TIDMHAYD
RNS Number : 5978H
Haydale Graphene Industries PLC
17 March 2015
17 March 2015
Haydale Graphene Industries plc
("Haydale", the "Company", or the "Group")
Half Yearly Report for the six months ended 31 December 2014
Haydale (AIM: HAYD), the Group focused on the commercialisation
of graphene and other nano particle products using their
proprietary plasma process, announces its unaudited results for the
six months ended 31 December 2014. Haydale's HDPlas(R) plasma
technology provides a rapid and highly cost-efficient method of
supplying tailored solutions for both raw material suppliers and
product manufacturers.
Operational Highlights
-- Acquisition of EPL Composite Solutions Limited ("EPL") who
design, develop, and commercialise advanced composite polymer
materials. EPL offers the Group an immediate access to the growing
composite market for graphene;
-- Innovative commercial agreement with the Welsh Centre for
Printing and Coating ("WCPC") for the development and
commercialisation of electronic ink;
-- Established marketing and distribution partners with
commercial agents in USA and Far East plus specialist web based
supplier Goodfellow; and
-- Successful factory acceptance test and commissioning of new
second generation plasma reactor offering greater control,
precision, processing flexibility and improved performance.
Post Period End Events
-- Delivery of two more R&D plasma reactors and a larger
capacity technology demonstrator (HD200);
-- EPL awarded GBP261,000 Regional Growth Fund ("RGF") grant;
-- Exclusive 5-year commercial agreement with Swansea University
to acquire their internally funded research projects which produce
prototype applications using a range of Haydale materials, the
first of which is a flexible, large area, intelligent pressure
sensor; and
-- Commercial collaboration with Alex Thomson Racing to develop
graphene enabled composite solutions for their current and future
designed Hugo Boss sponsored extreme racing boat.
Financial Summary
-- Total Income (comprising revenue and other income) increased
significantly to GBP0.48 million (1H 2013/14: GBP0.06 million);
-- Like for like Total Income (before Income from EPL) doubled to GBP0.12 million;
-- Loss per share in the period of 14p (1H 2013/14: 9p per share);
-- Capital expenditure of GBP0.6 million on plant and machinery
to increase capacity (1H 2013/14: GBP0.02 million); and
-- Cash balance at period end of GBP4.0 million (30 June 2014: GBP5.7 million).
Commenting on the results Ray Gibbs, CEO of Haydale, said:
"Haydale continues to carry out the strategic aims as set out in
our 2014 annual report as we begin to exploit the commercial and
technical momentum started in the second half of the previous
financial year. The period under review has been dominated by a
number of significant events; most importantly the acquisition of
EPL in early November 2014 which provides the Group with direct
access to the early adopting, substantial and innovative composite
market, already worth in excess of GBP10 billion per annum
globally.
The commercial agreements reached with agents in both the USA
and Far East have already started to show excellent progress
following sustained product sampling in the period. To ensure we
can satisfy predicted demand, we have procured a suite of new
second generation plasma reactors that have been commissioned and
are producing outstanding results. The build quality, engineering
and subsequent performance from these second-generation reactors
are significant improvements on our original units.
The remainder of the year will see our efforts focussed on
generating commercial revenues and the commissioning of our latest
large scale HD200 reactor."
For further information please contact:
Haydale Graphene Industries +44 (0) 1269 842
plc 946
John Knowles, Chairman
Ray Gibbs, Chief Executive
Officer
Cairn Financial Advisers LLP
(Nomad) +44 (0) 20 7148 7900
Tony Rawlinson
Cantor Fitzgerald Europe (Broker) +44 (0) 20 7894 7000
David Foreman
David Banks
Hermes Financial PR
+44 (0) 7889 153
628
Trevor Phillips +44 (0) 7979 604
Chris Steele 687
Introduction
I am delighted to present the first interim results of the Group
for the six months ended 31 December 2014, following our AIM IPO in
April 2014 and first annual report to 30 June 2014. There have been
a number of key events in this period and none more so than the
acquisition of EPL on 3 November 2014 (the "Acquisition").
