus within one hour. When you can actually start thinking about embedding their technology or embedding the anti-microbial properties into plastic, that provides protection for the lifetime of the plastic product, which is significantly ground-breaking when you think of that and compare it against other short term protections of washing with soap or wiping surfaces with anti-bac, it’s certainly been pivotable.

The announcement that came through yesterday was very much, I think, a result of years of hard work and scientific knowledge that has underpinned all their technology.

Q3: Now, as I mentioned earlier, they’ve entered into a collaboration with Meditech Global, can you tell us a little bit more about the deal?

A3: It was very much a major milestone with this new partnership. Meditech, they’re a huge outfit based in Hong Kong, do anything from the medical technology investment. They’ve been heavily in the news recently, the were a major supplier for Sinopharm vaccine, also a big supplier of PPE and testing.

So, from what I was saying earlier, you can already see the synergies on why they would want to partner and it’s a great move for them. For Symphony Environmental, it will help increase their footprint out in China and further afield, Meditech have a huge global network, major clients across numerous industries that can all benefit from the company’s technology.

So, there was really four strands to the announcement yesterday.

The one is the initial 10-year term for a distribution agreement for their products, including d2w and d2p, the additive there in the masterbatch technologies for China.

Second, which on the manufacturing side as well using their technology to manufacture the gloves under various stringent medical and food regulations for PPE as well.

Third, which is the marketing agreement so they’ll been using the company as a global distributor for their gloves, that’s covering a three year term.

Finally, and perhaps most industry from a market perspective is that these types of agreements are incredibly rare on AIM, usually it’s just a simple transaction of money for services, but with Meditech, I think they see so much value in what SYM is doing, that they’re not only entering into a commercial agreement with them, but they’ve also agreed to acquire anywhere between 2.5% and 20% of the company at a substantial premium to where they are now so not less than 35p, shares are currently trading around the 26p level.

So, it’s a fantastic validation, a real rubber stamp to what the company is doing. Not only do Meditech want to partner with them, but also want to become a shareholder for the long-term as well so it bodes very well for both parties.

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