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Waste deep: Bioganix plc

Wednesday, July 09, 2008

Nick Helme doesn’t mind getting his hands dirty. In fact, when it comes to cashing in on Britain’s growing affection for recycling, he’s up to his waist in… well, waste.

On a crisp, sunny summer’s morning standing on the edge of Sharpness dock in Gloucestershire, the former Herefordshire farmer cuts a nonchalant figure. He has just spent £4.3 million fitting out his latest waste re-processing plant and at just five weeks old it’s not quite up to full speed.

But as a 10 tonne waste truck rounds the corner and rumbles past us leaving a hint of what resides within, it becomes clear that the nondescript warehouse building that we are standing in front of is nothing of the sort.

Helme, the managing director of AIM-listed Bioganix plc, is mildly amused. “They never send us the fresh waste,” he quips. “I can’t think why.”

Bioganix started life back in 2001 and today boasts three plants around England that process thousands of tonnes of domestic and commercial organic waste every week. That waste is taken on for a fee, quickly processed – with the help of some clever technology – and then sold on as compost to local farmers.

Originally backed by Herefordshire farming co-operative, 7Y, which still holds a stake, Helme took the business to AIM in April 2006. That move opened the way for a broader investor base and also raised £2.6 million. It is currently capitalised at about £8 million with its shares trading at 100p.

The original cash was used to finish Bioganix’ second plant at Parham in Suffolk – the first is at Wharton Court in Herefordshire. The latest – mark III – was funded through a combination of £2.25 million raised last year, grant money and debt. Another, in Buckinghamshire, is in the offing.

Last year the company’s revenues were up to £2.0m from £1.6m previously but the costs of funding the new plant plus a tangle with a supplier caused pre-tax losses to come in at £1.0 million. The supplier problem has since been fixed and the cash shortfall is being remedied.

Giant compost heap

Walking around the Sharpness plant it’s immediately clear that this is not simply a giant compost heap. In fact the scale of the engineering feat involved, led by technical and operations director Oliver O’Toole, is astonishing.

To start with, the company has developed its own “in vessel” composting process, which Helme describes as simply taking all the key elements of making compost in your own back garden and just accelerating them. The waste is pumped into two huge cylinders and carefully controlled, treated with bacterial cultures and passed through various stages until it emerges 100 hours later as usable – saleable – compost.

But while the process sounds a simple, clinical procedure, the truth is that the briefest encounter with any of the inner workings of the Sharpness facility will leave even those with strong stomachs reaching for a bucket.

It makes sense that a large proportion of the R&D expenditure in recent years has focused on cracking this problem – keeping the smell inside the building rather than letting it drift off across the countryside. Indeed, it’s critical because Helme’s success in winning planning approval for new facilities around the country will hinge on what went before. So keeping the local residents happy is vital.

But no fear here. On the approach to the plant you wouldn’t even know where or what it was. Helme’s team has levered all the necessary machinery into an anonymous dockside building – it was one occupied by Tarmac – and there’s no whiff of trouble. Even the regular delivery trucks are quickly ushered into air-locked delivery bays, away from sensitive noses.

Credit for all this goes to a complex arrangement of engineering innovation perched at the back of the building. What Helme calls “air scrubbers” connected through various pipe work, tubing and machinery essentially clean up the air before letting it escape. The entire facility is kept under negative air pressure, which means when a door is opened the air is sucked in rather than sucked out.

Helme and O’Toole are clearly very proud of this.

Government targets

While Bioganix has attracted some media scepticism in the past for being in the right industry at the wrong time, the criticism is waning. By 2010 all local authorities in the UK are expected to be recycling 30pc of household waste and they’ll be charged £150 per tonne for anything more that finds its way into landfill. That means recycling is edging up the priority lists of councils around the country.

Sharpness will be processing around 50,000 tonnes of waste every year from nearby local authorities. In Buckinghamshire, the local authority has given the thumbs up on a 30,000 ton contract, pending planning permission. So it’s clear that local authorities are starting to catch on.

And while Helme is happy to be selling off compost – indeed sales from Sharpness have been completed for the next 12 months – he is now eyeing other opportunities.

The company recently joined forces with Switzerland’s Kompogas AG and Germany’s Kuttner GmbH in a move that could see it generating “green” electricity in the near future from the gases created by its composting processes.

Kompogas is a specialist in anaerobic digestion and Kuttner a renewable energy generator. Using their technology Helme reckons it would be possible to introduce extra processing systems at its plants – including Sharpness – at around double the cost of a normal facility. The government is keen on this type of electricity generation and Helme is confident it could be a good move for the company, particularly with energy prices on the up.

In the meantime Bioganix is involved in tendering for council contracts as they arise. And the company is not alone – AIM peer TEG is also out and about tendering for in-vessel composting contracts. Nevertheless, Helme is confident that new plants – this time debt funded – will be on the way at a rate of one every year.

That just leaves the small matter of filtering out the odd alien object that somehow gets through. “Yes, we’ve had kettles and toasters turn up with the kitchen waste,” he says. “We’ve tried composting them but it doesn’t work. One of my mangers down at Suffolk tells me he’s nearly got a whole set of patio furniture from the garden waste being delivered there. Amazing.”

Ben Hobson, SmallCapNews.co.uk