EPL- an integrated package for a rapid route to commercialising
graphene in the composite market
The Acquisition is a major component underpinning the Group's
strategic plan to exploit markets that are expected to be the
earliest adopters of graphene, such as composites. EPL's 20 year
history, highly respected market presence and experienced employee
base are expected to significantly enhance the Group's sales in
this sector. In the short period of Haydale's ownership, EPL has
integrated very well with our Group, such that EPL is currently
being rebranded as Haydale Composite Solutions Limited.
In terms of trading over the two month period, EPL has performed
strongly, with higher than anticipated Income generated, in part
due to the timing of contract wins. Historically, EPL has generated
annual Income in excess of GBP0.75 million, whilst in just the
first two months under Haydale's ownership, EPL has generated
income of approximately GBP0.36 million.
Both businesses are already positively collaborating on a number
of projects, as demonstrated by the announcement in December 2014
of the award of a project grant for GBP0.26 million to part-finance
a series of long term accelerated durability tests by EPL on fibre
reinforced thermoplastic composite pipes for the oil and gas
industry. The setting up of a pipeline test facility at EPL will
accelerate the long term testing of thermoplastic composite pipes
required by the American Petroleum Institute's recommended best
practice (API 15S), as well as enabling us to fast track new
materials, such as graphene enhanced thermoplastics, into the
composite pipelines.
EPL has developed a reputation for delivering innovative
solutions in the commercial applications of advanced polymer
composite materials working with global companies over more than 20
years. Combining Haydale's technology, EPL's skills and the
outstanding technical capability of our collaboration partner, the
WCPC, is a unique and powerful combination, as evidenced by the
recent announcement of the heads of terms with Alex Thomson Racing
("ATR"), the HUGO BOSS sponsored extreme sailing team. Under the
terms of that collaboration, EPL and the WCPC will work with ATR to
incorporate Haydale enhanced graphene materials in their R&D
programme with the aim that performance enhancing materials are
incorporated in future boat builds and sail concepts.
Commercial Progress
Overseas expansion
We announced the appointment in July 2014 of two agents with
relevant industry knowledge and strong industrial links. To date we
have made significant strides in the two major overseas markets of
the US and the Far East. In particular, we see significant
opportunity in Korea and Japan, having provided samples to many of
the key customers in that region. Corporations are seeking tailored
surface functionalisation to enhance the dispersion of carbon
materials into a wide range of products. Initial results look
encouraging and we expect an uptake in demand for our
functionalisation service and ink products over the next six
months. We are reviewing how best to tackle this market in terms of
its distance, culture and desire for a rapid response time for the
supply of functionalised materials and inks.
The US is another major market for the Group and, as a result of
the initial research conducted, we have established a wholly owned
subsidiary, Haydale Technologies Inc. ("Haydale Tech"). Haydale
Tech has been formed as a Delaware corporation and, whilst early
days, we anticipate establishing a centre of excellence in the US
in the financial year to June 2016. This is expected to be based on
the East coast of the US, strategically aimed at providing the
Haydale HDPlas(R) process to industrial corporations seeking
innovative solutions.
Electronic inks
Inks, and especially electronic ink, is a market sector that we
have also focused on due to it representing a fast route to market
for our functionalisation skills. Establishing a formulation
capability through the WCPC was critical in being able to deliver
customer solutions, especially as specifications are generally
different for every application and customer. In the WCPC we also
have a printing and coatings capability to quickly test the inks
offering a rapid turnaround in solutions.
We formally launched the conductive graphene based ink in the
autumn of 2014 and provided samples to a significant quantity of
potential customers. A number are evaluating the results and we
expect to see increased demand for the ink over the next six
months. Positive customer responses to the sampling have led us to
establish our own dedicated team with the focussed remit to
commercialise our conductive inks. To achieve this strategic aim we
have established an ink manufacturing capability in an adjacent
site to the main factory in Ammanford. At the end of December 2014,
the infrastructure was complete and, as at today, we are now
manufacturing a consistent quality conductive ink in commercial
quantities with the in-house capability to quickly change the
specification to meet individual customers' requirements.
The recently announced five year exclusive arrangement with
Swansea University allows us to capture opportunities that derive
from ideas and experiments by Swansea University's staff using
Haydale's material but outside of our WCPC collaboration. It
empowers academic staff to benefit from their ideas and ensures
that we are at the forefront of research and production of graphene
enhanced inks with a multitude of applications for the printing and
coating markets. This, coupled with the options for Haydale to
acquire all new IP rights generated, places us in a strong position
in the marketplace.
Plasma Functionalisation
The increased need for sampling and materials testing during
2014 placed significant strain on our first generation plasma
reactors. In early 2014, we carried out extensive evaluations of
suitable suppliers of the highest quality plasma reactors and in
June 2014, we took delivery of the first reactor from Tantec A/S
("Tantec"). The significantly improved and enhanced results
obtained from this unit led us to place orders for two more
reactors with Tantec, culminating in Haydale and Tantec entering
into a rolling two year exclusive development and supply contract
in October 2014.
In December 2014, Haydale announced the delivery of two new
Rotovac HD60 plasma reactors from Tantec. These reactors are now
both fully operational and provide increased processing capability
and operational flexibility in functionalising our nano materials.
Consequently, Haydale has ordered a further three Rotovac HD60
units from Tantec for delivery by the end of June 2015, two of
which are expected to be shipped to overseas locations as part of
the Group's strategy to create "centres of excellence" on a
worldwide basis.
In February 2015, Haydale took delivery of an additional,
significantly larger reactor, the HD200, to fulfil anticipated
increased customer orders following successful sampling and supply
from our smaller units. Commissioning of the HD200 has already
commenced and we will update shareholders on progress in due
course.
The Market
At this stage in the development of the graphene industry,
customers are looking for consistent quality of functionalised
graphene nano platelets (GNPs) in kilograms, initially not tonnes,
although volume is expected to follow after successful trialling.
It is, however, crucial to the industry's acceptance of graphenes
that the samples provided are capable of being repeated in larger
commercial volumes. This is exactly what Haydale can provide.
At the time of writing, we now have three HD60 plasma reactors
in operation providing the required flexibility to process a
variety of materials for different customers simultaneously. The
arrival of the larger HD200 reactor further increases our
capability as the demand for volumes increase.
Over time there will be an increased supply of raw untreated
nano material, especially from the mined organic market, looking to
improve their price per kilo from today's base graphite material.
The pricing for the sister material to GNPs, carbon nano tubes
("CNTs"), is already under $100/kg in the Far East and likely to
fall further, especially as its target replacement material is
carbon black. Capability to supply many hundreds of tonnes of CNTs
exists in the market place today, but crucially dispersion remains
the key issue for both GNPs and CNTs. This is where
functionalisation plays a pivotal role in the commercialisation
process.
We continue to monitor production capability, consistency, and
quality for existing and new materials available for use.
Understanding the performance characteristics and specifications of
the multitude of differing raw material feedstock is a key
component in being able to source the right material for the
appropriate application. Falling prices of the raw materials opens
up even more market opportunities for our solution driven enabling
technology.
Financial Results
The Group's total income for the period under review, including
two months contribution from EPL, was GBP0.48 million, an 8-fold
increase on that reported in the same period in the prior year.
Taking out the positive effect of EPL, Income from the core
business was still double that of 12 months earlier at GBP0.12
million.
EPL's Income for the period of GBP0.36 million was higher than
anticipated, including as it did a number of one-off projects not
representative of its underlying run rate. Nevertheless, we are
very pleased with EPL's profitable contribution to the Group since
Acquisition.
Administrative costs for the period were in line with
management's expectations at GBP2.05 million, with R&D costs
representing almost a quarter of the Group's overhead. This
resulted in a loss before tax of GBP1.57 million and a loss per
share of 14p for the period under review, compared to a loss of
GBP0.58 million and a loss per share of 9p a year earlier.
Since the last reported balance sheet at 30 June 2014, the Group
has acquired the entire issued share capital of EPL for a maximum
consideration of GBP1.193 million, of which GBP0.4 million has
already been paid. This initial consideration, together with the
costs of the Acquisition of approximately GBP0.15 million, was
financed in part by the Group's new GBP0.5 million, 3-year loan
facility with Silicon Valley Bank. The maximum consideration
payable under the Acquisition earn out, which is dependent on EPL
profits for the period from Acquisition to June 2016, is GBP0.79
million and this contingent liability has been recognised by
Haydale in full. The Group also assumed loans owed by EPL of
GBP0.19 million at completion.
As referenced above in this report, the Group has invested
heavily in its reactor capacity and in its ink manufacturing
capabilities in order to be able to satisfy the anticipated demands
from customers. In the period under review, this capital
expenditure amounted to GBP0.62 million and there has been further
investment post period end, in particular, the recent delivery of
the larger HD200 reactor from Tantec.
Cash at the period end was GBP3.95 million.
Outlook
2015 promises to be an exciting year for Haydale, particularly
for tackling the next steps in the development of the Group's
commercialisation plans. Investors can expect to see announcements
regarding both technical and commercial progress associated with
the scale up and commissioning of our outstanding plasma reactors
and the Group developing commercial relationships both domestically
and in our targeted geographic territories.
The management team remains focussed and committed to bringing
its technology to successful conclusions and deliver attractive
returns to its shareholders.
Ray Gibbs
Chief Executive Officer
17 March 2015
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 December 2014
Note Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 Jun
2014 2013 2014
GBP'000 GBP'000 GBP'000
REVENUE 388 7 19
Other income 94 51 110
TOTAL INCOME 482 58 129
Administrative expenses
------------------------------------- ------- ------------- ------------- ----------
Costs of admission to AIM - - (424)
Research and development
expenditure (435) (179) (416)
Share based payment expense (105) (23) (67)
Other administrative expenses (1,509) (436) (1,424)
------------------------------------- ------- ------------- ------------- ----------
(2,049) (638) (2,331)
LOSS FROM OPERATIONS (1,567) (580) (2,202)
Finance costs (7) (4) (14)
LOSS BEFORE TAXATION (1,574) (584) (2,216)
Taxation 43 16 71
LOSS AND TOTAL COMPREHENSIVE
LOSS ATTRIBUTABLE TO OWNERS
OF THE PARENT (1,531) (568) (2,145)
Loss per share attributable
to owners of the Parent
Basic (GBP) 2 (0.14) (0.09) (0.28)
Diluted (GBP) 2 (0.14) (0.09) (0.28)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2014
Unaudited Unaudited Audited
31 Dec 31 Dec 30 Jun
2014 2013 2014
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Intangible assets 1,518 623 605
Property, plant and equipment 1,227 473 527
2,745 1,096 1,132
Current assets
Inventories 185 23 22
Trade receivables 443 - 8
Other receivables 250 86 244
Corporation tax 109 80 63
Cash and bank balances 3,951 758 5,677
4,938 947 6,014
TOTAL ASSETS 7,683 2,043 7,146
LIABILITIES
Non-current liabilities
Bank loans - due after one 338 - -
year
Current liabilities
Bank loans - due within one 162 - -
year
Trade and other payables 855 281 300
Deferred income 29 92 46
Corporation tax 7 - -
Provision for contingent consideration 793 - -
Convertible loan notes - 82 -
1,846 455 346
TOTAL LIABILITIES 2,184 455 346
TOTAL NET ASSETS 5,499 1,588 6,800
EQUITY
Capital and reserves attributable
to equity holders of the parent
Share capital 229 2 225
Share premium account 6,255 4,355 6,134
Share-based payment reserve 176 26 71
Retained (deficits) / profits (1,161) (2,795) 370
TOTAL EQUITY 5,499 1,588 6,800
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 December 2014
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 Jun
2014 2013 2014
GBP'000 GBP'000 GBP'000
Cash flow from operating activities
Loss before taxation (1,574) (584) (2,216)
Adjustments for:-
Amortisation of intangible
assets 18 19 36
Depreciation of property, plant
and equipment 116 63 137
Share-based payment charge 105 22 67
Profit on disposal of property, - (1) -
plant and equipment
Finance costs 7 4 14
Operating cash flow before
working capital changes (1,328) (477) (1,962)
(Increase) / decrease in inventories - 2 (2)
(Increase) / decrease in trade
and other receivables (167) 1 (165)
Increase / (decrease) in payables
and deferred income 17 (25) (51)
Cash used in operations (150) (22) (218)
Income tax (paid) / received (3) - 72
Net cash flow from operating
activities (1,481) (499) (2,108)
Cash flow used in investing
activities
Purchase of property, plant
and equipment (618) (17) (147)
Acquisition of subsidiary (note (244) - -
3)
Proceeds from disposal of property,
plant and equipment - 1 2
Finance costs (8) (2) (5)
Net cash flow in investing
activities (870) (18) (150)
Cash flow used in financing
activities
Proceeds from issue of share
capital 125 1,195 8,425
Share issue costs - (53) (623)
New bank loans raised 500 - -
Issue of convertible debt - 79 79
Net cash flow from financing
activities 625 1,221 7,881
Net (decrease) / increase in
cash and cash equivalents (1,726) 704 5,623
Cash and cash equivalents at
beginning of the financial
period 5,677 54 54
Cash and cash equivalents at
end of the financial period 3,951 758 5,677
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Share Share Share-based Retained Total
capital premium payment profits GBP'000
GBP'000 GBP'000 reserve GBP'000
GBP'000
At 1 July 2013 1 3,214 4 (2,227) 992
Total comprehensive
loss for the period - - - (568) (568)
Recognition of share-based
payments - - 22 - 22
Issue of ordinary
share capital 1 1,194 - - 1,195
Transaction costs
in respect of share
issues - (53) - - (53)
At 31 December 2013 2 4,355 26 (2,795) 1,588
Total comprehensive
loss for the period - - - (1,577) (1,577)
Recognition of share-based
payments - - 45 - 45
Issue of ordinary
share capital 65 7,249 - - 7,314
Transaction costs
in respect of share
issues - (570) - - (570)
Bonus issue of GBP0.02
ordinary shares 158 (158) - - -
Reduction in share
premium - (4,742) - 4,742 -
At 30 June 2014 225 6,134 71 370 6,800
Total comprehensive
loss for the period - - - (1,531) (1,531)
Recognition of share-based
payments - - 105 - 105
Issue of ordinary
share capital 4 121 - - 125
At 31 December 2014 229 6,255 176 (1,161) 5,499
Equity share capital and share premium
The balance classified as share capital and share premium
includes the total net proceeds on issue of the Company's equity
share capital, comprising GBP0.02 ordinary shares. The share
premium accounts can only be used for bonus issues, to provide for
the premium payable on redemption of debentures or to write off
preliminary expenses, or expenses of, or commissions paid on, or
discounts allowed on, any issues of shares or debentures of the
company.
Share premium account
The share premium account represents the amount received on the
issue of ordinary shares in excess of their nominal value and is
non-distributable.
Share-based payment reserve
The share-based payment reserve comprises the cumulative expense
representing the extent to which the vesting period of share
options has expired and management's best estimate of the
achievement or otherwise of non-market conditions and the number of
equity instruments that will ultimately vest.
Retained profits
The retained profits reserve comprises the cumulative effect of
all other net gains, losses and transactions with owners (e.g.
dividends) not recognised elsewhere.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 31 December 2014
1. Accounting policies
Basis of preparation
The interim financial statements, which are unaudited, have been
prepared on the basis of the accounting policies expected to apply
for the financial year to 30 June 2015 and in accordance with
recognition and measurement principles of International Financial
Reporting Standards (IFRSs) as endorsed by the European Union. The
accounting policies applied in the preparation of these interim
financial statements are consistent with those used in the
financial statements for the year ended 30 June 2014.
The interim financial statements do not include all of the
information required for full annual financial statements and do
not comply with all of the disclosures in IAS34 'Interim Financial
Reporting'. Accordingly while the interim financial statements have
been prepared in accordance with IFRS they cannot be construed as
being in full compliance with IFRS.
The financial information for the year ended 30 June 2014 does
not constitute the full statutory accounts for that period. The
Annual Report and Accounts for 30 June 2014 have been filed with
the Registrar of Companies. The Independent Auditors' Report on the
Annual Report and Accounts for 2014 was unqualified and did not
include references to any matters which the auditors drew attention
to by way of emphasis without qualifying their report and did not
contain statements under Section 498(2) or 498(3) of the Companies
Act 2006.
Going concern
The consolidated financial statements are prepared on a going
concern basis which the Directors believe continues to be
appropriate. The Group meets its day-to-day working capital
requirements through existing cash resources which at 31 December
2014, amounted to GBP3.95 million. The Directors have prepared cash
flow projections for the period ending no less than 12 months from
the date of their approval of these financial statements. On the
basis of those projections, the Directors believe that the Group
will be able to continue to trade for the foreseeable future.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 31 December 2014
2. Loss per share
The calculations of loss per share are based on the following
losses and number of shares:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 Jun
2014 2013 2014
GBP'000 GBP'000 GBP'000
Loss after tax attributable
to owners of the
Haydale Graphene
Industries Group (1,531) (568) (2,145)
Weighted average
number of shares:
* Basic 11,307,194 6,190,182 7,755,175
* Diluted 11,307,194 6,190,182 7,755,175
Loss per share:
* Basic (GBP) (0.14) (0.09) (0.28)
* Diluted (GBP) (0.14) (0.09) (0.28)
The loss attributable to ordinary shareholders and weighted
average number of ordinary shares for the purpose of calculating
the diluted earnings per ordinary share are identical to those used
for basic earnings per share. This is because the exercise of share
options would have the effect of reducing the loss per ordinary
share and is therefore not dilutive under the terms of IAS 33.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the six months ended 31 December 2014
3. Acquisition
On 3 November 2014, the Company announced that it had acquired
the entire issued share capital of EPL for a maximum consideration
of GBP1,193,000 comprising GBP400,000 cash with up to GBP792,500
payable in either cash and/or shares in the Company based on
earnings targets to 30 June 2016. Direct acquisition costs
amounting to GBP143,000 have been written off to the consolidated
statement of comprehensive income.
The provisional fair values of EPL are detailed below:-
GBP'000
ASSETS
Intangible assets 931
Property, plant and equipment 198
Inventories 163
Trade and other receivables 274
Cash and bank balances 163
TOTAL ASSETS 1,729
LIABILITIES
Trade and other payables 522
Corporation tax 7
TOTAL LIABILITIES 529
NET ASSETS ACQUIRED 1,200
Consideration
Cash consideration (including
GBP7,000 costs) 407
Maximum contingent consideration 793
1,200
Effect within consolidated
statement of cashflows:-
Cash consideration 407
Less: cash and bank balances
acquired (163)
244
4. Approval
The 31 December 2014 interim financial statements were approved
by a duly appointed and authorised committee of the Board of
Directors on 16 March 2015.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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